Russia to change terms of trade agreements with Ukraine

09:36, 03 September 2008
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Because of Kyiv`s entry into WTO

The Russian Economic Development Ministry may change the terms of its trade agreements with Ukraine because of Kyiv`s entry into the World Trade Organization, a ministry official with direct knowledge of the review said, according to Moscow Times.

The changes may affect free trade with Ukraine, including food and plant imports and other goods, the official said on condition of anonymity, citing ministry policy.

The revisions were first reported by Kommersant on Tuesday.

Ukraine, Russia`s biggest trade partner among the former Soviet republics, joined the WTO in May. Russia`s 15-year push to also become a WTO member is likely to be delayed beyond this year as the nation`s relations with the West reach a post-Soviet low following the conflict with Georgia.

Ukraine`s bid to join NATO and its support for Georgia have strained relations with Russia.

U.S. and European Union officials are concerned that Russia may pose a threat to Ukraine, a conduit for Russian natural gas exports to Europe. Russia cut off supplies to Ukraine in a 2006 dispute over price increases, creating shortages in Hungary and Italy.

Imports from Ukraine rose 26 percent to $7.85 billion in the first seven months of the year from the same period in 2007, according to the Federal Customs Service.

Measures limiting imports of pipes, foods including dairy and sweets, and possibly cars may be adopted, said Alexander Morozov, chief economist at HSBC Bank in Moscow.

"Russia may use the situation to protect domestic producers as its prospects of joining the WTO are being delayed for an indefinite amount of time," he said "This is probably not going to turn into a trade war with Ukraine."

Ukraine doesn`t have many ways to pressure Russia in return, according to Morozov, apart from taking measures against Russian businesses in Ukraine, which buys about 70 percent of the gas it consumes from its neighbor.

"It`s hard to hit Russia`s exports, since they are mainly oil and gas," he said.

The Russian government ordered several bodies, including the Economic Development Ministry, to propose changes to Russia`s trade relationship with Ukraine by the end of this week, the ministry official said, declining to elaborate.

The Moscow Times

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