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23rd Mar 2019

Ukraine and Russia on path to trade war over EU pact

Ukraine and Russia are set to meet on Monday (19 August) to discuss a trade dispute which has seen Ukrainian products piling up on the Russian border for the past week.

An EU-Ukraine political and trade agreement, which may be signed in November, has reportedly triggered the spat, with one top aide to Russian President Vladimir Putin describing the upcoming EU deal as "suicidal" for Ukraine.

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  • Ukraine president Viktor Yanukovich (r) is facing pressure from Moscow to join their trade bloc. (Photo: kremlin.ru)

“We are preparing to tighten customs procedures if suddenly Ukraine makes this suicidal step of signing the EU association agreement," said Sergei Glazev, who advises Putin on the Customs Union, a Moscow-led regional trade bloc, on Sunday.

The EU pact was first discussed in 2008 and is designed to integrate Ukraine into the EU’s political and economic sphere.

It includes, among other measures, provisions for stamping out corruption and putting an end to a system of selective justice, which has seen political opposition leaders sent to Ukrainian jails.

Ukraine already benefits from some preferential import tariffs, such as on machinery products, into the EU.

But similar products for the Russian market have been stuck at the border for several days.

Russian customs officers are preventing them from entering the country, incurring potentially massive losses for Ukraine-based companies.

Ukrainian steel producer Metinvest told the Financial Times that its products have been facing ever stricter border controls and delays since 13 August.

The Ukrainian Employers’ Federation says exports are being held up without explanation.

“De facto, there is a complete halt on Ukrainian exports. Actions of the Russian side could incur losses ... up to $2.5 billion in the second half of this year,” said the federation in a statement last week.

The group represents some 8,500 companies, which collectively account for 70 percent of Ukraine’s GDP.

For its part, Moscow last Friday denied that the customs measures are motivated by politics.

One Russian lawmaker said the delays are caused in part by Kiev’s refusal to join the Customs Union, composed of Russia, Belarus and Kazakhstan, but described them as being administrative in nature.

Meanwhile, Gennady Onishchenko, who heads Russia’s consumer rights agency, told Interfax: "We have a long and specific list of complaints ... relating to the protection of consumer rights."

He added: “If you want to call this a trade war, then call it a trade war."

Russia is one of Ukraine's largest trading partners.

Around a quarter its exports are shipped to Russia, while just over a third are shipped to the EU.

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