Russia has been grabbing headlines over its objection to possible U.S. attacks on Syria, however, the more important issue for the nation may be the trade war it is now engaged in with the Ukraine. In a move widely viewed as punishing the Ukraine for its increasing integration with the European Union, Russia has been blocking Ukrainian imports and taking other measures to punish Ukraine economically.
Officially, Russia has not imposed any tariffs on Ukrainian goods. Instead, Russia has been conducting extra customs checks, grinding cross border trade to halt. Russia has also been rejecting goods, such as chocolate as being inferior and not meeting standards. Such measures are sure to put a crimp on Ukraine’s economy, which is highly dependent on trade with Russia.
Ukraine signed a comprehensive trade agreement with the EU
The Ukraine signed a comprehensive trade agreement with the European Union in July of 2012, but the EU stalled implementation over concerns regarding the rule of law in Ukraine. Now, Ukraine is looking to sign another trade deal in November, one which will apparently be implemented if Ukraine meets certain conditions. Russia has responded by putting pressure on Ukraine and vowing to pull out of its own trade deals with the country.
On the surface Putin is expressing displeasure over what he sees as the increasing costs of doing business with the European Union. According to Putin, Ukraine will have to invest billions to quickly meet EU standard regulations. Further, Ukrainian companies will have trouble competing in the free trade zone and ultimately the deal with hurt the nation more than help it.
Ukraine is looking to move outside of Russia’s sphere
Most likely, Putin’s displeasure stems even deeper than the economics. The free-trade agreement could signal that Ukraine is looking to move outside of Russia’s sphere of influence and instead to slowly integrate with Europe. Ukraine was one of the most important satellite states in the Soviet Union and Russia and Ukraine share a long and complicated history.
While the Soviet Union has dissolved, Russia has been trying to keep its former satellite states within its sphere of influence. European states, such as Eastern Germany and Poland, have already been ceded to Europe and the larger world, but Russia has been less willing to give up far Eastern European countries and South Central Asia countries, such as Kazakhstan. These core countries are generally seen as indispensable to ensuring Russia’s place and position in the global hierarchy.
Ukraine has responded with forceful rhetoric, essentially telling Russia to “deal with it” and accept the new trade agreement. The forceful rhetoric shows that Ukraine is willing to stand up for its sovereign rights, however, Russia likely won’t let the issue go so easily. Russia has promised that it will push its allies, such as Kazakhstan and Belarus, to punish Ukraine by blocking trade.
Russia can hurt Ukraine’s economy in the short run
Still, if Ukraine meets the demands the EU has put forth, including measures to ensure democracy and the rule of law, the trade deal is likely to go through. Most politicians and businesses leaders in Ukraine are supporting the measure. Further, while Russia can hurt Ukraine’s economy in the short run, most Ukrainian leaders view the long-term benefits of trade with the EU outweighing the short-term costs.