Russia suspends free-trade deal with Ukraine from 2016

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Russian President Vladimir Putin has ordered the suspension of a free trade agreement with Ukraine

Russian President Vladimir Putin has ordered the suspension of a free trade agreement with Ukraine (AFP Photo/Alexei Druzhinin)

Moscow (AFP) - President Vladimir Putin on Wednesday signed a decree suspending Russia's free-trade agreement with Ukraine as of January 1, the same day Kiev is set to enter a similar trade deal with Brussels.

Ukrainian President Petro Poroshenko, speaking in Brussels, admitted Russia's retaliatory move would cause "damage" to his country's economy but said he was "ready to pay the price" and press on with efforts to join a European Union free trade zone.

Putin's decree orders a halt to the 2011 Russian-Ukrainian agreement "due to exceptional circumstances which impact the interests and economic security of the Russian Federation", according to the official document posted online.

"These measures are meant to protect Russia's economic interests," Kremlin spokesman Dmitry Peskov told journalists, citing a lack of protection for the Russian market once Kiev's free trade agreement with the EU goes into effect.

Relations between Moscow and Kiev plummeted after Ukraine's pro-Russia president was ousted in 2014 and replaced by the pro-Western Poroshenko, in a year that also saw Russia's annexation of Crimea and the start of fighting between government troops and pro-Russia rebels in east Ukraine.

Moscow has repeatedly expressed concern that Ukraine's free trade agreement with Brussels may flood its market with European goods and months of three-way talks with the EU to smooth things over have yielded no results.

"Unfortunately, no legally binding agreement has been reached with Russia" during the talks, said Peskov.

Poroshenko said Putin's decision to suspend their treaty was unfortunate.

"But we are ready to pay this price for our freedom and our European choice," he told reporters in Brussels, flanked by EU president Donald Tusk and European Commission chief Jean-Claude Juncker.

"Our position is firm and clear. From the 1st of January the DCFTA (Deep and Comprehensive Free Trade Agreement) will be introduced in full between Ukraine and the EU," he said.

"The DCFTA cannot be postponed, that's for sure."

- 'Eurasian Union' -

Moscow established a free-trade zone across the ex-Soviet countries of the Commonwealth of Independent States -- comprising all former Soviet republics except the Baltic states and Georgia -- in October 2011, when Putin was prime minister.

The zone was supposed to be a step toward tighter political and economic links between the former Soviet allies as part of Putin's "Eurasian Union" idea.

Ukraine's previous president, Viktor Yanukovych, at that time had been pushing for closer integration with the EU.

But Brussels backed away following the jailing of his opponent Yulia Tymoshenko, prompting him to edge closer to Moscow.

Yanukovych's decision in 2013 to opt for strategic partnership with Russia rather than sign the Association Agreement with the EU unleashed popular protests and sparked a chain of events which led to his ousting and Moscow's seizing of the Crimean peninsula.

In a further sign of souring ties between Kiev and Moscow, Putin earlier this month ordered his government to sue Ukraine if it defaults on its $3 billion (about 2.7 billion euros) debt to Russia.

The loan was given to Yanukovych in 2013 and is due for repayment this month.