Customs service of the Russian Federation has included all Ukrainian exporters into the 'risk list', blocking export from Ukraine for an indefinite period, press office of the Federation of employers of Ukraine (FEU) informs.
"At 00:00 of August 14, the profile of the system of risk control of the Customs service of Russia was updated. The list of "high-risk" enterprises, numbering 40 Ukrainian producers in June, now includes all Ukrainian enterprises without exception. In fact, Russian custom house has fully stopped Ukrainian export for an indefinite period - weeks or even months," the statement reads.
The FEU specifies that Russian customs house subject all Ukrainian goods to thorough control, including unloading, reloading and loading back, which causes delivery delays, fails to deliver, spoilage, and as a result tears down the positions of Ukrainian producers on Russian market.
The history of complicated economic relations between Ukraine and Russia dates back to the collapse of USSR, when then authorities approved the policy of import substitution. In recent years Russia does not hesitate to use various trade wars to support this policy. Thus, in 2008-2010 Russian machine engineering plants easily kicked out Ukrainian colleagues from the market, and in past years "cheese war" and "sweets war" have become an integral part of economic relations between our countries.
Thus, according to the State Statistics Service of Ukraine, in the first half year of 2013, export to Russia made only 24.7% (reduced by 13.5% comparing to the relevant period of last year) out of total export of Ukrainian goods. Export of basic export goods- metals and articles made therefrom - made 28.3% of total export in the first half year of 2013 (reduced by 11.9% comparing to the relevant period of 2012).
"Following the events, Ukrainians losses may reach $2-2.5 billion already by the year end," FEU sums up and appeals to the Premier Mykola Azarov to settle the issue at the state level as soon as possible.
So, where and what is the problem? Experts say...
Mykhailo Pohrebynski, political scientist, director of the Kyiv center for policies research and conflict study:
- This problem is not a surprise, and Russian authorities has warned Ukraine about it. If we do not want to be a part of the Customs Union, we will have to face this problem and deal with it. We may suffer budget losses or increased unemployment rate at enterprises working for Russian market, but it is a part of new reality we have chosen. Ukraine follows its course and chooses European integration and free trade area, not Customs Union.
We used to have one conditions, now we have different, and I believe Ukrainian authorities have a plan to meet the challenge. Obviously they will organize negotiations, will try to ease the circumstances, but deep down it is clear that this is price Ukraine has to pay for not joining the Customs Union, but going in opposite direction.
Oleksandr Okhrymenko, president of Ukrainian analytical center, Ph.D. in Economics:
- It may sound strange, but this situation has both pros and cons. Due to complications with export to Russia, Ukrainian producers will have to sell more products on Ukrainian territory. Though for producers it is not the best way out, Ukrainian consumers will benefit, as products will go down in price. In Russia, however, the situation is opposite. Blocking Ukrainian goods, Russia will have only domestic products to offer to the consumers. No being able to substitute production immediately, Russia will have to rise prices, and it will be Russian consumers to pay for this war.
The situation, however, will not last long. Yes, our engineering industry suffer losses because of this war, but Russia cannot stay without Ukrainian engineering products for long. The fact is that there are certain lobbyists who stand for settlement of this conflict and fast, fearing shutdown of many engineering plants in Russia.
In my opinion, the matter does not concern only Ukraine and Customs Union. Russia fears that we will sign the Association agreement with the EU, which will lead to shock of economy and political ambitions. When Ukraine becomes an associated member of the EU, it will completely change its economic model and priorities. It may take years, but in the end our economic model will have nothing to do with Russia. Russia understands that the agreement will happen anyway and tries to do everything possible to change the balance.
There are other variants as well. Now we have access to Chinese market, and thanks to this way our producers will go to Latin America. The fact is that until everything was fine, nobody wanted to bother and work on new markets. On one hand, this war is shock for Ukrainian producers, but on the other hand, due to these complications with Russia, our producers will be more motivated to discover and conquer the markets of Latin America.
Volodymyr Kornilov, political scientist, director of Ukrainian branch of CIS Institute:
Three or four years ago Vladimir Putin and Dmitry Medvedev directly warned Ukraine that signing FTA with the EU on the terms dictated by the EU would lead to the consequences we feel now. Ukraine did not take it seriously.
Ukraine is shown what blocking of economic and customs borders with Russia will result. If now Ukrainian producers and the government do not understand what challenges Ukraine may face after the Vilnius summit, we have a short-sighted government. Russia is interested in maintaining a high trade turnover with Ukraine and its market. However, dependence of the Ukrainian economy on the partners in the CIS and Customs Union is higher than Russia's dependence on Ukraine. Just look at the share of exports of Russia and Ukraine. If we pass to the real economic war, it will hit the Russian Federation, but it will affect more the economy of Ukraine.
