One of the more complicating factors in Russia's war against Ukraine is the high degree to which the nations' two economies are linked. Many in Ukraine and the West think the nation needs to lessen its dependency on Russia's economy.
Now, however, there is hard evidence that the disentangling of the two nations’ economies appears to be well under way.
Bilateral trade with Russia fell by almost a half in 2014, down to some $21 billion, according to the Ukraine’s Economy Minister Aivaras Abromavicius, crossing off the Kremlin-run country from the list of priority partners.
Given a 20 percent decrease of gas consumption, Russia’s stake in Ukraine’s overall $100 billion foreign trade diminishes. Moscow-based monopolist Gazprom is a key trade link between the two countries.
The European Union remains the biggest trade companion for Ukraine with an emphasis on Poland, Italy, Germany and Hungary. Bilateral trade fell by 20 percent in 11 months of 2014, down to $35 billion.
Even for Europe, Russia’s substantial market role is losing value because of its unpredictability, said Abromavicius during the Feb. 1 interview with 1+1 television station. “At any moment it might not like the taste of Georgian wine, Lithuanian dairy products or Ukrainian dairy and confectionary products,” he said.
Considering that Russia’s economy has been severely hit by the sanctions and the dramatic fall of oil prices as well as Russia’s 69-per-dollar ruble, the country is not to seen growing anytime soon by the leading economic institutions.
“I think our companies should reorient toward the Western markets,” concluded Abromavicius.
Ukraine is still known on the global market for its steel and
agriculture where goods are produced with lower added value, while production of goods more
sophisticated technologically remains undeveloped.
There’s nothing bad in exporting only resource-based goods, said Arturo Bris, professor at IMD Business School in Switzerland, in an earlier interview with the Kyiv Post.
However, the local tech sector continues to draw attention with its exporting potential. Though it’s still relatively small, compared to the other industries, Abromavicius places big hopes with it as Ukraine remains one of the top tech outsourcing destinations globally.
Abromavicius’s predecessor, Pavlo Sheremeta, was talking about popularizing branded Ukrainian products for them to be recognizable on the global market, basically in the stores around the world, but he quit his job in August with the parliament accepting his resignation in September.
Whether the new minister will follow Sheremeta’s agenda remains a question. For sure, Ukraine’s trade strategy will have to remain within the framework of the association agreement with the EU and rules of the World Trade Organization.
Kyiv Post staff writer Ilya Timtchenko can be reached at [email protected].
