"Completely lost its industrial potential": why Ukraine called the country a "raw material appendage" of the European Union

Vasily Furman, a member of the Council of the National Bank of Ukraine, called Ukraine a “raw material appendage” of the European Union.

He stated this in an interview with the Ukraine 24 TV channel.

According to Furman, Ukraine earns most of all from grain exports, but 10 years ago, it received the greatest benefit from the sale of metal abroad.

“This just means that we are gradually, unfortunately, turning into an agrarian power,” said a member of the Council of the National Bank of Ukraine.

“On the one hand, it seems good that we are exporting, but let's look at the structure of Ukrainian exports - alas, it is raw materials.

We are to such an extent a raw material appendage of our European neighbors, ”he said.

Furman also stressed that Ukraine needs a structural restructuring of the state, so that it turns from low-tech and raw materials into high-tech.

“Then we will really achieve European standards in salaries, pensions, healthcare, and living standards,” he stressed.

It is worth noting that, according to the analysis of the National Bank of Ukraine from 2018, raw materials prevail in the structure of Ukrainian exports to the European Union: grains, oilseeds, metals and ores.

At the same time, if in 2013 the total volume of Ukrainian exports amounted to $ 63.3 billion (before reorientation to Europe), then in 2018 this value decreased to $ 47.3 billion. Of this volume, the European Union accounted for 42.6%. 

At the same time, the volume of Ukraine's exports for seven months of 2020 (from January to July) amounted to $ 26.6 billion, which is $ 2.1 billion or 7% less compared to the same period last year.

• Trucks with Ukrainian goods to the borders of Ukraine and the EU

• RIA News

At the same time, the world trade turnover of Ukraine for the same seven months decreased by more than $ 6 billion, and the negative trade balance reached $ 2.2 billion. The corresponding data were published by the State Customs Service of Ukraine.

"Will not allow you to enter your market"

Recall that Russia has repeatedly warned that an alliance with the EU would destroy the Ukrainian economy and put it in a dependent position.

In particular, in March 2014, VTB Bank President Andrey Kostin made a similar statement at the CIS and New Forms of Interaction Forum.

According to him, “Brussels has accumulated tremendous experience in defending its own economic interests,” and Ukraine will be forced to “pull up” its economy to European standards at its own expense.

Russia also warned against the introduction of quotas by the EU on Ukrainian exports.

However, Kiev did not listen to Russian colleagues, and on September 16, 2014, the Verkhovna Rada adopted a bill on the ratification of the Association Agreement between Ukraine and the European Union, which was signed by Petro Poroshenko on the same day.

At the same time, both during the adoption of the document and after in Ukraine, voices were heard with proposals to revise it.

One of the last such statements was made by the Ukrainian Minister of Economic Development, Trade and Agriculture Igor Petrashko.

According to the head of the ministry, Kiev hopes to reach an agreement on revising the Association Agreement with the EU in 2021.

Earlier, Vadym Prystaiko, who then held the post of Deputy Prime Minister of Ukraine for European and Euro-Atlantic Integration, also announced the need to revise the terms of the Agreement.

According to him, Kiev is "not satisfied" with the majority of quotas for the supply of Ukrainian goods to the European Union, which were established by European partners.

Meanwhile, experts note that the EU does not intend to increase the purchase of Ukrainian goods and will not make significant concessions to Kiev in this matter.

As Ruslan Bortnik, director of the Kiev Institute for Analysis and Policy Management, clarified in an interview with RT, against the background of a decline in economic indicators due to the crisis due to the pandemic, the EU will not meet Ukraine halfway.

“Under such conditions, the European Union will definitely not allow the Ukrainian manufacturer to enter its market and will not provide them with any more favorable conditions,” the expert is sure.

Bortnik also stressed that, unlike Ukraine, Brussels "benefited from the association agreement by imposing its own terms on 100%."

“The European Union didn’t actually concede anything in this deal.

And, despite Ukraine's timid attempts to revise this agreement, Brussels will continue to act in the same vein, ”the analyst said.

Denis Denisov, director of the Institute for Peacekeeping Initiatives and Conflictology, expressed a similar point of view in an interview with RT.

According to him, Kiev "will definitely not be able to strategically change the agreement with the EU in its favor."

“After all, Ukraine is a politically completely unbalanced partner of the European Union.

Of course, the Ukrainian side will not stop bargaining for certain concessions for increasing export quotas, but this does not mean that they will meet halfway.

Moreover, European officials are well aware that it is not in their interests.

Therefore, Brussels will not radically change the terms of the deal already accepted earlier.

And this is a sad story for Ukraine, ”the expert said.

Bortnik, for his part, also noted that the predominance of raw materials supplies in Ukraine's exports can be explained by the fact that "the country has completely lost its industrial potential."

“Including because of the Association Agreement with the EU, the de-industrialization of Ukraine took place in an intensified way: now less and less goods with high added value are produced in the country and practically nothing is exported,” the analyst said.

At the same time, as Denis Denisov specified, before the outbreak of the intra-Ukrainian conflict, a whole mining and metallurgical complex was developed in the country, concentrated in the Donbass.

“However, when the war began in the east of the country, this negatively affected the state's ability to export metal and coal.

Therefore, it is not surprising that at present food products occupy a dominant position in the supply abroad.

Apparently, such trends will continue in the next decade, as there are practically no investments in industry in Ukraine.

The country now really acts as an appendage of the EU, as a service state, ”he said.

According to Bortnik, now the key profit of Ukraine "is concentrated only in the agricultural sector."

“At the same time, Ukraine did not become a great agrarian country.

And the agrarian sector by itself cannot keep the entire economy of the country on its shoulders.

He is unable to support the social system and provide conditions for a normal life for the population, ”the expert explained.

"Doesn't improve the situation in the country"

Analysts predict that the economic situation in Ukraine will only worsen, and deepening integration with the EU can only aggravate this process.  

As Viktor Medvedchuk, the head of the political council of the Opposition Platform - For Life party, noted on his Twitter page in July 2019, the Association Agreement with the EU “virtually destroyed” the Ukrainian economy.

• Food market in Ukraine

• Reuters

• © Valentyn Ogirenko

“The country has become destitute.

Therefore, it is impossible to speak about the fact that our economy is competitive today, or maybe it might be, even in the future 10-15 years, ”wrote Medvedchuk.

Recall, according to the IMF report published in May 2019, Ukraine is one of the poorest countries in Europe.

According to research by Growth from Knowledge, last year Ukraine was in last place in the ranking of countries in terms of purchasing power among 42 European countries.

According to Ruslan Bortnik, such trends are only the beginning of the deterioration of the economic situation in Ukraine.

The expert is sure that instead of building up interaction with the EU, Kiev "should look for third markets or negotiate a return to the CIS markets."

“However, this is not enough.

Kiev also needs to create a balance between industry and the agricultural sector, only then the economy will begin to develop in the right direction, ”the analyst said.

According to Bortnik, under the current conditions, the Ukrainian authorities will not be able to ensure this balance, and "life in the country will only get worse."

“But these processes will take place gradually.

There will not be any sharp collapse of the Ukrainian economy or a full-scale crisis in the near future, ”the expert explained.

Denis Denisov, for his part, believes that "export oriented to raw materials does not improve the situation in Ukraine."

“Under such conditions, the country cannot develop as a full-fledged state that could provide a decent future for its population,” the analyst concluded.