Putin seeks to woo Ukraine into customs union
Prime Minister Vladimir Putin on Tuesday sought to persuade Ukraine to join a Russian-led customs union rather than a free-trade zone with Europe as Moscow tries to keep its influence over Kiev.
Putin warned his Ukrainian counterpart Mykola Azarov on an official visit to Kiev that Russia will use "protective measures" if a free-trade zone is established between Ukraine and the European Union based on World Trade Organization standards, including a 4.5 percent import tariff.
"Russia is worried that if such conditions are used in the free-trade zone with Europe, products will not be in demand in Europe and go to our customs zone" instead, Putin said.
"We will have to come up with protective measures."
Ukrainian officials last week said that their priority is integration with Europe but Russia wants to bring its third largest trade partner into its customs union with Belarus and Kazakhstan.
Joining the customs union could boost Ukraine's economy by $9 billion or two percent of GDP annually, Putin said.
Ukraine meanwhile wants to secure a lower price for the gas it buys from Russia and Moscow has hinted that it is ready to accomodate the demand if Kiev takes part in the customs union.
"The price of gas supplied to the Ukraine according to contracts between Gazprom and Naftogaz is not based on the market price established in the West and is much higher than other types of fuel," Azarov said at the meeting.
Ukraine is also interested in Russia's help with building a new nuclear plant and modernizing its gas transportation network to triple its capacity, Azarov said.
Ukraine imports most of its energy from Russia and has struggled to come up with payments in recent years.
Russia has responded by sometimes halting natural gas supplies to Ukraine and, as a consequence, to other European countries that import Russian energy through the same pipelines.
© 2011 AFP