Russia accused of trade war against Ukraine

8/15/2013

KIEV, Ukraine  — Ukrainian politicians today accused Russia of starting a trade war to pressure the country against signing a cooperation pact with the European Union, bringing relations between the two former Soviet states to a new low.

Restrictions that Moscow slapped on Ukrainian products this week have left scores of trains and trucks queued at the border, according to a leading business group, which has warned of a “complete halt of Ukrainian exports.”

Moscow has been critical of Kiev’s plans to integrate economically and politically with the EU and lessen its dependence on imports of oil and gas from Russia. Last month, Russian President Vladimir Putin traveled to Kiev to attend a religious ceremony and again stressed that Russia should be Ukraine’s closest ally.

After Kiev pressed on with its negotiations with the EU, Russia banned popular Ukrainian confectionary products from its stores late last month, citing safety concerns. This week, it imposed tough restrictions on scores of other products, by adding Ukrainian companies to a list of risky producers.

The Russian government acknowledged traffic problems on the Russian-Ukrainian border, but did not give further details, according to the Interfax news agency. Ukraine’s government has shied from openly criticizing Russia, still a major trade partner, saying it was working on solving the difficulties.

Ukrainian opposition leader Arseniy Yatsenyuk today accused Russia of trying to bully Ukraine into joining a Moscow-led economic alliance, the Customs Union, and prevent it from signing a free-trade deal with the EU in November.

“This trade war has reached a threatening scale,” Yatsenyuk said in statement. “Even bad neighbors don’t do this, let alone partners.”

Even Ukraine’s pro-government, Russia-friendly Party of Regions protested the move by Moscow.

“One should not speak this way to neighbors, to sovereign states,” said Volodymyr Oliynyk, a Party of Regions parliament member. “Ukraine is being coerced into joining the Customs Union in an uncivilized manner.”

The business group, the Federation of Ukrainian Employers, said the trade restrictions could cost Ukrainian companies up to $2.5 billion in losses.

Analysts agree the move is an ill-disguised threat to Ukraine not to leave the Kremlin’s sphere of influence.

“Moscow is pushing for Ukraine to join the CIS Customs Union,” said Tim Ash, chief emerging-markets economist at Standard Bank.

He said the Ukrainian president, Viktor Yanukovych, will soon have to end his balancing act between Moscow and Brussels and take a stand.

“The Yanukovych administration probably wants to keep both options open, but the EU is now saying ‘sign up in November, or we have to re-negotiate the whole deal, which will take years’,” Ash said.