How Ukraine's trade with Rus­sia has changed

Although there’s been a sharp re­duc­tion in trade and com­mer­cial ties with Rus­sia and in Ukraine’s de­pen­dence on its neigh­bor, some key sec­tors still show lev­els of in­ter­ac­tion that pose a threat to na­tional se­cu­rity

The Ukrainian Week - - FRONT PAGE - Olek­sandr Kra­mar

The last five years have seen Ukrainian-Rus­sian trade re­la­tions ac­tively de­cline. The orig­i­nal im­pulse came when the Cus­toms Union was set up in 2011 by Rus­sia with Kaza­khstan and Be­larus, fol­low­ing which Rus­sia be­gan trade wars against Ukrainian man­u­fac­tur­ers and pro­duc­ers as a way to force Ukraine to also join. In sum­mer of 2013, pres­sure grew once more as Pres­i­dent Vik­tor Yanukovych pre­pared, for all in­tents and pur­poses, to sign an As­so­ci­a­tion Agree­ment with the Euro­pean Union that in­cluded a Deep and Com­pre­hen­sive Free Trade Agree­ment. With Rus­sia’s mil­i­tary ag­gres­sions against Ukraine in early and mid-2014 and the eco­nomic com­po­nent of the AA be­tween Ukraine and the EU com­ing into force in 2016, the process ac­cel­er­ated steadily.

The eco­nomic as­pect of Rus­sia’s hy­brid war has cost both coun­tries enor­mously. By 2016, Ukraine’s ex­ports of goods and ser­vices to Rus­sia had shrunk to US $6.68 bil­lion from US $20.31bn in 2013 and US $25.26bn in 2011. Rus­sian sup­pli­ers lost even more: im­ports from Rus­sia col­lapsed to US $5.65bn from $24.65bn in 2013 and US $30.47bn in 2011. The win­ner, if one can even talk in such terms in this kind of sit­u­a­tion, turned out to be Ukraine. Its huge trade deficit with Rus­sia, which amounted to US $5.2bn in 2011, had turned to a sur­plus of more than US $1bn by 2016.

A SLOPPY CLEAN-UP

The main thing is that Rus­sia lost its sta­tus as Ukraine’s key trad­ing and com­mer­cial part­ner, a de­pen­dence on its larger neigh­bor that forced the coun­try, for more than two decades, to con­cede to Moscow’s de­mands, even when Kyiv en­joyed a pro-Euro­pean ad­min­is­tra­tion, and made the ma­jor­ity of its pro­duc­ers ef­fec­tively Rus­sian lob­by­ists. This re­lease from its de­pen­dence is now a fact at the level of the econ­omy in gen­eral, but has not yet been ab­sorbed in the con­scious­ness of Ukrainian busi­ness—which can be seen in the way a large chunk of it po­si­tions it­self. The con­se­quence is that too many busi­nesses have re­mained pro-Rus­sian through sheer in­er­tia.

This is partly en­cour­aged by the rem­nants of eco­nomic de­pen­dence on Rus­sia, as well, by the large debts that a slew of Ukrainian com­pa­nies have at Rus­sian banks. Other fac­tors in­clude the dom­i­nance of im­ported Rus­sian top man­agers, the con­tin­u­ing and sig­nif­i­cant de­pen­dence of strate­gic do­mes­tic sec­tors on sup­plies of raw ma­te­ri­als and fu­els from the RF, and the de­pen­dence of cer­tain ex­port goods on the Rus­sian mar­ket. To over­come these fac­tors, a new push is needed, ei­ther from or­di­nary Ukraini­ans or from tar­geted re­stric­tive mea­sures on the part of the state—per­haps both.

