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Russia, Ukraine to look at ways to avoid Russia’s ban on imports of Ukrainian foods

December 01, 2015, 9:13 UTC+3 MOSCOW
The parties will be represented by Russian Minister of Economic Development Alexey Ulyukayev, European Union trade commissioner Cecilia Malmstrom and Ukrainian Foreign Minister Pavlo Klimkin
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© Denis Vyshinskiy/TASS

MOSCOW, December 1. /TASS/. Russia and Ukraine will make yet another, and probably the last, attempt to avoid a Russian ban on imports of Ukrainian-made goods and the cancellation of the free trade zone at a trilateral ministerial meeting in Brussels on Tuesday.

The parties to the talks will be represented by Russian Minister of Economic Development Alexey Ulyukayev, European Union trade commissioner Cecilia Malmstrom and Ukrainian Foreign Minister Pavlo Klimkin.

The talks are tasked to remove risks for the Russian economy stemming from the implementation of the trade-and-economic section of Ukraine’s association agreement with the European Union, which was signed in 2014.

The economic section of the agreement provides for the establishment of a free trade zone and regulates such areas as market access, trade in energy sources, cooperation in agriculture, transport, metallurgy, space exploration, research, tourism, business activities, protection of intellectual property, dispute settlement procedures and taxation terms.

The trilateral Russia-Ukraine-EU talks on September 12, 2014 yielded an agreement on postponement of the implementation of the agreement on a comprehensive free trade zone between Ukraine and the European Union till the end of 2015 and on preserving a free trade regime with Ukraine within the Commonwealth of Independent States (CIS) for this period. The sides were to use this time to find a compromise on a number of problems of concern for Russia and reach legally binding documents.

Russia is afraid that zero customs tariffs on European imports to Ukraine will be fraught with their uncontrolled movement to Russia, which might pose problems for Russian manufacturers.

Other issues of concern for Russia are linked with technical regulation, veterinary and phytosanitary measures, customs administration and energy, Russian Minister of Economic Development Alexey Ulyukayev said earlier.

Cancelation of Free Trade Zone and Food Embargo

Currently, Ukraine, like other countries of the Commonwealth of Independent States, enjoys a free trade regime with Russia. It means that Ukrainian-made goods are imported in Russia tax free.

If the sides fail to reach a compromise, Russia will impose a ban on foods imports from Ukraine and will replace the free trade zone by a most favored nation regime from January 1, 2016. Hence, Russia’s ban of food imports from the European Union will be applicable to Ukraine too.

In such a situation impacts on Russian businesses in Ukraine will not be very strong, Russian Deputy Minister of Economic Development Alexei Likhachev said, adding that a limited number of companies would need support. Russian businessmen are aware of possible risks and are getting prepared for the worst possible scenarios. Many are withdrawing their assets from Ukraine.

Russian Prime Minister Dmitry Medvedev said possible losses of the Ukrainian economy could be rather big. Despite shrinking trade between the two countries, the sum of losses may amount to hundreds of millions of U.S. dollars, Medvedev said.

Possible Solutions

To resolve the problem, Russia has offered such measures as setting quotas on Ukrainian goods from the so-called ‘risk group’ in case of the implementation of the association agreement between Ukraine and the European Union. Customs duties will be imposed on goods in excess of these quotas. Such measure does not run counter to the norms of the World Trade Organization (WTO), Likhachev said.

Another solution offered by Russia is to use concurrently Russia’s and the Customs Union’s technical regulations currently in force in Ukraine and the new standards of the European Union for a period till 2025.

Otherwise, re-certification of Russian goods exported to Ukraine will be needed, which is a long and costly procedure, Ulyukayev said. Overhaul of production facilities will require additional funding for laboratory tests and obtaining new certificates of conformity. As a result, in his words, established cooperation ties might be disrupted due to considerable differences in the current technical regulations in Russia and the Customs Union and EU standards.

The Russian minister said Ukraine’s adoption of EU standards is likely to complicate the procedure of customs clearing of goods. "It will be impossible to use the system of mutual recognition of customs control," he stressed, adding that rolling back the most efficient customs cooperation projects will impair mutual understanding and trust between Russia’s and Ukraine’s customs services.

Positive Results but not a Breakthrough

Russian Prime Minister Dmitry Medvedev assesses a possibility of an agreement between Moscow and Kiev on the terms of cooperation after Ukraine’s association with the European Union as extremely improbable.

Trilateral expert-level consultations on these problems were held in Brussels in October and November 2015. At the meeting in October, experts arrived at a conclusion that the European Union’s project on risk settlement after Ukraine’s association with the European Union was unacceptable and decided to look at an option offered by the Russian side, Ulyukayev said. However, the subsequent meeting in November yielded no progress, Likhachev told TASS.

Anticipating the talks on December 1, Ulyukayev said he hoped for positive results. "Our position proceeds from the necessity of preserving trade and economic cooperation to ensure development of trade in the region as an instrument of inclusive economic growth," he said.

Likhachev however told TASS he did not hope for a breakthrough at the talks. "We are waiting for a ministerial meeting. But we have practically no hope that the results of these consultations would be acceptably for all sides. The question is rather will these talks continue after December 1 and could we reach some concrete solutions before January 1, 2016. This date is a kind of point of no return," he said.

Not to Strip Kiev Off Preferences

EU trade commissioner Cecilia Malmstrom said she hopes for a positive outcome of the forthcoming talks. But Russia, in her words, should accept enforcement of the free trade zone agreement between Ukraine and the European Union and not to strip Kiev off trade preferences.

She said the European Commission had demonstrated openness by turning an ear to Russia’s concerns and could offer assistance to ease some of them, such as customs cooperation and interim periods.

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