Abstract
The purpose of research is to analyze the reasons and effects of disintegration with Russia for Ukraine and its association with the EU. Expected results of the Association Agreement with the EU and conflict with Russia in previous research are compared with the actual effects. Export losses of the opposing countries from the economic conflict are calculated and compared. The EU-Ukraine Association Agreement has marked the choice of Ukraine to follow the European social and economic development model. It aimed at decreasing trade barriers, making reforms and engaging Ukraine in international production networks by foreign investment inflows. But the EU and Ukraine did not foresee the severe economic, political and military reaction of Russia, which is a barrier to efficient implementation of the Association Agreement. Decrease in exports to Russia and other CIS countries has not been offset by better access to the EU market. Severe reaction of Russia is politically motivated and is not substantiated economically. All the conflicting parties faced losses from the economic war. Ukraine and Russia were the most affected countries, while Western countries faced minor losses. Restoring cooperation and integration is not possible without changes in foreign policy of Russia or / and other parties.
Highlights
Ukraine as an open economy is objectively interested in developing mutually beneficial economic relations with its partner countries
The fundamental reason for political and economic confrontation in the WestUkraine-Russia triangle is the existence of two main integration attractors in Europe: Western Europe / the EU and Russia / the EAEU
AA is only a minor challenge for Russian economy despite the fears expressed by Russian government
Summary
Ukraine as an open economy is objectively interested in developing mutually beneficial economic relations with its partner countries. Our estimates of Russia’s losses from shrinking market in Ukraine (largely due to Russian actions) include decrease in exports to the mainland Ukraine by $9 billion in 2014 and $13 billion in 2015 (base year – 2013) and decrease in trade surplus by $6 billion and $7 billion respectively (calculations based on [State Statistics Service of Ukraine: 2016]). In these estimates we tried to account for the loss of territorial integrity. Export losses of countries from shrinking of the Ukrainian and Russian markets (2015 to 2013)
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