What will happen to the Ukrainian economy?

By Vestnik Kavkaza

Alexei Kudrin, the former minister of finance, stated at the St. Petersburg International Economic Forum that the situation in Ukraine and sanctions against Russia could make the country’s economy lag in three years, BaltInfo reports. Soon political decisions which would normalize the economic situation could be made, according to the expert.

Victor Zvagelsky, deputy chairman of GDRF economic policy, innovation and business, told Vestnik Kavkaza that “all economic forecasts can only be made in conditions of an absolutely calm political situation. As for Ukraine, it is restless and unpredictable, it will depend on how political passions calm down, how the situation with the elections develops and, in general, whether they will take place on May 25, as far as they will be recognized, not only by the world community, which, illogically, supports all that is negative today in Ukraine, and as far as it will be supported by the Russian Federation, because Russia is the country which is the basic economic, strategically-economic partner of Ukraine.”

According to Zvagelsky, the elections will just play the main role inasfaras the economic situation in Ukraine develops in the correct direction, as far as this cooperation will develop. “Today Ukraine has lost its pace of economic growth and it will be impossible to regain it soon. Ukraine has lost its mutual relationship, which has compelled Russia to go for substituting imports of those goods which are exported from Ukraine, first of all. What belongs to Ukraine, unfortunately, is only in demand in Russia. If today, Russia, in view of the situation, already rejects the majority of goods made in Ukraine, it could lead to catastrophic consequences. Ukraine will be completely subsidized, an economic appendage, like Georgia today, for example, with respect to attempts by Georgia today to gain some economic independence.”

Professor of the Financial University under the Russian government, Nikolai Kotlyarov, who deals with problems of integration within the Customs Union, thinks that from the point of view of the processes, the Ukrainian economy is very important: “The turnover between Russia and Ukraine was about $40 billion last year; it is about 2/3 of the entire turnover of the Customs Union. A big part of it is machinery. The percentage of the trade categories in Russian foreign trade with countries of the far abroad is much lower; it also concerns Ukrainian foreign trade.

These are the nuclear energy industry, several branches of machinery production, the military industrial complex. The turnover in these spheres is more than $8 billion. Reduction of the turnover will lead to reduction of Russian revenues by $30 billion. That’s why it was expected that Ukraine will be an active participant in the integration processes. The association agreement between Ukraine and the EU will lead to shutting down Ukrainian industry. A turn to European engineering standards will demand about $30 billion.

A turn to European engineering standards of railways will demand huge amounts of money – about $30-40 billion. Who will finance this? The prospects for the Ukrainian economy are dim.”