The fifth column's new front: Why those who push for renewal of economic ties with Russia for Ukraine are wrong
Pro-Russian oligarchs have begun a serious push to persuade Ukrainians that the only way to a better life is to renew “torn” economic ties with Russia. This flies in the face of facts on the ground
In a while, September 2016 could be recognized as the time when a new front opened in Russia’s hybrid war. A huge campaign has just unfolded to “renew economic ties with Russia,” as a supposed panacea for Ukraine in its difficult socio-economic situation. Pubic opinion is actively been bombarded with a myth about how the economic crisis and the falling standard of living are the result of Ukraine’s economy turning more towards the West.
But the claims being disseminated in the press are completely contradicted by facts. For instance, Ukraine lost the Russian market because of its association with the EU. Or Ukrainian manufacturers have no chance of making it on European markets and the reorientation towards EU markets is turning Ukraine’s economy into a producer of raw materials. With the help of such statements, Ukrainian society, worn down by social problems, is being seduced by the promise of a “simple” solution: rejecting the policy of mutual sanctions and restoring trade ties with Russia—supposedly broken at Ukraine’s initiative—could compensate the economic losses of recent years and restore the standard of living that Ukrainians had prior to the start of Russian aggression.
Initially, the press was warmed up with a series of announcements whose contents were in the tradition of Russian lobbyists among current and former Opposition Bloc members, such as Yevhen Murayev, Vadym Novinskiy, Yuriy Boyko, Oleksandr Vilkul, and Mykola Skoryk. Murayev’s NewsOne channel has been busy spreading manipulated surveys among its viewers, promoting the opinion that “more than 75% of respondents want to restore economic relations with Russia.”
Meanwhile, other members of the previous regime have begun to join them, such as deputy leader of Vidrodzhennia [Renaissance] Vitaliy Khomutynnik, who is linked to tycoon Ihor Kolomoyskiy; MP from the Volya Narodu [The Will of the People] deputy group Volodymyr Lytvyn, and Yakiv Bezbakh, an independent MP who represents another oligarch in the Rada, ex-president Leonid Kuchma’s son-in-law Viktor Pinchuk. The ranks of those actively lobbying for a reversal of the country’s direction towards Russia are regularly filled by people who had been quiet on this issue since the Euromaidan.
Pinchuk himself, judging by the activeness of Bezbakh and frequent reports on this issue on his television channel, ICTV, also became one of the main organizers of the so-called “International Economic Forum” at the Kyiv Hilton, right next to the main sponsors from the OppBloc. Taking place on September 21, the event came almost immediately after the Pinchuk-funded Yalta European Strategy or YES Summit, and was clearly a manifesto rejecting European integration and returning to the Kuchma era “multivectoral” policy, with a special accent on restoring “vitally important” economic ties with Russia.
The IEF gained its status as ‘international’ thanks to the fact that MEPs of clearly pro-Russian orientations, representatives of the embassies of Russian satellites in the Eurasian Union—Belarus, Kazakhstan and Kyrgyzstan—participated in it, alongside Ukrainian MPs, the deputy Minister of Justice, and department heads from the Ministry of Economic Development, the Finance Ministry, the State Fiscal Service, and a number of ex ministers.
According to one attendee, Romanian MEP Laurenţiu Rebega said, “Ukraine is not moving towards economic recovery today. The time has come for the Government of Ukraine to restore ties with Russia. The old Ukrainian-Russian partnership, which has suffered since 2014, could offer a new way out of the crisis for the sake of a stable future and economic growth. This is the only thing that will pull Ukraine out of the general crisis it is in.”
THE WAY TO IMPROVE THE SOCIO-ECONOMIC SITUATION IN UKRAINE LIES, NOT THROUGH POINTLESS EFFORTS TO TURN BACK THE CLOCK, BUT IN LOOKING AT OPPORTUNITIES TO REPLACE THE LOST RUSSIAN MARKET WITH NEW NICHE MARKETS IN EUROPE AND ELSEWHERE
Some old Ukrainian faces came out at the forum as well, such as Yevhen Chervonenko, once Viktor Yushchenko’s closest confidant and a former minister of transport who owned a major trucking and beverages company called Orlan. “If we acted normal, dialog with Russia would be possible,” he said. “Europe doesn’t need us and it’s not going to let us enter its markets.” Another former Cabinet member, ex-economy minister Viktor Suslov claimed that Ukraine’s economy was on a downward slid and was becoming a raw material economy, while Europe was putting pressure on Ukraine to export raw materials rather than finished products.
