There are many reckless decisions taken by the Ukraine’s government and lawmakers. One of them stands out among others for being really harebrained. The Verkhovna Rada (parliament) has recently adopted a legislation allowing 29 sanctions to be applied against Russia. The sanction options include blocking and freezing assets, a ban on business activity in Ukraine, barring participation in privatizations, halting the use of licenses and all transit through its territory. Special economic measures also involve a ban on financial transactions, as well as a ban on entry and movement across the country. The adoption of the legislation doesn’t mean the special economic restrictions will be applied automatically; it just creates the legal basis for applying them. The legislative act inflicts great damage on Ukraine making it slide into the past, not to the last but rather to the XIX century, to the days of landowners and farm-hands. The national industry and science are going to downgrade. The would be “agrarization” probably introduced on the assumption that peasants are easier to be ruled. But it will not alleviate the economic plight of the country. Russia has imposed food embargo on the European Union. As a result it’ll be impossible to export agricultural production to the EU member-countires. The sanctions give Moscow additional impulse to introduce innovations and new technology providing jobs for qualified personnel to come from Ukraine.
The amount of bilateral trade ($38, 2 billion as of 2013) is comparable with the bilateral trade between Russia and the European Union – $45, 6 billion. According to Ukrainian Prime Minister Arseniy Yatsenyuk, Ukraine is going to lose $7 billion as a result of curtailing the economic ties with Moscow. It’s a huge loss for Kiev. It’s important to look at the structure of Ukrainian export to Russia: it accounts for around 58% of all machine building exports ($2, 2 billion out of 3, 8 billion) while in case of Russia only 3, 8% of engineering imports falls on Ukraine. Ukraine used to export 70% of railway equipment to Russia ($1, 7 billion out of 2, 4 billion), in case of inorganic chemistry the figure is 53 percent ($0, 9 billion out of 1, 7 billion). The list can go on. These are the examples of high value added commodities produced with the use of up-to-date technology. If there is no internal or external demand, the enterprises will close increasing numbers of Ukraine’s unemployed. No production means the closure of design offices and research laboratories, high professionals and scholars will lose jobs. There is no way to turn the clock back.
The Ukraine’s military-industrial complex is rich since the days of the Soviet Union. The same goes for Russian military industry. Moscow can sever ties with Ukraine by introducing some corrections into the defence programs. The same can hardly be applied to Ukraine. There is no ground to believe that Kiev could use dumping prices to export military hardware to other countries, including hot spots. No way could Ukrainian enterprises find the needed elements to substitute for the ones that used to come from Russia. Sticking to NATO standards will ultimately drive the military industry to the wall.
Valery Geets, a Member of the National Academy of Sciences of Ukraine, D. Sc. in Economics, professor, Director of Economics and Forecast Institute of the National Academy of Sciences of Ukraine, says “In recent years Russia has been successful in import substitution, including military production, especially talking about the elements imported from the republics of former Soviet Union.” Russia and Ukraine could cooperate to mutual advantage, but the new Kiev regime is reluctant to develop bilateral ties – now it will have to reap what it has sown. The Ukrainian authorities like to mention the consequences of terminating the cooperation of Russia with the Motor-Sich factory in Zaporozhye – one of the largest engine manufacturers for airplanes and helicopters in the world (about 27 thousand people employed workers). In the days of the Soviet Union it enjoyed a monopoly on helicopter engines production. It has a five year $1, 2 billion contract with Russian Helicopters to supply 1, 3 thousand TV3-117 turboshaft-series engines till 2016 for Mi-8, Mi-17 and Mi-24 helicopters. At present Russia is fulfilling a program of import substitution, consisting of launching the production of helicopter engines at the Klimov open joint-stock company in Shuvalovo near St. Petersburg. In 2015 the Klimov is to reach its full production capacity with 600 helicopter engines a year to satisfy the country-wide demand. In emergency the production capacity could be increased in a short period of time. It will manufacture up-to-date engines TV7-117 for Mi design helicopters as well as VK-2500 engines for Ka-50 (Black Shark) and Ka-52 (Alligator) attack rotary wing aircraft.
