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Issue #584 | Breakbulk Quarterly

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2014 Media Kit
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Medvedev warns Ukraine over joining EU trade bloc

By: | at 12:20 PM | Channel(s): International Trade  

​Ukraine’s hopes of signing a free-tradepact and other agreements with the European Union at a summit in November have caused concern in Moscow, which aims to derail Ukraine’s pro-Europe policy and keep the country focused on the former Soviet bloc. It has already warned that Kiev would forfeit its special partner status with Russia if it goes ahead with signing theEUaccords.

Ukraine’s economy is heavily dependent on exports of steel, chemicals and grain, more than 60 percent of which go to the former Soviet market, with Russia, Belarus and Kazakhstan - all members of the Customs Union - the biggest markets.

“I don’t want there to be any illusions ... Practically, for our Ukrainian partners, entry into the Customs Union will be closed,” Medvedev told his deputy premiers during a weekly meeting.

“This is a key political decision that the leadership of Ukraine is making,” he said.

Russia, which would like control of Ukraine’s gas pipeline network, has used the promise of much cheaper gas to try to coax Kiev into the Customs Union, which was set up in 2010 and offers tariff-freetradebetween members. Ukrainian President Viktor Yanukovich dismissed the promise as “humiliating”.

Last month, Russia sounded a warning shot to Ukraine, conducting extra customs checks on Ukrainian imports over several days. Russian President Vladimir Putin has also spoken of possible “protective” measures by Moscow and its Customs Union allies.

More than just losing geopolitical influence in the former Soviet region, Moscow is also concerned that Ukraine’sEUagreement could lead to the re-export ofEUgoods into Russia, mostly tariff-free, where they could threaten sales of Russian-made products.

Swedish Foreign Minister Carl Bildt, speaking during a meeting ofEUforeign ministers last week, criticised what he called Russia’s “economic warfare” against former Soviet countries that aim for closertradeties with the European Union.

Moldova is also seeking freetradeagreements with theEUat a summit ofEUleaders and their counterparts from some former Soviet states in November in Vilnius.

A Russian envoy last week warned Moldova that its pro-Europe drive could cause it to lose its control over the breakaway territory of Transdniestria and lead to a more costly energy relationship with Russia, its main supplier of gas.

The 28-memberEUhas set democratic progress in Ukraine as a condition of any landmark agreements to be signed with Kiev in November and the issue of jailed ex-Ukraine prime minister Yulia Tymoshenko, whom Western governments want to be freed, could still jeopardise any agreements.

The Customs Union gained fresh impetus last week when Armenia announced its intention to join. (Reuters)