Russia Threatens Heavy Tariffs Against Ukraine in Response to Free Trade Deal

In retaliation to an impending free trade deal between Ukraine and the EU, Russia has announced that it will be placing new tariffs on Ukrainian goods exported to Russia. The announcement comes shortly after attempts by the EU to mediate an agreement with Russia on the matter broke down.

free trade

The trade deal in question, dubbed the EU-Ukraine Deep and Comprehensive Free Trade Area, is a free trade agreement that has been in negotiations since the presidency of Viktor Yanukovych, the Russia-friendly former leader of Ukraine who was ousted in 2014. Since that time, Russia has heavily opposed the trade deal, ostensibly because of concerns that the terms of the agreement would interfere with its own free trade deal with Ukraine. Because of political conditions in Ukraine, the move to finalize the agreement was put off earlier this year. The deal, now set to go into force on the first day of 2016, has been the cause of several sessions of mediation between the EU, Ukraine and Russia.

 

Failure on the part of the European Union to meet Russia’s demands, called “impossible” by Lana Zerkel, Ukraine’s deputy foreign minister, resulted in a complete breakdown of the negotiations on Monday.  By December 16th, however, Russian officials had already made the decision to suspend Russia’s free trade zone with Ukraine if the EU deal went through in its currently proposed form. The decree authorizing this suspension, signed and authorized by Vladimir Putin on the aforementioned date, takes effect on January 1st, the same day that would mark the beginning of free trade between the EU and Ukraine if the agreement proceeds according to current plans. Accompanying this suspension will be a ban on Ukrainian agricultural products, one of Ukraine’s main exports to Russia. Ukrainian President Petro Poroshenko stated at that time that the move would damage Ukraine’s economy due to its close economic ties with Russia, but that his country was prepared to deal with the potential ramifications of the end of free trade with Russia.

 

“We have to defend the economic interests of Russia, that’s why we started the sanctions and stopped free trade with Ukraine,” said Alexey Ulyakaev, Russia’s minister of economic development in a statement regarding the decision. Mr. Ulyakaev acknowledged that Russia’s economy would also be negatively affected by the end of the free trade zone between the two countries. He also stated, however, that the impact on Russia’ economy would be minimal and that protecting Russian economic interests was more important.

 

European Union officials have criticized the move by Russia, with some saying that Russia’s demands were unreasonable. Cecilia Malmström, the EU’s trade commissioner, has said that a deal could have been worked out with European cooperation if Russia had been willing to compromise, but that “there wasn’t enough flexibility from the Russian side to do that.” Malmström was among the European trade officials that had been working with Russian and Ukrainian leaders to find a solution that would satisfy all parties before the negotiations broke down.

 

The end of the negotiations and the suspension of the Russia-Ukraine free trade zone comprise part of a larger series of economic events that have set Russia and Europe at odds with each other in recent weeks, with Ukraine often in the middle. The European Union recently voted to extend the sanctions against Russia that resulted from the annexation of the Crimean Peninsula for another six months, carrying them on until at least June of next year. Concurrently, the Ukrainian government announced that it would be defaulting on a major eurobond loan that had been issued to it by Russia in order to keep the terms of an agreement it made for an IMF bailout. Following that announcement, Russian officials stated that legal action would be pursued in order to force Ukraine to repay the entire amount of the loan, rather than the percentage payment that Ukraine’s government was attempting to renegotiate for.

 

Sources:

http://www.wsj.com/articles/russia-penalizes-ukraine-because-of-its-imminent-trade-deal-with-eu-1450725567

http://news.yahoo.com/russia-suspends-free-trade-deal-ukraine-2016-154025521.html

https://www.rt.com/business/326765-putin-free-trade-zone-ukraine/

http://www.ft.com/cms/s/0/d799d1a0-a8c8-11e5-9700-2b669a5aeb83.html#axzz3v5WejzN0

http://uatoday.tv/news/russia-claims-billion-in-losses-due-to-eu-ukraine-association-558722.html

 

Image Credit:

By MARIAJONER (Own work) [CC BY-SA 4.0 (http://creativecommons.org/licenses/by-sa/4.0)], via Wikimedia Commons


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