Russia's Customs Union partners refuse to block Ukrainian imports

By bne IntelliNews June 30, 2014

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Belarus and Kazakhstan hit Russia with a palpable blow on June 27 as they rejected a Customs Union resolution calling for limits on Ukrainian imports, according to local media.

The move from Moscow was an immediate response to Kyiv's signing of a free trade and association pact with the EU the same day. However, revealing apparent cracks in the Customs Union trade club - which tallies with reports of growing concern over Russia's dominance - both Minsk and Astana suggested they're ready to dig their heels in to forge policy in their own interests.

The signing of the EU agreement by Ukrainian President Petro Poroshenko has enraged the Kremlin. The refusal - under Russian pressure - of predecessor Viktor Yanukovych in November to sign such an EU deal sparked huge protests and saw him toppled by February. The country has since been torn by fighting between pro-Russian militia and Ukrainian forces for control of the east.

Moscow sees Ukraine as a lynchpin for the Customs Union, and the trade club is set to take a major step towards becoming the bloc the Kremlin envisages at the start of 2015 as it transforms into the broader and deeper Eurasian Economic Union (EEU). Russian officials have long threatened Ukraine with reprisals should it make such a strong move towards the West.

Moscow's technical argument is that the agreement threatens domestic producers by allowing European goods to be re-exported from Ukraine under the CIS trade agreements. The Kremlin wasted little time in reiterating its warnings on June 27.

"It's possible that we have to take a series of measures to protect our economy," President Vladimir Putin's spokesman Dmitry Peskov said in televised remarks, according to AFP. Deputy Foreign Minister Vasily Nebenzya said Russia may hike customs tariffs for Ukraine. 

Not for bending

That would hit cash-strapped Ukraine hard, given that around 25% of its exports head to its neighbour. Overall, Russia has threatened to impose sanctions worth an estimated $8bn. Alexey Pushkov, chairman of the State Duma's Committee for International Relations, estimates Ukraine's losses from the closure of the Russian market at up to $40bn.

However, Russia's Vedomosti reports that Moscow's Customs Union partners refused at a Eurasian Economic Commission to join the action. That will not go down well with the Kremlin, but could help stem claims from critics in Belarus and Kazakhstan that the EEU will see them handing over sovereignty to Russia, and that it is also hurting some parts of the economy.

According to a source in the Russian administration however, both Belarus and Kazakhstan have valid technical reasons for abstaining from signing the resolution. “We do understand our colleagues from Kazakhstan and Belarus. Kazakhstan is seeking to enter the WTO and there’s a risk of Ukraine trying to block its accession. Belarus shares a 600km-long border with Ukraine and closing the border is economically unreasonable”, he said, according to

Vedomosti reports that following Astana and Minsk's refusal to bend to pressure, the Kremlin will act unilaterally. However, at the same time, Moscow says it will continue to press them to join the action. 

“This decision involves three parties – Ukraine, Russia and the latter’s partners within the Eurasian Economic Space," said Peskov. "[S]ome protective measures are needed, and we will keep on the dialogue to decide on concerted measures."


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