The big­gest pos­i­tive im­pact in re­leas­ing Ukraine from the dom­i­nance of Rus­sian busi­ness more re­cently can be at­trib­uted to the sharp loss of po­si­tion by IUD, the In­dus­trial Union of Don­bas, a cor­po­ra­tion once owned by Ser­hiy Taruta and now con­trolled by Rus-

sia’s Vneshekonom­bank. In 2013, it was re­spon­si­ble for al­most 20% of Ukraine's metal out­put; since the block­ade of ORDiLO, it has al­most com­pletely lost its mar­ket. An­other fac­tor was the sale of the Kharkiv Trac­tor Plant by its Rus­sian owner. Yet an­other one is sanc­tions against Rus­sian banks and other com­pa­nies, which is forc­ing them to find a way out of the Ukrainian mar­ket, in­clud­ing the sale of the Ukrainian sub­sidiary of Sber­bank, the Rus­sian state sav­ings bank.

Still, there re­mains the threat that these sales are fic­tions, be­cause the buy­ers are Rus­sian busi­ness en­ti­ties, the way it was with Sber­bank in Ukraine. Or that some­one is tak­ing ad­van­tage of the sit­u­a­tion to re­duce the ev­i­dent pres­ence of Rus­sian busi­ness on in­di­vid­ual Ukrainian mar­kets in order for them to be dom­i­nated by com­pa­nies that are nom­i­nally Ukrainian, but are ac­tu­ally owned by Ukrainian com­pradors who are closely linked to Rus­sia, such as SCM’s Ri­nat Akhme­tov or Olek­sandr Yaroslavskiy, who has long been an agent for Rus­sian oli­garch Oleg Deri­paska.

In a dis­cus­sion of the prospects and pur­pose of main­tain­ing Rus­sian busi­ness in Ukraine that took place in March 2016, the Pres­i­dent of the Rus­sian Union of In­dus­tri­al­ists and En­trepreneurs (RUIE) Alek­sandr Shokhin told those present that, ac­cord­ing to Putin, “you have to be pa­tient a lit­tle longer. At least there’s still a chance.” As long as this opin­ion does not change to its op­po­site and we don’t see a large-scale, ir­re­versible exit of Rus­sian busi­nesses from Ukraine, there’s a great deal that needs to be done.

It is also ev­i­dent that an op­po­site ten­dency is tak­ing place: a grow­ing pres­ence of other Rus­sian FIGs on the Ukrainian mar­ket, such as the Alfa Group, which re­cently added Italy’s UniCredit—and along with it, its sub­sidiary and one of Ukraine’s larger fi­nan­cial in­sti­tu­tions, UkrSot­sBank—to a port­fo­lio that al­ready con­tains its own epony­mous Ukrainian sub­sidiary. Alfa also con­tin­ues to con­trol the largest mo­bile op­er­a­tors in Ukraine, Kyivs­tar, and has a stake in a smaller one, life:), and the other ma­jor op­er­a­tor is owned by Rus­sia’s Mo­bile TeleSys­tems, which has re­branded its Ukrainian sub­sidiary as Vo­da­phone. Dozens of other Rus­sian providers also con­tinue to op­er­ate on the in­ter­net and telecoms ser­vice mar­kets.

In this re­gard, the re­cent de­ci­sion to add own­ers of Rus­sian so­cial net­works to Ukraine’s sanc­tions list seems like just a small step in a huge task that needs to be un­der­taken to free the coun­try from the dom­i­na­tion of Krem­lin agents in strate­gic sec­tors. Be­cause any Rus­sian en­tity op­er­at­ing in these sec­tors is com­pletely de­pen­dent po­lit­i­cally on Rus­sia’s se­cu­rity forces for its sur­vival.

