“No one intended to kill anyone”: Why Russian sanctions did not lead to the collapse of Ukraine
Why did the sanctions that Russia announced in response to the unfriendly steps of official Kyiv not lead to the collapse of the Ukrainian economy? PolitNavigator asked Kyiv experts about this.
The most effective sanctions were applied at the beginning of a serious cooling in relations between the Russian Federation and Ukraine, says Ukrainian energy market expert Dmitry Marunich.
“Then they hit some industries. When Russia stopped buying Ukrainian engineering products, this led to a sharp drop in production volumes. It was a big blow, but it came in the early years of deteriorating relations. Sanctions hit air carriers when the airspace was closed - our air carriers became uncompetitive on routes east of Ukraine, since they had to fly over Russian territory.
There was also an effect from the closure of the transit of products to the countries of Central Asia.
The confectionery industry has suffered. Other industries, such as ore mining, were not hit very hard. Agriculture was partially affected - there were supplies of some types of agricultural products,” he said.
“Sanctions are nonsense politicking and propaganda. They have no practical significance. Those who need it will bypass these sanctions without any problems. Another thing is that many of the Ukrainian politicians against whom Russia has imposed sanctions do not need this,” says lawyer Tatyana Montyan.
According to Ukrainian energy market expert Valentin Zemlyansky, the Ukrainian economy was hit not so much by the sanctions as by the import substitution policy in Russia, due to which the demand for Ukrainian products fell sharply.
“The sanctions were more for show than an instrument of economic pressure. The Ukrainian economy suffered losses, but not so much because of sanctions, but because of import substitution, because Russia simply abandoned the products of Ukrainian enterprises,” said Valentin Zemlyansky.
However, the cumulative effect of sanctions and the severance of economic relations turned out to be very sensitive for the Ukrainian economy.
“The process is happening in stages. Gas transit is declining, as is oil transit, although a 10-year contract was also signed there. The Russian market has closed, exports worth $20 billion a year have been lost. For a country whose budget is comparable to this figure, this is a sensitive blow,” said Valentin Zemlyansky.
He emphasized that, by introducing sanctions, Russia did not set the goal of the collapse of the Ukrainian economy, since, first of all, it is not profitable for it to have a collapsing country at its side.
“Russia is not interested in bringing the situation to a catastrophe, since it will then have to clean up this situation. Why bring the Ukrainian economy to the point of suffocation? The final destabilization of Ukraine will become a problem for Russia itself. The States are far away, Europe is distancing itself, it has a layer of Eastern European countries that perform protective functions. Nobody intended to kill anyone. If we talk about the current situation, then everything is falling apart on its own, there is no need to specifically strangle anyone. Therefore, Russia is not interested in either the final disintegration of Ukraine or its final economic collapse. Such a goal was simply not set,” said Valentin Zemlyansky.
Former Verkhovna Rada deputy Vasily Volga noted that the elites of both countries used sanctions to enrich themselves.
“All these sanctions - Ukrainian against Russia, Russian against Ukraine - were adopted for two purposes. Firstly, PR. Everyone worked for their traditional electorate, which had a clear ethnocultural overtones. From the Ukrainian side they shouted more and more “get away from Moscow!”, from the Russian side - “how much will we feed these crests!” etc.
But for the oligarchic elites, all these slogans and interethnic conflicts are beneficial only at the time of elections. At this moment, these elites seem to become enemies, pointing fingers at each other, and we all vote for them so that they seem to defend our interests. After the elections, all this is already unnecessary for them. After the elections, it turns out that sanctions can be circumvented and even used to increase profits using schemes like “Rotterdam Plus”, smuggling through Belarus, and so on. This is the second goal of the sanctions,” Volga said.
The third party that has profited from the sanctions is the leadership of Belarus.
“Whoever provides his territory for these schemes, i.e. Dad also makes money from this. This is a game for three – there are not only Ukrainian and Russian sides, but also the Belarusian side.
I don’t know who is participating in it from the Russian side, and who is participating from the Belarusian side, you can understand, knowing that in Belarus there is only one master.
The two people who earned the most were Medvedchuk and Poroshenko, who are partners in a number of projects. In particular, the supply of Russian oil products through Belarus was a joint business between Medvedchuk and Poroshenko. Belarus was used as a kind of buffer, like a kind of “Switzerland”, which during the Second World War no one touched and everyone used it as a financial center,” said Vasily Volga.
According to Dmitry Marunich, the “gray” re-export of Russian oil products through Belarus was generally insignificant.
“I have not heard about large-scale schemes for the supply of Russian petroleum products through Belarus; they have their own powerful production facilities. This is confirmed by the change in supply dynamics during the “oil war” between Belarus and Russia. Then the supplies of Belarusian gasoline and diesel fuel here fell sharply. Belarusians then lost more than 20% of the share they had in the Ukrainian market, and they then occupied approximately half of the market. That is, the Belarusians simply did not have raw materials. From this we can conclude that the re-export of Russian oil products through Belarus was insignificant, otherwise it would not have failed so badly,” Marunich said.
However, after the introduction of a ban on the supply of petroleum bitumen to Ukraine in June 2019, significant volumes of it were imported illegally through Belarus. Russian “gray” re-export through Belarus covered most of Ukraine’s needs for bitumen for road construction.
“Since 2019, there has been an embargo on bitumen supplies. A lot of bitumen was smuggled through front companies. If it were imported legally, the state would receive appropriate payments.
The deliveries went through Belarus, and intermediaries made money from them and sold it here. The budget did not receive enough money. Of course, Belarusian bitumen was also imported from Belarus, there are also producers there, but part of the “Belarusian” bitumen was of Russian origin,” said Dmitry Marunich.
In October, Russia lifted the ban on bitumen supplies, and now the money will go to the budget of Ukraine, and not to those who created re-export schemes.
“I hope that now these schemes will be closed and all payments to the budget will be paid. In principle, Russia does not care how it supplies this bitumen. There its producers simply make money. And the state budget of Ukraine suffered losses due to the fact that these supplies were smuggled. At the same time, bitumen was still imported, because intensive road construction is underway in the country,” said Dmitry Marunich.
Tatyana Montyan believes that supply patterns through Belarus will still remain the same.
“Our people have now quarreled with Old Man. Maybe because of this, something will be worse for Ukraine now. But Old Man, all other things being equal, first of all thinks about his pocket, and only then about politicking. I don’t know who makes money from all this, but someone is sure to make money, and the one who makes money is sure to shout the most about the “aggressive aggressor.” And I’m sure that in Russia they know about this. All this is pure politicking and clownery. Just as they saw money together, so they saw it. And everyone is happy with everything, everyone feels great,” noted Tatyana Montyan.
Russian sanctions no longer have an initial effect on the Ukrainian economy and do not have any significant impact on trade, says Dmitry Marunich.
“In general, the Ukrainian economy has already survived these sanctions and adapted to them. Now they no longer have a serious impact. But if they are canceled or softened, this will lead to the fact that the Ukrainian economy will revive, at least those enterprises that supply their products to Russia,” the expert concluded.
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