Ukraine, EU sign historic trade and economic pact

BRUSSELS - Ukraine's new president signed a trade and economic pact with the European Union on Friday, pushing his troubled country closer into a European orbit and angering Russia, which warned of unspecified consequences.

A beaming Petro Poroshenko called it "maybe the most important day for my country" since independence from the Soviet Union in 1991. His pro-Moscow predecessor, Viktor Yanukovych, backed out of signing the agreement in November. The bloody protests that followed toppled his government, sparking an insurgency in the east and the Russian annexation of the Crimean Peninsula.

Agreements signed Friday let businesses in former Soviet republics Ukraine, Moldova and Georgia trade freely in any of the EU's 28 member nations without tariffs or restrictions, as long as their goods and practices meet EU standards. Likewise, goods and services from the EU will be sold more easily and cheaply in the three countries.

The closer ties between Ukraine and the EU have been overshadowed by Russian opposition. Moscow is loath to see its historic influence wane in its strategic neighbor, which it considers the birthplace of Russian statehood and Russian Orthodox Christianity.

"There will undoubtedly be serious consequences for Ukraine and Moldova's signing," Deputy Foreign Minister Grigory Karasin said.

Russian President Vladimir Putin did not immediately comment on the trade pact, but in recent days has made signals that he wants to de-escalate the conflict ahead of talks later Friday by EU heads of state and government on whether to ramp up sanctions against Russia over its conduct toward Ukraine.

"The most important thing is to guarantee a long-term regime of cease-fire as a precondition for meaningful talks between the Kiev authorities and representatives of the southeast (of Ukraine)," Putin said Friday.

A second round of talks was to be held Friday in eastern Ukraine between representatives of the mutinous regions and the government, as well as envoys from Russia and the EU, Russian news agencies quoted rebel leader Andrei Purgin as saying.

A spokesman from Poroshenko's office confirmed that a weeklong cease-fire, which each side has accused the other of violating, was set to expire at 10 p.m. local time.

Interior Minister Arsen Avakov told Ukraine's Fifth Channel on Friday that at least 20 servicemen had been killed since the rebels agreed to the cease-fire, although he did not specify when and where they died. He said the government would respond "harshly and adequately" to all rebels who did not put down their arms by Friday evening.

An overnight battle for a National Guard base in Donetsk left rebels in control early Friday. All servicemen were set free but the commander was taken captive, according to a statement posted on the National Guard's website.

In Brussels, Poroshenko made no mention of the cease-fire as he triumphantly signed the agreement.

"What a great day!" he said. "Maybe the most important day for my country after independence day."

European Commission experts estimate implementation of the deal will boost Ukraine's national income by 1.2 billion euros ($1.6 billion) a year. Ukraine won a 15-year transition period during which it can use tariffs to support its domestic auto industry from competition. Moldova will gradually eliminate protections for its dairy, pork, poultry and wine producers over 10 years, while the EU placed limits on imports of chicken from both countries.

Perhaps more important than the trade clauses is an accompanying 10-year plan for Ukraine to adopt EU product regulations. Such rules ease the way for international trade beyond Europe.

The deal also demands that Ukraine change the way it does business. Adopting EU rules on government contracts, competition policy and copyright for ideas and inventions should improve the economy by making it more investor-friendly and reducing corruption.

EU President Herman Van Rompuy said Moscow need not worry about the deal: "There is nothing in these agreements or in the European Union's approach that might harm Russia in any way."

Russian officials weren't so sure. Putin's spokesman, Dmitry Peskov, told Russian news agencies that the Kremlin would respond to the accord "as soon as negative consequences arise for the economy." He noted those were possible only after the agreement is implemented.

Amanda Paul, a policy analyst at the Brussels-based think tank European Policy Center, said Russia has levers to inflict serious economic pain on Ukraine, Moldova and Georgia through trade restrictions, cuts in energy supplies or the deportation of migrant workers from those countries.

Poroshenko reminded EU leaders of the Ukrainians who died opposing Yanukovych's government and in the ongoing battle against the pro-Russian insurgency in the country's east. He said Ukraine "paid the highest possible price to make her European dreams come true."

He asked EU leaders to take a further step and formally pledge that one day Ukraine can join the EU as a full-fledged member.

That "would cost the European Union nothing," he said, "but would mean the world to my country."