Why Ukraine shouldn't fear economic consequences of quitting CIS

Andriy Novak
21:00, 27 May 2018
Economy
652 0
Opinion

Ukraine's withdrawal from the Commonwealth of Independent States (CIS) is a step that should have been done at least four years ago, and that is if we focus on the beginning of Russian aggression against the country in 2014. In fact, the move is much more years late because the CIS as a structure was created at a transition stage between the fall of the Soviet Union and the formation of fully independent states. Therefore, the CIS is purely a transitional structure. Although independent states were formed long ago (in 1992-1993), the CIS dragged along in inertia.

In addition, from a tactical point of view, and especially from an economic standpoint, Ukraine's participation yielded neither positive nor negative results, except for the virtual presence of almost all of the former Soviet republics in this transitional structure. After all, all economic agreements were generally concluded either bilaterally or between CIS member-states within the framework of the Customs Union, of which Ukraine is not part.

So, Ukraine's latest step is, rather, political. For our country, the CIS has no economic significance. That's because the Russian Federation has for 15 years been waging the economic war against Ukraine via all types of bans and restrictions on Ukrainian goods in its market, having started in recent years a "hybrid war" involving both economic warfare and direct military action. Russia has already introduced massive unilateral restrictions in its market for Ukrainian goods.

In addition, from a tactical point of view, and especially from an economic standpoint, Ukraine's participation yielded neither positive nor negative results, except for the virtual presence of almost all of the former Soviet republics in this transitional structure

Therefore, the withdrawal from the CIS and termination of treaties has no economic importance for Ukraine - only a light political trail, that's it.

Will Ukraine be punished in any way for breaching agreements within the CIS? Of course, one needs to look closely at the CIS statute, but I don't believe any penalties are laid down for such a move.

In principle, in 2014, Ukraine recalled all its representatives from the CIS structures. Therefore, Ukraine's withdrawal from the CIS bodies today is purely a symbolic gesture – there has long been no Ukrainian representation there anyway... So what Ukraine is doing now is simply a political move, nothing more.

As for the deals concluded precisely within the CIS, it should be understood that there are interstate agreements and there are commercial ones, between business structures. Even if the business structures used to be connected with the CIS through some deals, they would simply re-enter into new bilateral agreements with their partners to keep on cooperating. At the same time, intergovernmental deals are formally severed, as Ukraine has previously terminated a trade agreement with the Russian Federation, which is much more important than agreements within the CIS.

Russia really is anything but happy about Ukraine quitting the CIS, but its attitude is dictated by politics, not the economy. That's because such a decision by Kyiv is another political step by which Ukraine "tears the umbilical cord" with supposedly "elder brother." Of course, the "elder brother" responds very very painfully and will do so in relation to any similar steps Ukraine might take in the future.

Andriy Novak is Candidate of Economic Sciences, Chairman of the Committee of Economists of Ukraine

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