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Trade with us, or else

Roman Goncharenko / aiAugust 21, 2013

The media describe it as a "trade war" while the governments in Moscow and Kyiv try to downplay the issue. Observers say Russia's halt of Ukrainian imports was to pressure the country into abandoning its EU aspirations.

The Hoptivka car border crossing on the Ukrainian-Russian border Alexander Mazurkevich/RIA Novosti
Image: RIA Novosti

The seven day trade war, the most recent dispute between Russia and Ukraine, is over. Russian customs authorities informed the Ukrainians on Tuesday that there would not be any additional controls and border checks. The controversy was about measures that had led to an almost complete halt to the import of Ukrainian goods into Russia.

On August 14, the Ukrainians had sounded the alarm: Russia had classified all Ukrainian imports as "risky." In effect that meant that customs officers had to give special attention to checking Ukrainian goods. Whether food or steel - everything had to be unloaded and examined. It wasn't long until there were endless queues of trucks and train carriages at the border. The Russian measure might have cost Ukraine a total of up to $2.5 million (1.9 million euros) in damage, a Kyiv trade organization estimated.

A trade war?

It was the worst trade escalation between the two sides since the "gas wars" of 2006 and 2009, when Russia cut off gas into pipelines that supplied Ukraine, leaving much of its former Soviet sister republic in the cold. The government in Kyiv is trying though to downplay the current quarrel with Moscow. "There will be no trade war," Prime Minister Mykola Asarov wrote on his Facebook page. Ukrainian President Viktor Yanukovych had a phone conversation with his Russian counterpart, Vladimir Putin, but neither wanted to comment on the content of the call.

Russian President Vladimir Putin, right, and his Ukranian counterpart Viktor Yanukovych make a joint statement to the media in Novo-Ogaryovo residence. Sergey Guneev/RIA Novosti
Neither Putin nor Yanukovych wanted to make a big deal out of the trucks waiting at border crossingsImage: picture-alliance/dpa

So far there's only speculation as to what exactly is the reason behind the fuss. The Kyiv daily "Dserkalo Tyschnja" claimed to know that it's all part of a Russian plan to undermine Ukraine's closer ties with the European Union.

Moving west

A consultant to the Kremlin, Sergei Glasjew, indirectly confirmed this reading of the situation. The Russian customs office had been preparing for the possibility of Ukraine signing an association agreement with the EU, Glasjew told the Interfax news agency. Moscow was looking to prevent European goods from being imported to Russia in the future at cheaper prices via Ukraine.

By the end of November, Ukraine hopes to sign the European Union association agreement, which would also plan for the establishment of a free-trade zone. It is seen as a milestone on Ukraine's way towards the EU - even if there are no concrete plans for eventual full membership in the 28-nation bloc.

Russian pressure ...

Glasjew warned Ukraine not to sign the deal with Brussels, describing it as a "suicidal" step. Instead, Ukraine should join a customs union with Russia, Belarus and Kazakhstan, he said. The incentive is that the country would then be able to import cheaper gas from Russia, Glasjew explained in a newspaper interview.

Such statements are not new. Putin for years has been trying to woo Ukraine into that customs union. The message from the Kremlin is that the Russian market is a lot better for Kyiv because of traditional ties and similar standards. But Ukraine so far has resisted and preferred to rather look towards the EU for its future. It's a move backed by the population where according to a DW poll, some 55 percent want their country to sign the association agreement still this year.

EU, Ukraine and Russian flags
Ukraine is caught between the EU and Russia both geographically and economically

Experts in Moscow believe Russia was simply loosing patience. "Russia is pursuing a path to motivate Ukraine to join the customs union," Alexander Dorofejew who heads a consultancy company in the Russian capital, told DW. The customs dispute was a signal: Ukraine would have to decide between Russia and the West, Dorofejew said.

"The Kremlin is nervous because Ukraine seems to be undecided," Ruslan Grinsberg, head of the economic institute at the Russian Academy of Sciences, told DW. Kyiv keeping a distance to Russia was not going down well with Moscow.

... might drive Kyiv westwards

Holding up Ukrainian imports was not the only signal sent by Moscow. Since mid-July, Ukrainian sweets company "Roshen" can no longer ship its deliveries to Russia over alleged quality issues. It's a major blow to the chocolate company run by Kyiv oligarch Petro Poroshenko. He is seen as being in favor of closer ties with the West rather than Russia.

Whether Russia will manage to pressure the Ukraine into closer ties, remains to be seen. Ricardo Guicci of the Berlin Economics Center believes that Moscow's bullying could be counterproductive. He's member of a German consultancy group to the Ukrainian government.

"I believe this might actually bolster support for the association agreement," Guicci told DW. The customs controls were a form of harassment, he said. The incident was simply proof that closer ties with the EU were "the only way forward."