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Russia to respond with prohibitive duties to Ukraine’s association deal with EU

March 14, 2014, 16:48 UTC+3 MOSCOW

VTB chief Andrei Kostin says Russia reasonably sees vulnerability of its domestic market as one of the key threats emanating from Ukraine’s association deal

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VTB chief Andrei Kostin

VTB chief Andrei Kostin

© ITAR-TASS/Mikhail Metsel

MOSCOW, March 14. /ITAR-TASS/. Ukraine’s association agreement with the European Union will inevitably bring about Russia’s prohibitive duties, says VTB chief Andrei Kostin.

“Russia reasonably sees vulnerability of its domestic market as one of the key threats emanating from Ukraine’s association deal. Russia’s market will be flooded by less costly and more qualitative goods from the EU if the current Russian-Ukrainian trade rules remain effective after the agreement is signed,” he said. “Introduction of Russia’s prohibitive duties will become inevitable. As a result, competitiveness of Ukrainian goods in Russia and member-states of the Customs Union of Russia, Belarus and Kazakhstan will decrease.”

Kostin warned that Ukraine should not hope that EU member-states that had just overcome the crisis would modernize its economy at their own expense.

“In turn, the competitive part of Ukraine’s exports to the EU, mainly agricultural goods, will be strongly limited by quotas,” he said. “It is worth noting that more than two thirds of a draft association agreement on 906 pages are devoted to quotas and customs duties. By the way, ordinary Ukrainians do not know much about this. As for agriculture, around 400 export items will face quotas or a complete ban," Kostin added.

Economic aspects of Ukraine’s development aggravate to a greater degree its smooth integration with the European Union, says VTB chief Andrei Kostin.

This process would be difficult and even devastating for the Ukrainian economy, he told the international economic forum of CIS member-states on Friday, naming among major problems non-competitiveness of Ukrainian goods, the low level of existing technical regulations and tough mechanism of Europe’s decision-making on accession of new countries to its trade zone.

In fact, the banker spoke of the economic misalliance.

“For the past decades the European Union has been in trade talks with third countries exclusively on its own terms,” Kostin said. “The partner of Brussels has no chance to influence the decision-making process and gets only obligations, often unacceptable for newcomers,” he added.

The VTB chief believes Ukraine’s position in relations with the EU will remain unequal for a long while.

“I have an impression that Ukraine’s integration with the EU, in any case under the current conditions of creating an advanced and comprehensive free trade zone will be painful, uneasy and devastating for that country’s economy,” Kostin said.

“The Customs Union makes decisions on the principle of consensus and equality of its members. In turn, a draft association agreement envisages that decisions will be made by three parties - Ukraine, 28 EU member-states and the European Commission. Evidently, the result of any voting in such a composition can be easily predicted,” he said.

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