Executive secretary of the Customs Union commission Sergey Glazyov, for example, keeps repeating that the Association agreement is disadvantageous and dangerous and that the EU imposes neocolonial pressure on Ukraine. Does it mean that after the summit in Vilnius Russia and Ukraine will cut off trading ties? ForUm has analyzed the issue...
Trade and industrial cooperation
It stands to reason that signing of the agreement on free trade area and political association with the EU requires revision of many aspects of Ukrainian-Russian trading relations. This question was discussed at the CEO summit in Astana. As a result, the parties, represented by Vice Prime Minister of Ukraine Yuriy Boiko and first deputy Prime Minister of Russia Sergei Shuvalov, agreed to seek solutions to the problematic issues of the bilateral Ukrainian-Russian cooperation. The second round of talks will take place on October 22 in Moscow, and most probably, many pressing issues will be solved, as both parties appreciate the necessity.
Industrial cooperation, for example, including knowledge-intensive industries like aircraft engine building, atomic energy industry, aerospace, etc., has come down to us from soviet past. Though Russia has repeatedly spoken about import substitution, it is hardly possible to accomplish in one day, and Russian ambassador to Ukraine Mikhail Zurabov agrees that the impact of abrupt cut-off of cooperation will reverberate through both economies.
Thus, in an interview to Ukrainian journalists Zurabov said that if Ukraine signed the Association agreement with the EU, many aspects of trading relations would require revision. "It is a very delicate matter for economies of Ukraine and Russia and immediate cut-off of cooperation in industrial sphere may affect both economies. However, Russia has a huge proficit of foreign trade balance, which means Russia has resources to switch, step by step, to a new technological mode... Import substitution is inevitable, and some of productions, like car building, manufacturing of railroad and helicopter engines, have already been moved from Ukraine's territory to Russia."
At the same time, according to the ambassador, following the signing of the free trade area agreement between Ukraine and the EU, Russia also worries about risks of re-export of third country production though customs territory of Ukraine to Russia, as well as possible displacement of Ukrainian goods on Russian market... Though the Russian authorities discuss certain safeguard actions, cooperation and mutual trade are also on the agenda. Thus, during the meeting in Astana, Prime Minister Mykola Azarov and his Russian counterpart Dmitry Medvedev agreed to provide the mutual trade with a new dynamic and to restore the volume of trade at the level of previous years. Moreover, the Ukrainian party assured that integrating into Europe it had no intention to withdraw from CIS, while CIS executive secretary Anatoly Dron declared that contradictions between the Customs Union and the EU integration could be avoided if the parties based their cooperation on the principles of free trade, compliant systems of regulation and mutual interests...
"Grain pool": Ukraine is out?
Apart from trade and industry, Russia and Ukraine have common production of grain. In this respect, Ukrainian and Russian authorities have agreed to establish a grain pool among Ukraine, Russia and Kazakhstan. In particular, it is planned to establish the Black Sea Grain Committee, a union open for other states, and the Black Sea Grain Exchange.
So, will these ambitious plans be really abandoned due to Russia's intolerance of Ukraine's European course? It turns out, not at all. "This process is completely depoliticized. The cooperation among three countries has pure economic and pragmatic reasons. And whatever decision Ukraine makes on its foreign policy, it will not affect the "grain pool" project," ambassador Zurabov assured.
Zurabov reminded that the Prime Ministers agreed to complete preparations for establishment of the grain pool within the next half a year. According to him, the time is needed to work out the model of cooperation and to improve the infrastructure: to agree on grain volumes to store in common storages, considering Russia's interest in feed grain; to provide necessary equipment and facilities; to define ports for grain transportation. In case of project success, Ukraine, Russia and Kazakhstan will form 33-34% of the global grain market against current 27-28%, Zurabov pointed out.
Gas transportation consortium - it's all in EU's hands?
Among other matters, tying Ukraine, Europe and Russia, there is the idea to establish a three-partied consortium on management of Ukrainian gas transportation system. The idea comes and goes, but according to ambassador Zyrabov, the consortium is unlikely to be created now, since it requires the guarantee of Europe's interest in the Ukrainian gas transportation system.
He stressed that a number of countries, including Germany, are interested in the creation of energy swaps. "We have clear signals about alternative supplies of Russian energy to Europe, in particular through the "North Stream". And if it expands its capacity, Germany will offer its GTS to the neighbours," Zurabov said and explained that in such a case the prospect for pumping Russian gas through the Ukrainian gas transportation system would deteriorate, and then Ukraine would have to seek other sources of energy, particularly shale gas, gas supplies from third countries, or to reduce GTS infrastructure.
According to him, the fact that the Prime Minister of Ukraine Mykola Azarov discussed the prospects of the Ukrainian gas transport system with European Commissioner for Energy Gunther Oettinger "shows an awareness of the need to get answers about the prospects of demand for Ukrainian gas transportation system."
Well, the ambassador has a point. In this respect, we cannot help but to enjoy two positive facts. Firstly, Europe has confirmed its readiness to finance modernization of Ukrainian GTS. Moreover, Commissioner Gunther Oettinger noted that development of own shale deposits was a good opportunity for Ukraine to attract long-term investments. Secondly, experts say that economic benefits from shale gas production in the world and in Ukraine may be colossal, and in 20 years Ukraine may become a powerful global producer of carbohydrates.
Challenge is not a problem
Psychologists always say that any problem can be solved step by step: jumping over a high wall we will most probably fall to death, but removing brick after brick we will see the wall falling and will be able to cross over. The same principle can be applied to international relations. Even if others do not like Ukraine declaring and realizing ambitious plans, we should proceed, and then other countries will have to take us seriously, whether they want it or not.
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