ukmuiik

Question

According to a Russian News Agency Ukrainian politician Evgeny Murayev said that

Anti-Russian sanctions of the EU and the United States deprived the Ukraine
from half of its gross domestic product.

[...]

According to the parlamentarian, Russia and the EU lost only a small fraction of
their GDPs. For the Ukraine, though, the sanctions led to a contraction of the GDP
by a half.

This statement is also published on Murayev's news site NewsOne.ua.

Is the statement "sanctions against Russia harm Ukraine more than Russia", defensible?

Sounds more like a skeptics.SE question than a politics one. — Aug 6 at 7:50
GDP is important but here I'd rather look to GNI per capita (PPP), given depopulation and the potential noise form foreign investors. data.worldbank.org/indicator/NY.GNP.PCAP.PP.CD?locations=UA databank.worldbank.org/data/views/reports/â€¦ — Aug 6 at 12:16
There is a lot missing from this in my opinion. It could be argued that Sanctions started a chain of events that lead to GDP decline. This could include protests and political turmoil and even lead to annexation. Depending on how you frame the argument you can get different answers. This is obvious to me how populations of major countries with mostly free access to the internet can believe what seem to be two widely different views on topics such as this. — Aug 6 at 14:47
Funny thing is, the Russian propaganda tends to say two things at once: 1) These stupid Ukrainians go against their own economical interests by severing ties with us! Why don't they accept the inevitable? 2) We will endure all the economical sanctions and impose our own, but will never bow down to the West! — Aug 7 at 3:08

score 25 · Accepted Answer · 2018-08-08 14:56:52Z

By some metrics, Ukraine's GDP was divided by two between 2013 and 2015. However, this is misleading.

As a consequence of war, annexation of Crimea, and a 70%-devaluation of Ukrainian currency, a brut series of Ukrainian GDP labelled in US$ shows that it contracted by a half between 2013 and 2015.

But if we consider real activity (corrected from currency variations), GDP has "only" lost 8% in 2014 and 12% in 2015. I am not 100% sure whether these World Bank figures take into account the loss of territory or not. Wikipedia actually mentions less drastic reductions of GDP (6.6% and 9.8% in 2014 and 2015 respectively), but the sources are in Russian and I cannot check them.

Moreover, anti-Russia sanctions can only explain a tiny fraction of that contraction.

Russia traditionally is a major trading partner for Ukraine. Back in 2012, it amounted to a quarter of Ukraine's exports and one third of its imports. In 2016, trade exchanges with Russia have dwindled to 10% of Ukraine's exports and 15% of its imports.

This trade has first been affected by anti-Ukrainian sanctions taken by Russia in 2013 when Ukraine was negociating an association agreement with UE.

the Customs Service of the Russian Federation put all Ukrainian imports on the list of potentially dangerous goods on August 14, which halted the shipment of goods from Ukraine for an indefinite time.

It has been further reduced after the Crimean crisis and the civil war in Donbass. Moreover, the very industrial oblasts of Donetsk and Luhansk have being damaged by the war, reducing the industrial production of the country, and nowadays escape the central government's control.

Since 2015, sanctions have not been alleviated but Ukraine's GDP has started to recover.

Is the statement "sanctions against Russia harm Ukraine more than Russia", defensible?

No. Although precise figures are hard to find, Western sanctions against Russia have been decided at a point when Ukraine-Russia trade was already shrinking because of the war. Moreover, Evgeny Murayev offers neither details nor explanations to sustain such a paradoxical claim.

About the claim

Note that Evgeny Murayev, formerly a member of Party of Regions and now a chairman of For Life is a russophile politician and opposed to anti-Russia sanctions from the get-go.

Brythan 59.3k7120209 · Answer 2 · 2018-08-07 22:54:23Z

False

First let's clarify what the comment is about. The most relevant figure to the "a contraction of the GDP by a half" seems to refer to Ukraine's GDP in US$, of which there is some data

2013: US$183.31 billion.

