Trade War
by
Walter Derzko
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One
event captured Ukrainian and international headlines in the past week-the
escalating trade war, launched by Russia against Ukraine. Initially, Russia
banded Roshen chocolates from Ukraine. Then, the Ukrainian Federation of
Employees (headed by Dmytro Firtash) announcing a blockade of a range of Ukrainian exports by
Russia. “Products of Ukrainian manufacturers are subjected to total
ungrounded inspection at the Russian border, including unloading and
re-weighing of freight and downloading for shipment back to the original
point,” says the statement.
The
federation appealed to Ukraine’s Premier Mykola Azarov with a request to
immediately resolve this problem, but his reply was lackadaisical. Yanukowych
on the other hand, was totally mute, not offering a single comment on the
issue.
Azarov
told journalists that the export problems are overblown. “At the moment, Ukrainian mass media are
exaggerating the problem of a seemingly existing conflict. There are indeed
problems, but there is no need to artificially blow them out of proportion.”
Only later did he instruct officials to deal with the problem.
Ukraine
has yet to appeal to the World Trade Organization (WTO) or to bring it up at
the Cabinet of Ministers level, deciding instead to rectify the problem in a
Customs Union (CU) working group.
EU
trade representative John Clancy called on Russia and Ukraine to immediately
resolve their trade problems. Svoboda demanded that Ukraine’s government
respond “symmetrically” to Russia’s trade war. Ukraine could indeed ban certain
strategic military and energy exports, such as Zaporizhstal production, which
would immediately cripple Russia. Just enforcing existing environmental
standards for trucks in transit through Ukraine, would immediately halt most
Russian exports.
Russia’s
latest economic offensive against Ukraine can be attributed to the upcoming
November EU summit in Vilnius, where Ukraine may sign the EU Association
Agreement, if they meet all pre-conditions. Russia is mortally terrified of
this prospect. Losing Ukraine to the EU means a collapse of their sphere of
influence in the “near abroad” and no hope of resurrecting Putin’s dream
-a post USSR-like empire, with Ukraine as its center piece.
Can
we expect more from Russia? Yes. “Russia may impose tougher trade sanctions
against Ukraine should Kyiv make the “suicidal” move to sign free trade and
political association agreements with the European Union.” said Sergei Glaziev, an aide to Vladimir Putin on Aug 18. Glaziev,
hinted that last week’s suspension of Ukraine’s exports to Russia was only a
one-shot deal to prepare for “bigger action”. This revelation suggests
that the action was politically motivated and poses a threat to economic
stability in Europe. Russia’s strong-arm tactics could easily backfire against
Putin and further tarnish Russia’s shaky economic image, evoking a counter reaction from Ukraine,
Brussels, other parts of the world and
the WTO..
Swedish
Foreign Minister said the trade restrictions “would be a very serious matter if
it was found that Moscow was blocking Kyiv’s relations with the EU.”
Spontaneous
boycotts against Russian products have arisen all across Ukraine and across the
internet.
Numerous
Russian brands are masquerading as international brands, and could be targets
for boycotts. These include: Vitek, Vigor, Scarlett, Rolsen Kaiser, Bork
Industrial, Erisson, Prology, Akira, Plar, Kentatsu, Milagro Caf・ Kaffa
Industries, Greenfield tea, Curtis & Patridge, Maitre, FL faberlic,
YLLOZURE (Paris), SELA, Carlo Pazolini, TJ Collection, Carnaby, Chester
(England) , OGGI, Gloria Jeans, Gee Jay, Tervolina, Ralf Ringer, Ostin, Finn
Flare, Incity, Baon, Savage, Corsocomo, Machiavellli Luxury Boutiques, Paolo
Conte, American Spirit Westland 1930, Egle,
Motor, Bask, Stels, Nordway Sports Equipment, Grand di Pasta, Gipfel,
Berghoff Worldwide, Mr. Ricco, Bagbier, Frau Schmidt Special, Proplex, Erich Krause, Stolychnaya and others.
Russian
goods are identified by the bar code starting with the numbers 460 to 469.
The
other main question: are Ukrainian
imports and exports from the Russian Federation significant? If we look at recent trade figures, we see
that Ukraine joining the Customs Union (CU) is a road to nowhere. Statistics on
foreign trade in the first half of 2013 speak volumes. Both imports and exports between Ukraine and
Russia decreased significantly in 2013.
The
volume of Ukrainian exports to CIS countries amounted to 35.9% of total
exports, Europe - 27.6%, including European Union countries - 27.1%; Asia - 25.7%;
Africa - 6.6%; America - 3.9%;
Significant exports go to the Russian Federation - 24.7% of total exports
(ferrous metals, mechanical machinery, locomotives), Turkey - 6.1%; China -
4.5%; Italy - 4.2%; Poland - 3.9%;
Kazakhstan - 3.6% and India - 3.4%. Among the major partner countries,
exports to China increased by 60.7%;
Italy - 9.8%. At the same time, exports decreased by 14.8% to
Kazakhstan, 13.5% to the Russian Federation; Poland - 11.3%; India - 11.1%, and Turkey - 0.9%.
Imports
from Europe account for 37.2% of total imports to Ukraine, including 35% from the European Union ; 34% from CIS countries; Asia - 21.2%;
America - 6.3%; Africa -
1.1%; The largest imports came from the
Russian Federation - 27.5% (mineral fuel, oil and distillation products,
mechanical machinery, ferrous metals);
China - 11.3%; Germany - 9.2%; Poland - 5.2%; Belarus - 4.9%; the USA - 4.1%; and Italy - 2.8%. Imports of
goods increased only from China and Poland by 19% and 13.7%, respectively. Imports
decreased from Belarus by 31.5%; from
the Russian Federation - by 29.3%; Italy - 14.4%, USA - 11.7% and Germany - 2.4%.
Expect
more Russian economic blackmail in the fall and after the Association Agreement
is signed.