Ukraine Says No Trade War With Russia On The Horizon

by Tatiana Smolensky, Tax-News.com, Moscow

05 July 2001

The Ukranian President, Leonid Kuchma, announced on Tuesday that there would be no trade war with Russia, despite the reciprocal application of VAT and excise duties on imports from Russia.

The duties were imposed on the 1st June after Russia applied such taxes on Ukranian goods and those from other former Soviet republics. As China and Japan are at present battling it out elsewhere on the world stage over a similar disagreement, observers are understandably jumpy, and fear that this dispute may escalate in a similar way.

However, President Kuchma has ruled out the possibility of a trade war between the countries, and was quoted by the Interfax news agency as saying that a precedent exists in trade practice, and he doesn't see the imposition of indirect taxes causing much of a commotion.

He did, however, admit that given the current trade balance between the Ukraine and Russia, the VAT introduction will not be favourable for his country, given that the Ukraine is heavily reliant on Russia. Speaking to journalists on the 3rd July, he said: 'You know well that VAT on the 60 percent of goods which Ukraine imports, starting with oil and gas, is collected in the Russian Federation. So when you calculate the balance it will not be in Ukraine's favour. But this is our fate.'

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