On April 10, the Ukrainian government expanded list of goods banned to import from Russia. By this decision the embargo was extended to formalin and carbamide-formaldehyde concentrate, springs for freight wagons, electrical equipment for railway automation and communication devices, and electric conductors for voltage above 1000V. In addition, another resolution imposed sanction on the import of glass containers, including cans, bottles for food and beverages, containers and other similar products.
This move became the continueation of a series of previous restrictions imposed by Ukraine on Russia and Russia-affiliated business. Despite formal declarations, the real impact of the recent and previous Ukrainian actions is minimal because the Russian export in the aforementioned can be neglected.
On April 18, the Russian government came with a sensational declaration in response to the Ukrainian behavior. Prime Minister Dmitry Medvedev announced that he had signed a decree banning export to Ukraine of oil, oil products and coal. Starting June 1, the export of products listed in the decree will require a special one time permit.
The decree also bans the import into Russia of Ukrainian engineering, light and metalworking products.
“The Ukrainian Cabinet of Ministers took another unfriendly step towards our country, expanding the list of Russian goods prohibited for import into Ukraine. Under these conditions, we have to defend our interests and take retaliatory measures,” Medvedev said, according to Interfax.
This unprecedented move will deliver a strong blow to the already weakened economy of Ukraine. In the previous years, Russian oil products were about 36-40% of the Ukrainian market. About 40% of oil products Ukraine was importing from Belarus – in fact, these were Russian oil products under another brand. It is expected that Russia would strengthen the monitoring of the re-export of its oil products by Belarus thus preventing the gray schemes that may allow the Kiev government to avoid the imposed ban.
The remaining Ukrainian industry will suffer most of consequences from the imposed ban. Another group, which would feel the impact immediately, is the ordinary citizens. Taking into account the ban of Russian oil products, the Kiev government would have to diversify its market, most likely buying additional oil products from Azerbaijan or even Iran and other states of the Persian Gulf. This desperate measure would increase the cost of transportation. The cost increase of oil products for the Ukrainian economy would be around 15-20%.
Additionally, it is unlikely that the Kiev government would be able to replace fully Russian oil products in a short period of time. This will further increase the cost of oil products due to the lack of supply in the Ukrainian internal market.
According to experts, Ukrainian citizens would be able to observe a 18-20% increase of the fuel price soon. Currently, one liter of 95 RON in Kiev costs about 28 UAH (1.04 USD). An average monthly revenue of Ukrainian is about 7,000 UAH (250 USD). So, it’s expected that the price of 95 RON would grow to about 1.25 USD per liter. The cost of oil products for the production sector will also grow.
The decision of the Kremlin to introduce the oil export bun to Ukraine ahead of the second round of the presidential election in the country is a clear signal to Volodymyr Zelensky, who can be already assumed as the elected president. [Petro Poroshenko has very little chances to achieve a victory] Moscow shows that it is not going tolerate formal declarations and waits for real actions, which would change the Ukrainian policy towards Ukraine. If the newly elected president introduces changes into his country’s policy, it’s expected that the oil ban as well as other sanctions will be lifted in the nearest future.