2014: US$133.503 billion.

2015: US$91.031 billion.

2016: US$93.27 billion.

Evolution of the GDP of Ukraine

Between 2013 and 2015 the GDP was, effectively, halved. But the affirmation by Evgeny Murayev blames all of that to EU and USA sanctions against Russia. While separating the influence of several events in the total outcome is often complicated, this attribution has a lot of problems:

Ignores the conflict with Russia.

The two most obvious issues would be:

The internal tensions between the Euromaidan and Yanukovich and the 2014 revolution.

Russian intervention in Crimea and Eastern Ukraine has taken away from these figures the value produced in Crimea and Donbas region (Donets'k and Luhans'k). The later two were rather heavily industrialized and must have contributed considerably. According to Ukraine's government, Ukraine has lost 20% of its national economy.

Ignoring these two facts when talking about the recent politics and economy of Ukraine is like talking about how Abraham Lincoln's presidency saw an increase in government spending while "forgetting" to mention the USA Civil War.

There are also other related effects that impact the economy:

Logically, trade with Russia, which was one of Ukraine's main trade partners, has shrunk (albeit it seems that it is slowly recovering). The exports went from US$ 15 billion in 2013, to less than US$ 4 billion in 2017, the imports went from US$ 27 billion in 2013 to almost none in 2016 and about US$ 2.5 billion in 2017.

The military spending of Ukraine has increased significantly: from US$ 2.606 billion in 2013 to US$ 3.530 billion in 2015.

Political tensions and instability usually lead to GDP loss.

Is misleading.

While the data about halving the GDP in US$ is correct, as others have pointed, the figure of GDP in US$ is highly dependent on several factors, specially the conversion rate between US$ and the local currency.

In 2014 Ukraine agreed (as part of an unrelated agreement with the FMI) to stop setting the exchange rate of its local currency. That usually leads to a sharp adjustment; coupled with the political tension and the fact the US$ exchange rate was rising in general led to a sharp devaluation some graph here, if you are interested.

That made the figure of the GDP appear to be far worse than the actual economical impact of the crisis¹; evaluation by other indicators show a far more (yet still considerable) recession².

It does not explain the mechanism.

USA and EU sanctions against Russia are, how to say it, against Russia. They affect Russian business, investments, exports, not Ukrainian ones. That does not mean that there are no possible effects of the sanctions on Ukraine's economy, either directly³ or indirectly⁴, but certainly those would not be in the scale claimed by Mr. Murayev⁵.

Additionally, Mr. Murayev conveniently forgets about the EU help to Ukraine, which amounts Ã¢Â‚Â¬11 billion

Russia shows weak numbers, too.

If we return to the data, we see that the same figure of GDP in US$ gives us that Russia has gone from 2.297 US$ trillion in 2013 to 1.285 US$ trillion in 2016 (a 44% reduction).

Here, while it could be tempting to blame all of it on the Ukrainian crisis and sanctions, it is fair to remember that there are other factors in effect (rising USD, low oil prices, etc.)⁶. But certainly raises some questions about Mr. Murayev fast dismissal of the effect of the sanctions on the Russian economy.

¹Although it would have still affected the economy, as imports became considerably more expensive. But just not as much as it shows in the GDP in US$ chart.

²Figures for GDP PPP show a decrease from 392 US$ billion in 2013 to 340 US$ billion in 2015, or about a 13.3% in two years, for example.

³For example, stopping Russian gas imports through Ukrainian gas pipelines would deprive Ukraine of the "tolls" it receives from it. But gas exports seem not to have been directly targeted.

⁴An economic crisis in Russia means that trade with its partners is reduced, as spending is slashed. But trade between Russia and Ukraine was severely affected by the conflict anyway.

⁵I have tried to find some data quantifying those, but I have been unable to find any.

⁶And again, data related to GDP PPP shows a more moderate (yet still significant) economic downturn.

