UKRAINE FINDS RUSSIA AN UNRELIABLE PARTNER.

Ukrainian president Leonid Kuchma told a news conference in Kharkov that Russia is failing to live up to the 1994 Russian-Ukrainian treaty on free trade. Kuchma ruled out discussing Ukraine’s accession to the existing Russia-Belarus-Kazakhstan customs union, or a future CIS Customs Union, until Russia begins abiding by the bilateral free trade treaty. The existing customs union moreover "does not play by the rules, its decisions are not taken by consensus, and Ukrainian and Russian interests often fail to coincide," Kuchma said. Arms exports was one sector in which Kuchma found cooperation with Russia potentially advantageous to Ukraine for entering third country markets. (11)

Along the same lines, Prime Minister Evhen Marchuk told a Dutch economic delegation that Russia is pursuing a discriminatory trade policy toward Ukraine. He charged that the Russian government has unilaterally exempted some 200 categories of goods from the provisions of the free trade treaty with Ukraine, causing it to lose approximately $1.5 billion thus far this year. According to Marchuk, Ukraine is being forced to stop adhering to the 1994 treaty and to introduce reciprocal measures which will drive up the prices of its exports to Russia. (12) Kuchma and Marchuk had aired similar complaints and warnings late last month.

Free trade provisions in Russia’s agreements with CIS countries often turn out to be mere statements of intent, subsequently overridden by political decisions in Moscow. The Russian government often surprises its CIS partners by introducing without advance notice protective tariffs and excise taxes aimed to protect Russian producers, or manipulating the CIS countries’ physical access to the Russian market and using customs procedures as pressure levers. Such trade restrictions are often unpredictable and can stem from foreign policy considerations or more often from ministerial decisions responsive to the interests of Russian lobbies. Moreover, the completion of Russia’s customs union with Belarus and Kazakhstan would force the latter two countries and Ukraine to coordinate their bilateral trade relations with a new supranational structure.

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