Ukraine trade with Russia will drop USD 12 bln annually, Kremlin warns

Ukraine’s trade with the Russian Federation will drop “at minimum” USD 12 bln per year once the Ukraine-EU Association Agreement takes effect, said Russian Presidential Administration Head Sergei Ivanov on September 30, as reported by the RIA Novosti news wire. The launch of the Ukraine-EU Free Trade Area will mean the end of what’s left of Ukraine’s aerospace, aviation and shipbuilding industries, he warned, adding that the nuclear industry is already non-existent. “Ukraine will become a big agricultural exporter, though I’m not certain of that, but certainly (an exporter) of labor to the EU and Russia, at that,” Ivanov said.

EU experts estimated that 90 percent of the rules of the Deep and Comprehensive Free Trade Area will take effect immediately upon the Association Agreement’s signing scheduled for November 28-29 at the Eastern Partnership summit in Vilnius.

Zenon Zawada: Objective data is not available on the impact of the Ukraine Free Trade Area on Russian-Ukrainian trade. Yet many of the Ukrainian industries mentioned by Ivanov can be competitive on the global market if the necessary investment is made. The Free Trade Area won’t stop European or Russian companies from offering that needed investment.

What figures we can cite with certainty is that USD 12 bln accounted for two-thirds of Ukraine’s goods exports to Russia in 2012. Therefore, a USD 12 bln loss would mean that Russia will have initiated a full-scale trade war with Ukraine. Such comments are clearcut blackmail, in our view, which is precisely what we were expecting. The closer the Vilnius summit, the greater the threats and the dirtier the tricks.

Moreover, Russia’s arguments against the Free Trade Area are unconvincing considering that Ukraine’s railcar production enterprises (which Ivanov did not mention in his list of industries doomed to fail) have been heavily discriminated against by the Russian government in the last couple of years, despite Ukraine’s “brotherly” relations with its northern neighbor. Somehow the Russians also failed to rescue Ukraine’s nuclear industry as well, “of which nothing is left,” according to Ivanov.