Russia, EU trade talks fail

Kiev set to face retaliation

BRUSSELS, Dec 22, (Agencies): The European Union failed to allay Russia’s concerns about Ukraine’s freetrade accord with the 28-nation bloc on Monday, leaving Kiev to face Russian retaliation through tighter bilateral trade rules from 2016.

Closer ties between Ukraine and the EU, including the free trade deal, were at the heart of a battle for influence between Brussels and Moscow in Russia’s former satellite.

When the then-Ukrainian president, Viktor Yanukovich, ditched the accord in early 2014 under pressure from Russia, protests erupted on the street of Kiev leading to a crisis in which he fled power and a pro-Europe leadership took over.

The European Union and Ukraine delayed implementation of their trade deal by a year out of deference to Moscow’s concerns that it could lead to a flood of European imports across its borders, damaging the competitiveness of Russian exports.

But comments by EU and Russian officials on Monday indicated that numerous meetings between the two sides to try to narrow differences and assuage Moscow’s concerns had failed.

EU Trade Commissioner Cecilia Malmstrom raised doubts about the validity of the Russian concerns, saying some were “not real.”

Concerns

“We have been very open in listening to some of the concerns of Russia. Some of them we think are not real in economic terms. Some of them could potentially be real,” Malmstrom told a news conference following final talks in Brussels.

Russian Economy Minister Alexei Ulyukayev, speaking in Brussels, said there was no deal and Moscow would scrap trade preferences dating back to 2011 for Ukraine as of 2016, when the bilateral EU-Ukraine deal will be implemented.

“An agreement has not been reached. We were left with our concerns on our own and we are forced to safeguard our economic interest unilaterally,” Ulyukayev told reporters. Such retaliatory action will mean that Ukrainian firms will pay duties to export to Russia, which says it needs to protect the competitiveness of its exports to Ukraine.

Malmstrom blamed Russia for showing not enough flexibility, while Ulyukayev said the EU’s trade officials were not serious enough about the talks.

Moscow has sought a legally binding agreement involving the three parties, something rejected by Kiev and Brussels which say no third party should be allowed to amend their bilateral deal.

Ulyukayev said the three sides will go on discussing the situation should issues arise as the deal is implemented.

Yanukovich fled to Russia in early 2014 after protesters were shot on the streets. When pro-Western leaders took over, Moscow annexed Ukraine’s Crimea and subsequently gave backing to a separatist rebellion in east Ukraine.

The economic effect on Ukraine and Russia of any Russian trade retaliation is likely to be muted since their bilateral trade fell off considerably as a result of the conflict in Ukraine, which triggered sanctions on Russia from the West.

The European Union on Monday blamed Russia for the failure of last-ditch talks meant to ease Moscow’s fears about an EU free trade accord with Ukraine that is due to take effect on Jan 1.

“We were quite close to finding some solutions but today there was not enough flexibility from the Russian side,” EU Trade Commissioner Cecilia Malmstroem said after talks in Brussels with top Russian and Ukrainian officials.

“This exercise is now over,” Malmstroem said, detailing repeated efforts over the past 18 months to meet Russia’s demands as the Ukraine crisis pushed ties with Moscow into the deep freeze.

The trade pact is part of a wider EUUkraine association agreement which sparked the overthrow of the pro-Moscow government in Kiev in early 2014.

Moscow claims the trade deal undermines its economic interests in Ukraine, a former Soviet-era satellite, and will allow a flood of cheap EU products into one of its key markets.

Agreement

Russian Prime Minister Dmitry Medvedev said in Moscow earlier: “Neither Ukraine nor the European Union are ready to sign a legally binding agreement which would take into account Russia’s interests.”

Malmstroem said the 28-nation EU had “been very open to listening to concerns from Russia,” even if some of them “were not very real” and, if accepted, would have scuppered the free trade accord.

She said Russian President Vladimir Putin’s decision last week to suspend Moscow’s own free trade accord with Ukraine came as a surprise, as did Medvedev’s announcement of a food import ban against Kiev.

“We agreed to meet with Russia to take stock of concerns they might have. The implication was that Russia would not add sanctions to Ukraine, nor suspend its own free trade accord.”

“We were a bit surprised by Putin’s announcement,” she said.

The EU extended damaging economic sanctions against Russia on Monday amid sharp differences over relations with Moscow which struck back with a furious tirade and its own import ban against Ukraine.

Russia said the decision showed the EU did not really want improved relations so as battle common threats such as terrorism.

“It is necessary to point out that instead of building constructive cooperation to counter the key challenges of our times such as international terrorism, the EU in Brussels prefers to continue its short-sighted game of sanctions,” the Russian foreign ministry said in a statement.

The European Council of all 28 EU member states rolled over the economic sanctions because peace accords -- agreed by France, Germany, Ukraine and Russia at talks in the Belarusian capital Minsk -- would not be fully executed by year’s end as required.

“Since the Minsk agreements will not be fully implemented by 31 December 2015, the duration of the sanctions has been prolonged whilst the Council continues its assessment of progress in implementation,” it said in a statement. EU officials say there can be no let up in sanctions until Russia ensures pro-Moscow rebels in eastern Ukraine stick to the Minsk deal.

Brussels meanwhile blamed Russia Monday for the failure of last-ditch talks meant to ease Moscow’s fears about an EU free trade accord with Ukraine due to take effect on Jan 1.

“We were quite close to finding some solutions but today there was not enough flexibility from the Russian side,” EU Trade Commissioner Cecilia Malmstroem said, describing 18 months of repeated efforts to meet Russia’s demands.

The trade pact is part of a wider EUUkraine association agreement which sparked the overthrow of the pro-Moscow government in Kiev in early 2014.

Moscow claims it undermines its economic interests in Ukraine, a former Soviet-era satellite, and will allow a flood of cheap EU products into one of its key markets.