Economic Perspective Of Ukraine And Russia Economics Essay

As it is known in the modern geopolitical worlds that have been developed in the Eastern Europe as a consequence of the prostration of the Soviet Union – Ukraine has gained at its importance and became the 2nd military power province after Russia in the post-Soviet Eurasia infinite. The geopolitical place of Ukraine is determined by the propinquity of the two provinces: Russia and Poland. The latter is a member of NATO and the European Union.A This vicinity effects the operation of the state that could be virtually split into two different parts.

Most politicians and political analysts say about being of the phenomenon called “ ambidextrous Ukrayina ” . The Dnieper River separates the state in the manner the civilisation cordon could make, making unsurmountable ideological chasm between two parts of the individual country.A One portion of the Ukraine is closer to Russia – “ pro-Russian ” and the other – “ anti-Russian ” and “ pro-Western ” ( Okara, 2007 )

The eastern portion of Ukraine is characterized by a important portion of the Russian population and Russian-speaking Ukrainians, chiefly Orthodox trusters. This is where the industrial potency of the state is concentrated.A This leads to shut personal and economic ties with Russia. The western portion of the state, albeit with breaks, was for a long clip portion of Poland and the Austro-Hungarian Empire, which had a strong influence on the socio-cultural features of its population. The Uniat Church dominates at that place and anti-Russian sentiments are widely spread. These facts manifest themselves in chauvinistic mottos of some political parties and their orientation to the West. ( Mirabdullaev, 2010 )

After the prostration of the Soviet Union political relations in Ukraine has mostly been the merchandise of the mutualism of anti-Russian sentiments of the Ukrainian elite and the continued orientation of the bulk of population to cooperation with the Russian Federation. Ukraine has been ever equilibrating between the CIS and NATO. With Russia Ukraine has associated economic realities.A It is dependent on Russian natural stuffs and energy by 80 % , while showing the most negative attitude towards the enlargement and acceleration of integrating with Russia and other states of the Commonwealth of Independent States.

Meanwhile, the official attitude of Ukraine to the CIS is that it considers Commonwealth as a mechanism for a civilised solution of jobs that have arisen since the prostration of the USSR.A Since Ukraine has non signed the CIS Charter, it does non see itself as a member of Commonwealth, taking portion in a figure of organic structures as an perceiver. Highlighted desire to consolidate the independency in all the ways has resulted in a refusal to take part in a many-sided military cooperation of the CIS, in the joint protection of external boundary lines, place on the subdivision of the Black Sea Fleet. The latter circumstance is good known and has contributed to a crisp weakening of Russia ‘s place in the Black Sea basin, where, in add-on, the strategic place of Turkey has besides enhanced.

In general, in the East European part all CIS states depend on Russian natural stuffs exports and energy.A Russia practically ensures Ukraine with energy ( 90 % ) . Industrial production in Ukraine and its terminal merchandises is closely tied to cooperation with other CIS states, chiefly Russia.A This dependance is 70 % . However, Ukraine has a negative attitude to the enlargement and acceleration of integrating with Russia and within the CIS ( Mirabdullaev, 2010 ) .

Ukrainian and Russian society, like the huge bulk of societies with province socialism past began their motion to a market economic system and democracy at the bend of 1980-1990s with similar resources. In the prostration of the Soviet system they lacked:

Strong province

Developed civil society, able to counterbalance for the “ failures ” of the province and other public establishments

Initial capitals, developed markets and relevant accomplishments ( Kucenko, 2006 ) .

Since 1992 the denationalization of little and big endeavors through an unfastened stamp process has started in Ukraine, and from 1995 to 1999 the procedure of mass verifier denationalization took topographic point. However, as a consequence of large-scale verifier denationalization 1000000s of citizens, contrary to outlooks, did non go existent proprietors. For illustration, in Ukraine 19 million stockholders became proprietors in name merely, non even make fulling out the ownership of the portions acquired. Non-cash denationalization led to the acquisition of ownership by insiders, which caused a slow demand for institutional reforms. In bend, the deficiency of developed market establishments leads to the fact that minutess on the secondary market promote the concentration of ownership in the custodies of a little figure of politically-engaged proprietors. On this footing, really rapidly were formed a “ redistributive alliances ” , which led to the crystallisation of the economic laterality of several major concern and political groups of “ oligarchic ” nature ( Kucenko, 2006 ) .

