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Russia may Impose Sanctions against Ukraine, Georgia and Moldova

Introduction of non-zero duty for imports from Ukraine, Moldova and Georgia is not the only possible answer of Russia to the Association Agreement with the European Union signed by the three countries. Moscow may impose restrictions on trade with its neighbors following the example of Western sanctions, government documents say. However, this scenario is fraught with proceedings in the WTO.

The government discussed three options for how Russia can protect its domestic market after theAssociation Agreements with Ukraine, Moldova and Georgia enter into force. This follows from the working paper of the  Ministry of Economic Development (RBC sites), which authenticity was confirmedby three government officials.

The first option – Russia could use annex-6  to the agreement on free trade zone in the CIS. According to it, a free trade zone member countries   can set non-zero tariffs for the  zone countries, if as a result, there was a significant increase in imports of foreign goods in one of the countries.

Officials propose to use this option for the case of Moldova. Now zero import duties are imposed on most goods entering the Russian market from  this country. Moscow will raise them to the level of themost-favoured-nation treatment (MFN)  if sees a threat of gray imports growth  from the European Union.

This proposal contains  risks: if Belarus and Kazakhstan do not carry the same actions, the question of additional supply control within the Customs Union will arise.

The second option is  the suspension of the agreement on free trade zone for the country that has signed an agreement with the EU. It can be done if it is  proved that the country violated the treaty or changes that radically changed the situation in which the contract was signed have occurred.

But the suspension of the agreement is more beneficial for Russia from a political standpoint and for the same reason is difficult in execution. To do this, the consent of all members of the CIS free trade zoneis needed. However, Russia has  failed to agree on joint actions even with partners in the Customs Union.

The third option is the toughest and suggests protective measures on grounds of national security. Thisis a fallback option, it is not recommended, as officials say.

In September, negotiations will be held at the ministerial level, where the parties will try to reach a compromise, but until then the expert group will work, which will assess the risks of the Russian side.