Ukraine admits economy suffers dramatic losses thanks to anti-Russian policy

The massive decline in Russia-Ukraine trade has incurred major losses for the Ukrainian economy, according to Ukraine’s Federation of Employers which claims the financial damage is 13 times as much as losses suffered by Moscow.

Anti-Russian rhetoric adopted by Kiev in recent years resulted in a drastic reduction of trade turnover between the neighboring states, and stripped Ukraine of 10 percent of its gross domestic product (GDP), according to Sergey Salivon, the head of the economic policy department at the business association.

“Ukraine’s cross-border trade with Russia shrunk more than three times over five years through 2018,” the official said in interview with CapitalTV. “At the same time, our exports dropped more than four times as imports from Russia fell by less than three times.”

The expert highlighted that those calculations do not include Ukraine’s purchases of Russian gas from Slovakia and other European countries.

“If we take into account gas imports, we’ll see the mutual trade decline of about US$11.5 billion,” Salivon said, stressing that the number accounts for only 0.8 percent of Russia’s GDP, while for Ukraine it’s ten percent of the economy.

Ukraine is aware that Kiev is losing much more than Moscow due to a deterioration in political and economic relations, according to political analyst Aleksandr Dudchak, who says that Kiev’s policies in recent years have made the Ukrainian economy non-competitive due to a sluggish development of technology.

“Ukrainian business had been trying to defy the restrictions but most of the businessmen turned out to be under tight scrutiny of the country’s security service,” the expert told RT, stressing that it was difficult for businesses to overcome the crisis under a total dictatorship.

Trade relations between Russia and Ukraine saw a significant decline over the past five years. In 2015, Moscow suspended the free trade zone deal with Ukraine following Kiev’s decision to sign an association agreement with the EU. Ukraine was automatically included on Russia’s counter-sanctions list against the bloc, introduced by Moscow in 2014 in response to European penalties over re-unification with Crimea and Russia’s alleged military involvement in Ukraine’s eastern regions.

Ukrainian authorities imposed an import ban on a wide range of food produce from Russia, including meat and fish, coffee, dairy products, chocolate and confectionery, grains, cigarettes, beer, and many others. Last year, Kiev added fertilizers to its endless list of restrictions. In December 2018, Kiev extended the measures for another year. The country also introduced sanctions against several Russian individuals and entities.

In response, the Russian government banned imports of more than 50 Ukrainian goods, worth $510 million. According to Moscow, the restrictions can be lifted if Kiev gives up its own restrictions targeting Russian goods.

The trade spat intensified earlier this year, when the Kremlin banned exports of oil and petroleum products to Ukraine shortly after Kiev expanded the list of trade restrictions targeting more Russian goods. Moreover, Moscow banned imports of clothes, bulldozers, pipes and pipe-laying vehicles, among other goods. The measure targets goods worth $250 million as of last year, according to Russian Prime Minister Dmitry Medvedev.

The restrictions on oil exports to Ukraine are currently the most vital, according to president of the Kiev-based independent Ukrainian Analytical Center, Aleksander Okhrimenko.

“The fact that we stopped purchasing the wire is not serious. But banning sales of crude to Ukraine is huge, while Kiev’s sanctions against Russia are simulation. Ukrainian authorities cannot inflict any harm to the Russian economy,” Okhrimenko said in an interview with RT.

The expert stressed that lifting the mutual restrictions wouldn’t help to restore the previous volume of mutual trade.

For more stories on economy & finance visit RT's business section