Why Putin Went to War to Keep Ukraine Out of the European Union

And Why Ukraine Feels The Need To Join

Vladimir Putin’s war against Ukraine began, not in February of this year, but February eight years ago when Putin seized Crimea and installed puppet governments in two eastern areas of Ukraine, areas that he now calls “independent republics.” Crimea, by the way, held 80% of Ukraine’s oil and gas deposits, mostly in the Black Sea, and had been a major source of export income.

What triggered Putin’s sudden aggression, the first military seizure of territory in Europe since the 1940s (accompanied by a similar seizure of part of Georgia the same year)? The fact that, via the Euromaidan protests, the Ukrainian people dethroned his puppet in Kyiv, a man named Viktor Yanukovych. The uprising began when, on orders from the Kremlin, Yanukovych reneged on a pact with the European Union intended to lead to full membership. Joining Europe was hardly the only issue. Yanukovych had been tagged as the most corrupt ruler in the world. Putin’s military moves began on Feb. 20, two days before Yanukovych fled to Russia. Putin now says this year’s “special military operation” will not end until Ukraine meets his assorted demands. These range for acquiescing to Putin’s territorial conquests to adding a “neutralization” clause to the Constitution. The latter would prevent Ukraine from joining “any bloc,” not just NATO (which is not on the agenda anyway), but also the EU.

In the era of Brexit, it's a stunning to think that desire to join the EU prompted ordinary Ukrainians to rise up en masse against a Russian-ruled autocrat. What drove these people to the streets? It was a desire to become an independent, liberal, prosperous, European democracy. Part of this package is attaining European living standards, and this cannot be done without EU membership. Compare Poland, which hitched its star to Western Europe after the fall of the Berlin Wall in 1989, to Ukraine, which remained too tethered to Russia for too long. The Russian leverage has been so strong that, as late as 2002, someone in Moscow could shut down Ukraine’s electricity just by throwing a switch (thankfully, that’s no longer the case). Poland’s per capita GDP has tripled since 1990 while Ukraine’s per capita GDP halved in the 1990s and, as of 2020 was still 25% below its level three decades ago (see chart above).

Compare six Eastern European states to Russia and three others which failed to do so, including Ukraine in the chart below. Back in 1990, the average per capita GDP in each group was 44% of per capita GDP in the Euro-currency zone. By 2019, among those who joined the EU, per capita GDP rose to 70% of the Eurozone level; but Russia and the other three actually fell further behind to just 39% of the Eurozone level. Moreover, among the six EU-joining countries, those who started off the poorest in 1990 did the most catching up. Relatively poorer Poland and Lithuania grew faster than the richer Czech Republic. While Czechia is still the richest of these six, the gap among them is smaller, as is the gap between them and the rest of the EU.

By contrast, Russia’s economic recovery stalled out after 2013. Whether coincidentally or not, that’s during the same period when Putin shifted from focusing on economic recovery to recreating the Russian/Soviet empire. Out of 15 post-Communist countries, Russia suffered the third lowest growth in per capita income during 2013‑19, just 0.5% per year versus an average of more than 3% for the rest. The only countries worse off were Moscow’s Belarusian satellite and the victim of its aggression: Ukraine.

Why does integration with the EU countries, and eventually full EU membership, make such a difference for Ukraine? For one thing, while the EU has created association pacts with non-members as part of a transition, full membership requires that countries meet certain standards called the “Copenhagen criteria.” The latter promote not only the rule of law, certain democratic norms, and anti-corruption measures, but also market-oriented economic reforms that promote growth as well as eventual adoption of the Euro currency. Countries typically take several years to make themselves ready.

While Boris Yeltsin once spoke about Russia joining the EU, Putin has never wanted to do so, on the grounds that it would entail EU interference in Russian affairs. Instead, he organized a countergroup called the Eurasian Economic Union, whose members are former Soviet territories or former satellite states.

Along with economic and political modernization, EU membership also entails full integration into the single market through greater volumes of trade and foreign direct investment (FDI). The latter refers to a foreign firm setting up operations on a country’s soil or else buying a controlling stake in an existing firm. It’s not volatile “hot money” flows.

On the trade side, in the six post-Communist EU members discussed here, the ratio of trade (exports plus imports) to GDP averaged 70% in 1990. By 2019 it had nearly doubled to 130%. The cumulative stock on inward FDI has mushroomed from a negligible amount in 1990 to 60% of GDP as of 2020. It’s been long established that countries grow faster if they enjoy higher levels of trade and inward FDI. That’s partly because trade and inward FDI introduce new technologies and new management strategies, and partly because they enable countries to specialize in what they do best as well as increase the force of competition.

Over the years, Ukraine has gradually reoriented both its economy and overall society away from Russia and toward the countries of the EU. In one telling move, in 2019, the newly established Orthodox Church of Ukraine received permission from the Patriarch in Istanbul to become independent, rather than remain under the sway of the Russian Orthodox Church.

On the trade side, Ukraine shifted toward the West. The peak value of Ukraine’s trade with Russia came in 2011 at $49 billion. By 2020, it had plummeted to just $7.2 billion. By contrast, in 2021, trade with the EU totaled to more than $58 billion. When Russia dominated Ukraine’s trade, Ukrainians served as “the hewers of wood and drawers of water,” i.e., primarily exporting agricultural goods, energy products and basic metals, along with some machinery. As with other countries, trading more with the EU will upgrade Ukraine’s exports to more knowledge-intensive items, thereby helping the entire economy upgrade. That’s what will raise living standards.

FDI is also playing a big role in the economic upgrade. The stock of inward FDI rose from a negligible level in 1990 to 32% of GDP by 2020. The top investors were the US at 20% of all FDI, followed by Germany, and the UK. Russia does not even show up in the top ten. Importantly, half of this investment has come in the fields of software, renewable energy and logistics. Full EU membership will increase both FDI and trade.

To the Ukrainian people, prosperity, democracy, independence and becoming a part today’s European community are not separate goals but indivisible threads in one tapestry. No wonder Putin sees Ukraine as a threat. If the Ukrainian people can do this, might not Russians start asking: why not us?