Russia-Ukraine trade war: updates and results

Author : Kateryna Reschuk

Source : 112 Ukraine

Last year EU became the trading partner of Ukraine, but Russia remains the largest partner as a separate country
10:52, 13 July 2016

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Cabinet of Ministers has continued embargo against Russia by the end of 2017. This was a response to similar actions of the Russian government. The first six months after launching the reciprocal sanctions have passed, and we can follow the first results.

Officially, "food war" between Russia and Ukraine began on 1 January 2016. The Russian government has used the embargo as "revenge" for the Association Agreement with the European Union, the economic part of which also came into force on January 1, 2016. Kremlin has repeatedly insisted on the postponing of the agreement implementation.

Unofficially, Russia has launched the sanctions a few years before. Since 2012, Russia uses state institution of inspection "Rosselkhoznadzor" as a puppet, which periodically bans the import and transit of Ukrainian cheese, dairy products, sweets, alcohol, and chicken.

Related: Italy supports preservation of sanctions against Russia, - Renzi

As from 1 January 2016, Russian sanctions became official; Russia imposed an embargo on Ukrainian pork, beef, chicken, fish, crabs, shellfish, dairy products, cheeses, sausages, vegetables, fruits, and nuts. The list of banned products was amended several times.

Ukrainian has to pay duty for goods that are out of the blacklist of Russia. Ukrainian producers to pay the same tolls as, for example, Japan and Germany (about 7.8%).

A similar amount of Russian goods is in a black list of Ukraine’s imports; insecticides and herbicides, locomotives, equipment for railways, and some other products.

The continuation of Ukrainian sanctions was import duties for goods originating from Russia. Earlier, Russia had preferential rate of 0%, now it is 0.5% - 10%.

Related: Ukraine urges EU to put pressure on Russia to cancel transit restrictions for Ukrainian exports

During the last year, Ukraine’s export to Russia has been steadily declining. In 2015, Russia's share of merchandise exports from Ukraine decreased to 12.1% and to 7.5% in the first quarter of 2016 (compared to 17.6% in 2014). Overall exports decreased by 49% in 2015.

Over the past year, the turnover of agricultural products between Ukraine and Russia declined by nearly 65% (or more than $1 billion compared to 2014) and camed almost to $575 million. Thus, the share of Russia in Ukraine's total exports fell from almost 6% in 2014 to 2 % in 2015.

There was a drop in Russian imports by 59% (to $366 million) to $264 million compared with the volumes of 2014.

Despite the fact that last year EU became the trading partner of Ukraine, Russia remains the largest partner as a separate country. According to the State Statistics Service, in 2015 Ukrainian exports to Russia amounted to $4.83 billion and imports to $7.485 billion.

Related: Ukraine set a new grain export record

National Bank recently published a disappointing forecast concerning financial loses. The introduced new trade restrictions might reduce exports to Russia by 31%, or $1.3 billion (during 2016).

However, not only Ukraine incurs losses due to the mutual sanctions. Ukraine’s association agreement with the EU would cause $3.5 billion loses to Russian businessmen.

However, there are some positive signs, which indicate that Ukraine is gradually returning to Europe. Yes, only in the first quarter of 2016, Ukrainian exports of food and beverages in the EU increased by 31%. At the same time, imports of industrial products increased by 4%.

Related: National Bank forecasts further decrease of export of Ukrainian goods to Russia

The agricultural sector also demonstrates a good dynamic. In the first quarter of 2016, Ukrainian agricultural exports to the EU grew by 15.3%.

During the first three months of the year, export of Ukraine’s agricultural goods amounted to 1.2 billion dollars.

Related: Ukraine is largest exporter of wheat to EU in 2015/16

Related: Ukraine will export cheese to UAE and Africa

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