EU Woos Ukraine with Tariff Cuts

The European Commission announced plans on Tuesday, 11 March to temporarily slash tariffs on imports coming from Ukraine, in the latest effort to try to shore up Kiev’s struggling economy. The news comes as the 28-member bloc continues to weigh the possibility of sanctions against Russia, following Moscow’s decision earlier this month to send forces into Ukraine’s Crimean peninsula.

The planned tariff cuts, which still require approval of the European Council and Parliament, would amount to nearly €500 million in annual tariff reductions, the vast majority of which would go to Ukraine’s agricultural sector.

According to the Commission, these unilateral preferences would remain in place until 1 November of this year, in a bid to give Kiev enough time to sign and provisionally apply the free trade deal that has already been negotiated between the two sides. The EU has said that it will sign the pact whenever Ukraine is ready.

Current estimates indicate that the Eastern European country needs at least US$15 billion in loans, and US$35 billion over two years. Along with EU help, discussions on possible support from the US and the International Monetary Fund have also been ongoing over the past few weeks.

The EU had already confirmed last week plans to provide its Eastern European neighbour with €11 billion in aid over the next few years: €1.565 billion in overall development assistance, or grants; €1.61 billion in macro financial assistance, in the form of loans, and up to €8 billion from the European Investment Bank and the European Bank for reconstruction and development.

Russia sanctions forthcoming?

The US, which has comparatively little trade with Russia, has already signed off on financial and visa sanctions on officials associated with the Crimean developments, while also suspending bilateral trade and investment talks with Moscow. Further US sanctions are being discussed in Congress.

However, whether the strong rhetoric on behalf of the EU will also translate into sanctions has been an open question, with a meeting of the bloc’s Foreign Affairs Council scheduled for Monday. EU member states, particularly Germany, have strong energy and trade ties with Moscow, and have been wary of the negative ramifications that sanctions on their Russian neighbor could have upon their own market.