Why Ukraine has a chance to get a special regime of CBAM

Ukraine should conduct negotiations with the EU on easing the terms and conditions of CBAM application. One of the most important reasons for weakening may be that the country is at war, and the Europeans may create a special mechanism for Ukraine. We will cite the key points from the speech of Oleksandr Kalenkov, president of OP Ukrmetalurgprom at the round table «How CBAM will weaken the economy of Ukraine», held by the GMK Center.

European officials in Ukraine already treat Ukraine as an EU country on many issues. This is understandable, since they finance half of the expenses of the state budget of Ukraine. And that’s why they ask «how can we help you in other issues?», that is, not only CBAM, trade policy or something else, but negotiations with third countries, for example, with the US or Canada. And therefore, it is necessary to use it. I think we can find in them an understanding of our situation. Yes, we can’t change the rules, but we can talk about terms and conditions.

Negotiations with the EU regarding the application of CBAM must be conducted taking into account the following positions:

1. Ukraine is in a state of war, and therefore, probably, the Europeans will be able to create for us a special mechanism for the application of CBAM, taking into account part 7 of Art. 30 of the CBAM Regulations on emergency and force majeure events.
2. We should already be considered as part of the European Union. Many countries enjoy certain privileges of the European Union even before they became EU members.
3. European steel companies get a lot of free emission allowances, which is a form of subsidy, and they also have various other opportunities.
4. All of our major steel companies are international companies in terms of jurisdiction and/or scope of activity. ArcelorMittal Kryvyi Rih is directly owned by a German company, Ferrexpo shares are listed on the LondonStock Exchange, other companies have central offices abroad, attract Western loans, sell products on Western markets, etc.
5. The Europeans are interested in the Ukrainian economy working and filling the state budget so that the financial hole they are closing does not become larger.

I think that, taking these positions into account, they will meet us, as they have already done, when, for example, they canceled all tariffs and quotas on Ukrainian goods at the beginning of the war. If they finance Ukraine’s budgetary needs, they can probably make concessions in terms of applying CBAM.

From our side, Ukraine must understand the importance of what we will have along the perimeter of our borders, so that we do not become a loophole through which products from third countries that were imported to Ukraine will be re-exported to the EU.