BOFIT Viikkokatsaus / BOFIT Weekly Review 2019/17

The serious issues in Russia-Ukraine relations since the annexation of Crimea have been amplified by the latest rounds of trade restrictions. Russian economy minister Maxim Oreshkin estimates the restrictions imposed by Russia on Ukrainian goods affect nearly 30 % (4.3 billion dollars) of bilateral trade.

Russian president Vladimir Putin ordered his government last autumn to move ahead with new special economic measures on Ukraine in response to Ukrainian measures on Russian firms and individuals. In December, the government imposed new import bans on select Ukrainian goods. At the end of 2018, Ukraine extended its import bans of 2016 to the end of 2019. Russia last week widened its list of import bans and placed export bans and licencing processes on exports to Ukraine. Commodities subject to export licences include coal, coke, gasoline and diesel oil. Ukraine imported from Russia 3.5−4 billion dollars of these commodities in 2018.

Early this month, a WTO dispute settlement panel issued a first-time conclusion regarding the grounds for Russian transit bans imposed on Ukrainian goods, particularly in January 2016. Russia argued that the measures were necessary to protect “essential security interests” in an “emergency in international relations”. Against Russia’s view, the panel saw it had jurisdiction to review the matter. In the panel’s view, Russia’s basis for its bans comply with WTO rules. A focus was on deterioration of Russia-Ukraine relations to such a point that they constituted an international emergency. The panel saw evidence in a reference to armed conflict in a UN General Assembly Resolution on the Crimean situation, and third-country sanctions imposed on Russia. The panel stressed that in the absence of this international emergency the transit bans would appear to be inconsistent with WTO rules. The parties have 60 days to appeal.

In the second round of Ukraine’s presidential election, Volodymyr Zelenskyi beat the incumbent Petro Poroshenko by gaining more than 73 % of votes against Poroshenko’s just over 24 %. Voter turnout was 62 %.

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