Archive for July 18th, 2011

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Let the geopolitical trade battle begin – Russia and Ukraine – First shots manifest in Agri‏

July 18, 2011

Unsurprisingly, and as predicted many months ago amongst the posts here, Russia has hit out at Ukraine’s determination to sign the DCFTA agreement with the EU by the year end by banning certain Ukrainian imports into Russia on various grounds.

The targets thus far are dairy and meat products with the bans coming into force on 14th July.

A tactically expected move and timed to take effect before the next Ukrainian-Russian meeting at the end of July. The ban affects about 28 Ukrainian companies directly and probably numerous others indirectly along the procurement chain.

It is, of course, just the thin end of a possibly very large wedge designed to test the resolve of the current government towards the EU and DCFTA. Undoubtedly the companies and public directly affected will be quite vocal in their angst adding further pressure to abandon the current EU facing course. That said, the current government when it comes to the DCFTA and AA with the EU have thus far managed to hold on to the big picture and ignore the Russian rhetoric. That rhetoric has now become action. It not only bans dairy and meat produce from Russia but also Belarus and Kazakhstan who are part of a trade block similar to that of the EU.

It also adds to the nerves of the EU who do not want to lose this geopolitical battle to Russia despite its on-going internal issues on several fronts.

There is a real potential for a serious trade war on the near horizon affecting much more than dairy and meat products. Russia accounts for a massive amount of Ukrainian exports, similar in size to that of the EU in fact.
The public mood is generally much more in favour of heading towards the EU at the moment. Whether that will continue should Russia really turn the screw on Ukrainian produce is a different matter as the economic fallout would be immense.

The Polish EU presidency and the European Council will now have no place for faint hearts if they do not want to see Ukraine about face between now and the pending agreements being signed off. The more hard sticks from Russia, the more carrots from the EU will be necessary to maintain current Ukrainian trajectory if things take a radical turn for the worse.

Not necessarily a good time for 80% of the EU politicians, diplomats and mandarins to go on holiday, or indeed those in Ukraine, but that is what is about to happen for a month. You can expect this time-frame to be thoroughly exploited by Russia if it seriously considers there is a chance to turn Ukraine around.

The question is, do they seriously think that they can?

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