Russia steps up discrimination against Ukrainian business

Russia has again reminded Ukraine that trade wars never end and can only be suspended for truces and tea parties without neckties. Moscow has decided to impose a prohibitive import duty on Ukrainian galvanized steel as of May 8. The 24.3% duty will be in place for two and a half years. As a result, a major Ukrainian exporter of galvanized metal, the Mariupol-based Ilyich Metal Plant, will lose $1 million a month.

Against this background, the talks on a single economic space of Russia, Ukraine, Belarus, and Kazakhstan look stranger and stranger. Undeniably, if the Kremlin considered creating a new supranational alliance resting on the principles of free trade its top political priority, Ukrainian galvanized metal exporters would not be now facing a prohibitive duty. The more so that the analysis of the Russian market suggests that Ukrainian-made galvanized metal is not all that damaging to the interests of Russian producers. An antidumping investigation against the Mariupol plant has been launched at the insistence of the Severstal Company as well as the Novolipetsk and Magnitogorsk Metal Combines. Their metal, however, is in a completely different price and quality category. Roofing from Ukrainian metal is much cheaper and thus is meant for the less affluent buyers. It is not surprising that after our galvanized metal is ousted from the Russian market, price hikes will be inevitable, the more so that peak demand falls on the second half of spring.

An unexpectedly harsh response to Moscow’s decision came from Ukraine’s Ministry of the Economy. It released a special statement to the effect that this duty violates the free trade agreement between the two countries as well as the main principle of imposing trade limitations. The statement stressed in part that this decision “does not reflect the spirit of cooperation proclaimed by the presidents of the two countries.” It is not often that the ministry ventures to release such a sharply worded statement. Obviously, this time the blow from our northern neighbor came as a disappointment to many Eurasian-minded optimists working out schemes of economic integration with Russia. Incidentally, the premiers of the two countries formerly pledged to inform each other of intentions to impose duties on products of other country. The antidumping investigation against Ukrainian galvanized metal was instituted last August without any such notification.

In connection with the introduction of the prohibitive duty on galvanized steel, many recalled that the truce in the Russo- Ukrainian trade war was already far from cloudless. This April, Russia increased its export duty on oil, with Premier Yanukovych attempting unsuccessfully to negotiate a deferral of this decision during his talks in Moscow with his Russian counterpart Mikhail Kasyanov. Destabilizing Ukraine’s fuel market before the sowing campaign and at harvest time has become a traditional Russian tactic. The breakdown of trilateral talks among Ukraine, Russia, and Germany on the creation of a gas consortium the week before last could be also seen as an unfriendly act on the part of Russia. On the whole, the gap between the statements of President Putin and the actions of his government is quite large. So far, the Year of Russia in Ukraine is only the subject of cynical ridicule and Mariupol metallurgists understand this better than anyone.