Negotiations between the EU, Ukraine and the Russian Federation on a free trade area between the EU and Ukraine the last round of which took place on 21 December 2015, did not succeed. The parties failed to reach compromise on a range of trade issues, which resulted in trade restrictions imposed by the Russian Federation against Ukraine and countermeasures imposed by Ukraine against the Russian Federation.
Russian Federation trade restrictions
On 16 December 2015 the President of the Russian Federation adopted the Order "On Suspension by the Russian Federation of the Agreement on Free Trade Area Regarding Ukraine" No. 628 (Order No. 628). According to this Order, starting from 1 January 2016 the Russian Federation suspended in regard of Ukraine the Agreement on Free Trade Area (Agreement) signed in Saint-Petersburg on 18 October 2011. The Law "On Suspension by the Russian Federation of the Agreement on Free Trade Area Regarding Ukraine" No. 410-FZ of 30 December 2015, confirming the Order No. 628, was adopted by the State Duma of the Russian Federation and by the Federation Council.
The Order No. 628 resulted in imposition by the Russian Federation of the most-favoured-nation treatment regarding the goods originating from Ukraine, instead of preferential treatment, which was applied until 31 December 2015, as well as application of the basic custom duties envisaged by the Uniform Customs Tariff of the Eurasian Economic Union (EAEU) to all groups of Ukrainian products instead of zero rates applied earlier.
On 13 August 2015, the Government of the Russian Federation adopted the Resolution "On Amendments to the Resolutions of the Government of the Russian Federation of 7 August 2014 No. 778 and of 31 July 2015 No. 774" No. 842. The Resolution ordered a ban (embargo) on import of certain kinds of agricultural products, raw materials and food to the Russian Federation from Ukraine.The banned goods include such product categories as meat, poultry, fish, milk, vegetables, fruit and nuts. The ban came into force on 1 January 2016 and will be effective until 5 August 2016 but may be extended by the decision of the President and the Government of the Russian Federation.
Furthermore, the Order of the President of the Russian Federation "On Measures to Ensure Economic Safety and National Interests of the Russian Federation in the Process of International Transit Cargo Transportations from the Territory of Ukraine to the Territory of the Republic of Kazakhstan through the Territory of the Russian Federation" No. 1 dated 1 January 2016 and the Resolution of the Government of the Russian Federation "On Measures to Implement the Order of the President of the Russian Federation"dated 1 January 2016 No. 1 "On Measures to Ensure Economic Safety and National Interests of the Russian Federation in the Process of International Transit Cargo Transportations from the Territory of Ukraine to the Territory of the Republic of Kazakhstan through the Territory of the Russian Federation" No. 1 dated 1 January 2016 ban the transit to Kazakhstan of goods originating from Ukraine through the territory of the Russian Federation. According to these acts, transit of goods from Ukraine to Kazakhstan by road transport and railway through the territory of the Russian Federation is allowed only from the territory of Belarus through the established checkpoints and with GLONASS seals on the transport. At the same time, according to the Ministry of Economic Development and Trade of Ukraine the Russian Federation de facto completely stopped transit of goods originating from Ukraine through its territory, regardless of the destination country.
Therefore, starting from 1 January 2016, the products originating from Ukraine are subject to three kinds of restrictions when shipped to the territory of the Russian Federation:
- the full ban on import of certain kinds of agricultural products, raw materials and food products according to the Resolution No.842;
- levying of custom duties envisaged by the Uniform Customs Tariff of the EAEU on all groups of Ukrainian products following suspension of the Agreement regarding Ukraine and
- ban on transit of Ukrainian goods through the territory of the Russian Federation to third countries.
Countermeasures by Ukraine
In response to actions of the Russian Federation on 23 December 2015 the Ukrainian Parliament adopted the Law No.898-VIII "On Amendments to the Law of Ukraine "On Foreign Economic Activity" (Regarding Empowering the Government to Take Adequate Measures of Economic Nature to the Aggressor State)". According to this Law by Resolution "On Tariff Rates for the Goods Originating from the Russian Federation" No. 1146 dated 30 December 2015 (Resolution No. 1146) the Cabinet of Ministers of Ukraine, with reference to the significant violation of the Agreement by the Russian Federation, imposed customs duties at preferential rates fixed by the Customs Tariff of Ukraine to the goods originating from the Russian Federation. Thus, Ukraine will levy customs duties from all Russian goods until 31 December 2016 instead of granting Russian goods a duty free regime, which was applied before adoption of Resolution No. 1146.
Furthermore, by its Resolution "On Ban on Import of Goods Originating from the Russian Federation to the Customs Territory of Ukraine" No. 1147 dated 30 December 2015 (Resolution No. 1147) the Cabinet of Ministers of Ukraine banned import into Ukraine of a wide range of products primarily of agricultural nature until 5 August 2016. The ban covers such product categories as meat, fish, crustacean, some milk products, cheese, tea, confectionary, sweets, potato, spirit, beer, cigarettes etc. Except from food products, the ban also covers railway and tram track equipment, diesel-electric locomotives, octanol, potash chloride, detergents, some agricultural chemicals. Resolution No. 1146 entered into force on 2 January 2016 and Resolution No. 1147 entered into force on 10 January 2016.
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