On May 11, the headline of an article posted by the Russian state-owned media outlet RIA Novosti claimed an expert had said “Russia has gained control over the Ukrainian economy.”
The expert in question is Dmitry Marunich of the Kyiv-based Foundation for Energy Strategies, and RIA was quoting from comments he made in an interview with the Ukrainian outlet NewsOne:
“It is obvious that the Russian authorities have received a powerful lever of influence on the situation with deliveries and, accordingly, on the oil products market in Ukraine, with a footprint on the general state of the Ukrainian economy.”
Mirroring a line from the NewsOne article preceding the quote RIA Novosti’s headline suggests that Russia has gained control over Ukraine’s economy. Both are inaccurate – the expert said that it had only gained powerful influence over one sector of the Ukrainian economy, albeit it is an important one. Thus, in order to fully understand why the RIA Novosti headline is deceptive, one must look at the NewsOne story it quotes, as well as the context of the interview.
In April, Russian Prime Minister Dmitry Medvedev announced that he had approved a law banning all Russian oil, coal, and oil products exports to Ukraine without special permission. The ban is scheduled to go into effect on June 1. In the NewsOne interview, Marunich expressed doubt that exports will be cut off.
“I wouldn’t predict a cessation of imports of petroleum products from the Russian Federation,” he told NewsOne. “As far as I know, a large Russian company, Rosneft, has already received permission for supplies inside Ukraine. Therefore, in all probability, there will be no cessation of supplies from June 1.”
The quote used by RIA Novosti about Russia gaining leverage over Ukraine’s economy came elsewhere in Marunich’s NewsOne interview.
So what is the prognosis for Ukraine should Russia decide to cut off oil and coal exports to Ukraine? Back in April, Ukraine Business News reported that Ukraine’s Oil and Gas Association announced that it could meet the country’s oil and gas needs from other countries. UBN quoted representatives of the association as saying that Ukraine’s supply was more diversified than some European nations.
“Starting in 2017, fuel comes to Ukraine from more than 10 countries using all sorts of logistics – maritime, rail, road and pipeline, which allows organizing any deliveries in a short time,” the representatives stated, although they did allow for slightly higher prices at gas pumps.
Coal is another matter. Ukraine produces coal, but part of its main coal-mining territory is under the control of Russia’s proxies in the Donbas. In 2017, protests organized by Ukrainian war veterans compelled the government to stop buying coal from these territories. However, there has been suspicions that Ukraine continued to buy the coal using Belarus as an intermediary. Ukraine also sought to import coal from the United States in 2018.
Russia’s influence over other sectors of Ukraine’s economy has dropped since 2014. On May 12, Business News Europe reported that Poland had surpassed Russia as Ukraine’s main trading partner. Additionally, BNE, citing the State Statics Service of Ukraine, showed trade with Russia stood at 7.3% of the total in February 2018, dropping to 6.0% by February 2019. Earlier this year, BNE reported that restrictive quotas on certain exports remain a barrier still holding back Ukraine’s trade with the EU. It stands to reason that without these restrictions, Ukraine-EU trade, which has been larger than Ukraine’s trade with Russia for some time, would likely grow even more.
It is unclear whether Russia’s energy embargo on Ukraine will be as powerful a lever as Dmitry Marunich predicts after and if it goes into effect on June 1. What is clear, however, is that RIA Novosti’s headline proclaiming Russia’s “control” over Ukraine’s economy is misleading.