Russia makes its move

A CU committee recently approved a list of goods to which member states can apply anti-dumping and other protective measures. Among certain goods from Brazil, China, South Africa and South Korea, Ukrainian metal companies popped up in the list of target manufacturers.

A curious anomaly? A surprise?

Not in this situation. As a result of the CU action, Ukrainian producers will face limitations in Belarus, Kazakhstan and Russia's markets while Russian industrialists run riot. The Ukrainian factories may be forced to look to African and Asian markets instead.

To informed observers, it looks like Russia has begun an operation designed to bring Ukraine back into its fold.

There were early warnings of this already: claims by Russian PM Vladimir Putin in March and June that the DCFTA would see restrictions on Ukrainian imports; Russia's offer of cheap gas if Ukraine stays out of the EU deal; claims by Russian experts that joining the CU would yield Ukraine up to $9 billion a year and two percent extra GDP growth.

With the metals trade move, the warnings have ended and the retaliation has begun.

Or perhaps, the metals move is in fact a final warning. Russia is running out of time on its Ukraine game - the normative base of the CU comes into force on 1 July. Until that time Russia can still play nice with Ukraine. If it 'loses' Kiev to the DCFTA, it will lose both political and economic influence in the post-soviet space.

Moscow has for a long time been trying to create a counterbalance to the EU, in the understanding that the enterprise would fail without Ukraine on board.

Back in 2003, a time of great Russian-Ukrainian friendship, it floated the idea of a Single Economic Space (SES) for post-Soviet countries. The then Ukrainian leader Leonid Kuchma was so isolated on the world stage he had no other options. But even in this context, Ukraine limited its participation based on its constitutional red lines.

The political implication of the SES was clear enough - subservience to the Kremlin.

The CU idea surfaced in 2007 when Russia, Belarus and Kazakhstan concluded relevant agreements. Russia knew the CU would be a flop without Ukraine, but began putting pressure on Kiev only when Ukraine made progress in its EU free trade talks.

We should not forget that in 2012 there will be presidential elections in Russia: perhaps Putin aims to make Ukrainian absorption into the CU into a personal victory to help him win.

Ukraine is fighting back in a cold blooded way. In Moscow on 7 June Ukrainian PM Mykola Azarov said Ukraine should work with both the EU and the Commonwealth of Independent States, the Russian-dominated club of 11 post-Soviet countries. The statement indicates that Kiev wants to find a compromise solution with Russia instead of moving into a trade war, a bad thing for all concerned.

Ukraine will not turn away from its European choice because it has profound and long term implications for the future of the country. It will not turn away entirely from Russia because it cannot risk political and economic isolation from its giant neighbour. A win-win solution must be found for all sides.

The writer is an analyst at the Kiev-based Institute of Ukrainian Policy