Blocking Ukrainian export, Russia does not impede our producers to sell the goods somewhere else. The problem is that nobody else takes it. Who else needs Roshen sweets, apart from CIS and Russia? Poroshenko (owner of the Roshen company - ed.), who fiercely defends European integration, could not answer this question. If our cheese is so good, why does not Europe take it? Our quality of goods is not welcome in Europe. For the moment we can export only to Russia and CIS countries.
Volodymyr Fesenko, CEO of the Center for applied political research "Penta":
- Ban on import of Roshen confectionary is not the first trade war, initiated by Russia. But if in the "cheese war" of past years there was certain economic reason, the situation with Roshen is pure politics. Moreover, I think this war is a signal for other Ukrainian enterprises. This is way Russia uses to make Ukrainians oligarchs understand what may happen to their business if they insist on European course.
We cannot rule out further bans, sanctions and blocking of Ukrainian production, tough negative consequences of this war may hit not only Ukraine. If Russia choose the path of conflicts and bans, it will push Ukraine off even more. And if Russia expects Ukraine to join the Customs Union after all these conflicts, it is a big mistake. Ukrainian enterprises do not like to be dictated the rules. Such attitude will force Ukraine to seek even closer cooperation with the European Union and conquer new markets.
Kost Bondarenko, political scientist, CEO of the Institute of Ukrainian politics:
- This ban will definitely hit our economic and political relations with Russia. Russia intends to control absolutely all imported goods, including food productions and metal production. We should expect delays, failures to meet the delivery date, forfeits and various misunderstandings. And if Ukraine impose the same sanctions on Russia, the problem will double.
However, I think this is a political move. Russia has decided to show what may happen if Ukraine signs the Association agreement with the EU. Both Russia and the EU have their sanitary norms and standards, and customs control on the Russian borders with EU countries is very thorough. In fact, Ukraine has been included in the list of countries, subjected for additional control. And it was supposed to happen sooner or later, if not now, then in November or December.
Ukraine can always reorient to other foreign markets. We should explore Africa, Latin America, and not get lost in Washington-Brussels-Moscow woods.
"At 00:00 of August 14, the profile of the system of risk control of the Customs service of Russia was updated. The list of "high-risk" enterprises, numbering 40 Ukrainian producers in June, now includes all Ukrainian enterprises without exception. In fact, Russian custom house has fully stopped Ukrainian export for an indefinite period - weeks or even months," the statement reads.
The FEU specifies that Russian customs house subject all Ukrainian goods to thorough control, including unloading, reloading and loading back, which causes delivery delays, fails to deliver, spoilage, and as a result tears down the positions of Ukrainian producers on Russian market.
The history of complicated economic relations between Ukraine and Russia dates back to the collapse of USSR, when then authorities approved the policy of import substitution. In recent years Russia does not hesitate to use various trade wars to support this policy. Thus, in 2008-2010 Russian machine engineering plants easily kicked out Ukrainian colleagues from the market, and in past years "cheese war" and "sweets war" have become an integral part of economic relations between our countries.
Thus, according to the State Statistics Service of Ukraine, in the first half year of 2013, export to Russia made only 24.7% (reduced by 13.5% comparing to the relevant period of last year) out of total export of Ukrainian goods. Export of basic export goods- metals and articles made therefrom - made 28.3% of total export in the first half year of 2013 (reduced by 11.9% comparing to the relevant period of 2012).
"Following the events, Ukrainians losses may reach $2-2.5 billion already by the year end," FEU sums up and appeals to the Premier Mykola Azarov to settle the issue at the state level as soon as possible.
So, where and what is the problem? Experts say...
Mykhailo Pohrebynski, political scientist, director of the Kyiv center for policies research and conflict study:
- This problem is not a surprise, and Russian authorities has warned Ukraine about it. If we do not want to be a part of the Customs Union, we will have to face this problem and deal with it. We may suffer budget losses or increased unemployment rate at enterprises working for Russian market, but it is a part of new reality we have chosen. Ukraine follows its course and chooses European integration and free trade area, not Customs Union.
We used to have one conditions, now we have different, and I believe Ukrainian authorities have a plan to meet the challenge. Obviously they will organize negotiations, will try to ease the circumstances, but deep down it is clear that this is price Ukraine has to pay for not joining the Customs Union, but going in opposite direction.
