The armed conflict in Donbas has now entered its seventh year. President Zelenskyy, who came to power in May 2019, promised to end the war with Russia and bring peace to Ukraine.

Since assuming office, Zelenskyy has managed to revive the Normandy Format talks, complete military disengagement at three points along the line of contact and negotiate the release of over a hundred Ukrainians held as prisoners of war in Russia. However, ceasefire violations continue to occur frequently.

Looking at the origins of the armed conflict in Donbas and the region’s economic role in Ukraine’s economy, this event discusses the prospects for conflict resolution. Do the recent events signify an opportunity for peace? Does Zelenskyy have a viable plan for re-integrating Donbas or will the region be cut off from mainland Ukraine for the foreseeable future?

The speakers assess the strategy and track record of the Ukrainian government and its Western allies in bringing parts of the occupied Donbas under Kyiv’s control. They also review possible policy implications of the COVID-19 pandemic for the conflict.

The interdependence of communities across the Horn of Africa results from social, familial, linguistic and cultural ties that cross territorial borders. Such linkages are reinforced by established patterns of movement and trade, often leading to stronger political and social connections between communities on either side of borders, than with their respective national capitals. States in the region are increasingly being challenged by demands for decentralization and more effective local governance. Improved understanding of the complexity of sub-national and cross-border political and economic contexts will be required to meet these demands and support enhanced governance so that challenges such as marginalization, intercommunal conflict and more equitable sharing of resources can be effectively addressed.

At this event, speakers will examine some of the key subnational and cross-border relations in the Horn of Africa. They will also discuss initiatives and stakeholders needed to support common solutions to building peace, furthering development and bolstering inclusive growth and integration. 

THIS EVENT IS NOW FULL AND REGISTRATION HAS CLOSED.

Two December meetings between Presidents Vladimir Putin and Alexander Lukashenka failed to deliver Moscow’s hopes of securing Minsk’s acceptance of closer alignment between Russia and Belarus.

Over the past year, relations between Belarus and Russia have been under unprecedented strain as Moscow has tried to encourage Minsk to sign up to a different format of relations designed to keep Belarus firmly in a Russian orbit. Details of the negotiations have remained secret, yet issues on the table appear to include unification of tax and customs systems, a common energy regulator and joint governing bodies.

The Kremlin believes that Belarus needs to deliver more in return for Russia’s continued economic support, worth around $10 billion per year. In December 2018, it issued an ultimatum: Belarus would only continue to receive a discounted price for oil and gas and enjoy preferential access to the Russian market if it agreed to reanimate the largely dormant 1999 Union Treaty that called for the unification of Belarus with Russia.

During 2019, frantic work took place on both sides to prepare a detailed framework for achieving deeper integration between the two countries. This did not succeed in overcoming a set of long-standing issues related to economic relations.

To step up pressure, the Russian prime minister, Dmitri Medvedev, signalled in early December that Russia would withhold economic privileges for Belarus pending full implementation of 30 integration road maps that he claimed had already been agreed. To the alarm of Minsk, he also suggested that discussion of a 31st roadmap would follow to include the creation of a single currency and supranational institutions. The Belarusian authorities view this level of integration as a threat to national sovereignty.

On the surface, Belarus’ negotiating position is weak. By resisting market reforms that could have diversified imports and exports, Lukashenka has instead kept the economy tied to Russia; 40% of Belarusian exports go to Russia. In addition, Russia has decreased its reliance on imports from Belarus as part of a broad policy of import substitution.

Raising the gas price will deprive Belarusian companies of their comparative advantage.  Approximately 90% of Belarus’s electricity and heat is generated by natural gas imported from Russia at below market prices. Petroleum products refined from Russian crude oil that is supplied duty-free to Belarus account for the largest source of the country’s export earnings.

Minsk fears that the current oil taxation reform in Russia could cause Belarus losses of up to $9 billion by 2024 as a result of higher prices for Russian oil and the loss of export duties. Economic growth slowed from 3% in 2018 to just over 1% in 2019 and could fall further if Russia does not grant concessions on the oil price.

The country’s high level of public debt denominated in foreign currency makes the need to find cash more urgent and exacerbates the Russian pressure. Russia is Belarus’ biggest creditor, accounting for 38% of state debt.

However, Lukashenka is a master of negotiation with the Kremlin, with a talent for turning weakness into strength.

