Trade and Economic Cooperation between the Russian Federation and Ukraine
Ukraine is one of the priority trade and economic partners for Russia, ranking sixth in 2009 after the Netherlands, Germany, China, Italy and Belarus. In 2009 Ukraine accounted for 4.9% ($22.9 billion) of Russia's trade turnover. In spite of the adverse impact of the world financial and economic crisis trade with Ukraine almost doubled in January-February of 2010 compared with the same period of last year to $4.39 billion (196.1% of January-February 2009).
Russian exports to Ukraine in 2009 were dominated by minerals (65%). The share of chemicals was 12%, machines, equipment and transport means 11% and of metals and metal goods 6%.
Imports from Ukraine are dominated by machines, equipment and transport means (34%), metals and metal goods (22%), foodstuffs and agricultural raw materials (16%) and chemicals (10%).
Stability of Russian supplies of energy to the Ukrainian economy is an important factor in ensuring uninterrupted work and development of Ukrainian industrial and agricultural enterprises for many of which Russia is the main market. Alumina, ferrochrome, large-diameter pipes, and machines from Ukraine play an important part in the Russian economy.
Mutual investments between the two countries are growing. Ukraine, owing to its considerable economic potential, is one of the main investment destinations of Russian business within the CIS.
As of January 1, 2010 Russian investments in Ukraine's economy amounted to $2,674.6 million (7% of the total volume of foreign direct investments). Russia is in second place after Germany on that count. Russian companies prefer to invest in basic sectors of the Ukrainian economy, such as the fuel and energy sector, chemistry, metallurgy, machine-building and metal working as well as the banking and financial sector. Russian investments in construction, hotel and restaurant business and wholesale trade increased markedly of late. The main Russian investors are big companies, such as Gazprom, RusAl, LUKOIL, Tatneft, TNK-BP, SUAL-Holding, Vympelcom, MTS, AFK-Sistema, Wimm Bill Dunn and others.
Direct Ukrainian investments in Russia stood at $165.5 million as of January 1, 2010. The bulk of the investments is in the manufacturing industry (44% of the total volume) and finances (30%) as well as in the pulp and paper industry, ferrous metallurgy, machine-building and metal-working and the food industry. The main Ukrainian investors are the Privat Group (metallurgy and the chemical industry), Energo Group (coal mining), Ukrprominvest (78% stake in the Lipetsk Confectionary Factory), Kiev-Konfi (100% ownership of the Kursk Confectionary Group). In 2009 investments also increased in the processing industry, notably the production of foodstuffs, drinks and tobacco products.
At the same time there are some problems connected with the activities of Russian investors in Ukraine: the situation around the Kremenchug Oil Refinery, around the privatization of the Luganskteplovoz company, suspension of the Krivoy Rog Ore-Dressing Plant construction in which Metalloinvest takes part, to name only some.
Russian-Ukrainian cooperation in the fuel and energy sphere
During Russian President Medvedev's working visit to Ukraine on April 21, 2010 an addition to the contract for the supply of natural gas between Gazprom and Naftogaz Ukrainy was signed in Kharkov. The document confirms that Naftogaz Ukrainy will enjoy a discount on gas price equal to the decrease of the export duty. The decrease is expected to be 30% of the price of gas but not more than $100 per 1000 cubic metres of gas and will cover supply of 30 billion cubic metres in 2010 and 40 billion cubic metres in the following years. The additional document also repeals the contract provisions relating to mutual fines which have never been applied in practice.
In 2009 gas transit to consumers in Western Europe through Ukraine amounted to 95.8 billion cubic metres (the target being 116.9 billion cubic metres) and the target for 2010 is 116.069 billion cubic metres.
Russia remains the main supplier of oil to Ukraine (more than 95%). Receiving about 99% of oil through the system of long-distance pipelines, Ukraine also has several oil terminals on the Black Sea that handle Russian oil delivered both by pipeline through the port of Odessa (which has a capacity of 25 million tons a year) and the Yuzhny Port (its capacity is 9 million tons a year but in future may be brought to 45 million tons) and by rail through the port of Feodosia (with a capacity of 6 million tons a year).
Cooperation between regions and border cooperation add significantly to mutual trade. In 2009 eleven Russian regions accounted for 77% of the total trade, of which Moscow accounted for 33%, the Tyumen Region for 9%, the Belgorod Region for 8%, Rostov Region 6%, Moscow Region 5%, St Petersburg 4%, Tatarstan 3%, Nizhniy Novgorod Region 3%, Kemerovo Region 2%, Samara Region 2% and Volgograd Region 2%. Contributing to economic interaction between Russia and Ukraine is the work of the Russian-Ukrainian Intergovernmental Commission's Committee on Economic Cooperation (hereinafter, the Committee).
The Committee has created 12 subcommissions: on trade and economic cooperation, fuel and energy, nuclear energy and nuclear materials, industrial policy, cooperation in the aircraft building industry, cooperation in the space industry, agrarian industrial complex, transport, credit and financial cooperation, scientific-technical cooperation, property and interregional and border cooperation.
The Russian cochairman of the Committee is Vladimir Putin and the Ukrainian cochairman is the Ukrainian Prime Minister Nikolai Azarov.
