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. Last Updated: 07/27/2016

Sugar Tax Outrages Ukraine

KIEV -- Russia fired the first shot in a trade dispute with Ukraine on Wednesday by pressing ahead with a 10 percent tax on Ukrainian sugar imports, a move described as discriminatory and a "tragedy" by Ukrainian officials.

The levy, to be introduced from next month, was one of a series of "value added taxes" of about 20 percent initially proposed last month to counter what Russian producers say is mass dumping of cut-price goods on their markets.

The measure had been postponed after emergency talks between the two countries' prime ministers.

"Russia's decision is pure discrimination. I would even call it a tragedy. But this is caused by our short-sightedness and inability to foresee developments," said Olexander Bohatarenyk, deputy head of state Ukrtsukor sugar concern.

"The only way out is to sit down with our Russian partners and find common ground on this. Ukraine will find no markets other than Russia."

Vladimir Yemelyanov, a Russian state customs official, said the measure applied to raw and refined sugar imports from Ukraine and sought to protect domestic producers. "We have sugar production of our own, which is nearly enough to meet our needs," he said. "It is abnormal when a country is glutted with cheap Ukrainian sugar."

The dispute over the taxes has raised political passions and threatens to spoil recent improvements in relations between Russia and Ukraine.

Ukrainian President Leonid Kuchma said last week that a Russian decision to proceed with the taxes would be a political one which could trigger a trade war.

The taxes were to apply to most Ukrainian goods, with special tariffs for some imports like vodka, which Russian reports said would be hit by a 300 percent duty. Other punitive measures, including quotas, have also been proposed.

Traders said the tax would prompt them to find new CIS markets.