Kuchma and Putin agree to end trade restrictions (08/18/02)

Kuchma and Putin agree to end trade restrictions

by Roman Woronowycz
Kyiv Press Bureau

KYIV - The presidents of Ukraine and Russia, meeting in Moscow on short notice, agreed to end a series of trade restrictions that some experts had predicted could eventually lead to economic war if not curtailed. They also indicated they were ready to sign a formal agreement on the formation of a gas trading consortium during the Commonwealth of Independent States summit scheduled for October 7 in Moscow.

Ukraine's President Leonid Kuchma flew to Moscow on August 8 at the behest of his Russian counterpart, President Vladimir Putin, who the week before had invited the Ukrainian leader for a series of informal economic talks and to celebrate Mr. Kuchma's 64th birthday.

Mr. Kuchma said that while he was not completely satisfied with the results of the trade talks, he was happy the discussions had produced some progress.

"It is better to have a bad peace [than economic war], but it is even better to kill the fire of mutual recriminations while it is still smoldering," said the Ukrainian president in Moscow, according to Interfax-Ukraine.

The discussions led to a breakthrough in easing tariffs and restrictions on trade between the two countries, which were increasingly being levied by both sides. Moscow agreed to lift trade quotas on Ukrainian steel pipes, a move that Ukraine had vehemently opposed when the limits were introduced in 2000, while Kyiv agreed to lift restrictions on the importation of 19 Russian commodities.

Notably, the two sides did not touch the matter of the recent placement of Ukrainian tariffs on imports of Russian automobiles, which Russian Vice Prime Minister Viktor Khristenko called a misunderstanding, a "statistical error" in his words. The Russian-made Lada and Volga continue to make up a noticeable segment of the Ukrainian new car market, however.

Experts have said the various sanctions the two sides had placed on each other's commodities over the last year were responsible for an $800 million decrease in trade in the first half of this year. The quota on steel pipes, currently at 620,000 tons annually will end on December 31. Interfax-Ukraine reported that the lifting of restrictions would negatively affect the Russian metallurgical sector because Ukrainian steel remains much cheaper.

The two presidents, however, said they were satisfied that while the amount of trade in specific sectors might change, more important for both countries was that aggregate figures again begin to rise.

A day earlier, the economy ministers of both sides met for preliminary talks on the documents eventually agreed upon, as well as to coordinate their actions on fulfilling requirements for entry into the World Trade Organization. Kyiv and Moscow, with the backing of the WTO, have said they would move towards WTO membership together. However, some experts are saying that with tax reform completed, Russia has taken a distinct lead in meeting WTO standards.

Presidents Putin and Kuchma tried to add substance to a trilateral agreement of intent for establishing a gas transport consortium involving Russia, Ukraine and Germany that was signed at the beginning of June by the leaders of the three countries. Thus far no multinational gas or oil companies have shown any initiative in giving life to the structure by agreeing to transport their product through the Ukrainian pipeline, and no specific plan for fulfilling the project has been presented. Some Ukrainian newspapers have criticized the agreement as lacking transparency. Nonetheless, Mr. Kuchma said that progress was being made, while Mr. Putin said that Russia and Ukraine needed to determine the details before bringing in other parties.

On the matter of Mr. Kuchma's 64th birthday, the details were made plain for all to see. President Putin presented his Ukrainian colleague hunting equipment on August 9, and then he and his wife hosted the Kuchmas at a private dinner at a local Moscow restaurant in the evening.

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