Politics Affects Importing and Exporting
Russia and Ukraine are two republics of the former Soviet Union. After the collapse of the Soviet Union, they became independent states that had close economic and political relations. These two counties are connected not only by their tight economic and political relations; they have very similar cultures, religions, some traditions and customs, ways of life and even languages. In fact, they have the same history, because they are all the part of the Slavic people, who were developing as one nation during many centuries.
Till present days, Ukraine and Russia were dependent economic partners. Ukraine produces heavy industry, which was imported in Russia; on the other hand, Russia was the main importer of gas in Ukraine and Europe. Besides the gas and goods of heavy industry, these countries were the providers of various agricultural products. Thus, it can be said that the economy of Ukraine substantially depended on the cooperation with its neighbor Russia (Coyne & Mathers, 2011). These relations existed during the last twenty two years, and, due to the common history and the present economic relations, these countries coexisted in peace and relative harmony. However, the situation has changed this spring, when the Russian president Vladimir Putin occupied the territory of the Ukrainian peninsula Crimea. This action was caused by the recent revolution that happened in Ukraine this winter, and, as a result, the president of Ukraine Victor Yanukovych had to leave the territory of Ukraine and search for the shelter with the help of the president Putin.
Yanukovych stated that he was the only legitimate president of Ukraine and terrorists have captured the power in the country in the illegal way. He asked for the president Putin’s help in order to regulate this issue. After the elective resolution, the Russian government gave the president Putin the authority to bring the troops to the territory of the Crimea in order to protect people from the threat of the new Ukrainian government. Soon, there was held a referendum, which separated the Crimea from Ukraine and made it the territory of the Russian Federation. Few weeks later, the same scenario happened at the Ukrainian eastern regions, namely Donetsk and Luhansk. Today, the separatists have announced their independence and want to become the part of the Russian Federation.
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The recent events in Ukraine have spoiled the relations between fraternal peoples, and it has negative influence on the political and economic partnerships. The situation reaches the boiling point, and if the countries are not able to find a compromise, it will lead to the serious damage of the economies of both nations.
Import and Export
The escalation of the conflict between Russia and Ukraine may have negative consequences not only for these two countries but also for the half of Europe. In fact, Ukraine lies between Russia and the Western Europe, and gas tubes that bring gas to the European countries lie on the territory of Ukraine. Ukraine plays the mediator role between the West and the East. The recent events led to the increasing prices for gas and oil not only for Ukraine, but also for Europe. According to this fact, it can be said that the political situation between Russia and Ukraine has become the reason of the rapid increasing of prices for oil and gas. First of all, it is connected with sanctions that were used towards Russia. On the other hand, Russia, which loses its foreign investors, should make the economy of the country stable to the Western sanctions. In terms of this fact, it can be said that the rapid increasing of prices for gas and oil is the president Putin’s answer for the Western sanctions.
Moreover, the general Ukrainian debt is about 3 billion dollars. This debt has always existed, but recently, the Russian government announced that if Ukraine does not pay all the money for gas till summer, then Russia will stop the supply of gas to Ukraine. For Ukraine, it means total catastrophe because Russia has always been the main importer of gas. Today, the Ukrainian government seeks for other possible sources of gas, including its own supplies and gas from Europe (Vinik, 2014). Unfortunately, these supplies are too limited, and it will be not enough to cover the gas consumption of Ukraine. On the other hand, Ukraine experiences rough time, and it makes impossible to pay the debt to Russia. Russia knows that Ukraine does not have enough money to pay the gas debt, and, in this way, the Russian government tries to influence the arising conflict by the means of the blackmail.
The supplies of the Russian goods to Ukraine as well as the supplies of the Ukrainian goods to Russia have been shorted. Moreover, many Ukrainian citizens boycott Russian products and do not buy them because they believe that in this way, they are able to bring harm to the Russian economy. Some of the Ukrainian people also state that when buying Russian goods, one finances the Russian army which kills Ukrainian soldiers. In regard to this fact, people say that it is a crime to buy the products of the country demonstrates aggression towards these people. Thus, the Ukrainian economy loses one of the biggest importers of agricultural products to Ukraine, and the reason is the Russian policy towards the Ukrainian government and the impossibility to find the compromise in this situation.
Consequences of the Political Climate
The conflict that rose between Russia and Ukraine has influenced not only the import and export but also the economy of both nations. Today, Ukraine, as well as Russia, experiences difficult times, and the main reason is the impossibility to establish good economic relations, which has always been the guarantee of reliable support during crises or financial problems. During the last three months, the prices for goods have increased dramatically; almost every sphere faces this problem, and the average increasing of prices is about 30-40 percent (Vinik, 2014). However, the prices are left at the same level, besides the fact that they were much lower than in Europe. According to this fact, the majority of Ukrainian population is on the fringe of poverty. Many people are left without work and, as a result, they have to find any job to survive. About 17 percent of Ukrainian population was financially dependent on the export-import business with Russia. In other words, the escalation of the conflict led to the decreasing of import/export goods to Russia and vice versa. Thus, those people whose business was oriented primarily on the importing goods from Russia are left without jobs.