TRENDS IN BI­LAT­ERAL TRADE IN SER­VICES

Ex­ports of Ukrainian goods to the Rus­sian Fed­er­a­tion bot­tomed out in 2016, pos­si­bly tem­po­rar­ily, at US $3.59bn or 9.9% of Ukraine’s over­all ex­ports com­pared to US $15.05bn or 23.8% in 2013, and US $19.8bn or 29.0% in 2011. Since the be­gin­ning of 2017, ex­ports be­gan to rise again, reach­ing US $1.28bn over Jan­uary-April, which is 38.5% more than for the same pe­riod last year. Still, the trade wars of re­cent year have led to a sit­u­a­tion where the cu­mu­la­tive do­mes­tic ex­port to Rus­sia, the vol­umes of goods and ser­vices are al­most equal. Nearly US $3.09bn of ser­vices or 32.1% of over­all ex­ports of ser­vices from Ukraine went to Rus­sia in 2016. The de­cline in such ex­ports com­pared to 2013 and 2011 is also sig­nif­i­cant, when they were 36.9% and 38.5%, but noth­ing com­pared to the col­lapse of trade in goods.

At first glance, Ukraine’s de­pen­dence on the ex­port of ser­vices to Rus­sia re­mains con­sid­er­able, and ex­chang­ing them seems ben­e­fi­cial pri­mar­ily to Ukraine, as it en­sures a sub­stan­tial sur­plus bal­ance of US $3.1bn, com­pared to less than US $0.5bn of im­ported ser­vices in 2016. How­ever, these ap­par­ent fig­ures hide a rad­i­cally dif­fer­ent re­al­ity. The lion’s share of do­mes­tic ex­ports is trans­port ser­vices, which con­sti­tuted US $2.77bn or 89.6% of all ex­ports and US $2.63 of the trade sur­plus. But in­cluded in these fig­ures is more than 80% of the cost of Rus­sian gas that tran­sits through Ukraine’s gas trans­port sys­tem (GTS).

This tran­sit is a ser­vice ex­ported to Rus­sia only as a con­se­quence of the fact that, at one point, Ukraine’s lead­er­ship al­lowed the Rus­sians to main­tain their colo­nial ap­proach to Ukraine and its GTS. And so gas is sold to Europe, not at the Ukrainian-Rus­sian bor­der, as it should be, but on the Ukrainian sec­tion of the one­time bor­der of the USSR. In the end, this ap­proach en­trenched Ukraine’s sta­tus as al­most lit­tle more than a Rus­sian au­ton­omy, a ter­ri­tory through which Gazprom sim­ply trans­ported its fuel to con­sumers. Once Ukraine puts into ef­fect its an­nounced in­ten­tion to change things when the cur­rent con­tract with Gazprom ex­pires in 2019, Euro­pean con­sumers will be buy­ing Gazprom’s nat­u­ral gas at the bor­der be­tween Ukraine and Rus­sia, and the tran­sit ser­vices will then be ex­ported to EU coun­tries, not to the Rus­sian Fed­er­a­tion.

If trans­port­ing gas is re­moved from the equa­tion, it turns out that there is no other se­ri­ous com­po­nent in the ex­port of ser­vices to Rus­sia from Ukraine. And that means that Ukraine has a sig­nif­i­cant pos­i­tive bal­ance only in such ser­vice ar­eas as IT, with US $145.1 mil­lion ex­ported vs US $68.1mn im­ported, equip­ment main­te­nance and re­pair with US $29.3mn vs US $5.3mn, con­struc­tion with US $5.5mn vs $1.3mn, and pro­cess­ing raw ma­te­ri­als on a tolling ba­sis, with US $4.2mn vs US $0.9mn. Rus­sia, by con­trast, has a huge pos­i­tive bal­ance in pro­vid­ing a slew of ser­vices to Ukraine, sug­gest­ing that the post-colo­nial in­er­tia in busi­ness, fi­nance and in­sur­ance re­mains: busi­ness ser­vices with $206.7mn im­ported vs US $119.1mn ex­ported, fi­nan­cial with US $34.6mn vs US $2.7mn, in­sur­ance with US $5.7mn vs US $1.0mn, as well as roy­al­ties and other mat­ters re­lated to in­tel­lec­tual prop­erty with US $10.5mn vs US $7.2mn.

