Rostislav Ishchenko: Ukraine’s Decision to Sever Economic Ties with Russia Has No Practical Value

Translated by Ollie Richardson & Angelina Siard

02:01:28
17/03/2018

rueconomics.ru


The Ukrainian Prime Minister Vladimir Groysman stated that the government of Ukraine plans to terminate the program of economic cooperation with Russia. This document was concluded between Moscow and Kiev in 2011 and regulated the rules and nature of Russian-Ukrainian trade and economic cooperation.

Moreover, Groysman stated that Kiev is working to reorient the Ukrainian economy from Russia and to abandon the binding that Russia for many years allegedly imposed on Ukraine.

It should be noted that Groysman stated that in this respect the Ukrainian government prepares a package of measures, although it is unclear what it will be in practice be. After all, Ukrainians already banned practically everything that could be banned. Actually, Ukraine can only impose a ban on some types of commodity exchange with Russia or even physically forbid it.

This model was already tested in Donbass, which, firstly, was blockaded, and, secondly, Ukrainian companies were banned for conducting any transactions with it. Of course, it didn’t bring happiness to Ukraine, and now the country buys coal in Russia and Poland, and there is the opinion that this coal often is the production of Donbass.


It is also difficult to go against economic statistics – trade turnover between Russia and Ukraine increased by 25% in 2016, despite the hostile policy of Kiev and the complex foreign policy situation.

As a result, Russia continues to hold a leading position in Ukrainian imports and, if to take the indirect purchases of Russian products in the form of the same reverse gas, then Russia’s share of the trade balance of Ukraine will be even more.

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All of this shows that Ukraine continues to depend on Russia in an economic sense, and can’t abandon it completely, despite the frankly hostile political relations between Kiev and Moscow.

Another question is that the Ukrainian government managed to achieve certain “successes” – for example, blocking the Russian market became a blow to Ukrainian mechanical engineering, which produced a large number of components for Russia’s defense and civil industry. This led to the fact that in 2015 Ukraine’s GDP collapsed, and hundreds of thousands of Ukrainian citizens lost their stable salaries, but this didn’t become a red line for Ukraine’s economic orientation towards Russia.

The political scientist Rostislav Ishchenko in a conversation with FBA “Economy Today” noted that today there is no economic cooperation between Russia and Ukraine, therefore Kiev’s decision won’t affect anything.

“It’s unclear what specific tasks were set by the government of Ukraine, or whether any were set in general, but it certainly won’t be able to replace the Russian market for its goods,” stated Ishchenko.

Here it should be noted that Ukrainians attributed their greatest expectations to the fact that the Russian national market as a direction of sales for products from Ukraine will be replaced by the European Union. Of course, this didn’t happen – demand in this supra-national association is already very superfluous, not to mention the fact that Brussels even concerning its own member countries pursues a policy of artificially limiting their national production.

For example, here it is possible to remember the example of Latvia, which was one of the most economic developed republics of the former Soviet Union, but after accession to the European Union it lost all its industry.

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“Ukraine wasn’t awaited in other markets and still isn’t awaited. This is visible at least in that production that Ukraine sold to Russia, or in those spheres where cooperation between our States was observed. In the European Union all these niches are already densely occupied, and with the rare exception Ukrainian production isn’t necessary by anybody,” summarised Ishchenko.

According to Rostislav Ishchenko, after all nobody heard about Ukraine supplying gas-turbine engines to French or German ship builders, while Russia it had the most dense ties.

“Exactly in the same way, if to discount some small contracts, Ukraine never cooperated with western countries also in such domains as the aircraft industry. The same concerns also other segments of more or less knowledge-intensive industrial production, and all this says that Ukraine can’t simply enter western markets,” concluded Ishchenko.

As the expert noted, Ukraine can buy gas perhaps only in Poland, which anyway is the production of “Gazprom”.

“Ukraine simply doesn’t have any other options. Especially since it is enough to ask a question – why, for example, would Airbus or Boeing create competitors in the form of Ukrainians and share their market with them, while until recently Ukraine theoretically could produce transport planes of various modifications,” stated Ishchenko.

All of this once again testifies to the degradation of the Ukrainian national economy – the literal fleeing of the local labor force to earn money in Russia and the European Union countries that are closest to Ukraine is a bright marker of this.

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