This characteristic quiet good displays a system of internal and external factors, the outgrowth and development of political crisis in Ukraine.A However, it suggests that significant footing of this system is the fact that Ukraine is oligarchic province. This is a polar constituent of the internal economic factors. ( Koryakina_1 )

Ukrayina from 1994 until 2004 was ruled by President Leonid Kuchma and group of powerful concern work forces alleged “ oligarchs ” who supported him during the elections in 1999. His policies did non differ by important reforms, but were characterized by corruptness and violation of human rights ( Woehrel, S. , 2009 ) .

Control over the returns of all grosss from oil and gas resources on history concern constructions, controlled by a “ kin ” of Leonid Kuchma, gave oligarchs economic weight and limitless chance to act upon political determinations. This economic factor has contributed to the intensifying crisis in political relations due to the power crisis 1999 – 2000 periods.

However, it should be one time more celebrated that Ukraine, like most of the CIS states, is economically dependent on Russia.A This is evidenced by a figure of important facts. Back in 1999, Ukraine was considered as hopeless defaulter for gas.A On that period it was owed to Gazprom $ 1,065 billion.A Furthermore, Russia was providing gas to Ukraine for merely $ 34 per 1000 three-dimensional metres. Then it became obvious that if E. Primakov ( Russian Prime-Minister at that clip ) would non see Kiev, the Ukrainian would endure worst economic prostration, lending to declining Crisis in political relations ( Koryakina, 2006 ) .

These events were linked to the effort of the Ukrainian president to blackjack Moscow that was associated with Ukraine ‘s desire to come in NATO. In 1998A in response to a “ public flirting ” of the Ukrainian governments with “ the West ” took topographic point the breach of the Russian – Ukrainian energy dealingss.

In any manner, Ukraine ‘s geopolitical place between Russia and the European Union is frequently used by Ukrainian politicians to coerce the Russian leading to the acquisition of certain economic and political advantages ( Mirabdullaev, 2010 ) .

Current state of affairs

Since the Soviet prostration, dealingss between Ukraine and Russia were characterized by

both elements of cooperation and struggle. Difficult determinations besides include inquiries sing the Crimea and the Black Sea Fleet ( BSF ) that locates its Russian portion in Sevastopol. On May 31, 1997 the Russian-Ukrainian Treaty on Friendship, Cooperation and partnership was signed, which has resolved existed claims of both states against each other, including territorial, which meant the terminal of the difference over the ownership of the Crimea. Since independency, Ukraine is prosecuting a multi-policy which was based on the undertaking of guaranting autonomy, including the military political issues ( Kuzio, 2003 ) .A Relations with NATO are regulated within the Council of Ukraine -A NATO. Ukraine has actively participated in the plan: “ Partnership for Peace ” ( Mirabdullaev, 2010 )

In 2005 a new leading of Ukraine led by president Viktor Yushchenko who came to the power after the Orange Revolution made a much greater accent on the chase to incorporate the state into NATO and the European Union. Kiev confirmed committedness assumed by the military and political duties in relation to Russia, in peculiar, an understanding on BSF in Crimea Peninsula before 2017. Some experts believe that the presence of the Russian base in Crimea closes the way of Ukraine ‘s accession to NATO. Indeed, one of the conditions of admittance of new NATO members is the absence of military bases of other provinces on their territory.A In this context, Russia raises some concerns about Ukraine ‘s foreign policy.A It envisages the inclination of the gradual transmutation of Ukraine into one of the centres of power against Russia. ( Kropacheva, 2006:16 )

To day of the month, we can evidently presume that political system of Ukraine during the presidential term of Viktor Yushchenko ( 2005-2010 ) was in a province of marked protracted crisis.A It is characterized by continuance and equivocal episodic manifestation of tendencies in the exacerbating of the crisis in the political relations of the State.