WEAK SPOTS IN BI­LAT­ERAL TRADE IN GOODS

The weak spot for Ukraine’s ex­port goods to the RF re­mains the fact that most of them con­tinue to con­sti­tute a ma­jor share of their mak­ers’ over­all ex­ports. For in­stance, over Jan­uary-April 2017, 70% of all Ukrai-

UKRAINE IS ENOR­MOUSLY DE­PEN­DENT ON IM­PORTS OF MOST OF ITS RAW MA­TE­RI­ALS AND FU­ELS FROM RUS­SIA, WHICH CON­STI­TUTES A THREAT TO THE COUN­TRY’S ECO­NOMIC SE­CU­RITY IN KEY SEC­TORS: THE POWER IN­DUS­TRY, STEEL-MAK­ING AND FARM­ING

nian de­liv­er­ies to Rus­sia rep­re­sented 40%+ of the to­tal ex­port of such goods out of Ukraine, while for around 30% of de­liv­er­ies to the Fed­er­a­tion, the Rus­sian mar­ket rep­re­sented 70%+ of the to­tal ex­port of such goods out of Ukraine. To be more pre­cise, nearly all of Ukraine’s alu­mina ex­ports—96.1% worth US $166.6mn in Q1 of 2017—and all of its ex­ports of ra­dioac­tive el­e­ments and iso­topes, worth US $36.6mn, end up on the Rus­sian mar­ket. They are the fi­nal rem­nants of Moscow’s strat­egy of in­cor­po­rat­ing Ukrainian as­sets into the “transna­tional cor­po­ra­tion” known as the Rus­sian Fed­er­a­tion.

In the case of alu­mina, it’s about the out­put of the Myko­layiv Alu­mina Plant (MHZ), which is part of Deri­paska and Part­ners’ Ros­siyskiy Alu­minia [Rus­sian Alu­minum]. In­deed, the dom­i­na­tion of the Rus­sian mo­nop­o­list has led to a sit­u­a­tion where, de­spite its ca­pac­ity to sat­isfy all of Ukraine’s do­mes­tic needs and even ex­port alu­minum and goods made of it, Ukraine still im­ports it to this day, in­clud­ing from Rus­sia! Mean­while, the com­mit­ments Ros­siyskiy Alu­minia made to build an alu­minum plant in Ukraine and process part of the alu­mina into alu­minum lo­cally dur­ing the pri­va­ti­za­tion of MAP were for­got­ten the mo­ment the pa­pers were signed. More­over, for a long time, RA de­lib­er­ately blocked the work and ef­fec­tively de­stroyed an­other en­ter­prise in the in­dus­try, the Za­por­izhzhia Alu­minum Plant (ZAK).

The ex­port of all of Ukraine’s nu­clear ma­te­ri­als to Rus­sia, which is re­pro­cessed into nu­clear fuel and other ma­te­ri­als in the Fed­er­a­tion and then im­ported to Ukraine as a fin­ished prod­uct, is sim­i­larly the con­se­quence of many years of fail­ure on the part of Ukraine’s gov­ern­ments in es­tab­lish­ing a do­mes­tic nu­clear pro­duc­tion cy­cle for the coun­try’s atomic en­ergy sta­tions (AESs).

Still, sub­stan­tial de­pen­dence, more than 40% of all ex­ports, on the Rus­sian mar­ket can be seen in an ad­di­tional 30 or so other Ukrainian com­modi­ties whose de­liv­er­ies to the RF are worth nearly US $1bn a year and more—each. These are pre­dom­i­nantly a large va­ri­ety of ma­chine-build­ing prod­ucts, which were con­nected to sup­ply­ing com­po­nents to Rus­sian en­ter­prises: tur­bines worth US $83.1mn over Jan­uary-April 2017, or 66.8% of all such ex­ports from Ukraine; rail­cars worth US $22.5mn or 82.4% and lo­co­mo­tive rail­car com­po­nents worth US $24.5mn or about 53.0%; liq­uid pumps worth US $24.2mn or 65.9%; elec­tric mo­tors and gen­er­a­tors worth US $16.1mn or 63.5%; trans­form­ers worth US $12.3mn or 44.7%; mo­tion trans­mis­sion mech­a­nisms worth US $14.5mn or 68.5%; farm­ing equip­ment worth US $11.5mn or 64.8%; and equip­ment for mov­ing soil, rock and ores worth US $8.9mn or 62.5%.