Oleksandr Okhrymenko, president of Ukrainian analytical center, Ph.D. in Economics:
- It may sound strange, but this situation has both pros and cons. Due to complications with export to Russia, Ukrainian producers will have to sell more products on Ukrainian territory. Though for producers it is not the best way out, Ukrainian consumers will benefit, as products will go down in price. In Russia, however, the situation is opposite. Blocking Ukrainian goods, Russia will have only domestic products to offer to the consumers. No being able to substitute production immediately, Russia will have to rise prices, and it will be Russian consumers to pay for this war.
The situation, however, will not last long. Yes, our engineering industry suffer losses because of this war, but Russia cannot stay without Ukrainian engineering products for long. The fact is that there are certain lobbyists who stand for settlement of this conflict and fast, fearing shutdown of many engineering plants in Russia.
In my opinion, the matter does not concern only Ukraine and Customs Union. Russia fears that we will sign the Association agreement with the EU, which will lead to shock of economy and political ambitions. When Ukraine becomes an associated member of the EU, it will completely change its economic model and priorities. It may take years, but in the end our economic model will have nothing to do with Russia. Russia understands that the agreement will happen anyway and tries to do everything possible to change the balance.
There are other variants as well. Now we have access to Chinese market, and thanks to this way our producers will go to Latin America. The fact is that until everything was fine, nobody wanted to bother and work on new markets. On one hand, this war is shock for Ukrainian producers, but on the other hand, due to these complications with Russia, our producers will be more motivated to discover and conquer the markets of Latin America.
Volodymyr Kornilov, political scientist, director of Ukrainian branch of CIS Institute:
Three or four years ago Vladimir Putin and Dmitry Medvedev directly warned Ukraine that signing FTA with the EU on the terms dictated by the EU would lead to the consequences we feel now. Ukraine did not take it seriously.
Ukraine is shown what blocking of economic and customs borders with Russia will result. If now Ukrainian producers and the government do not understand what challenges Ukraine may face after the Vilnius summit, we have a short-sighted government. Russia is interested in maintaining a high trade turnover with Ukraine and its market. However, dependence of the Ukrainian economy on the partners in the CIS and Customs Union is higher than Russia's dependence on Ukraine. Just look at the share of exports of Russia and Ukraine. If we pass to the real economic war, it will hit the Russian Federation, but it will affect more the economy of Ukraine.
Blocking Ukrainian export, Russia does not impede our producers to sell the goods somewhere else. The problem is that nobody else takes it. Who else needs Roshen sweets, apart from CIS and Russia? Poroshenko (owner of the Roshen company - ed.), who fiercely defends European integration, could not answer this question. If our cheese is so good, why does not Europe take it? Our quality of goods is not welcome in Europe. For the moment we can export only to Russia and CIS countries.
Volodymyr Fesenko, CEO of the Center for applied political research "Penta":
- Ban on import of Roshen confectionary is not the first trade war, initiated by Russia. But if in the "cheese war" of past years there was certain economic reason, the situation with Roshen is pure politics. Moreover, I think this war is a signal for other Ukrainian enterprises. This is way Russia uses to make Ukrainians oligarchs understand what may happen to their business if they insist on European course.
We cannot rule out further bans, sanctions and blocking of Ukrainian production, tough negative consequences of this war may hit not only Ukraine. If Russia choose the path of conflicts and bans, it will push Ukraine off even more. And if Russia expects Ukraine to join the Customs Union after all these conflicts, it is a big mistake. Ukrainian enterprises do not like to be dictated the rules. Such attitude will force Ukraine to seek even closer cooperation with the European Union and conquer new markets.
Kost Bondarenko, political scientist, CEO of the Institute of Ukrainian politics:
- This ban will definitely hit our economic and political relations with Russia. Russia intends to control absolutely all imported goods, including food productions and metal production. We should expect delays, failures to meet the delivery date, forfeits and various misunderstandings. And if Ukraine impose the same sanctions on Russia, the problem will double.
However, I think this is a political move. Russia has decided to show what may happen if Ukraine signs the Association agreement with the EU. Both Russia and the EU have their sanitary norms and standards, and customs control on the Russian borders with EU countries is very thorough. In fact, Ukraine has been included in the list of countries, subjected for additional control. And it was supposed to happen sooner or later, if not now, then in November or December.
Ukraine can always reorient to other foreign markets. We should explore Africa, Latin America, and not get lost in Washington-Brussels-Moscow woods.
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