Dutch voters were adamant in their rejection of the free trade and association deal signed in 2014 between Ukraine and the EU, voting almost two to one against accepting it in a non-binding referendum on April 6.
If no fudge can be found – admittedly a Brussels speciality – then the collapse of the Association Agreement would be disastrous for Ukraine. It has already reduced trade relations with Russia, with both sides slapping sanctions on each other, and instead it is banking on improving economic ties with the EU for its future growth. Without this EU deal, it will be left in limbo between east and west, hemmed in by trade barriers on both sides.
Although the Dutch government is free to ignore the referendum, which was only a “reference” vote, with general elections due in 2017 Dutch Prime Minister Mark Rutte has been put in an awkward position. All of the EU’s other 27 members have already ratified the Association Agreement in parallel with Ukraine’s parliament on September 16, 2014. The Netherlands was the last to go, but Rutte said following the vote that he needs now to consult with his EU partners before committing himself to a course of action. Rutte pledged to respect the result and said ratification of the treaty “cannot simply proceed”.
Even if this obstacle is overcome, the result will inevitably lead to more delays for Ukraine’s reform agenda, which has already become bogged down in a political crisis.
Following the pro-EU Euromaidan protests that ousted the corrupt regime of Viktor Yanukovych in 2014, the country embarked on a road that was supposed to bring it closer to Europe, But the spectacular failure of President Petro Poroshenko's government to make any significant progress on the reforms demanded by its new partners in the West have thrown the whole project into doubt. The International Monetary Fund (IMF) has de facto suspended its aid programme beacause of Kyiv’s foot-dragging. Last year, the IMF sent only $6.6bn out of $10bn of promised aid, while this year a $1.7bn tranche due in February has also failed to appear. The last tranche of IMF money Kyiv received was paid out in August last year.
The disappointment by the people of Ukraine is palpable and Euromaidan activists, such as bne IntelliNews columnist Katya Kruk, who was in the Netherlands this past week to campaign for a 'Yes' vote, are now comparing Poroshenko to his disgraced predecessor. “With each passing day since February 2014, Ukraine’s post-revolution romantic belief that we would automatically get good politicians after what we had been through – more than 100 people were killed in the Euromaidan protests that ousted Yanukovych and his corrupt regime – has died,” Kruk wrote in her column this week.
Poroshenko and his prime minister, Arseniy Yatsenyuk, are desperate to avoid the increasingly likely early elections, as their approval ratings are so low. Indeed, Yatsenyuk’s poll numbers are so poor that his party refused to stand in regional elections in October to avoid the inevitable humiliating defeat at the polls.
All this is extremely embarrassing for the EU, which almost went to war with Russia over Ukraine’s fate. But having nailed its flag to the mast, Brussels will probably now have to push ahead with the free trade and association deal, finding some way to bypass the Dutch people's rejection of the treaty. The Netherlands has been here before: in 2005 they rejected a treaty to establish a new European constituion in a referendum, only to find most of what they had rejected found its way into law through the subsquent Lisbon Treaty.
While Brussels could legally simply ignore the result, happily there is a finesse at hand. The difference between the Association Agreement and a piece of fundamental EU law like the proposed European constitution is that the free trade and association deal is a “mixed agreement”, according to Peter Van Elsuwege, a professor of European Union law at Ghent University. In short, what this means is the EU can issue an “adjusting protocol” to the Association Agreement, which exempts the Netherlands from complying with any of the treaty’s terms, Elsuwege explains in his blog. This would allow the EU to claim that Dutch voters wishes had been respected, while in practice the exemption will have no practical consequences given that the Netherlands has virtually no trade with Ukraine now and if trade does grow, it can still be routed via other EU states.
“Few believe the Dutch will fully oppose the coming into force of the Ukraine Association Agreement. They believe some form of Dutch opt-out from some aspects of the EU’s treaties with Ukraine could be the final outcome of a political process that has only begun to unfold,” says Iana Dreyer, founder and editor of Borderlex.
Without such a fudge, this rejection by the Dutch could undermine the whole EU project, argues Elsuwege. “[Blocking the treaty] would not be a victory for democracy as proclaimed by the Dutch initiators of the referendum but rather the opposite,” Elsuwege writes. “Allowing a relatively small part of the population in a relatively small member state to block the entry into force of an agreement which is approved by the national parliaments of 29 countries and the European Parliament would be very cynical. It would also undermine the consistency and legitimacy of the EU’s external action taking into account that other, largely comparable agreements would remain unaffected.”