Russian warns Ukraine and EU not to implement Association Agreement

By bne IntelliNews September 25, 2014

bne -

Russian economy minister Aleksei Ulyukaev has warned Ukraine and the EU in a letter not to implement their Association Agreement signed on September 15. Otherwise Russia will place restrictions on its trade with Ukraine. Postponement of implementation of the free trade provisions of the agreement until 2016 was one of the terms of the so-called Minsk peace accords that brought an end to fighting in the Donbass on September 5.

"We take note that the launch of the full or partial implementation of the provision of this agreement by Ukraine before the expiry of the deferral period - until December 31 2015 - will mean for the Russian side the actual entry of the agreement into force and the appearance of the risks we spoke before," Ulyukaev said in the letter. "We reiterate our intention to adjust if necessary the preferential regime between Russia and Ukraine in order to minimise negative problems related to the change in the trading regime between Ukraine and the EU, not excluding other possible ways to protect the Russian economy," he continued.

Prior to ratification by Ukraine and EU, the sides together with Russia signed a commitment in Brussels on September 12, whereby EU and Ukraine declared they would not implement the trade provisions of the Association Agreement until December 31 2015, although EU would continue to provide unilateral access to its markets to Ukraine.

Later however Ukraine's prime minister Arseny Yatsenyuk said that the government would start implementation of the Association Agreement immediately. Yatsenyuk said on September 15 that "the government will implement the agreement starting from the very first day", as quoted by Interfax.

"The Ukrainian government has not decided to delay or adjust the free trade zone provision of the Association Agreement. The government's position is clear: we will begin to implement this agreement the day after it is ratified," justice minister Serhiy Petrenko said on the same day, as quoted by Interfax.

Under Ukraine's constitution, the government decides domestic economic policy and is answerable to parliament. This means the decision to implement a foreign trade agreement that has been ratified by parliament should be the government's prerogative. Yatsenyuk may also have been seeking domestic political advantage as the country enters a parliamentary election campaign. However, he may have been referring  to political and administrative reform measures mandated by the Association Agreement, rather than implementation of the terms of the Deep Free Trade Agreement.

The letter from Ulyukaev referred to the "Trilateral Group" comprising Russia, Ukraine and the EU now proceeding to develop amendments to the Association Agreement that will "remove the concerns of the Russian side."

In comments made to the Wall Street Journal, EU enlargement commissioner Stefan FŸule said that Russia is living in a "virtual reality" regarding its interpretation of the compromise over the Association Agreement. According to the EU, the compromise decided on September 12 referred only to provisions on trade, whereas Ulyukaev's letter refers to the entire Association Agreement.

"You could compare the texts" FuŸle told the WSJ. "You just need to put together the text of what has been agreed and what the Russian interpretation is, to understand that this interpretation is from a different world, a parallel world," he said. "The Russians will have to abandon this virtual reality," he added.

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