Switching over to EU trade standards and nixing duty-free trade with Russia will cost Ukraine €165 billion over the next 10 years, President Putin warned at a meeting with President Petro Poroshenko in Minsk on Tuesday.
Russia will be forced to cancel all preferential trade agreements
for Ukraine’s imports and switch to a standard regime when it
ratifies its EU trade association agreement in September, the
President said.
“In full accordance with the terms of agreement with the CIS
free trade zone and WTO standards, we will be forced to cancel
preferential imports from Ukraine,” Putin said.
Russia will cancel
its duty-free relationship with Ukraine, which will lead to
import tariffs of up to 8 percent affecting 98 percent of
commodities.
Russia insists it needs to protect domestic markets from the
flood of European goods on the Ukrainian market, which will in
turn make Ukrainian goods less competitive. If the trade corridor
of Ukraine is left wide open, Russian, Belarusian, and Kazakh
products are at risk.
In response, Ukrainian President Petro Poroshenko said that he
would like to establish a monitoring group to assess the actual
damage of Ukraine’s association with the EU.
“Today we can agree to set up a monitoring group that will
assess real and not hypothetical potential damage,” said
Poroshenko. “After this damage is calculated we can put in
protection mechanisms.”
Moscow has warned Kiev that signing the Association Agreement
(AA) with the EU would be economic suicide, and Moscow is also poised
to suffer a €2 billion blow, according to Putin.
“Entire sectors of industry and agriculture business will be
hugely impacted, and there will be negative implications on the
pace of economic growth and employment,” the Russian
President said.
Losses will not only be absorbed by Russia, but also by Customs
Union members Belarus and Kazakhstan, he added.
The Minsk talks are the first meeting between Putin and
Poroshenko since early June when the two informally met
on the sidelines of the World War II commemoration ceremony in
Normandy.
Controversy over Association Agreement
The AA sits at the heart of the Ukrainian conflict, as people
first began protesting in Maidan Square in Kiev after the
then–President Viktor Yanukovich decided against signing the
deal.
However, in June the new Kiev government signed the economic part of the Association
Agreement, about a month after Russia, Belarus, and Kazakhstan
sealed their Eurasian Economic Union on May
29 in Minsk. President Poroshenko said the EU association
document will be ratified in September.
Ukraine has strong economic ties with both the EU and Russia,
which is why it wants to forge trade relations with both the
European Union and the Russian-led Eurasian Union. It is Europe’s
second largest country by landmass, has a $176 billion economy,
and a population of 45 million.
The perceived threat is that EU goods will illegally make their
way to Russia via Ukraine. Russia has an agreement with Belarus
to deter such smuggling, but not with Ukraine.
“Even within the Customs Union, EU goods banned from entering
the Russian Federation are now being delivered to us, in this
case, unfortunately through Belarus,” Putin said.
“We are looking at the country of origin – Belarus. A sticker
torn away saying Poland.”
Russia-Ukraine economic standoff
Russia suspended alcohol imports from Ukraine
shortly after it imposed the import ban on agricultural
products from the EU, US, Canada, Norway, and Australia.
Ukraine’s Parliament has also moved closer towards sanctions,
adopting a law that would allow sanctions
against Russia, and most importantly, halt Russian energy imports
through Ukraine.
Energy is a large wedge between Moscow-Kiev relations. In June,
Gazprom Russia’s national gas company said it was stopping deliveries to Ukraine
after chronic late payment and an unpaid bill of over $5 billion . Ukraine imports nearly 50 percent
of its gas from Russia, which in 2013 amounted to 27.7 billion
cubic meters. If Ukraine cut off Russian gas transit, it would
hit Europe, which sources 15 percent of its energy from Russia.
Article source: http://rt.com/business/182868-russia-ukraine-europe-trade/
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