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“We are ready to exchange opinions on the current urgent crisis situation in Ukraine, which, we are convinced, cannot be solved through further escalation of the military scenario, without account for the vital interests of the country’s southeastern regions, without peace dialogue with their representatives,” Putin said at the meeting that also involved representatives of the European Commission.
Troops loyal to Kiev and local militias in the southeastern Ukrainian Donetsk and Luhansk regions are involved in fierce clashes as the Ukrainian armed forces are conducting a military operation to regain control over the breakaway territories, which on May 11 proclaimed their independence at local referendums and now call themselves the Donetsk and Luhansk People’s republics.
During the military operation, conducted since mid-April, Kiev has used armored vehicles, heavy artillery and attack aviation. Hundreds of civilians have been killed in it. Many buildings have been destroyed and hundreds of thousands of people have had to flee Ukraine’s embattled southeast.
“The refusal to use technical norms common in the CIS countries and adaptation to EU standards will cost Ukraine €165 billion within 10 years,” Putin said at a meeting of the leaders of the Customs Union member states and the Ukrainian president.
The economies of Russia, Belarus and Kazakhstan that form the Customs Union will also be affected, Putin noted.
“In the most modest estimates, damage to the Russian economy alone may total 100 billion rubles. Entire sectors of our industry and agribusiness will be affected with all ensuing consequences for economic growth rates and employment,” Putin said.
“Losses will also be sustained by Belarus and Kazakhstan,” Putin said.
The Civil Initiative Committee led by former Russian finance minister Alexei Kudrin earlier gave an estimate of possible losses for Russia and Ukraine, if their trade relations deteriorated.
The Civil Initiative Committee estimates Ukraine’s losses at about $100 billion in 2015-2018, including up to $8 billion a year from smaller money receipts generated by labor migrants in Russia, up to $4.2 billion a year from Russia’s possible refusal to give up pipeline gas transit across Ukraine, up to $3.7 billion a year from the risk of the persistence of high Russian natural gas prices, $2 billion from the risk of falling short of Russian investment, $1.6 billion from the risk of a reduced number of Russian citizens’ trips to Ukraine and $400 million from a possible refusal by Russian companies to provide transportation services jointly with Ukrainian operators.
Ukraine and the EU signed the political block of the association agreement on March 21, 2014, and the economic block — on June 27. After the Ukrainian parliament ratifies the document, the free trade zone with zeroing the import duties will take effect between the European Union and Ukraine. Two weeks after the ratification, the agreement will take “temporary” effect. This formula was invented by the European Commission for accelerating the document’s coming into force without waiting for the so-called democratic procedure of its ratification by all 28 EU member states, which will take more than a year. Russia’s authorities have repeatedly said that if Ukraine enters the free trade zone with the EU, Russia would have to protect its internal market from the duty-free inflow of European goods through Ukraine.
Russia and Ukraine have signed about 400 various agreements — bilateral and within the CIS framework. The EU insists on Ukraine’s withdrawal from a number of important economic agreements, which threatens Ukraine’s agro-industrial enterprises and allied industries that employ seven to eight million workers - half of the total able-bodied population. The whole machine-building industry of Ukraine and its energy and military-industrial sectors face a similar problem.
Russia says that if it preserves the free trade regime with Ukraine after the opening of Ukraine’s market for the EU, the Russian market will be faced with unlimited re-exports of EU products through Ukraine, which will be damaging for Russian producers. Russia is based on the Annex 6 to the CIS Free Trade Agreement that allows setting inside the free trade zone customs duties above zero for the countries that concluded similar agreements with other states.
Russia will have to cancel preferences for Ukrainian imports as a measure to protect its market and introduce the standard trade regime in the conditions of Ukraine’s agreement on association with the EU, Vladimir Putin stated.
“I’d like to say that we are not going to discriminate against anybody, we won’t do this,” the Russian president added.
“We will just have to introduce the standard trade regime for Ukraine; the same that is applied also between Russia and the EU,” he said.
Putin said that more intensive cooperation between the Customs Union of Russia, Belarus and Kazakhstan on the one hand and Ukraine on the other would be useful but added that it was hardly possible due the Kiev’s association deal with the European Union.
“In our view, it would be expedient to not only preserve but considerably boost interaction,” Putin said at a meeting of the leaders of the Customs Union and Ukraine.
“But the question arises whether it is possible to achieve these goals if the Association Agreement between Ukraine and the EU really starts working,” the Russian president emphasized.
Putin said Moscow does not doubt Ukraine’s right to self-determination.
Russia has certainly always respected and will respect the sovereign choice of any people, any country in organizing their own political life and unions, both military and economic. But we hope this will take place not to the detriment of other players on the international arena and not at our expense. Vladimir Putin Russian President
Ukraine is closely integrated into the economic space of the Commonwealth of Independent States (CIS, a loose association of former Soviet republics), Putin said, adding that it, in essence, along with Russia, Belarus and Kazakhstan, is an integral part of the world’s largest economic complex.
The four countries’ companies have close connections in all basic spheres and have arranged unique production chains, the Russian leader said.
The Customs Union member states are Ukraine’s key foreign trade partners with trade reaching $50 billion in 2013 and $22.7 billion in the first six months of 2014. The Customs Union’s market accounts for 30% of Ukraine’s exports. The volume of Russian capital in Ukraine’s banking system has reached some 32%.
Putin also recalled that the four countries have formed a solid legal framework of cooperation. In particular, in 2011, CIS member states signed a free trade area agreement, and now deals are being drafted on free trade in services, on state procurement and pipeline transit.
Russia is hoping for a meaningful dialogue with Ukraine and EU over economic interaction while taking into account mutual interests, Russian President Vladimir Putin said at a meeting on Tuesday between the leaders of the Customs Union countries with the Ukrainian President Petro Poroshenko and representatives of the European Commission.
“We hope that we'll be able to have a meaningful dialogue at today's meeting, at which our arguments will be received both by Ukrainian and European partners,” he said.
“We stand for closer interaction between the European Union and the Eurasian Economic Community, and beginning the search for ways of interfacing both integration processes,” Putin said. He expressed hope that all the participants in the meeting supported the strategic objective to create one economic space from Lisbon to Vladivostok.
“I underline that we're ready to discuss any options based on taking into account mutual interests,” the Russian president said.