First, by eliminating political competition in Belarus, he has given Putin no option but to deal with him personally. Second, he understands that Moscow needs to present integration between the two countries as voluntary and does not want to use economic sanctions or other tools of persuasion that could destabilize Belarus. Third, he knows that there is no consensus in Moscow on creating a single currency. Unification of the tax systems would also be problematic because of their different structures. If these measures were implemented, Moscow could end up paying much larger subsidies to keep Belarus stable.

Minsk is therefore likely to pursue three options: dragging out the negotiations with Moscow, while continuing to declare its commitment to closer union with Russia; seeking alternative sources of energy and credits; and reforming the economy to lower its dependency on Russia.

Although Lukashenka is mindful of potential risks and threats to his power from economic liberalization, he is open to changes in some areas, such as further developing the successful IT sector, privatising non-strategic state-owned enterprises and increasing trade with EU countries.

These reforms will most likely continue, although this year’s presidential election may distract attention, as Lukashenka seeks a sixth term in the knowledge that his popularity is falling. He may also need to divert some economic resources to maintain the support of his core electorate.

For the moment, Moscow does not appear to be in a hurry, believing that Lukashenka and Belarus are going nowhere and that concessions by Minsk are only a matter of time.

The armed conflict in Donbas has now entered its seventh year. President Zelenskyy, who came to power in May 2019, promised to end the war with Russia and bring peace to Ukraine.

Since assuming office, Zelenskyy has managed to revive the Normandy Format talks, complete military disengagement at three points along the line of contact and negotiate the release of over a hundred Ukrainians held as prisoners of war in Russia. However, ceasefire violations continue to occur frequently.

Looking at the origins of the armed conflict in Donbas and the region’s economic role in Ukraine’s economy, this event discusses the prospects for conflict resolution. Do the recent events signify an opportunity for peace? Does Zelenskyy have a viable plan for re-integrating Donbas or will the region be cut off from mainland Ukraine for the foreseeable future?

The speakers assess the strategy and track record of the Ukrainian government and its Western allies in bringing parts of the occupied Donbas under Kyiv’s control. They also review possible policy implications of the COVID-19 pandemic for the conflict.

The European Union is the ultimate ‘rules-based order’. Since the end of the Cold War, the world has become increasingly integrated, in a process that Dani Rodrik has called ‘hyper-globalization’ to distinguish this from the more moderate form of globalization that occurred during the Cold War period.

But Europe, which was already more integrated than the rest of the world, has gone even further in removing barriers to the internal movement of capital, goods and people. The consequence of this has been the need for a more developed system of rules to govern this deep integration.

For much of this period, many Europeans – and also many outside Europe who had a liberal view of international politics – believed that the EU was a kind of blueprint for global governance.

They believed that the rest of the world would simply catch up with the enlightened and apparently successful approach that Europeans had taken. In short, Europeans were showing the way forward for the world.

However, after a decade of crisis, it now seems as if Europe may have overreached. In particular with the creation of the single currency, European rules increasingly extended into areas of life in which member states had previously had relative autonomy.

Since the beginning of the euro crisis in 2010, there has been a backlash against EU rules, which has raised the difficult question of whether international rule-making can go too far.

What makes international rules problematic is that they depoliticize – that is, they take the policy areas they cover out of the realm of democratic contestation. This can be a good thing when applied to policy areas that we think should be non-negotiable, like human rights.

But since the 1980s, and especially since the end of the Cold War, international rules have increasingly applied to areas of policy that not only should be contested but that should be at the centre of contestation – in particular, economic policy areas that have distributional consequences (that is, they create winners and losers).

The EU’s rules constrain its member states even more than global rules – for example, those of the World Trade Organization (WTO) – or rules associated with other regional integration projects constrain nation states elsewhere in the world. In particular, the EU’s fiscal rules – created along with the euro – set strict limits on the ability of member states to run budget deficits and accumulate debt.

Since the beginning of the euro crisis, these fiscal rules have been further tightened, which in turn has magnified the political backlash against the EU system and fuelled tensions between member states.

In democratic nation states, rules are made through a process that gives them what is sometimes called ‘input legitimacy’. International rule-making, by contrast, is essentially the product of power relations between states and therefore lacks this specific kind of legitimacy.

