Putin Orders Suspension of Free-Trade Zone With Ukraine

MOSCOW (Reuters) -

Russian President Vladimir Putin on Wednesday ordered his government to suspend Russia’s free-trade zone with Ukraine from Jan. 1, making good on Moscow’s threats to Kiev, which seeks closer ties with the European Union.

Russia annexed Ukraine’s Crimean peninsula last year, and is accused by Kiev of fomenting a bloody conflict with pro-Moscow separatists in the east of the country. It has staunchly opposed plans to launch an EU-Ukraine free-trade pact.

Senior Russian officials said this month that Moscow would probably have to penalize Ukrainian imports and impose a non-preferential trade regime if Kiev’s planned free-trade pact with Europe went ahead on Jan. 1.

Putin’s decision to suspend a 2011 free-trade treaty with Ukraine was set out in a decree that cited “extraordinary circumstances affecting the interests and economic security” of Russia.

The decree made no mention of how long the free-trade regime would be suspended.

There was no immediate reaction from Kiev, where the authorities have previously said there will be no amendments to the free-trade agreement with the EU and it will come into force on Jan. 1 regardless of any action by Russia.

Russia said the Ukraine-EU deal could lead to a flood of European imports across its own borders and damage the competitiveness of Russian exports to Ukraine.