A high-level group of the Four (Belarus, Kazakhstan, Russia, and Ukraine) discussed drafting the concept of a single economic space (SES) on March 21 in Astana.
According to Russian Vice Premier Viktor Khristenko, the main problem here is to coordinate and define in detail the measures aimed at establishing bilateral relations and drawing up the legal documents that would ensure free trade and movement of capital, services, and manpower. The vice premier said the parties would try to see to it that the draft concept include the dates of and conditions for such documents, as well as the mechanisms and institutions that will exercise control over the implementation of the concept. Mr. Khristenko said SES will be the most progressive form of regional integration. “The formula chosen by the presidents — a single economic space — is the most advanced and developed formula of the economic integration of countries... What makes this process difficult is, in brief, only one thing: the degree of the reciprocal penetration of our economies should be set by means of placing some essential economic levers under supranational, rather than national control.” Implementing this principle in interstate cooperation “is in fact the highest degree of integration,” he believes.
However, as far as real-life Russo-Ukrainian economic relations are concerned, we have so far only the experience of futile efforts directed at establishing a CIS free trade area. Still more revealing are some other facts about Russia’s current economic policy.
For example, on April 1 Russia will impose new customs duties on oil and oil products under its tariff law. The duty will be $40.30 per ton of crude oil (now $25.90) and $36.30 per ton of petroleum products (now $23.30).
Yet, economy ministry expert Svitlana Nifontova explained to The Day that, in theory, this action is not supposed to affect the prices for oil products in Ukraine because the Russian action will simply withdraw the superprofits from its dealers who have been trading in the past few months at prices higher than usual due to the current international market situation.
Non-governmental experts have a slightly different opinion. Ostap Kinash, deputy manager of the Spivdruzhnist Company, told The Day, “It is clear even to a footstool how Ukraine will feel the rise of customs duties: it will raise the price of oil for Ukrainian refineries, which will trigger a chain reaction of oil product price hikes.” This expert is convinced that this will adversely affect our economy because Russian oil accounted for 75% of the total oil Ukraine imported last year.
Serhiy Sapehin, director of the Psykhea engineering research center, who made a quick analysis at The Day’s request, forecast that, taking into account a number of factors, including the increase of Russian duties, the war in Iraq, and seasonal demand variations, the average level of oil product prices in Ukraine could rise 4% at most. He also took into account all kinds of disputes that had arisen between the government and the oil traders when they signed the memorandum of cooperation on the market. The government is being blamed for failure to satisfy the demand to reduce the oil transport fees and to unload the overfilled warehouses of refineries — moreover, it imposed restrictions on the export of fuel oil. Therefore, oil traders no longer consider themselves bound by the memorandum and, in all probability, are not very much inclined to share the government’s optimism.
Interestingly enough, the Ukrainian Embassy in Moscow was the first to warn about the likely consequences of the tariff rise on Russian oil. As trade representation expert Ivan Piven told The Day, since Russia adopted the law two years ago, nothing unexpected has happened in this sector: everything is predictable depending on the international market situation. Mr. Piven thinks Ukraine should analyze the situation and take adequate measures. In his opinion, oil prices rose on the international market in expectation of the Iraq War. “We have also fallen victim, in a way, to these developments,” the diplomat said. In his view, Russia might repeal its tariff law if the Four entered into a treaty creating a free economic space. In the absence of such a treaty, Mr. Piven says Russia is thus merely pressuring Ukraine and other countries.
Meanwhile, oil prices continue to rise in connection with the war in Iraq. On Friday morning the price of May futures contracts for WTI oil on the New York Mercantile Exchange (NYMEX) electronic system rose 1.6% (46 cents) to $28.58 per barrel, Bloomberg reports. In Ukraine, only retail prices for diesel fuel are so far heading upward. On March 10-14, they rose by 5-10 kopiykas a liter, compared to the previous week in Vinnytsia, Khmelnytsky, and Odesa oblasts. The retail prices of other brands of oil products have for the most part been declining.
