The “Hybrid” Occupation of Ukraine by Russian Goods

One of the Ukrainian sensations belonging to the “betrayal” category at the end of August was information about a $4.16 million purchase made by the state enterprise Antonov, part of the state concernUkroboronprom, from the company “Aerogulf FZC” (UAE). The subject of purchase, we recall, is eight TA18-200-124 auxiliary gas turbine engines. This engine was developed by the Russian company “Aerosila” for the An-124-100 “Ruslan” military transport aircraft. According to information published in the Ukrainian media, this is not the first such purchase. Earlier, in May 2019, Antonov already purchased one such engine from “Aerogulf FZC” at a price of $499,000. Now the price has risen to $520,000 apiece.

But more interesting in this story is another phenomenon: Ukraine, which refused any military-technical cooperation with Russia and a few years ago boasted of import substitution, quietly buys Russian-made components for its military transport aircraft through the Emirates from a local company. Moreover, it works with this company, which has obvious Russian roots, on a regular basis, ordering components from it (in April 2019, “Antonov” bought generators for TA18-200-124 engines for $180,000), then engineering services — and at a good price.

According to Ukrainian statistics and official relations, the import substitution of Russian goods on the Ukrainian market is going super-fast. But at the end of eight months of this year, Russia is still officially the second largest trading partner of Ukraine. And in terms of the scale of goods deliveries to Ukraine, it ranks third, behind China and Germany.

However, in these statistics, Ukraine buys natural gas from Slovakia, Switzerland, Hungary, Poland, the US, and six other countries, but not from Russia. If we add natural gas to the official data on purchases of goods in Russia, then Ukrainian imports from Russia will immediately grow from $3 billion to $3.8 billion in eight months.

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And as the above example shows, pseudo-import substitution is not limited to natural gas. In fact, many other Russian goods are imported to Ukraine, some of which are accounted for normally, some are de jure imported from other countries, and some are not included in the statistics at all, but somehow end up on the Ukrainian market.

Based on official Ukrainian statistics, this year purchases of hydrocarbons — coal, petroleum products, liquefied gas, coke, and the like – are leading the way in the import of goods from Russia. They were imported to Ukraine from Russia for $1.8 billion in eight months (of course, excluding natural gas). Imports of petroleum products due to lower prices and consumption fell to $840 million — by 40% compared to January-August 2019. But it collapsed in the same proportion from other countries too. Russia both controlled and controls 40% of the supply of oil products to Ukraine. Plus, there are rumours that some of the oil products purchased in Belarus for $712 million are still of Russian origin. Coal supplies fell by one-third to $725 million, which is also proportional to the reduction in imports from other countries. At the same time, deliveries of “Belarusian” coal stopped.

But purchases of natural gas fell quite a bit: taking advantage of the opportunity, Naftogaz maximised its storage facilities with cheap gas.

Nuclear fuel was not imported at all this year, according to the Ukrainian customs, and apparently, Ukrainian nuclear scientists have enough purchases of the past years. Moreover, several nuclear power plant units in Ukraine are regularly idle due to reduced consumption and an unbalanced electricity market.

Most unofficial imports are registered as purchases in third countries. This applies, among other things, to components within the framework of “discontinued” military-technical cooperation. But not only components for “Ruslan”. For example, in early 2019 “” published the results of a journalistic investigation, according to which since 2015 there was a scheme for smuggling components for aircraft, helicopters, armoured vehicles, and the like in service in Ukraine from Russia with a margin of up to 300%. And at the end of 2019, the former Director General of the state concern “Ukroboronprom” Pavel Bukin, in an interview with the publication Apostrof, directly said that Ukraine can not do without the supply of components from Russia. In other words, supplies of these components flow through third countries.

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But deliveries via “layers” are not limited to the military-technical direction.

Similarly, Russian mineral fertilisers are also entering Ukraine, against which Ukraine has applied prohibitive anti-dumping duties for several years, imposed new sanctions, and last year banned their import altogether. In 2017, by the way, bypassing the anti-dumping duty, $700 million worth of fertilisers were imported from Russia to Ukraine. But as Ukraine increases sanctions, Russian manufacturers have started to take measures to change, let’s say, the logistics of supplies. And it looks like Russian fertilisers continued to go to Ukraine under the guise of Lithuanian, Belarusian, Georgian, and Turkish fertilisers.

Something similar happened last year with … potatoes, and before that – with buckwheat and onions. Ukrainian farmers focused almost exclusively on growing export crops (sunflower, corn, soy, wheat, rapeseed) and have almost stopped growing crops consumed by their own population. Crises due to their under-production now occur almost every year. For example, last year the price of potatoes in Ukraine was several times higher than in Russia (threefold in retail). And Russia was the lowest of all the neighbouring countries. Therefore, it is natural that Russian potatoes occupied Ukraine, entering through Belarus…

This year, Ukraine started to produce its “own” brand of cars — HDC, which turned out to be a Russian “Gazel”, which in Ukraine only the wheels were bolted to. At the same time, “GAZ” is under Ukrainian sanctions. Moreover, as well as “PAZ”, which is regularly purchased as a school bus according to the same “wheel” scheme. The engines of the Yaroslavl motor plant, which is under sanctions, are also imported to Ukraine (via Belarus or Moldova). The list goes on.

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Buying Russian “confectionary”, caviar (red, black, pike), various types of fish and seafood, and a number of other products is not a big problem in Ukraine. They get to Ukraine quite illegally, and it’s possible to buy them either via the Internet or on the markets — one just needs to know the places and be ready to pay twice as much as these products cost in Russia.
But the record deliveries of pork to Ukraine, which are reported by Russian statistics, are still deliveries to the L/DPR.

It would be foolish to claim that trade between Ukraine and Russia is not declining, and Russia’s place in the Ukrainian market is not occupied by goods from other countries. By the way, the main beneficiaries of Maidan are clearly visible in this sense: at the end of eight months, Ukraine has the largest negative trade balance with Germany (-$2 billion) and the US (-$1.3 billion). However, it is also naive to believe in the wonders of Ukrainian import substitution, which in the Ukrainian version means not replacing imports with their own production, but the substitution of Russian imports by others.

Sergey Levchenko

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