Motor Sich President Vyacheslav Bohuslayev, who has headed the company for many years, is doing his best to avoid crisis saying it can transfer assembly lines to Russia or another country. According to him, Russia has already acquired French helicopter engines to substitute for the Ukrainian ones. There are great doubts the Ukrainian authorities will let the enterprise relocate to Russia, the government would prefer to raze it to the ground as it is doing with the industry of Donbass. Petersburg Motor Company will certainly employ many professionals from Zaporozhye.
Antonov State Company, formerly the Antonov Aeronautical Scientific-Technical Complex (Antonov ASTC), is a leading Ukrainian aircraft manufacturing and services company. Antonov's particular expertise is in the fields of very large aeroplanes and aeroplanes using unprepared runways. It employs 13, 5 thousand people. The workers demand to put dismissed Director Dmitry Kiva back in office again. The government dismissed him as he was maintaining active contacts with Russian producers. He understands the company is doomed without cooperation with Russia. Thanks to workers support he is back again. The decision of Antonov Design Bureau’s works council was unanimous and fully supported in a resolution by the members of the general meeting of the firm’s employees. “Step back from your decision and re-employ Mr Kiva in his role as Director of Antonov Design Bureau,” reads the declaration addressed to Kiev’s rulers by the staff. The recent workers meeting took place on August 4. The government’s incompetence resulted in falling production. At the same time Aviaster aircraft producer in Ulyanovsk is expanding its industrial capacity. The enterprise is capable of producing An-124-100 Ruslan legendary transport aircraft. The top management says Aviaster is ready to give jobs to 3 thousand Antonov workers, no clerks and managers, but qualified workers and engineers. The company is implementing its own house building program. It plans to provide its personnel with 5 thousand apartments till 2020.
The Ukraine’s space industry will, suffer great losses. Yuzhmash rocket plant in Dnepropetrovsk has been a leading manufacturer since the Soviet Union days. Now it is to go through rough times. Its employees who want to stay in the space research business will have join the Russian project to build the new Angara rocket family space-launch vehicles being developed by the Moscow-based Khrunichev State Research and production center. They could also find jobs joining the construction of the Vostochny Cosmodrome («Eastern Spaceport»), a planned Russian spaceport to be located in the Amur region in the Russian Far East and outer Manchuria. Construction began in January 2011 and is expected to be completed in 2018. As a result of severing ties in airspace industry Ukraine is estimated to lose 10-20 billion dollars, the figure greatly exceeding the Yatsenyuk’s assessment of the whole damage the country is to suffer by ending economic cooperation with Russia.
According to Dmitry Rogozin, Deputy Prime Minister of Russia in charge of defense industry, said gas turbines engines production for Russian Navy frigates will be transferred from Ukrainian Nikolaev to Research-and-production Association « Saturn « in Russian Rybinsk. This work should be accomplished as soon as possible. All enterprises manufacturing engines for Russia's national needs should be located on Russian territory, the Deputy Prime Minister said. «The deadline for replacing these imports announced by the president must be met. It is two or three years as the most», he said. Rogozin also called on the country's engine producers to «think how they can make up for lost time and secure a powerful technological breakthrough». It would be logical to expect that unemployed qualified personnel from Niklolaev would move to Rybinsk in search of work.
Ukraine’s energy sector is facing hard times as energy transit through the Ukraine’s territory is threatened and the programs to update nuclear units are suspended. The estimated damage is 6 billion dollars. According to Bogdan Sokolovsky, former Ukrainian president's representative on energy issues, Ukraine’s nuclear energy is a vulnerable branch of economy. He said that in case Moscow interrupts nuclear fuel supplies, the Ukraine’s nuclear plants will stop generating energy in a year leaving the country without energy to consume. It would mean economic collapse for Ukraine. The Kharkov-based Turbatom qualified employees will become unemployed with going to work in Russia as the only option left.
All told, with the new law in effect Ukrainian enterprises have no way but to look for new markets with the estimated turnover of 15 billion dollars a year. It requires at least a few years. Taking into account the incompetence of the incumbent Ukrainain government, it’s a real tall order.
The so called punitive measures taken by Ukraine in reality open new prospects for the Russian economy. The brain drain entailing exile of qualified Ukrainian workforce to Russia is inevitable. Ukraine is the only one to suffer damage. The Kiev rulers don’t value such things as hard labor, professional aptitude, it they need no gifted people. It needs obedient trigger happy shooters and dishonest spin doctors.