First part of EU-Ukraine treaty to enter into life in June

11.03.14 @ 18:33

  1. By Andrew Rettman
  2. Andrew email

BRUSSELS - The European Commission has offered to drop import duties for most Ukrainian goods in a move to enter into life in June and to save Ukrainian businesses €500 million a year.

  • Ukrainian wheat: The blue and gold is repeated on the flag of Ukraine, once called the "bread basket of Europe" for its good soil (Photo: valdemar.fishmen)

Commission chief Jose Manuel Barroso noted on Tuesday (11 March) “this will of course not be the only measure of support to Ukraine” and that his officials will “next week” spell out conditions for a €1 billion emergency loan to prop up its treasury.

His trade chief, Karel De Gucht, said: “We are all aware of the economic plight facing Ukraine right now. This trade action is more than a gesture - it is an economic life-line.”

De Gucht noted that MEPs should debate the trade move before their summer recess, paving the way for adoption by EU states in June, with Ukrainian exporters to feel the benefits “just weeks after.”

The customs waiver was originally part of an EU-Ukraine free trade agreement which Ukraine’s former leader, Viktor Yanukovych, refused to sign, prompting the protests which led to his fall.

The EU is also due to sign parts of a political association treaty in March.

It aims to sign the whole trade and association deal after Ukrainian presidential elections in May. Tuesday’s customs move is to stay in place until 1 November, but De Gucht noted that if something goes awry on the treaty signature process “we could prolong the measure.”

The customs move will contain some restrictions designed to protect EU companies.

For one, the new administration in Kiev must certify that goods originated in Ukraine to stop other countries abusing the system by re-exporting to the EU via Ukraine. It must also agree not to impose new fees to divert the benefits from Ukrainian firms to state coffers.

Meanwhile, some 5 percent of Ukrainian industrial products, including chemicals, are to see “lower” tariffs rather than zero tariffs.

About 18 percent of Ukrainian agricultural exports - including cereals, pork, beef, poultry, and some processed foods - will be subject to “tariff rate quotas,” or zero tariffs but only up to a certain limit of export levels.

For his part, Ukraine’s interim PM, Arseniy Yastenyuk said in parliament the same day the country is facing “an economic catastrophe.”

He also warned he will have to implement austerity measures to get the EU and international loans: “Ukraine will undergo a difficult period - cost reduction and decrease of social standards. But such harsh measures will give an opportunity for economic growth in a short time.”

Yanukovych also spoke on Tuesday from his bolthole in Rostov-on-Don, Russia.

He accused the three EU foreign ministers - from France, Germany, and Poland - who signed a transition agreement on 21 February, the day before he fled, of “trampling” on the deal by endorsing the Yastenyuk government, whom he denounced as “bandits” and “fascists".

The interim government is dominated by the Batkivshchyna party of former Ukrainian PM Yulia Tymoshenko and by Svoboda, a radical nationalist group.

The idea that they are “bandits” and “fascists” is a theme in Russian propaganda. But civil society activists in Ukraine are also concerned by some of the new appointments.

Ludmyla Denysova, who now runs the labour ministry, is dogged by corruption allegations from her time as Tymoshenko’s social affairs minister between 2007 and 2010. In one example, she appointed her own daughter, who had no relevant experience, as chief of state inspection for control of prices in the Crimean city of Sevastopol.

The new minister for internal affairs, Arsen Avakov, and energy, Yuriy Prodan, have a similar image problem.

For its part, the British daily The Independent on Tuesday reported that lawyers hired to dig up dirt on Tymoshenko found 85 foreign bank accounts linked to her or her relatives. One of them, in NatWest bank in London, contained €48 million.

The information came from a report, seen by the British paper, which was drawn up by Lawrence Graham, a London-based law firm hired by Yanukovych.

But Tymoshenko’s lawyer, Serhiy Vlasenko, told The Independent it is “a direct lie … part of a big, dirty propaganda war.”