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Post-Soviet states’ EU-bound drift prompts Russia to re-industrialize itself

June 20, 2014, 17:28 UTC+3 Zamyatina Tamara

MOSCOW, June 20. /ITAR-TASS/. As Ukraine and Moldova plan to sign the EU economic integration agreement in Brussels on June 27 and thus create a free trade zone, Russia is considering measures to protect its market against duty-free European goods. Experts polled by ITAR-TASS believe it is not the Russian economy that will be damaged by Ukraine’s and Moldova’s integration into the EU, but that of the EU hopefuls themselves.

Russian President Vladimir Putin warned Ukraine about what the agreement would entail: “We’ll be forced to take steps to protect our economy, if the agreement is signed and takes effect. I want to stress it that we’ll not impose some sanctions but just introduce common international practice of using the most-favored-nation regime in trade. This will be a tough challenge for Ukraine.”

The director for trade negotiations at the Ministry of Economic Development, Maxim Medvedkov, believes the problems can arise when the territory of Ukraine begins to be used by EU companies for simple value added operations or knock-down assembly and further re-export to the Customs Union countries, which will concern agricultural produce, energy cooperation, in particular nuclear power, aviation and other fields.

Before the Ukrainian crisis broke out, the country’s export to Russia had exceeded $23 billion, the amount expected to shrink considerably when Ukraine signs the agreement. From June 30 on, suppliers of Ukrainian goods to Russia will have to present documents as a proof the export items were manufactured in Ukraine.

“Use of the country of origin certificates is quite a normal and civilized practice aimed to protect customers,” a member of the presidential expert council Sergei Aleksashenko told ITAR-TASS.

As for Moldova, its economy is by more than a third reliant on wine, brandy and fruit export to Russia, while the Customs Union has a right to apply mechanisms to protect its market, if any of the CIS countries (and Moldova is one of them) creates a free trade zone with a third party.

The Russian Deputy Economic Development Minister, Alexei Likhachyov, warns that Moldova will be unable to combine CIS and EU regulatory systems and “have to make a choice.” If Moldova opts for the EU, the CIS system will turn inconvenient.

“Russia’s stance is pragmatic and is not motivated by Moldova’s political choice” but only the possible economic risks, the deputy minister believes.

Higher School of Economics professor Mikhail Berger said the Russian government was going to revise employment conditions for Moldovans and deport about 300,000 of the 700,000 Moldovan migrant workers, which will strip many building companies of cheap labor force. Construction workers from Moldova will hardly be able to find jobs in the EU, where labor market competition is high. The same fate could lie in store for 5-6 million Ukrainian citizens working in Russia, the expert told ITAR-TASS.

Vice-dean of the International Institute of Public Administration and Management, Alexander Bystryakov, believes Moldova’s and Ukraine’s agreements with the EU will not entail grave economic consequences for Russia.

“A temporary decline in market saturation is possible, but there is no strategic threat for Russia. Our producers can face this challenge,” he told ITAR-TASS forecasting “disastrous” losses for Ukraine. Kiev’s strategic mistake, he believes, is that it wants to rely on the EU and US help instead of using its own resources.

“Moldova has no economic potential to attract substantial investments from outside, but Moldavian agriculture cannot be restored without them. Besides, the Moldovan wine-making industry will not be able to develop swiftly, having to compete with Spain and Italy, not to mention France,” Bystryakov said.

Macroeconomically, Russia is second to none in terms of agricultural prospects, the expert believes: “Colossal fertile soil resources will make Russia an agricultural leader worldwide in twenty or thirty years with the help of new technologies.”

Economist Yuri Boldyrev believes the EU integration of former Soviet republics should stimulate Russia to take care of its own economic space through its reindustrialization.

“As the West is doing all it takes, from sanctions to luring Russia’s trade and economic partners into the European Union, in attempts to punish Moscow, Russia needs to become an independent, research-intensive, and re-industrialized modern economy,” Boldyrev, a former deputy chairman of the Russian Accounts Chamber, told ITAR-TASS.


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