RUSSIA: Moscow threatens Ukraine with trade sanctions

By Graeme Roberts | 9 July 2013

Russia plans to put trade sanctions on Ukraine, penalising imports of chocolate, coal and glass in retaliation for a Ukrainian emergency import tax on cars which has drawn World Trade Organisation opposition, it was reported on Tuesday (9 July).

According to Reuters, Ukraine imposed the emergency car tax under the WTO 'safeguard' rules, which allow countries to protect a sector if there is a threat of serious damage to producers from a surge in imports. But there are strict rules about their use, which Ukraine is accused of ignoring.

In response, WTO members affected by the car tax are allowed to levy an equivalent tax on Ukrainian imports, the report added.

Russia has said its proposed tax on Ukrainian imports would come into force as soon as it was adopted by the Customs Union, which also includes Kazakhstan and Belarus.

Russia is the second of five concerned WTO members to spell out how it plans to punish Ukraine over the car tax, Reuters added.

Turkey has already said it plans to target Ukrainian walnuts. But the other opponents of Ukraine's car tax could hurt Kiev more.

Japan plans to raise the issue at a WTO meeting on Thursday. Like the other opponents, the European Union and South Korea, it has not spelled out how they might retaliate against Ukraine.

In a WTO filing published on Tuesday, Russia said the Ukrainian car tax would hit Russian car exports worth US$328m, raising $36m of tax.

To offset this, it said it reserved the right to impose a duty of EUR0.10 per kilogramme of Ukrainian chocolate, 15% on glass and 54% on coal.

Diplomats told the news agency the car tariff is part of a pattern of aggressive and eccentric behaviour by Ukraine which is vetoing Yemen from joining the WTO, pursuing a legal challenge to Australian tobacco laws and undermining the WTO system by demanding a far-reaching renegotiation of its tariffs.

But Reuters noted Russia was also under fire for a policy alleged to be illegal protection of its carmakers. On Tuesday the European Union launched the first WTO dispute against Russia, claiming a recycling tax on car imports was an illegal restriction on trade.