Ukraine EU accession talks will be "difficult", European Council President Michel says

Ukraine EU accession talks will be
The formal talks on Ukraine's bid to join the EU are supposed to start in December, but in an understatement, European Council President Charles Michel admitted they will be "difficult" during a trip to Kyiv with Moldovan President Maia Sandu. / bne IntelliNews
By Ben Aris in Berlin November 23, 2023

The President of the European Council, Charles Michel, has predicted that the December summit on Ukraine's accession to the EU will be “difficult”.

Ukraine is getting closer to the EU, but the EU summit in December, where expansion is on the agenda, will be challenging, Michel said at a joint press conference with Ukrainian President Volodymyr Zelenskiy and Moldovan President Maya Sandu in Kyiv earlier this week.

While acknowledging Ukraine's progress towards the EU, Michel said that talks on the eventual expansion of the bloc have major obstacles to clear. Despite the challenges, he said he would make every effort to ensure a favourable decision regarding Ukraine's aspirations at the summit.

There is a growing divide between the EC executive body, which is fully committed to both supporting Ukraine and continuing military and macroeconomic support, and a growing number of member states that are worried about the economic impact of allowing Ukraine into the EU.

European Commission President Ursula von der Leyen threw her support behind Ukraine’s candidature during a trip to Kyiv earlier this month to show solidarity with Zelenskiy.

Hungary has been the most vocal opponent of allowing Ukraine into the union, and Hungarian Prime Minister Viktor Orban remains amongst the closest to Russian President Vladimir Putin out of all EU leaders.

The Hungarian strongman went a step further on November 22, saying that Russia would “never be defeated” in its war with Ukraine and that the EU needs a “new plan of action”.

Hungary condemned Russia’s actions regarding Ukraine from the start, Orban said, but the Western reaction to these actions was wrong.

"What was our strategy? The Ukrainians [would] fight and win at the front line, and the Russians [would] lose. What is the reality? The Ukrainians fight and die. What have we come to? Russia will not lose, and nothing will change in its policy. Therefore we must face the reality. We must switch to Plan B," Orban said, adding that the EU currently has no such plan, instead proposing to continue military and financial aid to Kyiv.

"However, it is totally pointless to simply send money to the Ukrainians, it would lead to nothing," the Hungarian prime minister said, according to Magyar Nemzet.

Although publicly most Western powers still support Ukraine, following the failure of Ukraine’s summer counteroffensive to make any notable progress, more are privately asking: “where do we go from here?” – something that Italian Prime Minister Giorgia Meloni inadvertently admitted to during a prank call from two Russians.

Ukraine fatigue and worries on the part of business are one side of the clash between, as bne IntelliNews described it in an opinion piece, Planet Business and Planet Politics. The Kremlin explicitly rejected this duality in relations between the EU and Russia in Russian Foreign Minister Sergei Lavrov’s “new rules of the game” speech in February 2021, an early warning of the coming conflict that broke out one year later.

The strains on business have been visible after cheap grain exports from Ukraine flooded the local Polish market and caused prices to crash. Poland, and four other Central European countries, quickly banned Ukrainian grain imports in April and defied a European Commission order to lift the ban when it expired on September 15.

More recently, another trade dispute flared when Polish truckers blocked the border crossing between Poland and Ukraine, creating a new flashpoint between the two, complaining that after already losing the profitable Russian haulage business due to sanctions, now they were losing more business to Ukrainian truckers after restrictions on the number of Ukrainian trucks transiting Poland were lifted last year. In the last few days Hungary, Slovakia, the Czech Republic and Lithuania have said they may also join the truck blockade for the same reasons.

However, the gorilla in the room is agricultural subsidies and what will happen to Europe’s agricultural and food businesses if Ukraine is given unfettered and duty-free access to the EU. As bne IntelliNews reported, Ukraine can’t join the EU until the Common Agricultural Policy is reformed. Ukraine would be entitled to a massive €186bn in subsidies if it joined under current rules. Just the agricultural subsidies for Ukraine under the CAP would cost €16bn a year, according to bne IntelliNews estimates, half as much again as the €11bn a year that Poland currently receives from the EU as grants for everything, including both agriculture and infrastructure subsidies.

The massive increase in spending if Ukraine joined the bloc would force deep changes to the structure of EU funding. Contributions by member states will have to be increased and current net recipients, including Poland and Hungary, will become net contributors. Given that decisions on enlargement have to be unanimous, both Poland and Hungary are likely to veto Ukraine’s entry unless the subsidy and contribution regime is radically reformed.

Hungary has already said that it wants the mooted four-year €50bn macroeconomic support package for Ukraine that is supposed to be approved at the EU summit on December 15 to be cut in half. Orban has also said that he will veto a decision to start formal accession negotiations unless a Ukrainian language law that bans teaching in Hungarian in schools for the ethnic Hungarians in western Ukraine is repealed.

The EU says it has found a dodge to avoid Orban’s veto by asking member states to borrow the funds at a sovereign level, something that is not under the control of Brussels, and contribute them to a special Ukraine fund. But clearly the wrangling on all these points has already begun.

Hope dies last

Michel welcomed Kyiv's efforts in implementing critical anti-corruption reforms that are a key element to Ukraine’s bid, as Ukraine still has a very bad corruption problem. Moldovan President Sandu joined the call for the EU to expedite the membership process for both Ukraine and Moldova, citing the urgency of the current situation marked by conflict and insecurity.

Zelenskiy expressed hope that a decision to initiate negotiations on Ukraine's EU membership would be made by the end of the year. Kyiv is due to submit a reform plan that lays out in detail its proposed actions to meet the seven goals set by Brussels in the next week or two.

European Commissioner for Agriculture Janusz Wojciechowski also predicted problems for Ukraine’s accession, specifically connected to the grain business.

Pre-war there were strict import quotas on Ukraine’s export of agricultural goods to the EU under the terms of the Association Agreement. But since the beginning of the war all those customs barriers have been suspended as an indirect way of supporting the Ukrainian economy. The EU market has become the largest recipient of Ukrainian food products and raw materials. The jump in trade has hit the neighbouring countries the most.

Wojciechowski said that since the beginning of the war, Ukrainian exports to EU countries have increased from €7bn to €13bn in monetary terms.

"An additional problem is that most of the exports remained in five neighbouring countries, including Poland, [amountin to] €5bn. We must not only monitor this but also sometimes react. Before the war, the main recipients of Ukrainian goods were the markets of Asia and Africa. Currently, Europe receives the most," he said, noting that agriculture will be the subject of difficult negotiations regarding Kyiv's accession to the EU.

Robert Telus, Poland’s Minister of Agriculture, explicitly highlighted these problems during a meeting of the Council on Agriculture and Fisheries in Brussels on November 22. Telus discussed the issue with his counterparts from the Visegrad Group countries and the coalition of five front-line countries, although few details of the discussion were released.

Telus emphasised the need to find solutions that “do not harm European farmers”, particularly in Poland and the other front-line countries, as Ukraine integrates into the EU. The ministers also discussed the transit of Ukrainian grain through the EU, expressing confidence that the flow is increasing and benefiting all parties involved.

Telus expressed hope that the EU would establish a system to ensure the continued flow of Ukrainian goods to their “intended destinations” and prevent them from stopping and entering the Polish market as soon as they cross the border. In a related move, Zelenskiy this week complained that some 20% of Ukraine’s grain exports are leaving through unregulated grey schemes that the government has no control over, asserting that this has been a major conduit for Ukrainian grain exports, intended for the international markets, ending up on the Polish market instead.