As the EaP leaders chat about DCFTA’s and AA’s - China invests $10 billion in Ukrainian agriculture

As the EU and EaP nations sit in Warsaw reaffirming commitments and pushing their respective positions collectively and individually, Eximbank of China has stated it will invest $10 billion in Ukrainian agriculture and set up a permanent working group to identify suitable projects in Ukraine.

$10 billion is not small money when it comes to FDI in a specific part of any domestic market in Ukraine.

This is additional to existing and agreed Chinese FDI in infrastructure, joint R&D in Space research, oil and gas exploration and production on the Black Sea Shelf and Sea of Azov and several arms deals as well (to name just a few Chinese maneuvers in Ukraine in the past 18 months)

Neither does it take into account the demand for Ukrainian raw materials China purchases in quite large quantities.

In 5 or 10 years time, one can almost see China buying up large opportunities in Ukraine (steel works, coal mines etc) and exporting jobs and manufacturing to Ukraine from China.  (Sounds crazy doesn’t it?)

The problem with the EU is that it has “sensibilities” that it ties to issues which Russia, China and Turkey are happy to segregate from business in order to get things done that are to their economic advantage when it comes to Ukraine.

China and Turkey are both WTO members like Ukraine (unlike Russia) so there would be little to stop a FTA with either nation based upon WTO principles.  Turkey is already pushing quite hard for a FTA with Ukraine and undoubtedly that makes sense for Ukraine.

Should we take bets on whether, and despite the DCFTA negotiations completing between the EU and Ukraine by the end of this year, an FTA between Turkey or China (maybe both) is signed and ratified before the EU Member States ratify the DCFTA and AA between the EU and Ukraine (the delay in EU ratification being those “sensibilities”)?

Will we see a splitting of the DCFTA and AA from their joined status if the “sensibilities” surrounding the AA prevent the DCFTA getting ratified thus allowing the powerful China and increasing more regionally powerful Turkey stealing a march on the best opportunities in Ukraine where being nimble, having cash and not being directly from the Kremlin are plus points?

Both Turkey and China are far more nimble than the bureaucracy heavy EU when it comes to seizing the moment and to be fair, both have economies in far better shape.

Now I don’t want this to come across as there being anything wrong with EU “sensibilities”.  There is a definite place for “sensibilities” on a political and diplomatic level as these are used to nudge nations in directions (normally rule of law, democracy, human rights etc).  It does not follow that sanctions or geese laying golden eggs will necessarily speed up change or even make change a consideration.  Reform depends on how far the national leadership being nudged is prepared to go along this path and how quickly.

The question is whether those “sensibilities” tied to the AA agreement and Copenhagen Criteria justify the delay in the DCFTA and the economic opportunities that provides, given increasing Chinese and Turkish interest in Ukraine together with the ever-present Russia.

One hopes that those currently sitting around in Warsaw are fully aware (and keeping a tally) of FDI and business interests flowing into Ukraine from China and the old Ottoman Empire.  As an example, there would be no real point to arguing over the agricultural part of the DCFTA, eventually come to an agreement, to then discover China has all the best bits and agreed the lion’s share of exports now would there?

Which is the EU priority, simplified trade or “sensibilities” if push came to shove?

The principled would hope that “sensibilities” carried more weight that trade.  The pragmatic may see things differently.