The European Union has granted Ukraine 100 million euros, Ukrainskaya Pravda reports. It was the first tranche. Ukraine will receive a total of 1.6 billion euros. The funds will be spent on realization of much-needed reforms to strengthen the national economy.
According to Leonid Vardomsky, the head of the Center for Post-Soviet Studies at the RAS Institute for Economics, Ukrainian GDP dropped by 1.5% and industrial output by 5% in the first quarter of 2014. The income of the population and retail trade turnover increased. “This means that the population has money. This stash reflects that quite a massive shadow market, an employment market, is characteristic of Ukraine. People, in general, have money, the government does not, these are different things that should be considered. I do not want to say that everyone there is rich, but everyone has savings for a rainy day.”
Concerning Russian-Ukrainian trade, according to Vardomsky, “it dropped by 10% in 2013, the decline this year is even more sufficient, but it has affected Russian imports from Ukraine to a greater extent. Evidently, there seem to be bans on exports of certain products. The mayor said in Moscow that the metro construction program has been downscaled because Ukraine was not shipping tubing which had been paid for. Their production had been paid for, they had been purchased, but the products have not been shipped. Perhaps there are political and economic factors, most importantly the financial factor, because any export or import needs loans. The banking system of Ukraine is not in the best condition.”
Meanwhile, in Vardomsky’s words, Ukraine is an important economic partner of Russia, amounting to 5% of Russian external trade. The expert said that the mutual complementarity of the Russian and Ukrainian economies inherited from the Soviet Union was falling apart. The process will be a hard blow to Ukraine and Russia, especially their border districts such as the Belgorod and the Rostov oblasts. The sides need to find a solution to compensating any losses in the regions that may occur in the context of the confrontation in the next couple of years. Russia and Georgia are in a state of economic war. Ukraine is not paying for the products it purchased, it shuts down water supplies, while Russia raises gas prices. The sides are in a state of war and trying to inflict economic damage on each other.
