Russia’s Concerns for the EU-Ukraine Association: Myths and Realities

Abstract

Reaction of Russian Federation to the EU-Ukraine Association Agreement and the Deep and Comprehensive Free Trade Area (DCFTA) as a part of it is a significant challenge for Ukraine. A great majority of Russia’s concerns can be questioned or be easily solved by legal instruments. Instead Russia practiced hard negotiations in a form of economic war against Ukraine. Hypothetical and practical concessions to Russia related to the Association Agreement implementation are discussed. We pay special attention to raising competition for Russian exports as a possible motivation for actions of Russia. The paper studies two possible motivations in details. The first one is the possibility of increased competitive pressure of Ukrainian exports to the EU on Russian exports to the EU because of the EU preferential treatment for Ukraine (competition in the EU market). And the second one is the possibility of increased competitive pressure of the EU exports to Ukraine on Russian exports to Ukraine because of Ukraine’s preferential treatment for the EU (competition in Ukrainian market). We compare trade structures of bilateral exports of the three countries to estimate the possibility of such motivations. Our calculations show that increase in competitive pressure on Russian exports is rather low. Our research provides the evidence in favor the presumption that economically the EU-Ukraine DCFTA is only a minor challenge for the Russian economy, and hard approach to Ukraine is rather a political decision of Russian authorities. Return to non-confrontation regime can be mutually beneficial for Ukraine, the EU and Russia.