Russian President Vladimir Putin on Wednesday signed a decree to suspend its free-trade agreement with Ukraine as of January 1, according to the official document posted online.
It orders a "halt" to the agreement "due to exceptional circumstances which impact the interests and economic security of the Russian Federation."
The free-trade zone was established between the ex-Soviet countries of the Commonwealth of Independent States -- comprising of all former Soviet republics except the Baltic states and Georgia -- in October 2011, when Putin was prime minister.
The zone was supposed to be a step toward establishing tighter political and economic partnership of the former Soviet allies as part of Putin's "Eurasian Union" idea.
Ukraine's president at the time, Viktor Yanukovych, at that time had been pushing for closer integration with the European Union.
But Brussels backed away due to the jailing of his opponent Yulia Tymoshenko, prompting him to edge closer to Moscow.
His decision in 2013 to opt for strategic partnership with Russia rather than sign the Association Agreement with the EU unleashed massive protests and sparked a chain of events which included his ouster and Moscow's annexation of the Crimean peninsula.
Arch-foe of current pro-Western authorities in Kiev, Moscow has expressed concern that Ukraine's free trade agreement with Brussels, set to go into effect on January 1, may flood its market with European goods.
Moscow is also threatening to extend its EU food embargo, introduced as retaliation for Western sanctions, to Ukraine.
The three sides have been negotiating to find a common ground between EU, Moscow, and Kiev, with talks scheduled Monday, but any compromise deal is unlikely to happen by the end of the year.