For these man­u­fac­tur­ers, it’s clear that the Rus­sian mar­ket re­mains key to their ex­port busi­ness and some­times even rep­re­sents most of their pro­duc­tion, how­ever small the or­ders might be. On one hand, this il­lus­trate just how flac­cid are the mar­ket­ing and pro­duc­tion strate­gies of the man­age­ment of these en­ter­prises, which are not putting se­ri­ous ef­fort into find­ing op­por- tu­ni­ties to re­ori­ent their pro­duc­tion fa­cil­i­ties to­wards mod­i­fied ver­sions of items that could be sold to dif­fer­ent mar­kets or even do­mes­ti­cally. On the other, it also shows that the govern­ment is do­ing lit­tle or noth­ing to en­cour­age this kind of re­ori­en­ta­tion from the Rus­sian mar­ket to the do­mes­tic one or other for­eign ones. For in­stance, it could of­fer tar­geted in­ter­est-free or low­in­ter­est loans for the pur­chase and mod­ern­iza­tion of equip­ment and for re­train­ing per­son­nel. There are also not enough public pro­cure­ments and of­ten un­jus­ti­fied pref­er­ences in pur­chas­ing that kind of equip­ment and tech­nol­ogy in Ukraine it­self.

A huge de­pen­dence on the Rus­sian mar­ket is also ev­i­dent among cer­tain types of fin­ished rolled steel prod­ucts. For in­stance, 77.5% of all of Ukraine’s ex­ports of steel an­gles, struc­tural bars and sec­tions, worth US $72.3mn in the first four months of 2017, 58.1% of all gal­va­nized flat-rolled steel, worth US $27.8mn, 72.7% of stain­less flat-rolled steel, worth $20.0mn, and 48.1% of bars, rods and sec­tions of cor­ro­sion-re­sis­tant steel, worth US $14.5mn, are ex­ported to the Rus­sian Fed­er­a­tion.

Clearly, the ex­port of cer­tain types of steel to the RF was huge within its cat­e­gory, even though it was rel­a­tively mi­nor com­pared to the to­tal ex­port of all steel prod­ucts from Ukraine, worth US $1.4 bil­lion dur­ing this same pe­riod—never mind all fer­rous ex­ports, which were worth US $2.9bn. Ukrainian pipe-mak­ers have pretty solidly moved away from the Rus­sian mar­ket, af­ter be­ing the fo­cus many a trade war be­tween the two coun­tries in years past: over Jan­uary-April, they shipped only 24.3% of their prod­ucts, worth US $31.2mn, to the RF.

Other in­dus­trial man­u­fac­tur­ers, how­ever, still are quite de­pen­dent on this mar­ket. 50.5% of Ukraine’s wall­pa­per prod­ucts, worth US $20.2 mil­lion over Jan­uary-April 2017, went to Rus­sia, 58.4% of ce­ramic tiles, worth $12.8mn, 45.1% of un­coated pa­per and card­board, worth US $9.5mn, and 50.0% of plas­tic con­tain­ers for trans­port­ing and pack­ag­ing goods, worth $13.5mn. Even though this rep­re­sents sec­tors that are far from lead­ing ones in Ukraine’s econ­omy, each of their an­nual sales to the Rus­sian mar­ket amount to gen­er­ally UAH 1bn and more and their share of over­all ex­ports is quite large. So the loss of the Rus­sian mar­ket for many man­u­fac­tur­ers in key sec­tor could be quite painful.