The crisis in Ukrainian political relations, determined by economic jobs was caused by a new aggravation of jobs related to the Russian – Ukrainian “ gas ” relationships. Until 2005, the Russian side carried out prepayment for about 200 – 250 $ million for gas theodolite via Ukraine to Europe.A At the same clip Ukrainian consumers were paying for ingestion of Russian gas at a monetary value two times lower than the market monetary value. The demand of “ orange ” governments to Russia paying for gas theodolite to the market monetary value, in fact, contributed to the start of the new way of development of the political crisis in Ukraine.

Statement by RAO “ Gazprom ” , in response to claims of Ukraine that the monetary value for gas supplies to Kiev will raise to 55 – 69 % ( i.e. to 110 – 160 $ per 1000 three-dimensional metres ) could hold highly negative impact on domestic economic place of the Ukrainian province. Alternatively of seeking consensus, Yulia Tymoshenko ( former Prime curate of the state ) , implementing programs for the U.S. rupture of economic ties with Russia, initiated a undertaking grapevine “ Iran – Europe ” , which is planned to provide gas to Ukraine from Iran alternatively of Russia ( Koryakina, 2006 ) .. It must be said, that the undertaking would necessitate considerable cost for Ukrainian budget which would impact the public assistance of the population taking into history the economically weak province

The political crisis in Ukraine in 2005, associated with the surrender of Tymoshenko was due non merely to internal jobs in the state, but besides to the “ gas ” split of the Ukrainian political elites to happen protagonists of a via media dealingss with Russia and his oppositions. Continued demand from Russia to cipher market monetary values for gas theodolite and the reluctance for the same monetary value to pay for energy supplies led to the fact that January 1, 2006 gas supplies to Ukraine were halted. Because of the self-take of gas from the pipe by the Ukrainian side gas supply to Europe was stopped, which contributed for subscribing a new contract between Ukraine and Russia and within two yearss the gas supply was restored ( Woehrel, S. , 2009 ) .

Consequently, the significant foundation of foreign economic factors outgrowth and development of the political crisis in Ukraine is characterized by instability in the socio-political and economic dealingss caused by the installing of the U.S. , pointing the “ orange ” political elites to interrupt economic ties with Russia with regard to which Ukraine is economically dependent on province, largely in natural stuffs industries ( Koryakina, , 2006 ) .

The last gas crisis that occurred in 2009 was caused by inability of the two sides to make understanding on a monetary value for the supply of gas and Ukraine ‘s debt to Gazprom. This clip the gas crisis has affected non merely Ukraine but besides Europe.A Finding other facts of gas self-taken on January 6 Russia cut off gas supplies to Europe for two hebdomads until the new understanding was reached. The EU was concerned about what is go oning in Ukraine, as many states within the Union have been earnestly affected due to the incident.

All these events together have contributed to the building of a new gas grapevines: Nord Stream ( under the Baltic See ) and South Stream ( trough Balkans ) short-circuiting Ukraine. Construction of the Nord Stream has already begun, while the South Stream is non available at an early day of the month. Construction of the latter would significantly impact the conveyance substructure of Ukraine that would significantly cut down its income. And, moreover, it will enable Russia to exercise force per unit area on Ukraine in work outing of other jobs ( Woehrel, S. , 2009 ) .

These facts suggest that efforts to interrupt the economic dealingss with Russia have highly negative impact on domestic economic and, therefore, the internal political state of affairs in Ukraine.

