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Ukraine Links Russia Trade Delays to Customs Union Discord

Aug. 15 (Bloomberg) -- Delays experienced by Ukrainian exporters on the border with Russia are linked to disagreements between the two countries over a Russia-led customs union, Ukraine’s Prime Minister Mykola Azarov said.

Russia’s Federal Customs Service has placed Ukrainian exporters in a higher-risk category, subjecting their goods to lengthier checks, Ukraine’s Employers Federation said yesterday. The country’s biggest steel producer, Metinvest, said its shipments have drawn additional scrutiny for two days.

“There are certain difficulties linked first of all to the setting up of the customs union,” Azarov said today in the eastern city of Luhansk, according to remarks broadcast by privately owned TV 5. Russia’s government denied restricting Ukrainian imports, saying delays are down to decisions by customs officials, according to its press office.

Russia wants Ukraine to join a customs union it’s formed with Belarus and Kazakhstan, promising benefits including cheaper natural gas and higher trade. Instead, Ukraine is seeking to sign a free-trade pact with the European Union in November, a move that would rule out customs union membership.

Russia is the top destination for Ukrainian goods exports, with almost a quarter of foreign sales being shipped there in the first six months of the year, according to Ukraine’s state statistics office.

‘Limited Consequences’

“The economic consequences are rather limited,” Dragon Capital, an investment bank based in the capital, Kiev, said today in a research note. Still, “pressure on Ukrainian exporters to Russia may escalate further and the risk of more serious import hurdles should be considered.”

Russia banned imports of candies produced by Ukraine’s Roshen on July 29, saying consumer regulators had discovered carcinogenic substances. Kazakhstan, Tajikistan and Moldova inspected Roshen products this month and said they found no dangerous ingredients.

Ukrainian poultry producer Mironovskiy Hleboproduct SA and pipe maker Interpipe said they haven’t suffered delays at the Russian border.

Ukraine hasn’t received confirmation from Russia that exporters have violated any laws, the Economy Ministry said in a statement on its website. The ministry said it’s “actively cooperating with Russia to resolve the problem.”

Russia’s actions violate trade agreements among the Commonwealth of Independent States and the basic principles of the World Trade Organization, of which both nations are members, according to opposition leader Arseniy Yatsenyuk.

“The ban on Ukrainian exports to Russia is nothing else but Russian pressure to force Ukraine to join the customs union,” he said today in a statement.

To contact the reporters on this story: Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net; Kateryna Choursina in Kiev at kchoursina@bloomberg.net;

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net; James M. Gomez at jagomez@bloomberg.net

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