Supporters of European integration as currently constituted – whom one might term ‘pro-Europeans’ – would argue that EU rules are more like domestic rules than international rules: after all, they are agreed through a process involving democratic institutions such as the European Parliament. But even within the EU, power matters – as notably illustrated by Germany’s prominent (and controversial) role in driving the development of fiscal rules since the beginning of the euro crisis.

In addition, because European integration is meant to be an irreversible process, it is extremely difficult to change or abolish rules that have already been agreed. To do so would be ‘disintegration’ in the sense that powers would be returned to member states.

For example, there are good economic and political arguments for abolishing the ‘debt brake’, based on a German model, that EU member states agreed to incorporate into their national constitutions as part of the Fiscal Compact in 2011. But anyone making those arguments is labelled as Eurosceptic or ‘anti-European’.

There is also insufficient differentiation between EU rules. Any decision taken at a European level – even those decisions, such as on the Fiscal Compact, that are outside the EU treaties – becomes part of the EU’s system of rules. To challenge such a decision is therefore to violate the rule of law and therefore the EU’s ‘values’.

As Dieter Grimm has shown, legislation that would normally have the status of secondary law in a nation state has constitutional status in EU law and is therefore ‘immunized against political correction’.[1]

Though European leaders still often speak of the EU as a model for the rest of the world, the reality is that it now illustrates what other regional integration projects should avoid as much as what they should emulate. Even before the euro crisis, few other regions were thinking of creating a common currency.

But they will now think even more carefully about how far to follow Europe down the route of economic integration it has taken – and in particular will be unlikely to introduce EU-style fiscal rules.

The difficult question is where exactly the limits of international rule-making should be set. The European experience in the past decade suggests that rules on economic policy are particularly problematic because of the distributional consequences they have.

But European integration focused on economic policy from its beginnings with the European Coal and Steel Community in the 1950s. Moreover, because globalization is to a large extent an economic phenomenon, economic policy is precisely where international rules are needed.

A good place to start in thinking about where to set the limits of international rule-making may be in terms of the objectives of rules. During the early phase of European integration and the more moderate phase of globalization in the 30 years after the end of the Second World War, integration strengthened nation states – indeed, Alan Milward argued that integration ‘rescued’ the nation state in Europe.[2]

But since the end of the Cold War, rules at both the global level and a European level have been driven by the maximization of economic efficiency. This has undermined the nation state. As Rodrik has argued, a reprioritization is now needed – rules should be made above all with their impact on democracy in mind.[3]

In order to regain legitimacy, Europe should apply this idea of democracy-enhancing rules to its own approach to integration. It should begin by differentiating more clearly between rules that are fundamental to the European project and those about which Europeans can – and should – disagree.

The consequence of thinking of rules above all in terms of legitimacy may be that in some policy areas, particularly those with distributive consequences, rules should be abolished and power returned to member states.

‘Pro-Europeans’ should be open to this kind of ‘disintegration’ as a way to help the EU regain legitimacy and thus be sustainable in the medium term. It is also only by successfully recalibrating the balance between rules and democracy that the EU will once again be seen as a model for regional integration projects in the rest of the world, and for global governance more generally.

Notes

[1] Grimm, D. (2015), ‘The Democratic Costs of Constitutionalisation: The European Case’, European Law Journal, Volume 21, Issue 4, July 2015, https://onlinelibrary.wiley.com/doi/abs/10.1111/eulj.12139.

[2] Milward, A. (1999), The European Rescue of the Nation State, London: Routledge.

[3] Rodrik, D. (2006), ‘Put Globalization to Work for Democracies’, New York Times, 17 September 2006, https://www.nytimes.com/2016/09/18/opinion/sunday/put-globalization-to-work-for-democracies.html.

This essay was produced for the 2019 edition of Chatham House Expert Perspectives – our annual survey of risks and opportunities in global affairs – in which our researchers identify areas where the current sets of rules, institutions and mechanisms for peaceful international cooperation are falling short, and present ideas for reform and modernization.

Two December meetings between Presidents Vladimir Putin and Alexander Lukashenka failed to deliver Moscow’s hopes of securing Minsk’s acceptance of closer alignment between Russia and Belarus.

Over the past year, relations between Belarus and Russia have been under unprecedented strain as Moscow has tried to encourage Minsk to sign up to a different format of relations designed to keep Belarus firmly in a Russian orbit. Details of the negotiations have remained secret, yet issues on the table appear to include unification of tax and customs systems, a common energy regulator and joint governing bodies.

