Trade war between the Russian Federation and Ukraine heats up in 2016

This articles focuses on the newest developments in the #trade relations between #Ukraine and Russia, namely the termination of the #Ukraine-Russia free trade zone, which might have significant effect on the #economy of Ukraine.

Visit our website if you are interested in the #Ukrainian economy or #doing business in Ukraine.

As previously reported, a long-awaited EU-Ukrainian free trade zone was launched on 1 January 2016. However, due to launching of the EU-Ukrainian free trade zone, the Russian Federation has unilaterally terminated the Ukraine-Russia free trade zone as of 1 January 2016. Implementation of such measure is explained by the Russian officials as ‘due to exceptional circumstances affecting the interests and economic security of the Russian Federation’. In addition, the Cabinet of Ministers of the Russian Federation included Ukraine in the list of countries, from which it is prohibited to import certain agricultural and industrial products.

In retaliation action, the Cabinet of Ministers of Ukraine adopted several resolutions in order to ban certain products from Russia and implement import duties for other products produced in the Russian Federation.

In particular, the following products of Russian origin were banned for import to Ukraine starting from 10 January 2016: vodka, confectionery products, meat, chocolate, baby food, fish, processed cheese, beer, cigarettes with filters, food for dogs and cats, equipment for railways and tramways, diesel-electric locomotives, etc.

The import duty for other products manufactured in the Russian Federation was introduced as of 2 January 2016.

We note that during 2015 Russia and Ukraine were applying various trade sanctions to each other in relation to certain categories of products, bilateral cooperation agreements in various fields, air traffic, etc. Recently, the Prime Minister of Ukraine announced that while three years ago export to Russia amounted to 35% of all Ukrainian exports, in 2015 it constituted only 12.5%. In turn, the Ministry of Economic Development of the Russian Federation stated that in 2015 the trade turnover between two countries shrunk by 80%, and the existing trend would continue in 2016.

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