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EU-Ukraine deal postponed, in part

Ben Waldron (Reuters, AFP)
September 16, 2014

Ukraine's deputy foreign minister has resigned in protest after the delay of a key part of the new EU-Ukraine Association Agreement. So why is the deal struck between the EU, Ukraine and Russia so controversial?

Symbolbild Ratifizierung des EU - Ukraine Abkommens
Image: Sean Gallup/Getty Images

The Ukrainian and European parliaments ratified a controversial association agreement on Tuesday, though in a compromise, a key measure in the agreement was delayed from taking effect for over a year in order to assuage Russian fears. Below, DW outlines the agreement's most contentious points.

A highly symbolic pact

The EU-Ukraine Association Agreement provides for closer economic ties and symbolizes Ukraine's move away from Russian influence. Former Ukrainian President Viktor Yanukovych's refusal, under Russian pressure, to sign the association agreement last year precipitated weeks of violent protests in Kyiv's Independence Square, and ultimately led to Yanukovych's ouster.

Current Ukrainian President Petro Poroshenko signed the association agreement with the EU this past June. "What a great day," he said at the signing of the agreement. "Maybe the most important day for my country after independence day," he added.

Ukraine is of deep historic and cultural significance to Russia, which for its part is strongly opposed to an agreement that would draw Ukraine out of its orbit and closer to Europe.

Russian President Vladimir Putin met with his advisory Security Council on Monday to discuss the potential consequences of such an agreement taking effect.

"There will undoubtedly be serious consequences for Ukraine and Moldova's signing," Russian Deputy Foreign Minister Grigory Karasin said at the time the agreement was signed.

Russian fear of European flood

The association agreement provides for a lowering of tariffs on Ukrainian goods flowing into the EU, but as part of the compromise, the reciprocal lowering of Ukrainian tariffs on European goods will be delayed until the end of 2015. Russia had complained that relaxed trade rules would indirectly flood the Russian market with cheap European goods.

In response, Moscow had threatened to impose harsher trade conditions on Ukraine if the association agreement went into effect as planned on November 1. Russian authorities objected to the deal, believing it would force both Russian and Ukrainian businesses to compete with European products.

Russian Prime Minister Dmitry Medvedev issued a warning Monday that Russia would be watching to ensure "there is no hidden implementation of these [trade] rules."

Deal buys time for a precarious Ukrainian peace

The compromise, negotiated by EU Trade Commissioner Karel De Gucht, Ukrainian Foreign Minister Pavlo Klimkin, and Russia's Minister of Economic Development Alexei Ulyukayev, was also agreed to with the aim of lessening tensions as fighting rages between pro-Russian separatists and the Ukrainian military in the country's east.

"It's a very complicated situation. It's a war situation," De Gucht told the "Wall Street Journal." "If this can contribute to calming down the pressure, it's a good thing."

"This ongoing process needs to be part and parcel of a comprehensive peace process in Ukraine, respecting the right of Ukraine to decide on its destiny as well as its territorial integrity," a joint statement from the three ministers read.

But some of Ukrainian president's strongest supporters have been fiercely critical of the deal. Deputy Foreign Minister Danylo Lubkivsky has submitted his resignation in protest, saying the delay was sending, "the wrong signal to everyone, the aggressor [Russia], our allies, and most importantly, the citizens of Ukraine."

Russia flexes economic muscle

Most analysts believe Ukraine and the West had little choice in agreeing to Moscow's terms, given Ukraine's deep economic ties to Russia.

Russia is Ukraine's largest trading partner, with the latter exporting about one-fourth of its goods to its neighbor to the east. Potential Russian trade restrictions on Ukraine would be felt immediately, while the benefits of free trade with Europe would not be felt for over a decade.

The EU tried to alleviate any potential short-term damage to the economy of Ukraine by lifting tariffs immediately on most products, and offering a 1.6-billion euro economic assistance package.

But the immediate effect of Russian trade restrictions would be too much to bear, according to officials. "The current state of the Ukrainian economy is such that the shocks dealt some industries, such as engineering, would simply be too much for the country to bear," incoming EU Commission Vice President Valdis Dombrovskis told Kyiv's Evropeiska Pravda news website, as reported by Agence France Presse.