March 11 (Bloomberg) -- The European Union promised Ukraine almost half a billion euros ($693 million) a year of trade relief as the Ukrainian government seeks to fend off bankruptcy and Russian encroachment in the region of Crimea.
The European Commission proposed to remove import duties on Ukrainian goods ranging from cereals to chemicals as the 28-nation EU prepares to sign a deeper trade pact with Ukraine after the country holds May 25 presidential elections.
The step would save Ukrainian exporters 487 million euros annually in EU border levies, according to the commission, the bloc’s trade authority. The proposal needs the support of EU governments and the European Parliament, which may act quickly enough for the plan to take effect by June.
“The EU will open its doors to exports from Ukraine, giving a real boost to the Ukrainian companies with a knock-on effect of creating or maintaining jobs across the country,” European Trade Commissioner Karel De Gucht told reporters today in Strasbourg, France. This “is more than a gesture, it is an economic lifeline.”
The trade relief is part of a planned European aid package for Ukraine that could total more than 11 billion euros over the next seven years. The EU has had 610 million euros ready to go as soon as Ukraine reaches an accord with the International Monetary Fund and next week the commission will outline a proposal to top that up with another 1 billion euros in macro-financial assistance.
The Ukrainian government of Prime Minister Arseniy Yatsenyuk is racing to secure international aid to avoid default as Russia wrests control of Ukraine’s Crimean peninsula following protests that toppled Ukraine’s pro-Russian president, Viktor Yanukovych. The developments in Crimea, home to the Russian Black Sea fleet, have prompted the EU to suspend visa and trade talks with Russia and threaten sanctions against officials in the country.
The trade relief for Ukraine’s $176 billion economy is scheduled to last until Nov. 1, by which time the EU expects to have signed a broader free-trade agreement with the country. EU officials want to wait until after Ukraine’s presidential elections in two-and-a-half months before striking the commercial pact.
Under today’s proposal, the EU would eliminate annual import duties against Ukraine of 330 million euros on agricultural goods including cereals, pork and poultry and 53 million euros on processed food products, according to De Gucht. In the area of industrial goods, 26.8 million euros a year of EU duties on chemicals from Ukraine would be eliminated, he said.
For the relief to take effect by June, the EU Parliament must give its approval no later than the week of April 14, the assembly’s last plenary session before European legislative elections the following month.
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