Few results emerge from EU-Russia-Ukraine trade talks

As anticipated, the Dec. 21 meeting between Russia, Ukraine and the EU to discuss both the Jan. 1 launch of the Ukraine-EU Free Trade Area and the cancelation of the 2011 Ukraine-Russia free trade agreement (as a part of the CIS free trade zone) brought few results and no compromise on contested issues. A report by the eurointegration.com.ua news site, citing those involved, described the Russian side as not being flexible, sometimes contradictory and “not being able to justify its incompetent actions in halting the CIS agreement in regards to us,” wrote on his Facebook page Taras Kachka, who played a key role in drafting the Ukraine-EU Free Trade Area. European Trade Commissioner Cecilia Malmstrom said the EU offered to cooperate on sanitary and veterinary norms, but Russia rejected its proposals. “Russia had very many demands and some of them indicate that a free trade zone simply doesn’t make sense,” she said.

Ukraine and the EU refused to consider Russia’s concerns on their free trade, said afterwards Russian Economy Minister Aleksei Uliukayev. When confronted with whether the talks were worth conducting at all, Uliukayev said that Russian President Putin’s Dec. 16 decree (cancelling Ukraine-Russia free trade area) with could be canceled if they were successful. He said the talks succeeded in achieving a transition period in technical regulations to allow for adhering to both CIS and EU standards, though they could not agree on the deadlines on the transition. Afterwards, Malmstrom declared the Free Trade Area talks to be concluded and offered to launch a negotiating process once implementation begins on Jan. 1, but Uliukayev insisted that they continue even after the free trade agreement is halted Jan. 1 “on new conditions.” To which Malmstrom said Russia would have to remove cancel its Ukrainian export restrictions imposed the same day.

The same day of the talks, Russian Prime Minister Dmitry Medvedev signed a resolution on Dec. 21 imposing ban on Ukrainian food imports that takes effect Jan. 1. 

Zenon Zawada: The consequences of the cancelled Ukraine-CIS free trade agreement will definitely have a negative effect on Ukrainian producers. However, we can hardly talk about some critical hit on the Ukrainian economy. The role of the Russian market for Ukrainian exporters decreased heavily over the last two years. In 10M15, the share of Russia in Ukraine’s total goods export was 12.8% vs. 19.1% a year ago and 29% in 2011. We anticipated the trend to continue in 2016 with exports to Russia falling below 10% of total Ukrainian commodities exports, with such moves of the Russian government only intensifying the declining trend.

In regards to Russia’s ban on imports of Ukrainian food, it’s clear that this decision won’t be painful any more. Total supplies of Ukrainian food to Russia amounted to a mere USD 0.2 bln in 10M15, or just 1.9% of Ukraine’s total food exports. This embargo has practically existed for years, when considering food exports to Russia amounted to USD 1.6 bln in 10M13 and USD 0.8 bln in 10M14. The approaching launch of the Ukraine-EU free trade area served as a useful informational pretext to feed the Kremlin’s anti-Western propaganda among the Russian public.

So Ukraine is already far down the path of economic diversification. In Russia’s case, rather than cooperating with the EU and fostering economic ties with Ukraine regardless, it has chosen the path of hostility in hopes that this aggression will change the minds of the Ukrainian people. Instead it’s a path of self-destruction.