Russia's Medvedev warns Ukraine over joining EU trade bloc

MOSCOW Mon Sep 9, 2013 10:21am EDT

Russia's Prime Minister Dmitry Medvedev chairs a meeting as he visits the headquarters of the Gazprom company in Moscow, August 30, 2013. REUTERS/Dmitry Astakhov/RIA Novosti/Pool

Russia's Prime Minister Dmitry Medvedev chairs a meeting as he visits the headquarters of the Gazprom company in Moscow, August 30, 2013.

Credit: Reuters/Dmitry Astakhov/RIA Novosti/Pool

MOSCOW (Reuters) - Russian Prime Minister Dmitry Medvedev stepped up pressure on Ukraine on Monday to back down on plans to join an EU trade bloc, warning that Kiev would be barred from a customs union of former Soviet states if it signs an agreement with Europe.

Ukraine's hopes of signing a free-trade pact and other agreements with the European Union at a summit in November have caused concern in Moscow, which aims to derail Ukraine's pro-Europe policy and keep the country focused on the former Soviet bloc. It has already warned that Kiev would forfeit its special partner status with Russia if it goes ahead with signing the EU accords.

Ukraine's economy is heavily dependent on exports of steel, chemicals and grain, more than 60 percent of which go to the former Soviet market, with Russia, Belarus and Kazakhstan - all members of the Customs Union - the biggest markets.

"I don't want there to be any illusions ... Practically, for our Ukrainian partners, entry into the Customs Union will be closed," Medvedev told his deputy premiers during a weekly meeting.

"This is a key political decision that the leadership of Ukraine is making," he said.

Russia, which would like control of Ukraine's gas pipeline network, has used the promise of much cheaper gas to try to coax Kiev into the Customs Union, which was set up in 2010 and offers tariff-free trade between members. Ukrainian President Viktor Yanukovich dismissed the promise as "humiliating".

Last month, Russia sounded a warning shot to Ukraine, conducting extra customs checks on Ukrainian imports over several days. Russian President Vladimir Putin has also spoken of possible "protective" measures by Moscow and its Customs Union allies.

More than just losing geopolitical influence in the former Soviet region, Moscow is also concerned that Ukraine's EU agreement could lead to the re-export of EU goods into Russia, mostly tariff-free, where they could threaten sales of Russian-made products.

Swedish Foreign Minister Carl Bildt, speaking during a meeting of EU foreign ministers last week, criticized what he called Russia's "economic warfare" against former Soviet countries that aim for closer trade ties with the European Union.

Moldova is also seeking free trade agreements with the EU at a summit of EU leaders and their counterparts from some former Soviet states in November in Vilnius.

A Russian envoy last week warned Moldova that its pro-Europe drive could cause it to lose its control over the breakaway territory of Transdniestria and lead to a more costly energy relationship with Russia, its main supplier of gas.

The 28-member EU has set democratic progress in Ukraine as a condition of any landmark agreements to be signed with Kiev in November and the issue of jailed ex-Ukraine prime minister Yulia Tymoshenko, whom Western governments want to be freed, could still jeopardize any agreements.

The Customs Union gained fresh impetus last week when Armenia announced its intention to join.

(Reporting By Thomas Grove; Editing by Susan Fenton)