Kinakh will try to come to terms with Moscow
The Ukrainian and Russian premiers are to have a working meeting in Moscow on April 10. Both governments, currently in a state of trade war, will try again to make a truce. Ukrainian Premier Anatoly Kinakh said the topic to be discussed is a draft free trade agreement. This issue has been discussed for a number of years, but Mr. Kinakh hopes to steer a middle course in the near future. “We must lift all those artificial barriers and increase the commodity turnover,” he said, adding that he would proceed primarily from Ukraine’s national interests.
In late March, the Ukrainian government announced restrictive duties on 22 groups of Russian commodities with formal decisions pending. The duties will be imposed if Russia restricts supplies of Ukrainian pipes. Moscow has started discussing withdrawal from the pipe agreement, pressured by local manufacturers that could have increased output by 40% last year, owing to the lessened competition from Ukrainian enterprises. Russian Premier Mikhail Kasianov is studying the option of replacing Ukrainian pipe import quotas by import duties. Already in May 2001, he signed a decree imposing protectionist tariffs on Ukrainian ferrous pipes, but the duties will be levied if the Ukrainian suppliers breach the agreed quota.
The situation at the other trade fronts remains tense. Contrary to Kyiv’s proposals, the Russian premier signed a decree increasing the oil export tax to $9.2 per ton in mid-March. This will make the Russian companies holding Odesa and Lysych ansk refineries suffer in the first place. The decree took effect in April 2002. The Ukrainian cabinet retaliated by curbing Russian iron ore imports, imposing a 4.5 million a year quota. Premier Anatoly Kinakh attributes this restriction to increased imports of raw materials hurting domestic producers.
The following points of Kyiv- Moscow economic confrontation are already visible. The Kinakh cabinet is considering the possibility of restrictions on Russian automotive and mineral fertilizer imports. The Ministry of the Economy is completing a special study of these commodity groups. Russia, meanwhile, is holding an antidumping investigation of Ukrainian crystalline silicon and galvanized steel supplies. Electricity supplies to Moldova remain a separate issue, still vague. The EES Russia Company wants to supply electricity, transiting it across Ukraine, and Anatoly Kinakh insists that Ukraine is interested in mastering foreign energy markets. “We do not intend to give up the Moldovan market and complicated negotiations are underway. Ukraine is supplying electricity to Moldova on account of the generating companies’ arrears on payments for natural gas supplied by Itera. As these debts are repaid, sometime in the first half of the year, Ukrainian electricity will be exported to Moldova directly,” he said. EES Russia earlier announced they had started exporting electricity to Moldova in April. In a word, the Ukrainian and Russian premiers will have much to discuss. The talks are expected to take place in a friendly atmosphere, owing to the signing of two documents, production and military-industrial complex cooperation agreements. Among other things, both countries are to coordinate their policies on the foreign special equipment markets. The draft free trade agreement is to be prepared for signing in June. The intergovernment task force, involving both premiers, will meet in Kyiv. At its last meeting Russia refused to increase the pipe quota for Ukraine or to include sugar and grain in the free trade draft. This makes one pessimistic about Premier Kinakh’s intention to “lift all artificial barriers,” the more so that there are many in Ukraine (including the bloc in power) eager to deal not with Kinakh but with his sucessor after the elections.
Ending the Ukrainian-Russian trade hostilities at the official level will be anything but easy. Steering a middle course is not likely without both presidents making a political decision. If the situation remains the same, the excellent political relations between the two countries will continue to the accompaniment of pitched trade battles inflicting heavy losses on both sides.