At the conclusion of the event, a resolution was passed stating that it was necessary to restore trade and commercial ties with Russia and addressed to the President, PM and VR Speaker. The basic message of the document was this: “Ukraine should espouse a multivectoral foreign policy approach and restore economic relations with traditional markets by setting up an inter-government group with Russia.” This was the initiative of that same Yakiv Bezbakh, who declared adamantly, “From an economic point-of-view, Ukraine cannot function normally without its traditional markets. We need to revive cooperation because that’s our future.”
MYTHS AND FACTS
In fact, statements about Ukrainian deliveries to Russia being cut back because of a “break in economic relations” after the Euromaidan or after the signing of the Association Agreement with the EU are a complete myth. Trade between the two countries has been falling apart for a long time as a result of objective processes that are either completely unrelated to the Revolution of Dignity or are only very indirectly related. In any case, there was never any “break” initiated by Kyiv, with the exception of MIC production.
And so no “miraculous effect” can be anticipated from restoring these ties, contrary to the claims of this fifth column and no panacea for the domestic economy, in fact. All that this really is, is a convenient slogan propagandizing the stereotypical thinking of certain elements in Ukraine’s population.
Ukraine’s suppliers were squeezed out of the Russian market as part of a long-term strategy of import substitution in the RF. In addition, because part of Ukraine’s manufacturers are stuck on Russian and post-soviet markets instead of looking for opportunities to compete on world markets for the last decades, they have understandably lost their competitive edge even in the Russian market. All this was compounded more recently by problems in Russia’s own economy and resulted in overall cutbacks in imported goods.
The objective reasons were compounded by various Russian-instigated trade wars that banned key Ukrainian products from its markets and eliminated those suppliers, the purpose of which was to force Ukraine to make concessions and eventually give up its sovereignty. All of this began long before the Euromaidan or the signing of the Association Agreement and were the result of Russia’s own hostile attitude to relations with Ukraine—a stick-and-carrot approach intended to reach key Moscow goals that relied on the stick more often than not.
And so the minimum that would be needed to change the long-term negative trends in Ukrainian-Russian bilateral relations would be complete capitulation by withdrawing from the Association Agreement and integrating into the Eurasian Union—something Ukraine would never agree to. Any other negotiations or concessions would do nothing to stop Russia’s discriminatory practices against Ukrainian imports.
FACTS ARE SUCH STUBBORN CREATURES
If we compare the volume of exports from Ukraine to Russia before and after the Euromaidan and the signing of the Association Agreement, we can see that the reduction in overall value was really striking, falling from US $8.94bn in the first seven months of 2013 to US $1.88bn in 2016. However, direct losses from Russian sanctions against Ukrainian producers, which might hypothetically be the subject of any negotiations, amounted to only a small fraction of this.
The greatest decline in exports to the RF was, in fact, from Donetsk and Luhansk Oblasts, Crimea and Sevastopol. In the first seven months of 2013, they constituted US $2.44bn, while during the same period of 2016 they were only US $0.32bn or about one eighth. However, these losses have nothing to do with a “breaking of economic ties,” but with Russia’s aggression against Ukraine. What’s more, the decline of US $2.12bn from these oblasts to overall exports to the RF in this case was not as significant, as the decline of US $8.2bn in all Ukrainian exports to all trading partners over January-July 2016, compared to the same period of 2013.
If we compare exports to Russia from Ukrainian territory outside of occupied Crimea and war-torn Donbas, over January-July 2016, they were worth US $1.56bn versus US $6.5bn over the same period of 2013. But most of that loss is not connected to “a break in economic links” between Ukraine and Russia, and so they cannot be compensated for even if ties are “restored,” the way the fifth column would have Ukrainians believe.
According to figures from the Federal Customs Service of Russia, all Russian imports in that time also declined by 50%, dropping from US $179.3bn to US $94.8bn. As prices for fuels and other resources that Russia relies on fell on world markets, consumer spending among Russians also went down as their purchasing power shrank, although prices on many of goods also