When is a customs union not a customs union?

The answer to the riddle is now clear: when it is led by Russia.

Following Russia's decision to ban food imports from the EU, Belarus and Kazakhstan have indicated that they will not follow, regarding Russia’s action asunilateral.

This means dismembering the customs union of the Eurasian Economic Union on a huge scale, adding to Russia’s other unilateral sanctions against the three states that have signed Association Agreements with the EU (Ukraine, Moldova andGeorgia), which again Belarus and Kazakhstan refuse to follow. So now, despite the grandiose institutional structures established with the Eurasian Economic Commission (mimicking those of the EU), employing now over 1,000 officials in Moscow, and lofty statements about the supranational nature of this organisation, thetruth is out. In practice the customs union hardly exists.

This failure is far more than a technicality of customs procedures. The customs union was destined by Putin when becoming President again in 2012 to be the centre piece for his priority strategic project, the Eurasian Union. Soon afterwards Belarus and Kazakhstan indicated that this project had to be purely economic, and not political in ways that would dilute their sovereignty. To satisfy his two reticent colleagues Putin had to agree to re-baptise the Eurasian Union as merely the Eurasian Economic Union.

This economic project has led to political conflict on a scale Putin did not anticipate. This is because the whole customs union concept for the post-Soviet states was utterly flawed from the start, and now becomes revealed as the biggest single disaster of Putin’s long career. How was this possible? Presumably because Putin has little sense of economic issues, or of their importance alongside his politico-strategic ambitions.

The customs union, imposing on the others Russia's external tariff regime, is judged contrary to the economic interests of all the others: Kazakhstan wanted a lower common tariff, Belarus had to be bought off with an oil export fiddle, Kyrgyzstan is to suffer by raising its tariffs against China and is to to bought off with $1.2 billion, and Armenia is to be bought off with a gas price discount following the earlier pressurisation with threats to its diaspora community in Russia and threats to its security in relation to Azerbaijan.

Putin did not have the sense to judge that he could have most of what he wanted by way of a common economic space with these countries with a deep free trade area, without the customs union constraint: like Norway in the European Economic Area with the EU, which gives it complete access to the EU single market without having to join the EU's customs union.

Worse than that, Putin chose to punish the states that would not join the project, and which has led him to wage war against Ukraine. Russia may as a result have regained Crimea, which became a stunning example of the law of unintended effects, since it seems indeed that this easy conquest just fell into his lap, without having been planned (so say credible Russian commentators). Here Putin wins huge popularity at home, while adding Crimea to its list of entities needing subsidies.

But Putin's big disaster has been to transform Russia into being seen as the enemy by the large majority of the rest of Ukraine, a stigma that will surely now last for as long as Putin remains President, and which will therefore feature in his political epitaph ('who lost Ukraine?'.

How could he have done this with the Ukrainian people, when on a visit to Kyiv as recently as in May 2013 he claimed Russians and Ukrainians to be but one people? Ukraine thus joins Georgia, which having been invaded by Russia in 2008 also regards Russia as the enemy. And then all the rest are unhappy in different ways, either seeing Russia abuse the customs union with its unilateral actions (Belarus, Kazakhstan), or having to be supplicants for aid to compensate for its ill-effects (Armenia, Kyrgyzstan), or being punished for not joining the Customs Union (Moldova, as well as Ukraine and Georgia).

Back home in Moscow consumers are about to experience declining choice and quality and rising prices through Putin's decision to escalate the sanctions tit-for-tats. Only the grossest propaganda campaign of disinformation and outright lies (e.g. Kyiv is run by 'fascists')for the time being persuades the Russian masses that this is yet another great patriotic war. Russians know how to stand alone and suffer.

Putin shows himself to a vicious and powerful operator at the tactical chessboard once again with his various manoeuvers in and around Ukraine, but he has become for Russia a strategic economic and political disaster. When will Russians see this? While nobody seems to know, realities will pierce through the propaganda in due course.