Business, Economics and Jobs

Russia: Take that, Ukraine!


Erstwhile pals: Viktor Yanukovych (L) and Vladimir Putin.



What happens when a big country disagrees with its smaller neighbor? It launches a trade war, of course.

At least that’s the apparent logic in Russia, where customs officials have imposed exhaustive and potentially crippling inspections on all Ukrainian goods crossing the border.

Launched last week, the checks are part of what critics say is Moscow’s heavy-handed effort to dissuade Ukraine from signing an association agreement with the European Union in November, which the Russian authorities fear would pull Kyiv further away from its traditional patron to the north.

Russia instead wants Ukraine to join the Moscow-led customs union, which also includes Belarus and Kazakhstan. But Ukrainian President Viktor Yanukovych, once seen as a pro-Russian lackey, has resisted the Kremlin’s overtures and indicated his desire for Ukraine’s European integration.

The Russians, Ukraine’s second-largest trading partners, aren’t happy.

“We are preparing to tighten the customs regime just in case Ukraine takes the suicidal step of signing an agreement of association with the EU,” Sergei Glazyev, an advisor to Russian President Vladimir Putin, told journalists Sunday, according to the state news agency RIA Novosti.

AlthoughMoscow says its move is a one-time affair, Kyiv says it would hurt perceptibly if applied permanently. The Federation of Employers of Ukraine, a major trade union, claims the restrictions could cost the country up to $2.5 billion by the end of this year they remain in place.

Despite Glazyev’s warning, the Russian authorities are presenting the customs regime changes as mostly economic.

Glazyev said the measures would be necessary to prevent the possible influx of European products onto the Russian market if Ukraine signs the Deep and Comprehensive Free Trade Agreement (DCFTA) at a November summit in the Lithuanian capital Vilnius.

This is hardly the first time the two post-Soviet neighbors have engaged in such a thinly veiled diplomatic dispute.

Just last month, Russia banned the import of Ukrainian chocolates by major candy manufacturer Roshen, citing substandard quality. It came just after Putin’s largely unsuccessful visit in July to Kyiv, where the Russian leader once again failed to persuade Yanukovych to join the customs union.

More prominent, however, was the recent series of so-called “gas wars” between the two countries. Pricing disputes prompted Russia to cut off natural gas supplies to Ukraine in 2006 and 2009, when deliveries to Europe were also disrupted during bitterly cold winters.

Experts say the most recent trade spat reflects Moscow’s increasingly forceful attempt to influence Ukraine’s geopolitical strategy.

“It’s not called ‘suicide,’ it’s called ‘homicide,’” said Arkady Moshes, an expert on Russia and Ukraine at the Finnish Institute for International Relations, referring to Glazyev’s comments.

“What they’re trying to do is to use the instruments of coercion and economic pressure to finally persuade Ukraine not to sign the agreement with the European Union.”

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Ukrainian Prime Minister Mykola Azarov, who reportedly spoke with his Russian counterpart Dmitry Medvedev on Sunday evening, batted down rumors of a developing trade war between the two countries.

It remains unclear whether Ukraine will actually sign the key agreements in November. The EU has been adamant that Yanukovych release former Prime Minister Yulia Tymoshenko, a rival who was jailed in 2011 for alleged abuse of office but who critics say was locked away for posing a political threat.

The EU is Ukraine’s largest trading partner. Last year, it exported about $17.2 billion to Europe, while Russia received about $16.4 billion in Ukrainian goods, according to European Commission figures.