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Nikolai Holmov

“Customs Union May Withdraw from FTA with Ukraine”

Presidential advisor to Vladimir Putin, Sergei Glazyev seems to have made a rather clear statement regarding the future of Russian-Ukrainian trade, business and R&D should Ukraine and the EU sign the pending Association Agreements in November.

English: Single markets in Europe: European Economic Area and Common Economic Space, author: Datasta, source: Wikimedia Commons

English: Single markets in Europe: European Economic Area and Common Economic Space, author: Datasta, source: Wikimedia Commons

There is perhaps a need to meddle with the technicalities of the trade bureaucracy if Ukraine is going to dump the Russian GOST standards systems and replace them with EU standards – undoubtedly there will be many existing and agreed contracts relating to GOST standards to which Ukraine, at some point in the future will no longer work to, for example.

There is perhaps a legal necessity to address such issues for the future. There is, however, no need to politicise such issues as has currently been happening unless the singular intent is to use the issue as a political tool – which is exactly what has happened in the past week.

I wrote on the day the media began talking of a “trade war” – that was never a “trade war” or even about trade:

“I would be surprised if this matter was not resolved by the end of the month.

After all amongst the products that will be considerably delayed in arriving with Russian customers are products such as trains and rolling stock, maintenance parts for the aforementioned, steel, pipes and other metals for construction use, jet and prop aviation engines, transformers and road building aggregate and materials – discounting chocolate and dairy produce. All items where replacements are not easily and quickly sourced within Russia – at least not yet.

The aim of this Russian exercise is not to cause lengthy delays to Russian businesses relying on these Ukrainian products – but to cause panic in Kyiv and amongst Ukrainian producers, whilst providing a little taste and fair warning of the pain that may lay ahead if it signs the Association Agreement.”

And so it proved to be that the “trade war” that never was – which is why I never used the phrase – concluded within a week. The Russian point made and Ukrainian response robust – at least publicly.

If we are to believe Arseniy Yatseniuk, leader of the opposition Batkivshchyna Party, “Now they have played the last card by banning all Ukrainian exports.” inferring there will be little else that can follow. However, Yatseniuk will undoubtedly rue such an ill-thought out statement (not for the first time). There are in fact several other very hurtful sticks in the Russian armoury to beat Ukraine with that can be employed at any time.

The last Russian window of opportunity to scupper the EU-Ukrainian association agreement lays not within the next few months prior to any signing (as it seems all media and political mutterings would like to suggest) , but within the period between signing and ratification – and that will take 2 years at least.

Ergo shenanigans aplenty await Ukraine – in numerous guises across not only political, business and fiscal spheres, but also within the social sphere, and of an order of magnitude and frequency that Ukraine is yet to experience since independence. Ukraine will have to be prepared to take the pain.

In relation to the agreements, only when all 28 EU Member States, the EU institutions and Ukraine have ratified the agreements can those pro-Ukrainian forces within the EU, and pro-EU forces within Ukraine afford to relax.

Despite the Customs Union (read Russia) framing the Ukrainian future choice in purely economic terms whenever and wherever it can, Russian concern relates to its desire to keep a nation with a perceived shared history, culture and language looking toward it favourably. The perception of Ukraine turning its back on Russia for the EU will present difficult questions for those in the Kremlin when ordinary Russians in huge numbers begin to ask whether the chosen Ukrainian direction is in fact the right direction – and shouldn’t Russia be following that route too?

For Russia, there is much more to play for than the EU has at stake – thus during the period between any signing and eventual ratification Yatseniuk’s “last card” comment will surely come back and haunt him. Fortunately for him, he is unlikely to have to deal with it being in opposition – and likely to stay there for the next few years at least.

Returning to Glazyev’s statement, will the Customs Union withdraw from the FTA it has with Ukraine? Not immediately – but that doesn’t mean it won’t if EU-Ukrainian agreement ratification becomes a real possibility in the years ahead.

Ukraine would do well to assess how swiftly Russia can replace the Ukrainian suppliers it currently relies upon – as somebody within the Kremlin will certainly be working on that scenario right now.

This post was originally published on OdessaBlogger

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UK citizen living in Ukraine since 2005 after working 15 years for The Crown. Actively engaged in civil society, blogger, Chatham House member, policy wonk, contributer to numerous Eastern European PhD papers, books and papers.

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