Serbia Maneuvers Between the EU and EEU

On November 3, Serbian Foreign Minister Ivica Dačić visited the Russian city of Suzdal. There, he stated that Serbia was planning to sign an agreement with the Russian-dominated Eurasian Economic Union (EEU) to homogenize existing bilateral trade agreements in place with some of the member states and to expand them to include all five EEU members (Pjmedia.com, November 4). The Serbian minister of trade, tourism, and telecommunications, Rasim Ljajić, previously posited that the goal was to expand the existing level of trade liberalization to incorporate additional industries, including automobiles, sugar, wine, poultry, tobacco, cheese, as well as different types of cotton (Karanovic-nikolic.com, August 26). Serbia is a candidate for membership in the European Union and has been in active accession negotiations since 2014.

EU-aspirant Serbia’s announcement about wanting to bolster trade with the Eurasian Union in some ways calls to mind the tug of war, several years ago, over Ukraine between the European Union and the direct precursor of the EEU—the Moscow-dominated Eurasian Customs Union (ECU). Although both trade blocs were pursuing primarily economic integration with Kyiv, this nonetheless necessarily entailed significant implications in other governance sectors. Ukraine had strong economic ties to both trade blocs at the time: in 2012, 26 percent of Ukrainian exports went to Russia and 11 percent to the rest of the Commonwealth of Independent States (CIS), while 25 percent of Ukrainian exports were destined for the EU market (Piie.com, September 2013). In that same year, imports from Russia made up 32 percent, from the CIS (excluding Russia) 8 percent, and from the EU 31 percent of total Ukrainian imports.

The EU Association Agreement (AA) with Ukraine was initiated in 2012, but the signing was delayed due to EU concerns regarding human rights and the rule of law in Ukraine. Meanwhile, Kyiv was negotiating the terms of a possible membership in the ECU, thereby raising the issue of the compatibility of the two. In theory, the draft version of the AA did not forbid Ukrainian membership in the ECU, as Article 39 lays out (Ponarseurasia.org, September 2013):

(1) This Agreement shall not preclude the maintenance or establishment of customs unions, free trade areas or arrangements for frontier traffic except insofar as they conflict with trade arrangements provided for in this Agreement.

(2) Consultations between the Parties shall take place within the Trade Committee concerning agreements establishing customs unions, free trade areas or arrangements for frontier traffic and, where requested, on other major issues related to their respective trade policy with third countries.

In other words: de jure, Ukraine could have had it both ways by adapting the terms of the AA to the conditions of membership in the ECU or vice versa. De facto, however, the rules and regulations of the two trade regimes were irreconcilable, as the tariff levels for ECU members vis-à-vis the EU are determined by the principle of a “single external tariff of the Customs Union.” These differed substantially from the tariffs negotiated bilaterally with Brussels, most of which would have been abolished within ten years (Ponarseurasia.org, September 2013). This reality was expressed by then European Commission President José Manuel Barroso when he stated that “[o]ne country cannot at the same time be a member of a customs union and be in a deep common free-trade area with the European Union. This is not possible” (Ukrinform.net, February 25, 2013).

Contrary to Russian claims at the time, the expected impact of the AA on the Russian economy would have been limited (Chathamhouse.org, August 2012), suggesting that Russian resistance was instead connected to the fear of a loss of geopolitical influence. Apart from the economic gravitation of Ukraine toward the EU, some preconditional reforms regarding the rule of law, corruption, and the justice system would have increased transparency in Kyiv’s style of governance, thereby decreasing opportunities for Moscow to influence domestic developments.

The incompatibility of the simultaneous integration with the EU and the Moscow-led Customs Union combined with the inability of former Ukrainian president Viktor Yanukovych to withstand Russian pressure. Ultimately, his defiance of popular support and refusal to sign the AA resulted in his ouster. Ukraine finally signed the AA document under President Petro Poroshenko’s administration in June 2014.

The Stabilization and Association Agreement (SAA) between Serbia and the EU essentially features much the same wording as the Ukrainian AA with regard to customs unions and free trade agreements with third countries (Europa.eu, September 2013). However, in this case, Maja Kocijancic, the EU spokesperson for foreign and security policy, stated when negotiations were opened in June 2016 that a unification of trade agreements between Serbia and the EEU was not in violation of the SAA. Nevertheless, she added, Serbia would be expected not to take any steps in violation of EU rules (Ansamed.info, June 6).

In principle, as was the case with Ukraine, a free trade agreement with the EEU is de jure compatible with the Serbia-EU SAA already in place. The decisive difference, however, is that Serbia is not negotiating on membership with the EEU. It therefore depends entirely on the terms of the free trade agreement being negotiated—specifically whether or not Serbia will be subject to the aforementioned regime of a “single external tariff of the Customs Union” (see above). If this is not the case, Serbia could be part of an agreement with the EEU while implementing the successive abolishment of tariffs with the EU.

Conversely, if Serbia completes the ongoing accession procedure to the EU, Belgrade will have to align domestic legislation with the acquis communautaire (the collective body of EU rules and legislation). As a full member, Serbia would fall within the EU customs union, with its uniform tariffs on goods crossing external EU borders. From the moment of accession, Serbia would have to implement the exact same tariffs on trade with the EEU as the EU as a single trade bloc does. Thus, as far as membership is concerned, membership in both trade blocs remains an either-or-decision.

Serbia has traditionally maintained strong ties to Russia and China as well as the West. And recently, pro-Russian organizations in Serbia—seemingly funded by the Kremlin (Ecfr.eu, June 8)—have shown increased advocacy for Serbian integration into the EEU. However, the Serbian business community seems decidedly less enthusiastic about this prospect, as it rightly fears that EEU membership would jeopardize the EU accession process.

In economic terms, it makes more sense for Serbia to join the EU rather than the EEU, as the former represents a much more important market for Serbia than the latter. In 2015, 65.7 percent of Serbian merchandise exports flowed to the EU, while 62.4 percent of merchandise imports were sourced from the EU (Wto.org, accessed on November 7). In contrast, merchandise exports to Russia made up only 8.8 percent, while less than 15.1 percent were exported to the remaining member states of the EEU. Meanwhile, 8.5 percent of Serbian merchandise imports were sourced from Russia while less than 16.4 percent of merchandise imports to Serbia stemmed from the remaining EEU countries.

Finally, for domestic political reasons, it seems unlikely that the Serbian government would veer from its path of EU integration. Accession to the EU was declared a “strategic goal” by the Serbian government (Srbija.gov, January 21, 2014). And this past July, President Tomislav Nikolić confirmed that pursuing EU membership was a foreign policy priority of the Serbian government (Inserbia.info, July 1). Russia’s Eurasian Union project simply does not approach this same level of importance for Belgrade at the moment.