BRICS and the Customs Union: Ukraine has no other way out

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July 18, 2016 – 

Yurasumy, PolitRussia – 

Translated by J. Arnoldski

For almost three years already, Ukraine has bragged about its “Euroassociation.” For two years, the free trade zone with Europe so coveted by the Kiev regime has been in operation for the sake of which so many lives have been put on the line and so many age-old ties have been broken.

Kiev has victoriously stated that the share of Ukrainian exports to EU countries now amounts to almost 50% or, more precisely, 46.6%. What does this prove? Let’s see what this proves…And let’s see who, even after two years of reckless policies, Ukraine really needs a free trade zone with: the EU, Canada, the countries of the Customs Union, or BRICS?

What has the free trade zone with the EU given Ukraine? The idea of a “great agricultural power”

Don’t even laugh. This is precisely the succinct answer that can be given to the question posed. The free trade zone between Ukraine and the EU first yielded the concept of a “great agricultural power” and secondly a temporary weakening of Russia’s positions in this region so key for it.

In fact, the applauding statements of the Kiev government are completely out of place. First of all, according to data for June, the total export of Ukrainian goods was once again below 3 billion dollars and, secondly, the 46.6% of exports has a simple and clear explanation arising from Ukraine’s enslavement by the free trade zone to the EU. If we follow what exactly Ukraine is exporting to EU countries, then we see that there has been a sharp growth in the share of agricultural products or their primary processing (sunflower oil and the waste from this processing). This is along with other traditional export goods to the EU, such as iron ore, ferrous metals, and timber.

As for the supply of such products from Ukraine to the EU, there exist quite strict quotas (the so-called “few percent goods” to which the free trade regime does not apply) and they are chosen in the first months of a calendar year. We can see how dramatically the share of EU countries of Ukrainian exports has fallen from month to month:

January – 46.6%

January-February – 44.4%

January-March – 41.4%

January-April – 39.9%

No one in Kiev is even happy that over the first 6 months only 7.5% more goods were exported to the EU, since this is still almost a quarter less than in 2013 when neither an extremely low national currency rate nor the so-called free trade zone helped Ukraine.

Based on the results of the year, and bearing in mind that since August the main shafts of grain have already gone from Ukraine (but not to the EU), we see that this number is quickly going down and stopping at the already familiar level of recent years at 33-35%, something which has been observed since at least 2003. One can very well see the trends on the chart of Ukraine’s exports over the past 15-17 years.

As we can see, there is no “global shift” in Ukrainian exports towards Europe in progress. All that the new rulers of Ukraine have “achieved” is the severing of traditional ties with Russia, who basically bought Ukrainian engineering and food products ready for consumption and with whom their incremental gross value was higher than agricultural raw materials.

This has largely driven the country’s economy into economic depression, the exit out of which is not visible.

It’s obvious that blind people are not sitting in Kiev. In fact, they quite well understand things, but they have merely “rushed to look” for other markets, free trade on which is supposed to help the country rectify the distortions associated with the trade war between Ukraine and Russia.

One such country sought after was Canada. The pathos that is the signing of the free trade zone with this North American country the other day made me genuinely smile, and with reason. Starting today, one doesn’t have to wait the promised 3-7 years (by the time of which the Ukrainian signatories of this will already be overthrown) before humorously speaking about how Kiev signed yet another “betrayal” of its national economic interests. In the end, besides the European yoke, Ukraine will be tied around the neck by yet another North American country…

The free trade zone with Canada as another PR campaign

It is noteworthy that, parallel with this event, yet another development has taken place which is directly connected and which shows the true essence of this agreement with Canada. Ukraine received advance payment for the first two An-178 aircraft for Azerbaijan. One can be happy for Ukrainian machine building, but still ask: what does Canada have to do with anything here?

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I’ll answer. It was immediately reported that the engines and avionics for these new aircraft will be delivered from Canada. Who will they replace? Ukrainian producers and machine builders (such as Motor Sich).

What is even more interesting to learn is what is understood by “final assembly” in Azerbaijan. Does this not smack of another “betrayal” linked to Russia?

Interestingly enough, according to the rules of the new free trade zone between Ottawa and Kiev, already after a few years duties on these goods will be zero, unlike products of Ukrainian agriculture, which fall into the 1-2% of quota products (who would doubt such?) This is no accident since Ukrainian grain, butter, and cheese is needed even less by Canada than Europe.

Maybe some believe that after a few years electronic giants will appear in Ukraine and will squeeze out Cisco from the country? These guys should go to Kashchenko Hospital (if you’re not in the loop, this is the First Moscow Psychiatric Ward).

