Russia toughens import control on 46 Ukrainian companies

The Russian Customs Service has included 46 Ukrainian enterprises in its “risky” list that imposes stricter customs control on their imports to the Russian Federation, the Ekonomichna Pravda news site reported on August 12. The list was amended back on July 12, while the listed companies started feeling trouble in Russian customs since July 24-25, according to the source.

The list contains companies related to Petro Poroshenko (ex-Economy Minister) and his close partners, including confectionary giant Roshen (whose products were outright banned on July 29) and Bogdan Motors (LUAZ UK). It also encompasses railcar industry giants Stakhanov Railcar (SVGZ UK), Dniprovahonmash (DNVM UK) and Kremenchuk Steel Casting (KRST UZ); the machinery companies of Donbas-based Azovmash Group; and the assets of oligarchs Dmytro Firtash, Andriy Kliuyev, Yuriy Boyko, and Igor Kolomoisky, including oil producer Ukrnafta (UNAF UK).

Zenon Zawada: The Russian government’s “restricted list” has a twofold purpose. The first is to tangibly demonstrate to Ukraine’s oligarchs that their businesses will suffer should they pursue the Ukraine-EU Association Agreement.

Poroshenko, for example, has been among the biggest advocates of signing the Ukraine-EU Association Agreement, which would close the door on Ukraine joining the Customs Union. Meanwhile, oligarchs such as Kliuyev and Boyko employ pro-Russian political rhetoric consistently, yet ironically haven’t voiced support for the Customs Union, a behavior that the Russian leadership is also seeking to correct with its customs policy.

The list bypassed some of Ukraine’s biggest exporters to Russia such as engine maker Motor Sich (MSICH UK), Kryukiv Railcar (KVBZ UK), as well as the assets of the two richest Ukraine-based oligarchs, Rinat Akhmetov and Victor Pinchuk. Yet we don’t exclude that the Russians will open a new front in the trade war and expand its list to include them as well.

The second purpose of the trade restrictions is to apply pressure to the Ukrainian economy, which has the potential to further destabilize its fragile condition. For instance, reduced exports to Russia will further deteriorate the current account balance and increase the risk of hryvnia destabilization.

With its restricted list, the Russian government is fully engaged in a battle to undermine the Association Agreement’s signing at the Eastern Partnership in Vilnius on November 28-29. The battle is being waged on both the economic and political fronts, with plans to launch a Ukrainian referendum on the agreement. Unfortunately, given Ukraine’s very fragile situation both politically and economically, these efforts have the potential to seriously destabilize the country.