The famous Ukrainian magnate Petro Poroshenko is one of the biggest manufactures of chocolate products in Ukraine. He supplies products not only over all regions in Ukraine but also abroad, and a considerable share of the goods is imported to Russia. Moreover, he has a few chocolate factories on the territory of Russia, which successfully operated till the recent events. When the conflict reached the boiling point, the Russian government announced that Poroshenko’s chocolate factory, which is situated on the territory of Russia, violates the law and thus, it should be closed down and nobody of its employees as well as the owner do not have a permission to enter the factory. However, it is only one of the most striking examples, and there are much more small companies that have the similar businesses working in Russia, and they faced the same problems. Thus, it can be said that those companies that cooperated with Russian partners had practically lost their business and investments. As a result, it has a negative consequence for the economy of Ukraine and Russia because these countries were one of the most reliable partners during the last twenty years.
Ways the Political Climate Affects Import and Export Businesses
The import and export business in Ukraine and Russia has been affected in the following way, when one takes into consideration the political relations between these countries. First of all, it affected the free-trade agreement. The friendly relations and durable cooperation led to the establishing of free-trade relations for these countries. The countries established free-trade agreements that removed the high tariff barriers on the goods and services. Moreover, the Ukrainian businessmen as well as the Russian ones had the simplified strategy of setting up a new business in a partner-country. The taxation, as well as the custom duty, was also lower than if the country cooperates with the European partners (D'Anieri, 1999). In terms of this fact, Ukraine and Russia had positive conditions that stimulated the development of business in both countries, because one does not experience difficulties as it often happens when one deals with a foreign investment. However, the last events changed the situation to worse. Today, businessmen had little desire to develop their businesses in the partner-country, and the reasons are the following:
- ihe increase in tax rate and the custom duty;
- tense political situation;
- non-friendly environment that endangers opening business;
- the terms that make the import-export processes almost impossible.
Another reason is the de facto trade embargo. Ukraine, as well as Russia, imports only 15 percent of all the goods that have been usually imported before. In fact, none of the governments has adopted the law that forbids the importing of the Russian or Ukrainian products, but, in fact, if one takes a look at shelves in supermarkets, he or she will find out that the number of the Russian/Ukrainian products have decreased almost in three times. This tendency is also supported by the citizens, who refuse to buy Russian goods because they do not want to finance the Russian army, which occupies their motherland (Velychenko, 2007). Thus, the goods are not bought, and the suppliers have no other choice as not to purchase these goods from the manufacturers because they lose profit. In regard to this fact, it can be said that the mood of the population has also a considerable impact on the process of import; people simply do not buy the imported goods.
The most terrible thing for the Ukrainian people is that their national currency becomes less stable. The Ukrainian national currency was firm during the last five years; it increases and falls for few percents as well as any other currency in the world, and it was primarily a seasonal phenomenon. However, this spring, the Ukrainian currency reached almost the record mark; it increased for 70 percent less than during few weeks. Fortunately, today it has slowed down, but still it has grown for 40 percent. The unstable economy that was impacted by the loss of economic ties with Russia experienced rough times, and the infirm currency is the first evidence of it (Vinik, 2014). The infirm condition of the national currency was caused by the trade agreements that are not obeyed anymore.
The situation in Ukraine-Russian relations becomes more and more dramatic every day. Some analysts believe that if the escalation of the conflict will not be reduced, it may even lead to a war. Nevertheless, even in the present situation, the relations between two reliable partners are spoiled. According to this fact import and export do not bring the profit as it was in the past. The political conflict created the environment, in which the developing and prospering of a business is almost impossible. The custom service works in hard conditions; they pay a special attention to the trucks that come through the Ukrainian-Russian borders and especially to those that carry products from Russia. The custom officers check all the cargo carefully, and people have to wait two, tree or even more days till they will receive the permission to enter the country, though earlier this procedure took few hours, in the particular cases, it could last more.
In fact, it is rather hard to believe that such a situation occurred between the two fraternal peoples that had good relations throughout many years. Today, one can see the consequences, to which the two countries are rapidly coming because of the threat of a war. Claiming that his only desire is to defend the Russian speaking population in Ukraine and make their lives better, the president of the Russian Federation, with his aggressive actions towards Ukraine, created the economic situation in the neighboring country that is difficult to cope both for those people, who are trying to defend, and those ones, from whom the President Putin is going to defend them. Moreover, the threat of a harsh economic crisis is even not as serious as the threat of the full-scale war, which can lead to the collapse of both countries economical positions and to a substantial amount of deaths. Besides, the crisis that takes place in Ukraine has already taken its charge on the Russian Federation’s economy and fiscal markets. Russia spent more than $60 billion within the first 3 months of this year. The reserve market is now down by 20 percent since the beginning of 2014. In addition, the national currency of Russia has dropped by 8 percent adjacent to the dollar.
To sum up, it can be said that the Ukrainian and Russian economies depend much on the mutual import and export. The political instability has led to such a phenomenon when import and export become problematic, and some of the goods are not delivered at all. No doubts that the limitation on the import and export was one of the most crucial challenges for the Ukrainian economy. According to this fact, one may outline such ways that affect the political climate between the two nations and had the impact on the export and import. The first one is a strict control of the Russian trucks on the borders; the second one is the unpopularity of the Russian goods in Ukraine because of the Ukrainian-Russian conflict; the third one is the escalation of the conflict that leads to the unwillingness among the manufacturers to deliver products to Ukraine and vice versa. Thus, one may say that the political misunderstanding between the two friendly countries is the reason of worsening of their economies that has led to the decreasing of the import and export. As one can see, any interferences and disagreements between any two countries can result into substantial changes in the economy, which are not favorable for both sides.