Ukraine-EU trade agreement: Russia predicts ‘grave consequences’

Ukraine signed a free-trade and political cooperation agreement with the European Union on Friday that has been at the heart of the country’s political crisis, drawing an immediate threat of “grave consequences” from Russia, news agency Reuters reports.

After months of upheaval, Ukraine signed the broad political and trade accord, making a historic shift away from Russia and closer to the West.

Georgia and Moldova signed similar deals, holding out the prospect of deep economic integration and unfettered access to the EU’s 500 million citizens.

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“Over the last months, Ukraine paid the highest possible price to make her European dreams come true,” Ukrainian President Petro Poroshenko told EU leaders at a signing ceremony in Brussels. “Today is a historic day for Ukraine,” Poroshenko said before a meeting of the European Council.

The economic part of the agreement envisages Ukraine’s deep economic integration with the EU, as well as the creation of a deep and comprehensive free trade area.The EU-Ukraine Association Agreement must be ratified by all 28 EU member states and Kyiv.

However, the European Council earlier approved the provisional application of certain parts of the agreement, which will take effect even before all EU member states ratify the document. These parts include the provisions of the free trade area, which will take effect, according to expectations of the parties, from the autumn of 2014 after the ratification of the document by the Ukrainian parliament.

The political chapter of the EU-Ukraine Association Agreement was signed on March 21 this year.

The EU says Ukraine is still free to trade with Russia, and it will provide support and funds to help meet EU rules. However, by agreeing to the EU accord, Ukraine can no longer join Russia’s customs union, because members Belarus and Kazakhstan are not members of the World Trade Organisation.

EU diplomats worry Moscow may take punitive action against Ukraine, Moldova and Georgia in retaliation for siding with the European Union, an act of “commercial aggression”. That could involve Russia removing Ukraine’s preferential treatment to its markets and implementing high tariffs, or at worst blocking goods at its border.

“I cannot conclude without referring to the very difficult security challenges that Ukraine is currently facing, nor to the uncertainty looming over relations between the Russian Federation and Georgia and the Republic of Moldova,” Herman Van Rompuy, President of the European Council, stated at the signing ceremony.

A free trade agreement and cooperation policy with the European Union signed by Ukraine will have ‘grave consequences’, warned Russia’s Deputy Foreign Minister Grigory Karasin on Friday. “For Ukraine, signing the agreement is economic suicide,” Sergey Glazyev, an economic aide to Russian President Vladimir Putin said on Thursday, warning of a sharp currency devaluation, soaring inflation, and lower living standards. At his turn, on June, 18 Mr Putin stressed that Ukrainian exports to Russia would no longer be zero-rated should Kyiv sign the economic part of a free-trade agreement with the EU.

Ukraine’s former pro-Moscow President Viktor Yanukovych turned his back on signing the EU agreement last November in favour of closer ties with Moscow and its financial backing, prompting months of street protests that eventually led to his fleeing the country. Soon afterwards, Russia annexed Ukraine’s Crimea region, drawing outrage and sanctions from the United States and EU. The standoff in the south-east of Ukraine is still in progress.

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