The relations between the two economies; Russia and Ukraine can be traced back to the 1990s after it became independent from the Soviet Union in 1991. The dissolution of the Soviet Union in 1991 established the need for economic and security relationships between the two nations. A deep dive into the nature of the relationship, both economic and political, shared among the two economies right from the beginning entails that it was certainly not a harmonious one. It had many ties, tensions and both the economies adopted a hostile behaviour for each other. Ukraine is an economy fitted narrowly between the two large ones; Russia and Europe. It is considered to be a weak economy since it was declared as a constituent republic after the dissolution of the Soviet Union in 1991 whereas Russia is a high income mixed economy.
The recent crisis in Ukraine
Only recently the two economies have touched the lowest point in terms of relations shared between the two. Problems between the two economies took flight from an EU trade pact. Ukrainian President Viktor Yanukovych rejected a European Union trade agreement in November 2013 that rattled the dreams of many Ukrainians. The president rejected the EU’s deal and accepted a new deal from Russia in the form of $15 billion in aid and other economic benefits. It was the European deal that would have let Eastern and Western European economies to enter into Ukraine’s trade agreements. The natives of Ukraine yearned for further involvement with Western Europe for making their economy a more productive one (Curran, 2014).
This act of President Viktor Yanukovych spawned a mass protest which gradually escalated to fierce opposition from the public to dis-announce the legitimacy of president’s honesty towards the oath taken during his appointment as a president. The fight between the two groups became volatile gradually when the opposed group failed to accept the public’s voice and tried to suppress them with cruel force. The agenda for the mass-protests on the streets of Kyiv (the capital city of Ukraine) was to raise their voice for economic reform and they demanded the president to resign from his position for his irresponsible and corrupted behaviour towards the nation. The protests persisted and became so fierce gradually that the death toll rose up to hundreds by mid of the month of February 2014.
On the other hand, Russia felt that such a massive protest arising out of a rejection of a single economic deal of an association agreement shows only that the former economy is losing its political influence over Ukraine. Russia maintained the viewpoint that the protests by the natives of Ukraine were not valid and the same needed to be annulled as soon as possible.
Russia’s interests and role in the Ukrainian economy
The president, Viktor Yanukovych had reasons to justify his act of backpedalling. According to him, Russia was against this EU trade pact. He asserted publicly that the small neighbour nation was threatened by Russia with huge gas bills (Ukraine largely depends on Russia for its gas resources) and with various trade sanctions (Ahmed, 2014). So, why was it that Russia didn’t let Ukraine sign the EU deal? Russia’s political influence over Ukraine’s decision to sign EU trade pact signified that the former economy had its own interests.
Energy continues to be the crux of the trade relations between Russia and Ukraine. Both of the economies are interdependent on each other, Ukraine imports nearly 50% of its gas from Russia, which in 2013 amounted to 27.7 billion cubic meters. On the other hand, Russia’s gas exports are highly dependent on Ukraine as the Russian gas pipelines travel through Ukraine to other parts of the economy. If the EU trade agreement would have taken place, then it would have affected Russian exports adversely (Johnson, 2014). The EU trade pact would have hit adversely the bilateral trade relations between Russia and Ukraine. Secondly, Russia never wanted to lose its supremacy over Ukraine and the trade pact was allowing more economic liberalization for the latter.
What the future holds for Russia and Ukraine
Since the chaotic scenario has taken its shape from a host of political and economic tensions between the two economies, the solution for rectification lies therein. The need of the hour is to develop a viable solution that would cater to the interests of Ukraine, Russia and the West. Ukraine lacks political stability, and a vast history of various political divisions in the economy demands that there is a huge need for diplomatic and conciliating behaviour. The economies in chaos can negotiate politically and economically to resolve the ongoing issue. Economic solutions could play a crucial role in negotiations. For example – Russia could relive Ukraine by making some possible concessions on the Ukrainian bonds they recently acquired and they can have favourable terms of trade for the energy debts on Ukraine’s capital. On the other hand, Ukraine would assure the dominant economy Russia’s continued access to the energy delivery infrastructure.
- Curran, J. (2014), Russian- Ukrainian conflict explained [online] Available at: http://www.huffingtonpost.com/john-curran2/russian-ukrainian-conflict-explained_b_4909192.html?ir=India.
- Ahmed, S. (2014), 20 Questions ; What is Russia’s Interests in Ukraine?[online] Available at: http://edition.cnn.com/2014/03/01/world/europe/ukrainWhat e-protests-explainer/.
- Johnson, S. (2014), Assesing the future Russia- Ukraine economic relations, [online] Available at: http://finance.yahoo.com/news/assessing-future-russia-ukraine-economic-180137382.html.