21 July 2014
The Ukrainian government is preparing for a regime of full bilateral trade restrictions with Russia, said on July 18 Prime Minister Arseniy Yatsenyuk, as reported by the Interfax-Ukrayina news agency. The closure of the Russian market to Ukrainian goods will reduce exports by USD 5 bln, he estimated. The Ukrainian government is supposed to do everything to diversify export markets in the short term, he said. Meanwhile, companies have begun to seek new markets already one their own. Russia’s “trade embargo has been imposed on all goods that could and could not have been imposed on,” Yatsenyuk said. “All that’s left is what they can’t do without.”
Alexander Paraschiy: A USD 5 bln exports plunge from a de facto trade war looks like a base-case estimate with certain downside risk. This statement does not necessarily mean that external trade with Russia will be stopped; however, it means that business should be aware of a potential aggravation of the problem.
For 5M14, exports to Russia are already USD 1.5 billion less than a year ago with the understanding that the trend will continue. In 2013, Ukraine exported USD 15.1 bln in goods to Russia, about a third of which can be substituted by Russian products or other international suppliers. What is critical for Russia is Ukraine’s machinery products, including power and transportation engineering, aerospace and defense products. In some of these areas, it may be Ukraine that imposed trade restrictions, which might result in a much bigger decline in exports to Russia.