And so, the shrink­age of the Rus­sian mar­ket share from around 30.0% to only 9.3% of ex­ported do­mes­tic prod­ucts in the first four months of 2017 does not re­flect the un­even share of in­di­vid­ual groups of goods. The fact is that the ma­jor­ity of in­dus­tries ei­ther ex­port only a few per­cent­age points of their prod­uct or none at all to Rus­sia. The ba­sis for Ukrainian de­liv­er­ies to the RF con­tinue to be pre­dom­i­nantly those prod­ucts that are sim­ply very de­pen­dent on this par­tic­u­lar mar­ket and makes these man­u­fac­tur­ers very vul­ner­a­ble not only to the eco­nomic sit­u­a­tion in Rus­sia but to bi­lat­eral re­la­tions. In terms of Ukraine to­day, this means that they will in­evitably tend to lobby Rus­sian po­si­tions.

THREATS TO ECO­NOMIC SE­CU­RITY

Mean­while, Ukraine is enor­mously de­pen­dent on im­ports of most of its raw ma­te­ri­als and fu­els from Rus­sia, which con­sti­tutes a threat to the coun­try’s eco­nomic se­cu­rity in key sec­tors: the power in­dus­try, steel-mak­ing and farm­ing. Moscow has demon­strated

on many oc­ca­sions its readi­ness to use not only re­stric­tions on im­ports of Ukrainian goods that are very de­pen­dent on the Rus­sian mar­ket in its hy­brid war against Ukraine, but also re­stric­tions on the de­liv­ery of raw ma­te­ri­als and fu­els from its own sup­pli­ers. Such ar­ti­fi­cial short­ages threaten to cause se­ri­ous prob­lems for Ukraine’s econ­omy. The lat­est ex­am­ples are coal, pip­ing and liq­uid gas. More­over, this does not mean that in the fu­ture this kind of ma­nip­u­la­tion might not be ex­tended to other com­modi­ties for which Ukraine is crit­i­cally de­pen­dent on sup­plies from the RF. Most of these can ob­vi­ously be sub­sti­tuted by switch­ing to other sup­pli­ers, but with Rus­sia de­liv­er­ing 50-80% of the needed quan­ti­ties to­day, switch­ing in a hurry is likely to present real prob­lems. That means that this switch needs to be hap­pen­ing grad­u­ally, al­ready to­day.

In the power in­dus­try, this means the hy­per­de­pen­dence on Rus­sian nu­clear fuel at Ukraine’s AESs, and on Rus­sian an­thracite, petroleum prod­ucts and liq­uid gas at its co­gen­er­a­tion plants or TESs. The ex­am­ple of nu­clear fuel is one of the top suc­cess sto­ries in this re­gard. Although 66.3% of Ukraine’s nu­clear fuel for its AESs, cal­cu­lated in fis­sile iso­topes, and 70.5% in terms of value was im­ported from the RF in 2016, this was still con­sid­er­ably less than just a year ear­lier, when the same shares were 90% and 95%, while in the first four months of 2017, the share of RF im­ports of fuel as­sem­blies was down to 53% by value.

With other forms of en­ergy, the sit­u­a­tion is much worse. In 2016, 69.8% of all an­thracite im­ports were from Rus­sia, 66.7% by value. Since the be­gin­ning of 2017, all de­liv­er­ies came from Rus­sia, de­spite ear­lier an­nounce­ments by the Min­istry of Power and Coal that they would be banned. More­over, there are in­di­ca­tions that ship­ments of an­thracite to Tsen­tren­ergo, one of the cen­tral power util­i­ties, marked as ap­par­ently com­ing from Ge­or­gia ap­pear to have been fic­ti­tious sales.