Areas of economic cooperation

The high degree of industrial development of Soviet Union was achieved through the alleged incorporate economic composite. This is the most obvious ground why economic dealingss between Ukraine and Russia were affected after the prostration of USSR – their mutuality of each other. This is explained by the fact that Ukraine produced merely 20-30 % of the entire sum of the production rhythm, whereas 70-80 % of the staying merchandises were manufactured or supplied for the assembly from the other Union democracies. Unfortunately, dealingss with other former Soviet democracies were the same and all integrative procedures which were created within the Soviet Union during the rupture of economic ties have been lost at the both micro and macro degrees ( Pylypenko, 2007 ) .

If during Soviet times it was possible to happen demand on Ukrainian goods within the Soviet democracies due to the presence of economic ties within the USSR that has really been a discrepancy of economic and pecuniary brotherhood, after its prostration and obliteration of all old concern links and supply ironss volumes of industrial production in Ukraine have decreased well, e.g. : production of mineral fertilisers decreased by 50 % , chemical fibres and man-made narrations – by 6 times, workss protection agents by 50 times ( NSD, 2009 ) .

Therefore, the reorientation of the excavation industry to universe markets to the hurt of the national fabrication sector has non merely reduced the domestic production in both states, but besides the volume of bilateral trade: The bilateral trade volume since 1996 to 1999 decreased from $ 14.4 billion to $ 8 billion or 55, 5 % , while Russia ‘s portion in the Ukrainian trade good exports declined from 38, 7 % to 20, 7 % .

Inability to work out economic jobs while keeping a high mutuality of economic systems has become one of the causes of economic struggle between Ukraine and Russia. Direct effect of the rupture of cooperation ties has been the diminution of hi-tech production ; autumn in profitableness, decrease of gross and, as a consequence – debasement of people ‘s public assistance, unemployment and the hazard of societal discontent.

At the same clip, in footings of usage of assorted strategies of revenue enhancement equivocation in the domain of foreign economic activity by business communities and the deficiency of effectual control over exports and imports, increased foreign exchange net incomes from trade good exports did non lend to a qualitative betterment in the economic system, because the additions from exports chiefly received the concern organisations instead than the economic system in general. ( NSD, 2009 )

Reorientation of trade dealingss between the two states began with the twelvemonth 2000, when, after a long period of diminution the first recorded growing of common trade took place.A In 2004A the entire trade turnover between Ukraine and Russia has reached $ 20.350 billion, which is about 2 times more than in 1999. Ukrainian exports to Russia during this period increased by 1.8 times, Russian imports to Ukraine – by 2, 1 times ( Table 1 ) .

( Table 1 ) Bilateral Trade between Ukraine and Russia 1998- 2006.








1998 / 1997 ( % )








1999 / 1998 ( % )








2000 / 1999 ( % )








2001 / 2000 ( % )








2002 / 2001 ( % )








2003 / 2002 ( % )








2004 / 2003 ( % )








2005 / 2004 ( % )








2006 / 2005 ( % )




( US $ million )

Beginning: ( Pylypenko, 2007: 131 )

In 2001 – 2002 of import bilateral paperss have been signed, in peculiar, the plan of cross-border and interregional cooperation, an intergovernmental memoranda on the rules of non-use of particular steps sing the import of goods originated from the imposts districts of the parties, understanding on strategic cooperation in the gas sector and other ( NSD, 2009 ) .

Despite the chilling of dealingss in the political domain, followed by the presidential elections in Ukraine in 2004, economic cooperation between Ukraine and Russia continued to develop. So, harmonizing to State Statistics Committee of Ukraine, Ukraine ‘s entire foreign trade turnover in goods and services from Russia increased, compared with the old twelvemonth, in 2006A – by 12, 1 % , in 2007A – by 28, 4 % in 2008 – by 18, 7 % .

