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

The Ukrainian Week - - CONTENTS - Olek­sandr Kra­mar

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

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