The results of the blockade of Donbass. The Ukrainian economy strengthens ties with Russia

Ukraine's accession to the European Union for the foreseeable future is hardly possible, and it is not capable of providing it with the necessary assistance.
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The year 2017 began for Ukraine with the announcement of the blockade of Donbass. The initiative was shown by opposition publics led by Semen Semenchenko - the former commander of the battalion "Donbass", and now a deputy of the Verkhovna Rada. The Ukrainian government initially took this extremely negatively, as its head Vladimir Groisman said at the time: "It is a question of that, according to preliminary calculations, 75,000 [people] can lose their jobs. We will lose $ 3.5 billion - it's foreign exchange earnings, which will negatively affect the hryvnia rate. "

But the pressure of the public was so strong that on March 15 the Cabinet of Ministers decided to impose a blockade on the economic communication with the uncontrolled South-East of Ukraine. What are the results of the decision? The situation should be considered more widely - in the light of the Russian-Ukrainian conflict.

Starting in 2014, the position of the Ukrainian economy is directly affected by two new factors - the transition of the Crimea to Russia and the war in the Donbass and its split. On the side of the NDP-LNR were the main settlements - Donetsk agglomeration with Donetsk, Makeyevka, Yenakiyevo and Gorlovka, that is, with three of the five largest cities in the Donetsk region, as well as Lugansk and the agglomeration Alchevsk-Stakhanov with the adjacent cities. However, under the control of Ukraine remained Mariupol (the main metallurgical center of the country), Kramatorsk, Slavyansk and Konstantinovka in the Donetsk region, and Lisichansk, Rubezhnoye, Severodonetsk (chemical and oil refining cluster) in Lugansk. Also, the main power plants of the region are on the Ukrainian side.

The situation is characterized by a break in the "live" long-established communications. The coal, metallurgical, coke-chemical industries of Donbass, as well as electric power and railways operated in a single complex. Now they are separated.

Moreover, it is impossible to invest in the modernization of the Mariupol metallurgical plants - Azovstal and MMK, as they are actually on the front line with an uncertain future. The same goes for Uglegorskaya and Luganskaya TPPs.

Thus, the Donbass, being an old industrial area with a surplus population and ramshackle infrastructure, and therefore in a crisis all the time after the collapse of the USSR, received even shock blows. The blockade was only the last of them. The direct damage from it amounted, according to the National Bank of Ukraine, $ 1.8 billion in 2017 and $ 500 million in 2018. Prime Minister Vladimir Groisman, summarizing the year, said on December 27 on the reduction of Ukraine's GDP by 1% as a result of blocking uncontrolled territories .

However, what are the general results of the year for the economy of Ukraine? And they are quite curious, if we consider them through the prism of Russian-Ukrainian relations. After all, Kiev has relied on minimizing economic cooperation between the two countries. At the same time, one must take into account that since 2015, there has been a ban on direct flights between Russia and Ukraine, the number of trains has decreased, calls for a general ban on railway traffic from Kiev regularly sound.

In 2016, Russia's trade with Ukraine decreased by 31.64% compared to 2015, and during 2017 there was a sharp increase: in the I quarter - by 38.17%, in the II quarter - by 28.59%, in III quarter - by 14.72%. These are the paradoxical results.

In some ways, Ukraine's path repeats the path of the Baltic states, which also sharply cut off economic ties with Russia in the early 1990s, reorienting to the European Union and other Western countries. But there are important differences. First, de-industrialization of the Baltic states was rather easy. At the factories, mainly representatives of Russian-speaking people worked, and the cuts did not lead to significant social conflicts. Secondly, due to the small population, these countries were able to adopt a model of intermediary economy, serving transport flows between Russia and the West. Thirdly, the European Union provided them with significant financial and other assistance from the very first steps and they quickly became its members.

There are no such factors in Ukraine. Deindustrialization leads to serious labor conflicts, as, for example, at the end of December at the shipyard in Nikolayev, in which Prime Minister Groisman was forced to intervene. Most Ukrainian plants, especially in the military-industrial complex, were intended to work in close cooperation with enterprises in Russia, and the breakdown of relations leads to the fact that, for example, the largest plant in Ukraine, Yuzhmash, is always in a fever.

From the intermediary model, which allowed somehow to exist in the 90s - early 2000s, receiving Russian gas at very discounted prices, Ukraine also refused. The role of the transitory does not suit her, nor does Russia want to continue the logistical dependence on Ukraine.

As for the European Union, Ukraine will not face membership in the foreseeable future, and due to its size, it is not capable of providing it with the necessary assistance.

In addition, Ukraine is a de facto belligerent state. The growth of defense spending is taking place at a faster pace, and it is already among the top five states on the planet by the percentage of GDP directed to the needs of the military. This sharply narrows the "horizon" of budgetary maneuvers. Therefore, in the economy there are absolutely natural restoration processes - namely, the strengthening of economic ties with Russia, which drastically "sagged" in 2014-2016. Strengthening of economic ties with Russia takes place within the framework of economic recovery in general: exports increased by 20% over the last ten months and wages increased approximately the same.

Whatever the politicians say, human and other connections can not be broken off overnight, as they did not break off with the same Baltic region, which became an important center of tourist attraction for Russians. Not for nothing in 2017, in just nine months, Russia was visited by more Ukrainian citizens (5.7 million) than for the entire 2016 - 4.1 million. Transfers from migrant workers, including from Russia, continue to be an important means of replenishing the currency and maintaining the exchange rate of the hryvnia.

But it should be understood that Russian-Ukrainian economic relations stabilize at a level much lower than the previous one. If in 2013 Ukraine occupied 4.7% of Russia's foreign trade turnover, now only 2.2%.

We can draw the following conclusions. Despite political difficulties and appeals, a very significant range of economic ties will remain between Ukraine and Russia, which will be based on both historical continuity and flow from geography and humanitarian ties.

This volume, having reached its recovery maximum at the turn of 2017-2018, will remain unchanged in the coming years, unless there are any extraordinary political incidents.

The situation in the Donbas can affect more the Ukrainian GDP than the foreign trade turnover between the two countries. The region, in fact, "turns off" from the big economy due to its uncertain status, and the closure of most enterprises on its territory. Accordingly, the continuation of the blockade has little impact on Russia, or even Ukraine.