Isn't that fall in GDP in US$ just mainly because the Ukraine currency Hrywnja lost about half of its value compared to the US$? It's a bit misleading to just use US$ as the only measurement. — Aug 6 at 9:19
@OHGODSPIDERS, I think it is the opposite: Hryvnia has lost its value due to economic losses and the currency mass remained the same. The new government was weak and had no monetary instruments for that drastic money supply reduction. — Aug 6 at 9:24
@OHGODSPIDERS That is an interesting point; with a floating currency it would not affect much (the loss of GDP would be reflected in the devaluation of the currency) but the 2014 crisis coincided with liberalization measures (as part of a deal with IMF) and one of those was allowing the currency to float (previously the change value was set by the government). So perhaps the loss of GDP has been increased by that effect. I will try to look into that. — Aug 6 at 9:25
@bytebuster I'm not saying the economy didn't contract in some manner. I'm just saying that stating the economy contracted by half and then using US$ to measure it ignoring exchange rate fluctuation is kind of simplistic. There is a reason economists have measures like PPP that try to take those factors out. — Aug 6 at 9:32

Brythan 59.3k7120209 · Answer 3 · 2018-08-07 22:07:17Z

Roughly true, Ukraine did lose around 50% of GDP as a consequence of Maidan

Ukraine GDP had its peak in 2013, and massive drop in 2014, 2015 and 2016 with slight rebound in 2017. You could put as much lipstick on the pig as you want, but it is entirely clear that this is direct consequence of coup d'ÃƒÂ©tat and subsequent separation of Crimea and war in Donbass.

Ukrainian sanctions vs Russia are more of "cut off your nose to spite your face" action. Russia was major trading partner for Ukraine before Maidan, and what is even more significant is that Ukrainian industry was compatible with Russian needs . This was of course consequence of being together in Soviet Union with its centralized planned economy, and holds especially true in defense sector.

What is especially damaging is the fact that Ukraine cannot gain new markets. Reasons for that are multiple : Ukrainian industrial products are simply "not needed" in EU countries where they face fierce competition. Ukraine has not enough capital to invest in R&D, therefore they are increasingly falling behind and rely on already obsolete Soviet technology. Because of low wages lots of well-trained Ukrainian engineers and other educated people are leaving Ukraine. In Russia, replacements were found for many of the products imported from Ukraine, so even if political relations improve economic would not follow.

Overall, what overthrow of Yanukovych has achieved was locking Ukraine in almost perpetual position of impoverished agricultural country, serving as a source of cheap labor and other cheap resources, without much hope for something better.

I believe you slightly missed the point of the question, that is, whether sanctions against Russia damage Ukraine as well. — Aug 7 at 6:55
Even the brut series in US$ from tradingeconomics.com doesn't show "a massive drop in (...) 2016". Moreover, most of your answer claims that the economical difficulties in Ukraine are due to other causes than Western anti-Russia sanctions, which contradict your title "Roughly true". — Aug 7 at 15:23
@DmitryGrigoryev Ukraine willingly joined sanctions against Russia, and even overdone West . — Aug 7 at 18:26
@Evargalo Roughly 50% of GDP in 2016 compared to 2013. That is not massive enough for you ? As I said, Ukraine joined sanctions against Russia . — Aug 7 at 18:28
I am not sure if it is worth debating with you because I believe you follow an agenda rather than looking for the truth, but to make it clear: when you say that nominal US$-GDP has dropped by 50% and that it's "roughly true" that anti-Russia sanctions caused a 50% loss of GDP, do you infer that Russian anti-Ukraine sanctions (August 2013, before Euromaidan), loss of controled territory (Crimea, Donbass), ongoing war (with destruction of indutries), devaluation of hryvnia, riots, etc. , had "roughly" zero negative impact on Ukraine's GDP ? — Aug 8 at 9:21

score 25 · Accepted Answer · 2018-08-08 14:56:52Z