Ukraine’s Tough Decision.

 

Ministers of the European Union will meet 18 November ahead of a summit in Vilnius, Lithuania to decide if Kiev has met enough criteria to sign a trade association agreement.

Tough admission standards could keep Ukraine’s trade integration with the European Union on hold. f the process is dragged out Ukraine may be forced back into the arms of Russia.

 Infographics by RT

Putin has done everything to convince Ukraine to join Russia, Belarus, Kazakhstan, and other former Soviet nations in a trade bloc built to rival that of the EU.

Russia is Ukraine’s main source of energy, loans, and trade. Ukraine, has great resource wealth and is in need of serious loans from the IMF. Russia has made it all too clear that should Ukraine cross this bridge there will be no returning. Prime Minister Medvedev said, ”There will be no bridge; if Ukraine steps west, they will give up their exclusive relationship with Russia.”

Caught between a Rock and a Hard Place

Ukraine stands at the biggest economic crossroads since the fall of the Soviet Union in 1991. By integrating with the west, Russia becomes ever more irritated as Russia imports 25 percent of Ukraine’s export goods.

Russia has said it will tighten the border between the two nations if Ukraine signs the agreement. Russia also claims that Ukraine’s choice to team up with Europe will come at a cost of 35 billion euros worth of Ukrainian goods.

Ukraine’s depreciating currency reserves and massive deficit prompted Moody’s rating agency to cut Ukraine’s credit rating from B3 to Caa1 in September putting the nation at very high risk of default. Russia says the agreement with the EU will cause Ukraine to default on its sovereign debt.

If the trade agreement is signed and Russia retaliates, the EU has plans already in place to supply Ukraine with natural gas, as well as emergency financing from the IMF.

Ukrainian exporters will save nearly $490 million over 10 years, as 95% of goods will have zero customs duties, according to the European Commission.

The EU and IMF will likely need to finance $12 billion by the end of 2014 in Ukraine. Ukrainian bonds have hit fresh lows, currency reserves are almost nonexistent, and there’s more than $60 billion in debt, which is roughly a third of the nations GDP, due by July 2014, according to central bank data from July 2013. The EU trade deal may not prevent the grivnya, Ukraine’s currency from going bust before elections in 15 months which will create political capitol for Russia.

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