The Kremlin believes that Belarus needs to deliver more in return for Russia’s continued economic support, worth around $10 billion per year. In December 2018, it issued an ultimatum: Belarus would only continue to receive a discounted price for oil and gas and enjoy preferential access to the Russian market if it agreed to reanimate the largely dormant 1999 Union Treaty that called for the unification of Belarus with Russia.

During 2019, frantic work took place on both sides to prepare a detailed framework for achieving deeper integration between the two countries. This did not succeed in overcoming a set of long-standing issues related to economic relations.

To step up pressure, the Russian prime minister, Dmitri Medvedev, signalled in early December that Russia would withhold economic privileges for Belarus pending full implementation of 30 integration road maps that he claimed had already been agreed. To the alarm of Minsk, he also suggested that discussion of a 31st roadmap would follow to include the creation of a single currency and supranational institutions. The Belarusian authorities view this level of integration as a threat to national sovereignty.

On the surface, Belarus’ negotiating position is weak. By resisting market reforms that could have diversified imports and exports, Lukashenka has instead kept the economy tied to Russia; 40% of Belarusian exports go to Russia. In addition, Russia has decreased its reliance on imports from Belarus as part of a broad policy of import substitution.

Raising the gas price will deprive Belarusian companies of their comparative advantage.  Approximately 90% of Belarus’s electricity and heat is generated by natural gas imported from Russia at below market prices. Petroleum products refined from Russian crude oil that is supplied duty-free to Belarus account for the largest source of the country’s export earnings.

Minsk fears that the current oil taxation reform in Russia could cause Belarus losses of up to $9 billion by 2024 as a result of higher prices for Russian oil and the loss of export duties. Economic growth slowed from 3% in 2018 to just over 1% in 2019 and could fall further if Russia does not grant concessions on the oil price.

The country’s high level of public debt denominated in foreign currency makes the need to find cash more urgent and exacerbates the Russian pressure. Russia is Belarus’ biggest creditor, accounting for 38% of state debt.

However, Lukashenka is a master of negotiation with the Kremlin, with a talent for turning weakness into strength.

First, by eliminating political competition in Belarus, he has given Putin no option but to deal with him personally. Second, he understands that Moscow needs to present integration between the two countries as voluntary and does not want to use economic sanctions or other tools of persuasion that could destabilize Belarus. Third, he knows that there is no consensus in Moscow on creating a single currency. Unification of the tax systems would also be problematic because of their different structures. If these measures were implemented, Moscow could end up paying much larger subsidies to keep Belarus stable.

Minsk is therefore likely to pursue three options: dragging out the negotiations with Moscow, while continuing to declare its commitment to closer union with Russia; seeking alternative sources of energy and credits; and reforming the economy to lower its dependency on Russia.

Although Lukashenka is mindful of potential risks and threats to his power from economic liberalization, he is open to changes in some areas, such as further developing the successful IT sector, privatising non-strategic state-owned enterprises and increasing trade with EU countries.

These reforms will most likely continue, although this year’s presidential election may distract attention, as Lukashenka seeks a sixth term in the knowledge that his popularity is falling. He may also need to divert some economic resources to maintain the support of his core electorate.

For the moment, Moscow does not appear to be in a hurry, believing that Lukashenka and Belarus are going nowhere and that concessions by Minsk are only a matter of time.

The armed conflict in Donbas has now entered its seventh year. President Zelenskyy, who came to power in May 2019, promised to end the war with Russia and bring peace to Ukraine.

Since assuming office, Zelenskyy has managed to revive the Normandy Format talks, complete military disengagement at three points along the line of contact and negotiate the release of over a hundred Ukrainians held as prisoners of war in Russia. However, ceasefire violations continue to occur frequently.

Looking at the origins of the armed conflict in Donbas and the region’s economic role in Ukraine’s economy, this event discusses the prospects for conflict resolution. Do the recent events signify an opportunity for peace? Does Zelenskyy have a viable plan for re-integrating Donbas or will the region be cut off from mainland Ukraine for the foreseeable future?

The speakers assess the strategy and track record of the Ukrainian government and its Western allies in bringing parts of the occupied Donbas under Kyiv’s control. They also review possible policy implications of the COVID-19 pandemic for the conflict.