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21 August, 2013 17:23   ▪  

Experts: the future of the Association Agreement between Ukraine and the EU dependents on the stance of the Ukrainian oligarchs

As oligarchs influence country's political and economic development, the result of Vilnius Summit will highly depend on their gains from the Association Agreement; write Piotr Kościński and Ievgen Vorobiov, PISM experts

"According to the DCFTA provisions, Ukrainian oligarchs are likely to gain short-term economic benefits from the elimination of import tariff duties, which might have otherwise impeded their access to the EU market.

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Food producers stand to gain the most. A decrease in duties would be useful to the likes of  confectionary giant Roshen, owned by Petro Poroshenko, given that these products are levied import tariffs of about 35–40% in the EU.

Lifting import duties would also be beneficial to the Kernel group, owned by Andriy Verevskiy, as his company exports about 17% of its grain and oil to the EU. Likewise, Mironivsky Hliboprodukt, owned by Yuri Kosyuk, could gain from the elimination of both sanitary barriers and import duties, to increase its fowl exports to the EU from the meagre share of 5%. However, these businessmen have little if any influence on the government’s compliance with the EU criteria," write experts in PISM Bulletin. 

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Meanwhile, the most influential oligarchs, who dominate the parliamentary faction of the Party of Regions, are not likely to gain much in the short run. The Metinvest Group, co-owned by Akhmetov and Vadim Novinsky, exports steel to the EU, free of import duty. Firtash’s Group DF exports about half of its nitrogen fertilisers to the EU, where a duty of 6.5% is levied. The only major Ukrainian oligarch who has limited access to the EU market is Pinchuk, whose Interpipe Holding exports only 1% of its seamless pipes to the EU, due to anti-dumping duties imposed by the European Commission.

Besides that PISM experts think that “Some of the most influential oligarchs could receive short-term gains from Ukraine’s accession to the Customs Union (CU) of Russia, Belarus and Kazakhstan.

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The tangible risks will, however, stem from a loss of control over tariff policies, which would be handed over to the Eurasian Economic Commission. Likewise, oligarchs such as Firtash who rely on imports of Russian gas cannot count on the promised low gas prices in the CU, given the likely increase of domestic gas prices in Russia. Last but not least, the future regulatory architecture of the Eurasian Economic Union beyond 2015 is unclear, in sharp contrast with the DCFTA provisions.”

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