The next chapter in the ongoing hostilities between Russia and the Ukraine is about trade and, more fundamentally, about
the Ukraine becoming friendlier with the West. The EU-Ukraine Deep and Comprehensive Free
Trade Area (“DCFTA”) came into existence on January 1. As of that same date, Russia put retaliatory trade bans and tariffs on the Ukraine and hinted at a legal justification in the terms of an earlier free-trade relationship between the two countries.
DCFTA, created by Title IV of the 2,100-page “Association Agreement” between the
EU and the Republic of Ukraine, “offer[s] Ukraine a framework for modernising its trade relations and for economic development by the opening of markets.” The free-trade agreement between the two
resulted in an “immediate abolition of import dut[ies] for more than 97% of all
goods exported from Ukraine to the EU.” The deal allows producers in the Ukraine to have
“access to a wide range of cheaper industrial products, components and
equipment.” Furthermore, Ukrainian consumers will have
access to a wider array of products, which will also be available at lower
"Russian President Vladimir Putin (left) and Ukrainian President
Petro Poroshenko (right) confer with German Chancellor
Angela Merkel (foreground) and French President François
Hollande (rear) at the ASEM summit meeting in October 2014.
As a member of the Commonwealth of
Independent States (“CIS”) and party to the CIS free-trade agreement ("FTA"), the
Ukraine had benefited from duty-free trade with Russia. That gets at the main problem with the
EU-Ukrainian free-trade deal: Russia does not like it. The DFTCA has been delayed for nearly a year in the hopes that talks among Russia, the Ukraine, and the EU would help to
sway Russia from imposing retaliatory tariffs and satisfy Russian concerns over
any harm that could come to its economy. “Russia
has repeatedly said that Ukraine can[not] simultaneously be a part of the
free-trade zone with the EU and within the CIS,” as
well as “continually insist[ing] on a legally binding agreement, which would
amount to a reopening of the bilateral agreement.” However, these talks failed, leading Putin to
end the free trade that Ukraine enjoyed with Russia and
“ban the import of agricultural products, raw materials, and
foodstuffs . . . .”
authorities stated that the “[i]mplementation of the [EU-Ukraine] Agreement
impinges on our interests and creates risk to our economic security.” Russia announced it has an obligation to
guard its “market and producers,” and therefore must make Ukraine “pay customs
duties.”Under the CIS FTA, Article 8, Parties to the
agreement may “apply special safeguard measures.” Furthermore, Article 19 states that if a
“Part[y] considers that another party is not fulfilling its obligations under
this Agreement and such non-fulfillment . . . causes or
threatens to cause harm to the economic interests of the First
Party . . . “ then the two parties are to “hold
consultations in order to achieve a mutually acceptable
resolution . . . .” Both the Ukraine and Russia have met along
with the EU in order to attempt to reach some sort of agreement. The same
Article of the CIS FTA also states that, if no agreement can be reached, then
“at the option of the First Party,” here Russia, the parties “may” enter into
other formal dispute resolution mechanisms. It does not seem as though Russia has chosen
to enter into any of the other formal dispute resolution mechanisms provided in
the CIS FTA, and instead has decided to end its own agreement with Ukraine.
two economies have been “intertwined for decades.” Kiev exports a large amount of food to
Russia, leading Ukrainian officials to “expect to lose . . . $600 million,” from these new bans and tariffs. The recent tension between
the two countries has already caused a “significant” decline in trade between
the countries, with Ukrainian exports to Russia falling nearly four times as
steeply as during earlier periods of discord. Time will tell which side the Ukraine is
better off dealing with, the EU or Russia, but one thing is certain: The
tensions between Russia and the Ukraine are not going away anytime soon.
 Max Biedermann, Ukraine: Between Scylla and Charybdis,
40 N.C. J. Int’l. L. & Com. Reg.
219, 231–35 (2014). Ukraine “has long divided its loyalties and economy between
Europe and longtime ruler Moscow, giving it huge strategic importance to
Russia, Europe, and the United States.” Id. at 231 (quoting Maria Danilova & Yuras Karmanau, Ukraine: East-West Tensions; Protesters Take Kiev, Yahoo! News (Feb. 22, 2014, 9:05 AM), http://news.yahoo.com/ukraine-east-
 Pop, supra note 2; Указ Президента Российской Федерации от 16.12.2015 № 628
"О приостановлении Российской Федерацией действия Договора о зоне
свободной торговли в отношении Украины" (Russian Federation President’s Dec. 16, 2015, Decree No. 628, "On the Russian Federation’s Suspension of the Free-Trade Area with Respect to the Ukraine"), RUSSIAN FEDERATION, available at http://publication.pravo.gov.ru/Document/GetFile/0001201512160035?type=pdf [https://perma.cc/KJ2Z-FWEE].
Overview of the key elements of the
EU-Ukraine Deep and Comprehensive Free Trade Area, Eur. Union, http://trade.ec.europa.eu/doclib/docs/2013/april/tradoc_150981.pdf [https://perma.cc/P53K-ZDGC] (“[T]he opening of markets [will be achieved
by] . . . the progressive removal of customs tariffs and quotas,
and by an extensive harmonisation of laws, norms and regulations in various
trade-related sectors, creating the conditions for aligning key sectors of the
Ukrainian economy to EU standards.”); see O.J. L 161 P. 0003 (Association Agreement between the European Union and
its Member States, of the one part, and Ukraine, of the other part, signed
March 21, 2014, as to Titles I, II, and VII), 21 May 2014, available
Russia Suspends Free Trade Agreement with
Ukraine, supra note 9.
also,Russia Suspends Free Trade
Agreement with Ukraine, supra note 9.
 О внесении
изменения в пункт 1 постановления Правительства Российской Федерации от 7
августа 2014 г. No. 778 [On Amending Resolution of the Government, paragraph 1, The
Russian Federation dated August 7, 2014, No. 778], postanovleniia palat
Federal’nogo Sobraniia [resolutions of the Duma and Federal Council of the
Federal Assembly] 2015, No. 1397, http://government.ru/media/files/cARbqlIpZCqHLkIdHair1Y7kCpdLEMiA.pdf [perma.cc/6QJL-YGZA].
 CIS FTA , supra note 8, Art. 8, para. 1. “Such
measures in respect of industrial and agricultural goods shall be applied only
in accordance with Article XIX of GATT 1994, WTO Agreement on Safeguards and
this Agreement.” Id.
Deal Sparks Moscow-Kyiv Trade War, Deutsche Welle, Jan. 1, 2016, http://dw.com/p/1HWhv [http://
perma.cc/XW36-KGEH]. “After Russia, the Ukranian republic was the most
important economic component of the former Soviet Union, producing about four
times the output of the next-ranking republic.” Biedermann, supra note 1, at 229-30 (quoting Ukraine:
The World Factbook, Cent. Intelligence Agency, Introduction, https://www.cia.gov/library/publications/the-world-factbook/geos/up.html [https://perma.cc/V9YZ-ZRQ4] (last visited Jan. 18, 2016).
 Tomkiw, supra note 21.
Posted by Kari M. Loomer on Tue. January 19, 2016 10:29 AM
European Union, Free Trade, Russia, Ukraine