Beginning: State Statistics Committee of Ukraine

Let us now have more closer expression at some issues of the bilateral trade between two states. As it becomes clear from the aforementioned tabular array, volumes of the bilateral trade between two states have faced an addition between 1998 and 2006. Both Ukrainian exports to Russia every bit good as Ukrainian imports from Russia have increased in absolute footings from $ 5.5 bn ( export ) and $ 7.3 bn ( import ) in 1998 to severally $ 11.8 bn ( export ) and $ 14.4 bn ( import ) in 2006. However, if we so take comparative footings in history we see that both Ukrainian export and import to and from Russia have decreased from 31 per centum point of entire exports in 1998 to 26 per centum points in 2006 and for imports from 46 per centum points in 1998 to 30 per centum points in 2006. From our point of position this controversial image can be described by agencies of several premises. First is that during the discussed period the construction of inter-state trade has likely been changed, which has been reflected in the lessening of the Russian portion in Ukrainian trade itself. Second, it can be that in absolute footings Ukrainian foreign trade has been increasing by higher rates than those between Ukraine and Russia. Finally, the ground can be that the period between 1998 and 2006 can itself reflect controversial informations and could stand for different tendencies and different sub-periods. Indeed, if we split given period into two sub-periods of 1998-2004 and 2004-2006 we see the diminishing portions of the Ukrainian exports to Russia in the first sub-period, whereas in 2004-2006 this portion has started to increase from 21.6 per centum points in 2004 to 26 per centum in 2006.

Additional information for 2007 and 2008 provinces that Ukrainian export to Russia increased to 28 per centum of entire exports in 2007 and remained at the same degree in 2008[ 1 ]. In the same clip the downward inclining tendency of the Ukrainian imports from Russia as a portion of entire imports continued to predominate and constituted 27 and 22[ 2 ]per centum points for 2007 and 2008 severally. So, on the one manus, we see two sub-periods with different tendencies for exports ‘ portion alterations: decreasing between 1998 and 2004 and increasing between 2004 and 2008, on the other manus – volumes of Ukrainian imports ( as portion in entire imports ) from Russia have been invariably diminishing between 1998 and 2008 and were halved as a portion of entire imports by 2008 comparing with 1998. By agencies of its exports ‘ growing in 2004-2008 Ukraine has besides been able to diminish its negative balance in trade with Russia from – $ 5.35 bn in 2006 to – $ 3.67 bn in 2008[ 3 ]. If we try to hold a more elaborate and closer expression at the construction of the Ukrainian foreign trade with Russia in 2004-2008 we will see the undermentioned image.

Ukrainian economic system continued to remain dependent on Russian imports as it was represented by energy trade goods and natural stuffs ( 46,8 per centum and 42,8 per centum of entire Russian imports to Ukraine in 2007 and 2008 severally ) . On the other manus in Ukrainian exports to Russia prevailed merchandises with center and high processing grade every bit good as services ( in 2008 exports to Russia were presented by machinery merchandises ( 32 per centum ) , metallurgy merchandises ( 20 % ) and services ( 20 % ) . This means that the construction of Ukrainian exports seems to be more diversified comparison to that of Russian imports that can be viewed as a positive minute and possible comparative advantage ( NSD, 2009 ) .

However, it should be stated that the bilateral trade between the states has been extremely influenced by the convulsion of planetary economic and fiscal crises in the terminal of 2008 and throughout 2009.

Beginning: ( NSD, 2009, 2009: 18 )

It is clear from the chart that Ukrainian exports to Russia every bit good as Russian imports decreased dramatically in 2008 – Intelligence quotient 2009 that high spots high dependance of both states on the international economic sciences every bit good as similar tendencies within the economic systems discussed. We would besides wish to observe that as a consequence of such lessening the portion of energy trade goods in Russian imports to Ukraine increased to 66 per centum that one time once more high spots critical dependence of Ukrainian economic system on energy imports from Russia. In its bend in Ukrainian exports to Russia portion of services has well increased to 34 % that likely indicates possibilities for farther growing if Ukraine will be able enhance the quality of its conveyance, building and fiscal services exported to Russia.

Reasoning it is possible to state that trade dealingss between Ukraine and Russia have experienced different periods of oppositely directed tendencies as common trade has stagnated in 1990-1999, so faced the addition in 2000-2008 and decreased once more in 2008-2009. This, one time once more, provinces about an ambiguity and complexness of economic dealingss between two states.