EU’s Eastern Enlargement Opens
New Avenues for CIS
CIS countries have formed the second, outer ‘ring’ of the EU neighbors, being geographically separated from the EU by the EU accession countries of Central and Eastern Europe. Their economic and political importance for EU-15 was quite limited with an exception of Russia, the largest (territorially) country in the world with huge natural resources and nuclear weapons, directly bordering with one of the EU members (Finland).
Simplifying, the EU-15 real economic and foreign policy interests in cooperation with CIS countries concentrated mostly on oil and natural gas supply from Russia, and on a relative geopolitical stability of the post-Soviet area (avoiding proliferating of regional and ethnic conflicts)
The picture changed with the Eastern enlargement of the EU. First, in purely geographical terms four CIS countries – Russia, Ukraine, Belarus and Moldova – became the direct EU neighbors sharing long land borders. In a slightly longer time horizon, with Turkey’s accession, three Caucasian countries (Armenia, Azerbaijan and Georgia) will also start to share their land borders with the EU. It means that most of CIS already moved or will move geographically from the second to the first ring of neighbors.
The new members states (NMS) of the EU share much of common political and economic history with countries of the former USSR, not only because of the unfortunate communist experience of the second half of the 20th century. Some of them were, before the World War I, part of the Russian empire (part of Poland, Baltic countries, Finland).
There are close ethnic and cultural links between NMS and EU candidate countries on the one hand and CIS countries on the other (Romania – Moldova, Poland – Belarus and Ukraine, Russian speaking minority in Baltic countries, Turkey – Azerbaijan and most of post-Soviet Central Asia). Looking at the aggregate trade indicators, CIS importance for the EU-27 is not much higher than it was for EU-15. This is a result of the limited economic potential of both NMS and CIS. In 2003 the NMS-10 constituted only 4.7 percent of EU-25 total GDP and small share of its total extra-EU export. On the other hand, even including Russia, the overall CIS share in the world economy is quite limited. It accounted for 3.7 percent of world GDP (2003; PPP-based estimation) and 2.3 percent of global export.
The NMS and EU candidates are much more exposed to trade with the CIS (and they can gain more from its development), and immigration from CIS than the old member states (OMS or EU-15). They are also more dependent on import of the CIS energy resources (mostly from Russia), they have more infrastructural links (mostly transport network). And obviously they are more vulnerable vis a vis any potential episodes of political, economic or social destabilization in CIS.
In 2004, simultaneously with the first and main phase of the EU Eastern Enlargement, the European Commission proposed European CIS and Southern Mediterranean countries the new cooperation framework under the name the European Neighborhood Policy (ENP), with the declared objective of avoiding the emergence of new dividing lines between the enlarged EU and its old and new direct neighbors and strengthening stability, security and well-being in the entire mega-region.
Furthermore, taking into consideration poorly developed institutional basis of trade and economic relations between the EU and CIS countries (based only on Partnership and Cooperation Agreements signed in 1990s) it is very unlikely that the ENP can offer the latter a fast-track and full participation in the EU internal market, similar to that of Norway, Iceland or Switzerland. A gradual building up of these relations based on more or less “deep” free trade agreements (FTA) and selective participation in some segments of EU internal market, a process which will take at least one decade, seems to be a more realistic option at the moment.
The ENP is conducted through bilateral Action Plans and principle of bilateralism is deeply rooted into this policy framework, contrary to regional approach, which governed the recent EU Eastern Enlargement. This does not mean, however, that third-country externalities of bilateral agreements will be completely neglected. For instance, some form of coordination on the EU side of future FTA negotiations with Russia and Ukraine is not excluded. The ENP has covered five CIS countries such as Armenia, Azerbaijan, Georgia, Moldova and Ukraine. Belarus is the potential ENP participant of this process but currently with a “frozen” status, for political reasons.
The EU also launched a mechanism of strategic partnership with Russia, similar to the ENP. Five Central Asian countries are left outside the ENP at the moment but one cannot exclude that some of them (Kazakhstan, in the first instance) will be invited to join this cooperation framework at some point. In order to have a real economic impact on development of CIS countries the ENP initiative must go beyond the narrowly defined EU-CIS trade relations in some selected sectors and address a broader set of issues.
The contemporary global economy is much more sophisticated than it was few decades ago and its complexity determines the need of a broader liberalization and institutional harmonization package involving also freer movement of services, investments and labor based on far going institutional harmonization/ alignment.

Trade between EU & Eastern Neighbours
1. Trade expansion between the EU and its Eastern neighbors will depend not only on trade liberalization per se (first membership of all the CIS countries in WTO, then their FTAs with EU) but also on investment climate in the CIS region, speed of institutional harmonization and, to some extent, on liberalization of movement of people (particularly important for trade in services).
2. Intensification of foreign investment inflow to the CIS region will depend not only on significant improvement of their domestic investment climate (determined by a speed of institutional harmonization) but also on trade liberalization offering potential foreign investors in CIS economies easy access to European markets.
3. Intensification of trade and FDI and the resulting diminishing of the income gap can weaken the income motive of labor migration from several CIS countries and make freer movement of people less politically and socially controversial in the EU countries.
4. Free movement of people is important not only for balancing national labor markets (both in “origin” and “destination” countries) and current account (in “origin” countries). It is also significant for the development of the domestic SME sector in “origin’ countries and learning experience of more mature market economies and democratic societies, therefore strengthening domestic constituencies in favor of democratic and market reforms (in “origin” countries).
5. Institutional harmonization very often involves substantial social, political and (sometimes) economic costs. Without strong incentives these costs may be considered too high by societies and politicians in neighboring countries. The traditional pay-off offered by the EU side to the CIS countries (very gradual improvement of their trade regime with the EU and technical assistance) seem to be insufficient. A stronger set of incentives should probably include at least a faster pace of trade liberalization and liberalization of movement of people. In the case of countries which are explicitly interested in EU membership, such a perspective should not be ruled out a priori, as it is potentially an important and powerful incentive.
There is a quite recognizable fact that the perspective of the EU membership (even if it is very distant in time) can become a very powerful incentive speeding up political, economic and institutional reforms, solving ethnic and political conflicts, mobilizing societies and politicians to accept the most unpopular measures and undertake the most difficult modernization efforts. This is an observation which can be drawn from the previous EU enlargement experience, especially that of Mediterranean countries in 1970s and 1980s, and Central and Eastern European countries, which joined the EU in 2004 and 2007. The same can be said about West Balkan countries and Turkey, despite their quite distant timetable of accession. The situation of CIS countries seem to be less favorable in this respect. In most cases their societies express the limited interest in the idea of deep European integration apart from Moldova, Ukraine and Georgia. But, more importantly, this has been lack of the serious “European offer” from the EU side addressed to these countries and societies, which has made pro-reform integration incentive unrealistic. At the moment it is hard to say whether the ENP give a chance to provide such an incentive but this cannot be totally excluded. Very much will depend on real interest and determination of individual CIS countries to deepen their economic and political relations with the enlarged EU.