Thursday, July 24, 2014


Russia

Fears Of Trade War Arise As Ukrainian Exports To Russia Grind To A Halt

The Nekhoteyevka border crossing between Russia and Ukraine. Ukrainian border officials say Moscow has declared all goods from Ukraine to be "high risk."
The Nekhoteyevka border crossing between Russia and Ukraine. Ukrainian border officials say Moscow has declared all goods from Ukraine to be "high risk."

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KYIV -- It's beginning to look a lot like a trade war.

At midnight on August 13-14, commercial traffic leaving Ukraine for Russia ground to a halt. Russian officials began demanding that trucks be completely unloaded, inspected item by item, and then reloaded. They began seizing and questioning the authenticity of documentation.

According to the Ukrainian Employers Union, a trade association that represents many of Ukraine's largest exporters, border officials said Moscow has declared all goods from Ukraine to be "high risk."

The Russian government denies any such decision has been made. Ukrainian officials are urging caution. But politicians and analysts seem confident the move is the latest in a string of measures Moscow has taken in an effort to block Kyiv's closer association with the European Union.

Russian Federal Customs Agency spokesman Akhmed Khasyanov was curt in his response to queries from RFE/RL's Ukrainian Service.

"We know what is happening," Khasyanov said. "But the only thing I can tell you is the Federal Customs Agency has no comment on this matter."

But the Ukrainian Employers Union said Ukrainian firms stand to lose more than $2 billion under existing contracts if nothing is done to resolve the matter quickly. The organization appealed to Prime Minister Mikola Azarov to discuss the issue with Moscow.

Azarov on August 15 issued a statement confirming "certain complications" at the border but saying that the media had exaggerated the problems. He confirmed that Ukrainian and Russian officials will meet on August 16 to discuss trade issues.

Ukraine's customs officials said traffic from Russia into Ukraine is proceeding normally; however, there have been some reports of backups on the Russian side of the border as well.

Pattern Of Pressure

The latest tangle at the border seems to be part of a pattern of Russian pressure against Ukraine that has intensified in recent weeks. Ukrainian trade into Russia has already been subject to intensified controls since late last month. On July 29, Russia's consumer protection agency banned imports from Ukraine's Roshen Confectionery Corporation, a major chocolate producer.

​Moscow claimed it had found benzopyrene, a carcinogen, in Roshen products. Since that assertion, health inspectors from Moldova, Tajikistan, and Kyrgyzstan have tested Roshen's goods and given them a clean bill of health.

WATCH: A Look Inside Ukraine's Roshen Chocolate Factory
A Look Inside Ukraine's Roshen Chocolate Factoryi
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August 16, 2013
In what appears to be a brewing trade war, Russia's consumer protection agency has banned imports from Ukraine's Roshen Confectionery Corporation, a major chocolate producer, claiming it had found a dangerous carcinogen in the chocolates. But the Russian findings have not deterred Ukrainians and Russians alike from buying their favorite chocolates directly from the factory in Kyiv. (Video by Yevhen Solonyna, RFE/RL's Ukrainian Service)

Roshen spokeswoman Inna Petrenko told RFE/RL that Roshen is refraining from comment because the firm wouldn't want any misunderstandings "in the context of recent events."

And those "recent events" appear to have more to do with politics than with economics.

Moscow has been growing increasingly wary as Kyiv's relations with the European Union have grown closer. Ukraine has already initialed an Association Agreement and a Deep and Comprehensive Free Trade Agreement (DCFTA) with the bloc and might finalize them at the EU Eastern Partnership Summit in November in Vilnius.

Moscow wants Ukraine and other post-Soviet countries to instead join its Eurasian Customs Union, which so far comprises Belarus, Kazakhstan, and Russia. It has been applying unambiguous pressure on Armenia, Kyrgyzstan, Moldova, and -- especially -- Ukraine to turn away from the EU and sign on to its customs union.

Russia 'Will Be Forced'

Sergei Markov, a Russian political analyst with close ties to the Kremlin and a former State Duma deputy from the ruling United Russia party, does not hide the political motivation behind Moscow's trade barriers.

"If Ukraine signs the suicidal DCFTA with the European Union -- I can't make myself call it a free-trade zone; it is a semicolonial model that Brussels is going to propose to Ukraine in Vilnius -- and if Ukraine opens itself to cheap and possibly low-quality goods from the European Union, then Russia will be forced automatically to close its doors to all goods from the territory of Ukraine," Markov says.

Question image

Quiz: Russian Food Bans

Moscow hasn't hesitated to close its market to a wide array of foodstuffs in the past decade of selective trade wars against its neighbors.

Konstantin Zatulin, director of the Institute of Countries of the CIS in Moscow, agrees that this is a political dispute.

"From the general political point of view, I can say that any ban that arises in relations between Russia and Ukraine usually is not concrete complaints so much as they are consequences of the course Ukraine has chosen in its desire to join the free-trade zone with the European Union," Zatulin says.

He argues that the Roshen factory was selected as an early target because it is owned by Petro Poroshenko, who served as foreign minister under former Ukrainian President Viktor Yushchenko and helped craft Ukraine's intensifying relationship with the European Union.

"You can't simultaneously agitate against economic cooperation with Russia and at the same time make profits in the Russian market," Zatulin says.

He adds that it makes no difference that both Ukraine and Russia are members of the World Trade Organization, saying that Russia will find many loopholes in WTO rules and that consideration of Ukraine's complaints "will drag out for years."

Bohdan Danylyshyn, economy minister in the government of former Ukrainian Prime Minister Yulia Tymoshenko, urged Kyiv to apply to the WTO immediately and adopt reciprocal measures against Russian goods entering Ukraine. He wrote on Facebook that "as the date approaches for the signing of the Association Agreement and DCFTA with the European Union grows nearer, such actions on the part of Russia and other countries [in the Eurasian Customs Union] will only intensify."

Anatoliy Kinakh, chairman of the ruling Party of Regions' parliamentary faction, agrees, saying, "There is a huge political component in Ukraine's trade with Russia. Considering that Ukraine has irreversibly decided to sign the agreements of association and free trade with the EU, we must be ready for the pressure to intensify. We must develop measures to defend our economic interests."


RFE/RL correspondent Robert Coalson contributed to this story from Prague

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