RIA Novosti: Ukraine, Moldova to Lose Billions over EU Association Deals

Ukraine Map and Flag

MOSCOW, June 26 (RIA Novosti) – Ukraine and Moldova’s struggling economies could face multi-billion-dollar losses after signing association agreements with the European Union, Russian experts warn.

“Countries that sign this association [deal] agree to fall in line with all EU directives, standards and technical regulations – and this is at their own expense. Even if the EU gives them certain technical assistance, it would be more than sparse,” says Dmitry Mityayev, a financial expert at the Russian Academy of Sciences.

Evgeny Vinokurov, an economist and director of the Centre for Integration Studies at the Eurasian Development Bank, told RIA Novosti Ukraine needs some $30 billion in financial aid to avoid the looming economic collapse.

“Ukraine requires almost $30 billion in the [base] scenario and over $50 billion in the worst-case scenario to tackle its budget and balance of payments deficit, as well as to service its foreign debt in 2014,” Vinokurov said, adding Ukraine was stuck in a deep economic and political crisis.

Vinokurov warned that Ukraine’s association with the EU would cripple Kiev’s trade and economic ties with the Russia-led Customs Union, a free trade zone of ex-Soviet states. Ukraine may experience a major economic setback this year, equavalent to 19 percent of the country’s 2013 GDP.

The pundit noted an association agreement with the EU stipulates the creation of a free-trade zone, implying certain export barriers. For instance, Ukrainian export goods would have to comply with EU standards. At the same time, the country’s agricultural produce may lose ground in the Russian, Belarusian and Kazakh markets.

Moldova runs the risk of losing $1.5 billion to $1.6 billion a year in export and migration-related revenues, equivalent to 20 percent of the country’s GDP.

“This includes a possible drop in export revenues, investment and migration-related income, an increase in gas prices and a decrease in various types of transit, including pipeline transport, as well as weakening corporate ties. Ukraine trips and much more,” Vinokurov explained.

However, Vinokurov also stressed that Moldova could benefit from closer ties with the EU, as the agreement would open up new markets for its workforce, which is one of the most mobile in Europe.

For Georgia, association with the EU would mostly be “intellectually satisfying,” because Tbilisi would become closer to the European community, despite having little to offer in return, the expert stated.

Russia, in turn, may face an influx of duty-free EU exports via Ukraine, which would force it to unilaterally end the free-trade agreement with Kiev and set up tariff barriers to protect its market from low-cost goods.

“It’s technically impossible for Ukraine to be part of the EU trade zone, with Russia pretending this has no impact on it. Russia will be forced to act because Ukraine won’t leave the [free-trade zone with Russia] voluntarily. Russia has the right to renounce the deal of a free-trade zone with [Kiev],” Dmitry Mityayev told RIA Novosti.

The EU is meeting on June 27 to sign association agreements and establish free-trade accords with Georgia and Moldova. The union is also expected to ink the economic chapter of a similar deal with Ukraine.

Russia has repeatedly stressed that it has no objection to Kiev’s decision, but, according to Russian President Vladimir Putin, for Ukraine the association with the EU would turn into an ordeal, as its goods are unlikely to be competitive on the Russian market.