On page six of the Labour-NZ First coalition deal, under the innocuous heading ‘other’, is an agreement to work towards a free trade agreement (FTA) with Russia. Given Winston Peters’ previous criticism of the National Government over its suspension of an FTA with the Russian-led Eurasian Customs Union, the move should hardly come as a surprise.
For Mr Peters, a past cabinet minister in both Labour and National-led governments, the policy continues his somewhat maverick brand of politics. In May last year he addressed the British House of Lords, imploring the UK public to be ‘bold’ and ditch the European Union (EU). And, following Trump's victory in the U.S. presidential election, he labelled the result ‘a dramatic lesson’ for the political establishment.
The most puzzling aspect of Peters’ plan for a Russia FTA, however, is its timing. New Zealand’s diplomats are currently working toward a lucrative free trade agreement with the EU, which happens to be a more significant trade partner than Russia. Although Prime Minister Jacinda Adern has come out publicly to say the EU deal—not the Russian FTA—is the priority, the announced policy is worth exploring because it breaks ranks with like-minded governments.
The National government very nearly concluded an FTA with Russia in March 2014. The political landscape changed, however, in the wake of the Crimea secession referendum—which the U.N. General Assembly declared invalid—and Moscow’s backing of pro-Russian separatists in the Donbass. It shifted further when, on 17 July, Flight MH17 was shot down out of the sky over Eastern Ukraine. International investigators later concluded that a Buk-missile, brought across from Russia and fired from rebel-held territory, had downed the plane. In solidarity with New Zealand's Western allies, former Prime Minister John Key recalled then Trade Minister Tim Groser from Moscow; his view being that negotiations could not continue while Russia deployed troops into Ukraine. Since then, the door for talks to restart has remained open. But there has been one proviso: further talks must adhere to a timeframe that reflects the European nations' attitude to the conflict.
New Zealand, as outlined in the Defence White Paper 2016, has long supported a rules-based international order. With regard to Crimea, the government saw an important principle at stake—that national borders should not be changed by force. Moscow’s actions were motivated by a desire to block the Ukrainian government’s moves toward closer relations with the EU. Moreover, under the 1994 Budapest Memorandum, the United States and Britain are—morally, if not legally— guarantors of Ukraine's territorial integrity.
In coordination with the US, the EU’s first sanctions against Russia came in the Spring of 2014. For restrictions to be lifted, Russia needs to implement the Minsk II agreement in its entirety. Negotiated by the leaders of France, Germany, Ukraine and Russia in February 2015, the arrangement calls for a ceasefire, withdrawal of heavy weapons 15km from either side of the front-line and the holding of local elections to give rebel-held regions greater autonomy. Moscow is yet to use its considerable influence to meet the agreement.
There are three sets of EU sanctions, and each one has a different target. The first is diplomatic, placing asset freezes and visa bans on persons connected to the Russian government, the second focuses on vital sectors of the Russian economy such as energy, defence and finance; while the final measure deals specifically with Crimea. Despite Moscow diversifying its pool of foreign investment beyond Europe and the U.S., lending restrictions are costly. Under these financial sanctions, European companies are prohibited from lending money to Russian state-owned banks for more than 30 days.
For all President Trump’s effusive praise of Russian President Vladimir Putin, a relaxation of the Obama-era sanctions is unlikely. In August, the Republican-controlled Congress overwhelmingly approved fresh sanctions against Russia: Trump grudgingly signed the Bill, knowing there were enough votes to override a presidential veto. Washington’s programme goes further than the EU’s and hones in on Russia's enormous energy sector. One restriction, for instance, prohibits U.S.-based entities from selling drilling technology needed to access oil and gas reserves.
The economic sanctions that Europe’s imposed require unanimous reaffirmation every six months. And despite various pressures, the EU has remained united. While countries like Hungary, Italy and Greece, have expressed their scepticism about the sanctions, they are yet to obstruct their renewal. This is partly explained by the leverage of Germany and France— who make up half of the Euro area GDP—and how they fulfil their role in the Minsk agreement. Outside these two, no other European country or institution plays a substantive role in these talks. Meanwhile, in the case of Russia’s counter-sanctions, the impact isn’t as great as one would imagine — for no other country does the loss exceed 1% of GDP.
Beyond the comparatively minor benefits of a NZ-Russia FTA, there are those who argue that New Zealand, as a sovereign nation, should be able to decide who our trade partners are. But with New Zealand far removed from events in Europe, there can be a tendency to lose sight of what is at stake: Moscow’s ongoing involvement in the Donbass, on top of its annexation of Crimea, violates the basic principles of 1975 Helsinki Final Act. The multifaceted Act—which counts both Ukraine and Russia as signatories— underlines the importance of respect for national sovereignty; it also dictates that participating states will refrain from the threat or use of force against each other.
Bearing in mind the EU’s existing sanctions and the emphasis New Zealand continues to place on a rules-based international order, now seems a rather strange time to revive talks with Putin’s government.
Christian Novak recently completed a Master of Philosophy in history at The University of Sydney. His thesis provided a diplomatic history of the international community’s response to the Kosovo Crisis of 1998–99.