The sit­u­a­tion is also crit­i­cal with de­liv­er­ies of petroleum prod­ucts and liq­uid gas. Fully 75.6% or 71.7% by value of the for­mer came to Ukraine from the RF and Be­larus in 2016, even though in 2015 only 67.9% and 66.7% did. This year, the share is up to 77.0%. In 2016, 75.6% of all liq­uid propane-bu­tane came from the RF or 75.4% by value, while an­other 20.7%, 19.1% by value, came from Be­larus. By com­par­i­son, these same im­ports in 2015 amounted to only 60.4% and 58.3% from Rus­sia and 93.1%, 89.9% by value, for the two coun­tries com­bined. And so we can see, not only com­plete de­pen­dence on sup­plies from the only re­al­is­tic source, and con­tin­u­ing pres­sure to re­duce sup­plies from al­ter­na­tive sources. Yet it would seem that the im­port of this kind of gas should be a lot sim­pler to di­ver­sify than im­ports of pip­ing.

In the met­al­lur­gi­cal in­dus­try, Ukraine is hy­per­de­pen­dent on de­liv­er­ies of coke and bi­tu­mi­nous coal from Rus­sia, which is needed to process ores. The share of RF im­ports of bi­tu­mi­nous coal grew to 69.8% in 2016, or 63.2% by value, com­pared to 55.0% and 46.8% in 2015, while im­ports of coke rose to 44.7%, 45.1% by value, com­pared to 34.5% and 36.9% in 2015—although the to­tal vol­ume of im­ported coke in 2016 was ac­tu­ally down from 2015.

In the farm sec­tor, dan­ger­ous de­pen­dence lev­els can be seen in im­ports of Rus­sian ni­tro­gen-based and espe­cially com­plex fer­til­iz­ers. In 2016, 78.1% of ni­tro­gen-based fer­til­iz­ers, 80.6% by value, came from the RF. The lion’s share of other fer­til­iz­ers came from Be­larus, whose en­ter­prises are com­pletely de­pen­dent on the sup­ply of gas from Rus­sia, which is needed to pro­duce them. Ukraine also gets all of its semi-fin­ished am­mo­nia to pro­duce fer­til­iz­ers at do­mes­tic plants. Lat year, 73.4% or 67.4% by value of all com­plex chem­i­cal fer­til­iz­ers came from the RF as well, rep­re­sent­ing a do­mes­tic mar­ket share that is sig­nif­i­cantly larger be­cause of the smaller out­put vol­umes from do­mes­tic man­u­fac­tur­ers.

And so, over­com­ing Ukraine’s crit­i­cal de­pen­dence on Rus­sian im­ports of raw ma­te­ri­als and goods that are im­por­tant for the eco­nomic se­cu­rity of the coun­try re­quires ac­tive, im­me­di­ate mea­sures to grad­u­ally di­ver­sify sup­plies. At the same time, it’s im­por­tant to avoid get­ting into pro­hib­i­tive tar­iffs and other mech­a­nisms that sim­ply pro­vide ar­ti­fi­cial breaks to in­di­vid­ual mar­ket mo­nop­o­lists and cre­ate prob­lems for con­sumers, as hap­pened not long ago with min­eral fer­til­iz­ers.

A more mea­sured and long-term in­stru­ment against dump­ing and mo­nop­o­liza­tion on the Ukrainian mar­ket by Rus­sian sup­pli­ers could be to ap­ply a cap on the vol­ume of de­liv­er­ies from a sin­gle source, say, not more than 25% or 35%, which is ac­cept­able ac­cord­ing to do­mes­tic anti-monopoly leg­is­la­tion. But the cal­cu­lus for such mea­sures must be based on the real, not nom­i­nal, coun­try of ori­gin of each prod­uct. For in­stance, it’s ob­vi­ous that sup­plies of petroleum prod­ucts or liq­uid gas from Be­larus should be treated as the equiv­a­lent of sup­plies com­ing from Rus­sia, which is the sole source of all raw ma­te­ri­als for pro­duc­ers in Be­larus.

Newspapers in English

Newspapers from Ukraine

© PressReader. All rights reserved.