Civil activists are expressing their anger at new figures that show trade between Russia and Ukraine increased significantly in the first months of 2017 compared to the same period last year, even as the Kremlin continues to wage war in Ukraine’s eastern Donbas region.
Russia was officially designated by Ukraine as an “aggressor state” in January 2015, some eight months after Moscow annexed Ukraine’s Crimean peninsula. In April 2014, the Kremlin launched its war in eastern Ukraine, sending a special operations team and then regular Russian troops across the border to direct and participate in the armed takeover of parts of Donetsk and Luhansk oblasts.
Following the outbreak of the war, trade between Russia and Ukraine more than halved as the two countries introduced reciprocal bans.
But today the trend has reversed, with the value of goods exported to Russia from Ukraine rising by 39 percent year-on-year, to $1.3 billion between January and April, according to figures from Ukraine’s State Statistics Service.
Meanwhile, imports of goods to Ukraine from Russia increased by 46 percent over the same period, to nearly $2 billion.
Limited approach
Activists from civic movement Vidsich, which has spearheaded efforts to boycott Russian goods since late 2013, say the trade dynamic is moving in the wrong direction. They accuse the authorities of not doing enough to wean the Ukrainian economy off its neighbor’s goods and services in the three years since the Kremlin began its war in the Donbas.
“We have our entire economy working as if there is no war,” said Vidsich’s Kateryna Chepura.
“But this is hybrid warfare,” Chepura said. “Everything that has been done so far has been highly targeted. We can ban something targeted, like some variety of products. But this is not economic warfare, this is not a systematic approach.”
Anatolii Pinchuk, the president of the Ukrainian Strategy think tank, also believes the Ukrainian authorities have been weak. He accuses them of failing to display the political will and coordination needed “to wage war with the aggressor on all fronts, including the economic front.”
He characterizes the steps taken by Ukraine so far as “a game of cat and mouse” rather than any serious attempt to inflict damage on the Russian economy. He thinks Ukraine has the potential to act much more effectively.
“If Ukraine were to make systematic use of its options for implementing sanctions and conducting an economic war, it could inflict serious losses upon the Russian economy and at the same time avoiding significant damage to its own economy,” Pinchuk told the Kyiv Post.
Interdependent
The Ukrainian government, meanwhile, has sought to draw attention away from the increase in trade with Russia by emphasizing growth in imports and exports with other countries, and especially with the nations of the European Union.
Trade with the 28-nation bloc jumped 25 percent in the first quarter of 2017 year-on-year, with nearly 40 percent of all Ukrainian goods exported in the period going to the EU, according to Ukraine’s Ministry of Trade and Economic Development.
But speaking to the Kyiv Post in March, Deputy Minister of Economic Development and Trade Nataliya Mykolska said that although Russia had “ceased to be the focus market for Ukraine,” it is “still a key trade partner because of a long history of close relationships.”
Mykolska said she believes the regime of Russian Vladimir Putin in Moscow “will eventually collapse,” allowing Ukraine and Russia, as neighboring countries, to return trade to the levels seen before the Kremlin unleashed war in the Donbas.
According to some observers, the growth seen so far this year in trade with Russia was unavoidable, given the reliance of the Ukrainian economy on Russian imports, with fertilizers and energy among the top sectors for incoming items. Going in the other direction, from Ukraine to Russia, are chemicals and metals.
And it could be dangerous for Ukraine to reduce trade too far, some experts believe.
“50 percent of our (Ukraine’s) electricity comes from nuclear fuel, and most of the fuel comes from Russia,” said Aleksandr Paraschiy, an analyst at Kyiv-based investment firm Concorde Capital. “In 2015-2016 Ukraine decreased its trade with Russia as much as possible, but we cannot do it again because of risks to our security. It’s in nobody’s interests to stop trade with each other completely. It’s not logical. International trade is the basis of all modern economies.”
Further action
In spite of the jump already seen in trade with the EU, Ukrainian lawmakers appear to be seeking further increases, having voted on June 21 in favor of a bill calling for an appeal to the European Parliament to expand preferential trade terms for Ukrainian products.
At the moment, under the terms of a free trade deal which came into force on January 1 last year, Ukrainian producers can export goods duty-free to the 28-country bloc within quotas on 36 commodity groups, most of which are set to increase by 25-50 percent over the next five years.
Vidsich, meanwhile, says it plans to renew its campaign calling for a boycott of Russian goods. But where its previous efforts have focused on raising awareness among consumers, this time it believes it must target the government.
“Trade is just one piece of a bigger chain,” said Chepura.
“Russian singers or actors are able to enter Ukraine, even after they have been in occupied Crimea. That means there is no straightforward state policy that covers the whole problem. The problem is Russia, and whatever is coming from Russia.”
