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Issue #583 | Forest Products

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2014 Media Kit
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Russia to set own barriers in response to Ukraine’s EU trade pact

By: | at 04:37 PM | Channel(s): International Trade  

With Ukraine set to sign a free trade pact with the European Union on Friday, Russia has said it is likely to respond with trade barriers without seeking approval from Belarus and Kazakhstan, its partners in a customs union.

Ukraine is due to sign the second part of its association agreement with the EU on June 27. The pact has been at the heart of the conflict between Russia and Ukraine since last year, when Moscow put pressure on Kiev to shun the EU in favor of joining its own Eurasian Economic Union.

Ukraine’s Moscow-backed president Viktor Yanukovich agreed to do so and triggered an uprising that led in February to his own overthrow, swiftly followed by Russia’s annexation of Crimea and a pro-Russian separatist rebellion in eastern Ukraine.

“We have a possibility of imposing customs-tariff measures at Russian government level,” First Deputy Prime Minister Igor Shuvalov was quoted by Interfax news agency as telling reporters in Russia’s Black Sea resort of Sochi on Monday.

Moscow fears that an influx of EU products into Ukraine will lead it to dump some of its own production in Russia. It is also concerned that Ukraine may re-export EU products into Russia, avoiding duties that Russia imposes to protect its own output.

Customs duties in Russia would put at risk some of Ukraine’s exports, which mainly consist of base metals, grains, machinery, equipment and processed food. Ukraine sends 24 percent of its exports to Russia, worth $15 billion a year.

Shuvalov did not say what kind of trade barriers were likely to be imposed, but said the move would not require approval from Belarus or Kazakhstan, raising the prospect that these could potentially re-export Ukrainian goods to Russia duty-free within the Eurasian Union.

Steel & Milk

Russian steelmakers and dairy producers have been among those lobbying for protection once Ukraine’s free trade agreement with the EU comes into force. The agricultural inspection agency Rosselkhoznadzor has said it is prepared to toughen the requirements for Ukrainian imports.

Although many Russian firms make heavy use of imported supplies from Ukraine, President Vladimir Putin told an agriculture meeting in the southern city of Stavropol last week it was “absolutely certain” that Russia would not be able to maintain its zero duty on imports from Ukraine.

In an attempt to allay some of Russia’s fears, the EU agreed last week to hold high-level talks with Moscow on the implementation of the agreement, something it had previously rejected.

Ukrainian Foreign Minister Pavlo Klimkin told reporters in Luxembourg on Monday that his country’s EU trade accord would ultimately be positive for its economic relations with Russia too, adding: “If there is concern, we are ready to conduct effective consultations further.”

The EU will also sign association agreements with two other former Soviet republics, Georgia and Moldova.

Belarus is Russia’s closest ally, relying on Moscow for cheap energy and serving as a buffer zone between Russia and NATO nations.

However, Belarus’s President Alexander Lukashenko has criticized referendums staged by pro-Russian separatists in Ukraine and has warned Moscow not to take any more ex-Soviet territory after annexing Crimea.

President Nursultan Nazarbayev of Kazakhstan, the second largest post-Soviet economy after Russia, told Putin in March he “understood” the logic of Moscow’s actions in Ukraine.

In a sign that the crisis in East-West relations over Ukraine could be easing, Putin asked Russia’s upper house to revoke the right it had granted him to order a military intervention in defense of Ukraine’s Russian speakers. (Reuters)