The conflict with Ukraine could cost Russia $30 billion or 1,4% of GDP

Moscow - Kyiv, May 30 (Navigator, Mikhail Stamm) - The deterioration of trade relations with Ukraine will become a new risk for Russia, Prime Minister Dmitry Medvedev admitted yesterday. Before Maidan, Russian exports to Ukraine amounted to $27–29 billion per year - 2/3 of them were gas, oil and petroleum products. In addition, the Russian Federation supplied Ukraine with high-tech equipment, chemical industry and metallurgy products. The reduction in trade will be significant, the Kremlin admits, writes NG.

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Ukraine's share in Russia's foreign trade turnover is now about 4–5%. It accounts for 31,5% of trade turnover with CIS countries. On the eve of the Ukrainian crisis, Russia supplied $27–29 billion worth of its products to Ukraine per year.

Russian mineral products – gas, oil, and refined petroleum products – were in greatest demand in Ukraine. Thus, in 2012–2013, they accounted for approximately two-thirds of all Russian exports to Ukraine. In addition to fuel, Ukraine purchases high-tech equipment from Russia (in particular, nuclear reactors, electrical machines), vehicles, chemical products, metals and products made from them. All Russian exports to Ukraine account for 1,4% of Russia's GDP.

Now Ukraine is reducing purchases of products and raw materials from Russia, primarily natural gas. Moreover, Poroshenko is threatening to completely abandon Russian gas, and although technically the country will not be able to do this soon, the reduction in purchases (not counting the theft, which Moscow is trying to force the European Union to pay for) could be significant. In addition, in April of this year, Kyiv announced the suspension of military-technical cooperation with the Russian Federation. This is also more of a declaration for now, but the threat is quite real.

So far, the likelihood of severing economic ties with Ukraine is assessed by experts as low. There is hope that Ukraine will not agree to a complete severance of trade relations with the Russian Federation. For example, Poroshenko’s loud statements about refusing Russian gas can be regarded not as a final decision, but only as an attempt to intimidate Moscow.

“Mutual trade turnover between Russia and Ukraine has been declining for the last three years. And if for Russia it is possible to reduce the volume of imports from Ukraine at least partially, then for Ukraine it is difficult to carry out similar measures, since the main volume of supplies here is energy,” comments financial analyst at Lionstone Investment Service Sergei Eremenko.

Ukraine is tied not only to Russian energy resources, but also to the opportunity to export its own products to Russia. Thus, for Ukraine, the Russian Federation is the largest sales market. Our country accounted for about 2012–2013% of all Ukrainian exports in 25–26. “A complete severance of economic relations between Russia and Ukraine is practically impossible. Our countries are very closely connected, and for both of them this will be a significant blow, especially for Ukraine, for which exports to the Russian Federation are the main source of income. The Ukrainian authorities will definitely not take this step. No financial assistance from the European Union will then help the country avoid a deep socio-economic crisis,” says Anton Soroko, an analyst at the Finam holding.

However, hopes for Kyiv's compliance may not come true. If the Ukrainian market closes, then losses of the Russian Federation up to 1,4% of GDP cannot be ruled out - this is exactly what all Russian exports to Ukraine amount to in relation to GDP.