Kudrin: Ukraine loses $33 billion annually without Russia. Are you serious? 

2014/06/23 • Analysis & Opinion

On Friday, in Moscow, at the session of the Committee of Civil Initiatives, which is headed by the former Minister of Finance Alexey Kudrin, the report “The dead-end fight of integrations in Europe.” It details the consequences of Ukraine’s joining the EU and disagreeing with Russia. The annual losses for our country are calculated at $33 bn. In order to better understand the significance of this sum for the Ukrainian economy, it should be said that this is more than the revenue budget of Ukraine in the current year.

LigaBusinessInform asked economist, head of the analytical department of the company SPAdvisors Vitaliy Vavryshchuk to comment on the prognoses of the Russian analysis. 

The losses of the Ukrainian economy from the worsening of the relationship with Russia will constitute a minima of $33 billion. 

Vitaliy Vavryshchuk: The sum of $33 billion can be grounded if we are talking about the prospective losses in the next four to five years. But annual losses of 33 billion USD are a huge exaggeration. 

The Ukrainian economy will fail to receive about $1,5-1,6 billion because Russian citizens will come to Ukraine less because of the very unstable atmosphere and, consequentially, leave less money there.

V.V.: If we assume that each visitor from Russia spends $400-500 in Ukraine during their stay, according to the calculations, the annual influx of Russians to Ukraine will decrease by 3.0-3.8 million people. Last year, 10.3 million Russian citizens came to Ukraine, 7.8 million of which came for personal reasons, so to visit their families, for the most party. I think that if such a dramatic decrease does occur, part of this money will come to Ukraine in the shape of transfers to family members.

Another 2 billion USD are Russian investments, which we will not receive. A number of Russian companies have not made additional investments to broaden their Ukrainian assets in 2011-2013. 

V.V.: The volume of Russian investments into the Ukrainian economy as of the end of the first quarter of 2014 constituted $3.5 billion. Even if we assume that the same amount of Russian investments came from Cyprus, we will get $7 billion. Obviously, an influx of $2 billion annually is impossible. 

The rise in gas prices relative to the 2013 level may cost Ukraine $2.2-3.7 billion. 

V.V.: This is a big question – we have to await the results of gas price talks. 

The amount of money sent by Ukrainian migrants working in Russia to their motherland may decrease as well. This money is a significant pillar for the support of the welfare of Ukrainian citizens – the end number of money transfers, according to expert calculation, is within $11-13 billion and equals about 7% of the country’s GDP.

V.V.: This is a huge exaggeration. According to the NBU, the general volume (from all countries) of transfers made my migrants to Ukraine last year constituted $5.8 billion together with transfers through informal channels. 

$2.7 billion came from Russia through formal channels (banks and money transfer systems). So the evaluation at $11-13 billion is an obvious exaggeration. 

And, finally, the most significant loss – the lowering of Ukrainian goods export to Russia and the Customs Union. Ukraine will have a lot of difficulties in finding other external buyers for their internal market surplus goods – raw materials take up 60% of the export to the countries of the European Union. So the sum losses of Ukraine here may reach $15 billion. Meanwhile the Customs Union countries will not find it difficult to replace the majority of Ukrainian supplies.

V.V.: Despite the claims, Russia will be unable to quickly replace many Ukrainian goods, especially machinery. All of them are at risk, of course, but I think may producers will continue supplying goods to Russia with minimal difficulty. Obviously the EU market will not compensate for the loss of the Russian market. Meanwhile the Russian government also understands that by making import from Ukraine more difficult they are creating problems to their own industry. 

Source: Biz.Liga

Translated by Mariya Shcherbinina

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