EU Offers Customs Union to Ukraine New Regime

The EU has reiterated its earlier pledge to ink a trade deal with Kiev, as international tensions over Ukraine’s future escalated further over the weekend following the incursion of Russian military forces into the Crimean peninsula. The fall-out has also put Moscow’s membership in the G-8 into question, while substantially worsening Russia’s economic and political ties with the EU and US.

“If and when Ukraine is ready to sign the [trade] deal, then the European Union is ready to sign the deal,” EU Trade Commissioner Karel De Gucht said after meeting with EU trade ministers in Athens on 28 February. He added that any decision from the EU would be taken by the Council, pledging an appropriate response “to any request from a new inclusive government committed to political and economic reforms.”

The upheaval in Ukraine began late last year, after President Viktor Yanukovich withdrew from signing an Association Agreement with the EU that would have included a trade pact. The decision to pull back from the deal was largely seen as the result of pressure from neighbouring Moscow, and sparked months’ worth of protests in Kiev.

Russia had argued that signing onto the EU deal would make it impossible for Ukraine to join the customs union that it has formed with Belarus and Kazakhstan, given that it would involve Kiev being party to two conflicting sets of tariff rules. It could also lead to a massive influx of European products across Russian borders, Moscow warned.

The protests ultimately led to Yanukovich being driven from Kiev, with a new pro-Western government being instated in the days following. Last week, Russian military forces entered the Ukrainian peninsula of Crimea, on the grounds that it needed to protect the Russian-speaking citizens living there.

Economic situation

While the Russian military manoeuvres have since been halted, the next steps for the embattled Ukraine, however, remain uncertain. The Ukrainian economy is facing severe difficulties, with estimates placing Ukraine’s needs at US$15 billion in loans, and US$35 billion over two years.

Question Mark on G-8 with Russia

The recent move of Russian forces into the Crimean region of Ukraine has also placed Moscow’s status in the G-8 coalition of industrialised economies in question, even as it prepares to host this year’s summit.

Leaders from the G-8 countries - which along with Russia also includes Canada, France, Germany, Italy, Japan, the UK, and the US, with participation of EU Commission and Council presidents - are set to meet in the Russian city of Sochi in June for their annual gathering. However, US Secretary of State John Kerry warned on Sunday that “there is no way, to start with, that if Russia persists in this, that the G8 countries are going to assemble in Sochi.”