Ukraine refuses to yield to Russia on EU trade

Ukraine has said there is no chance of postponing or changing its EU free-trade pact despite Russia’s threat of sanctions.

Ukrainian foreign minister, Pavlo Klimkin, told press in Brussels on Monday (7 September): “The first of January is the final date [for entry into life] of the pact. It’s an ultimate decision taken jointly by Ukraine and by the European Commission”.

“There’s no chance to influence this by the Russian side or any other side … there’s no chance of changing the agreement”.

He spoke after meeting EU trade chief Cecilia Malmstroem and Russian economy minister Alexei Ulyukayev.

The trilateral talks are designed to address Russia’s claims the trade treaty will cause customs problems, health regulation issues, and dumping of cheap EU re-exports on the Russian market.

But Klimkin, like many EU diplomats and officials, believes Russia is trying to use the talks to stymie the pact.

He said there's “no kind of proof” that Russia’s stated concerns had any substance.

He also said Russia’s threat to impose a trade embargo on Ukraine after 1 January makes a mockery of the process.

“If Russia is ready to take political decisions about prohibition of Ukrainian exports, then what kind of substance are we talking about?”.

Ukrainian agricultural exports to Russia already fell by 76 percent, to $175 million, in the first seven months of the year compared to the same period in 2014 due to the politics of the crisis.

It stands to lose $1.5 billion a year in industrial exports if Russia’s embargo goes ahead.

But the EU treaty is important to Ukraine for strategic as well as commercial reasons, by anchoring its economy in the single market and paving the way to deeper EU integration.

Klimkin, in Brussels on Monday, also met Nato chief Jens Stoltenberg i.

He said Stoltenberg is to visit Kiev by the end of the month in a “historic and symbolic” first-ever trip by a Nato chief.

There’s no prospect of Ukraine joining Nato in the near future.

But the visit, which is to see Nato inaugurate its embassy in Ukraine, also underlines Ukraine’s right to pursue a sovereign foreign policy despite Russian complaints.

Russia sanctions

Klimkin spoke the same day the French president, Francois Hollande i, told press in Paris that he's ready to propose lifting EU sanctions on Russia if the peace process works out.

He noted the two sides “almost completely” stopped shooting at each other in the past week.

He added if Russia lets Ukraine hold credible local elections on 25 October, including in Russian-occupied territories, then he would "personally advocate for lifting the sanctions".

Hollande’s olive branch does not signal a change in EU policy, however.

An EU official told this website the economic sanctions are designed to expire at the end of January if peace terms are fulfilled.

She said there've been no discussions at EU technical level on early lifting.

She also noted the EU recently renewed its Russian visa ban lists due to Moscow's ongoing non-compliance.

“The president of France can make a declaration … but we’re not there yet”, she said.

Syria factor

The Ukraine crisis has unfolded in parallel with EU-Russia co-operation in other areas, notably the recent Iran nuclear deal.

But EU and US diplomats are wondering why Russia has begun a military build-up in Syria.

Over the weekend, the US asked Greece, a fellow Nato state, to close its airspace to Russian military overflights.

An EU source said the US had made a similar request to Turkey.

Another EU source added the build-up could be linked to the Ukraine situation, with Russia trying to show the West it has to be reckoned with in geopolitical terms.

“I don’t know if it [the Syria build-up] is directly linked to EU sanctions”, he said.

“But it raises the stakes. The message is typically Russian: ‘We’re here and you have to reckon with us’. Meaning: 'You have to make deals with us'.”

Ukraine red lines

For his part, Ukraine president Petro Poroshenko i, on his last visit to the EU capital in August, set out his “red lines” on normalising Russia relations.

His informal paper, sent to the EU foreign service and seen by EUobserver, says Russia must: withdraw its forces from east Ukraine; seal the border; give back Crimea, and release Ukrainian prisoners.

The paper says the EU “should exclude ‘business as usual’ with Russia before status quo ante is restored. It should ensure that EU individuals and legal entities strictly abide by the sanctions in letter and in spirit”.

It also warns, in a premonition of the Syria developments, that “Russia [has] literally started to treat instability as a commodity and [to] deliberately foment it for trade-offs”.

Business as usual?

Poroshenko’s warning on “business as usual” also came ahead of a breakthrough in EU-Russia energy relations.

German firm BASF, last weekend, renewed an asset-swap deal with Russia’s Gazprom which is to see them jointly build a second leg of the Nord Stream gas pipeline to Germany.

Austrian firm OMV, British-Dutch firm Shell, and France’s Engie are also to take part.

The BASF deal was initially suspended due to Russia’s annexation of Crimea.

Judy Dempsey, an analyst at the Carnegie Europe think-tank, said its renewal is “just like the old days, before the European Union imposed sanctions”.

The Nord Stream upgrade will, critics say, weaken Ukraine by bypassing its gas transit network and increase EU dependence on Russia.

But the EU’s energy commissioner, Miguel Arias Canete i, in a reply to MEPs’ questions, said Monday he has no objections to the project, as long as Gazprom respects EU antitrust laws.

He added it will help EU energy security via “diversification of … transit routes”.