The prospects are clear. It is precisely for this reason that Canadian Prime Minister Justin Trudeau smiled and kept offering complements. He has signed a document that is really needed and important for his country. But just how important is Canada as a partner for Ukraine? In 2015, Ukrainian exports to Canada amounted to as much as 30 million dollars, which makes up less than .1% of the already twice-castrated (during Poroshenko’s reign) level of Ukrainian good exports. After the first months of 2016, they say, this won’t be the case in this year.

Of course, this is a mega “victory” which will soon enough become a “mega betrayal” after the collapse of production at Ukrainian factories whose production will be pushed out by the Canadians. Meanwhile, the Ukrainian government is not even looking in other directions for markets as they proudly wave their pro-European hair locks.

But these markets are not only important Ukraine – they are becoming absolutely vital…

What do we have with Egypt?

Here the question arises: why doesn’t Ukraine conclude a free trade zone agreement with Egypt? After all, it is obvious that this African country will buy not only our grain (our main product to date), but also with pleasure buy our machines and other industrial equipment. But the proud Eurointegrators can only stutter and pretend that they are not interested.

In the case of Egypt, they wouldn’t even be selling out their national interests for “small recompense.” Egypt won’t make you drink champagne or hide your capital from your own people in order to make you sign your own country into bondage. In this case, one would really have to try to not defend the interests of the Homeland, but the pro-Europeans of Kiev are really capable of this.

Meanwhile, Egypt has turned into Ukraine’s number two partner (after the “aggressor” country). By the end of 2015, Egypt was fourth. After the first 6 months of 2016, Cairo came out ahead of China and Turkey in terms of Ukrainian commodity exports.

Since its revolutionary storm funded by Saudi Arabian money, the country is quickly establishing military-technical cooperation with Russia and is not averse to doing the same thing with Kiev. But the West won’t allow the proud Ukrainians to stand on any kind of par with Russia. Ever.

BRICS, CIS, and the Customs Union – there are no other options

The idea of a “great agricultural power” imposed by the West upon Ukraine is deeply flawed and is simply a dead end for the country’s economy. It is obvious that Europe will never really open its markets to Ukrainian agricultural products, especially not for prepared food products.

There will be no sharp growth in exports to EU countries (which is precisely what is important for Ukraine) for this reason. As is already becoming clear, the relative growth seen today is not really growth, but rather the statistical result of the trade war between Russia and Ukraine which will end at some point as soon as the government in Kiev is changed.

And then Ukraine will have no other exit. It already doesn’t have one, just like in 2013. Let’s look at the major trading partners from at least 2015. As for the CIS countries, it is clear that awaiting any changes in political complications is senseless. But with the Asian countries, and first of all China and India, there is no problem to be had.

In general, if the turnover of goods for 2015 with the countries of the Customs Union and BRICS (in which Russia plays the main or one of the main roles) is added up, then we would already arrive at the same figure of 33-35% which is the case with trade with the EU.

I will repeat that the current direction of trade does not actually have any preferences while Kiev is pursuing simply suicidal policies in relation to some of its major partners. It is none other than trading in the direction of these other countries which is a priority from the point of view of exports. This was theoretically postulated in 2013 and shown in practice in 2014 to the present day.

Maybe this can be resisted for a year, two, or even five years, but sooner or later economics will simply prevail, because an artificial construction must be constantly supported, which means wasting resources. And there is no more artificial design more difficult to bolster, especially with all of the growing opposition from Russia. Sooner or later, this system will collapse and some kind of new, but more natural one, will take its place. It is obvious that this will come in the form of restoring relations with the countries of the Customs Union and BRICS as well with the death of the forcibly imposed, suicidal economic relations of “Eurointegration.”

The alternative is a fragmentation of the country’s economy along with the country as a whole. In vain the Eurointegrators and Euro-optimists hope that Ukraine, like Bulgaria and other countries, will be caught in the grip of the EU and survive to eke out a miserable and wretched, but holistic existence in this paradigm despite much worse economic conditions. But Ukraine is too motley a country and too full of inherent contradictions to withstand this.

No one has been able to undo the Leninist rule: “Politics is the concentrated expression of economics.” Economics can be opposed for a certain period of time by virtue of geopolitical dominance, but then the collapse of an altogether artificial system will only be all the more painful. All the new burdensome agreements, such as the free trade zone recently agreed upon with Canada, are only hastening the arrival of this moment. 

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