Kyiv terminated the treaty with Russia: implications for the economy

The Program of Economic Cooperation of Ukraine and Russia until 2020, which existed since 2011 was terminated by the Cabinet of Ministers of Ukraine last Wensday. How this could affect the Ukrainian economy?

Crimea and import
Last week Prime Minister Vladimir Groisman stated his willingness to cancel the document.
“The government is preparing a document on the cancellation of the economic cooperation program, and we will do everything to ensure that the aggressor country pays a high price for aggression in Ukraine”, the head of government said, adding that he is counting on Russia’s losses after this decision.
Later, the government unanimously supported the termination of the agreement.
“The program of economic cooperation was signed on June 7, 2011, but at the moment the steps taken by the Russian leadership directly contradict to the goals stated in the document”, the explanatory note stated.
The argument in favor of abandoning the program was the illegal annexation of Crimea in 2014. The government notes that since 2015 the Russian Federation is showing trading aggression towards Ukraine. We are talking about the suspension of the agreement on the free trade zone with Ukraine and the ban on the import of Ukrainian agricultural products.
The state level
The economist Olexandr Okhrimenko explains: the program concerned exclusively state cooperation in the economy, and private business was not affected. At the same time, many provisions of the document, for example, cooperation in the military-industrial sphere, already stopped in 2014 for obvious reasons. Therefore, the effect of the disruption of economic relations will not be large-scale.
However, according to Okhrimenko, problems may arise that are not currently present in the Ukrainian economy.
“For example, with Energoatom. Previously, there was a system of mutual loans. We supplied the Russians with ore, and they gave us fuel for nuclear power plants, and we paid for them later. It’s very difficult to pay for fuel elements at once. But they have to be bought, but in Russia they will say “sorry, money first”, said the expert.
Political scientist Ruslan Bortnik says that this is not the last document to be canceled in the near future.
“This program, like two-thirds of the Ukrainian-Russian economic documents, has not been functioning for a long time. Such demonstrative decisions do not affect the real economy, rather, they can be viewed as a pre-election struggle”, the expert believes.


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