On Putin’s statements and incentives for the development

Free Trade Area between Ukraine and the EU may damage its economic relations and cooperation with Russia. Such statement was made by the President of the Russian Federation Vladimir Putin at a press conference following the APEC Summit on October 8. He also noted that Ukraine’s accession to the free trade area with the EU won’t drive Ukraine away from Russia. And no matter in what direction the both countries would move, the main question is “the price of choosing that direction and its efficiency.” Putin also expressed his position that the two countries should hold consultations on the governmental level before deciding to join the free trade area with the EU. “This is not irony. We have proposed holding such consultations in order to see all pros and cons of the development of our relations outside of the CIS,” Putin said.

How should Putin’s statement be interpreted after all that has been said before? The Day has asked this question Oleksandr KENDIUKHOV, chairman of the all-Ukrainian Union of Economy Scientists.

“If Russia introduces additional customs barriers, it will be significant for Ukraine. First of all, this will be reflected in the form of increased negative trade balance with Russia and will also affect the trade with the other member states of the Customs Union. Another problem is that the Ukraine’s existing production capacities will not provide a positive trade balance with the EU. In the situation of tough economic policy pursued by Russia, the losses of Ukraine from the world trade will increase. However, Ukraine can mitigate these effects. Despite the worsening of trade relations with Russia, we have an opportunity to create better conditions for attracting international investments and, thus, create new production capacities. If this does not happen in the near future, in the future we will constantly lose from global trade. In my opinion, the aggravation of economic relations with Russia should serve as an incentive for Ukraine to transform. We must stop getting involved in infrastructure projects and begin to invest in new ventures. Otherwise, there will be no progress.

“The consultations with Russia are, of course, necessary. It is a dialogue needed to smooth negative emotions of the neighbor in response to Ukraine’s decision to sign the agreement on the establishment of the FTA with the EU. It is important to discuss the possibility of resuming the work of the industry enterprises, which suffered after the collapse of the Soviet Union because of the break of the technological chain. However, one should not count on great success in that. With the existing economic opportunities Ukraine will always be in the role of a weaker partner. Therefore, we first need to create new production capacities and then to start thinking about whom to join. And it turns out that having finished the remnants of the Soviet Union, we are now trying to integrate with someone. It is an illusion of a right choice. No matter what direction Ukraine chooses, it must first create modern national production, which will provide a positive trade balance.”