You're reading: Putin’s adviser threatens loss of observer status in Customs Union if Ukraine signs trade treaty with Europe

If Ukraine signs the Deep and Comprehensive Free Trade Agreement with the European Union this fall, it will lose not only membership perspective, but also its observer status in the Russia-led Customs Union, the Russian president’s adviser on economic issues, Sergei Glaziev, told a forum in Kyiv on June 14.

“(The signing of the DFTCA) crosses out not only the prospect of membership, but the 3+1 formula suggested by President (Viktor) Yanukovych,” Glaziev said.

Ukraine hopes to sign the DFTCA in November as a part of its Association Agreement with the EU. The 1,000-page agreement was initialed last year and offers an unprecedented degree of integration with the European body for a non-member nation.

At the same time, Ukraine is struggling to find a formula of closer cooperation with the Customs Union, which is comprised of Russia, Belarus and Kazakhstan, and is set to be joined by Kyrgyzstan by end-2013. These countries are the destination for about 36 percent of Ukraine’s exports.

Russia has encouraged Ukraine to become a full member of the organization, in exchange for lower gas prices, but Ukraine insisted on the so-called 3+1 formula, which would give it an observer status with the right to take part in Customs Union events and get early warnings on new policies and documents, but without the right to vote. Earlier this month, Ukraine signed a memorandum on its observer status in the Eurasian Economic Union, the successor organization of the Customs Union, which will become effective in 2015.

But Vladimir Putin’s Economic Adviser Glaziev said Ukraine will not be able to preserve this status if it develops closer trade ties with Europe.

“The status of observer will only be … given to those countries that express a desire to be a part of the common economic area,” he said.

He said that in case of signing the DFTCA, Ukraine will cease to be a free and equal partner, as required to be either an observer or a member of the Eurasian Economic Union. He called on Ukrainians to consider moving towards European integration along with Russia, which is also seeking closer trade ties with the European market of 500 million consumers.

“It would be optimal for Ukraine and Russia to move together, as eternal partners,” Glaziev said.