Few people now remember that there was a time when Ukraine, now war-torn and in a deep political and economic crisis, showed interest in cooperation with the Shanghai Cooperation Organization.
Russian President Vladimir Putin met with Ukraine’s ex president Viktor Yanukovich in Sochi on August 25, 2012, and Yanukovich told the Russian leader, “We would like you to be our partner in an organization like the SCO, we would like to become an SCO observer.”
At that time, the Ukrainian foreign policy, in addition to the desire to join the European Union, took on an eastern vector, translated into growing bilateral cooperation with China and the willingness to become an observer of the SCO. A stronger eastern vector in Ukraine’s foreign policy could broaden its geopolitical horizon, raise its status on the international political stage and optimize its possibilities. But things didn’t turn out that way.
In the first two years after the Euromaidan, the Ukrainian economy plunged by 20%, the national currency – hryvna – lost two thirds of its value, the inflation rate reached a disastrous 50% for the first time since the 1990s. The unemployment rate according to the methodology of the World Labor Organization hit 11%, a figure unseen since the crisis of the 1990s. Ukrainian exports collapsed.
In 2013, before the Euromaidan, the country’s nominal GDP was $183.3 billion. The economy grew by 4.3%. Already in 2017, GDP growth vs 2016 was 2%, while GDP totaled $112.2 billion. Per capita GDP dropped from $4,030 in 2013 to $2,640 in 2017.
“In 2012, Ukraine exported more than $69 billion worth of goods and services, but in 2017, this figure was about $43 billion,” says economic analyst Alexander Ryabokon. As to the zone of free trade with the EU, it has not brought much value to the Ukrainian economy, the expert says.
“The European Union has not opened its market for Ukrainian goods, with the exception of small annual quotas for duty-free imports. Most exports come from the industries that had access to the EU market even before. At the same time, the EU was unable and, apparently, wasn’t willing to compensate for the declining volumes of trade with Russia and the CIS countries. Instead, some EU countries managed to use the workforce freed in Ukraine to their advantage,” he points out.
The biggest economic shocks for Ukrainians in the last five years were the drastic rise of prices and growth of utilities tariffs. Consumer prices skyrocketed by 94.3%, driven mostly by the hryvna’s depreciation: the exchange rate before the Euromaidan was 8 hryvnas per $1, and now it is 27 hryvnas. Gas tariffs for households surged 11-fold, heat prices 5.5-fold and electricity prices 4-fold.
At the same time, the income of ordinary Ukrainians has dropped: in November 2013, the average salary in Ukraine was 3,268 hryvnas ($408.5) per month, but in September 2018 it was 9,042 hryvnas ($326). According to the Pension Fund, the average retirement pension went down from $183 a month in 2013 to $66 in July 2018.
Growth of tariffs not accompanied by an equal increase in income resulted in the number of poor families in the country surging 5.8-fold. The total number of the poor reached 24,640,000 people in 2017, or 58.7% of Ukraine’s population. For reference, the number of the poor in 2014 was 4,200,000 people, or 9.2%.
“The living conditions of Ukrainians have deteriorated, every second household wants to get subsidies,” says Vladimir Zharikhin, deputy director of the Institute of CIS Studies. “So far, Ukrainians have been able to survive thanks to previous savings. People had apartments, household appliances and clothes acquired in the Soviet time. But the average salary that is similar to the one in African countries is gradually pushing people into poverty. The only area where Ukraine has reached the European level is the price of gas and utilities. As a result of ill-conceived actions, it lost a significant part of its territory and population.”
The situation in Ukraine has deteriorated in all aspects, the expert says. The country is now proud to be an “agricultural superpower.” But this happened not due to improved productivity of its agriculture, but due to a drastic decline in the share of industrial and science-driven manufacturing. All this is leading the country to a dead end. Ukraine claims to be moving towards Europe, but in reality is growing ever more distant from it.
Sooner or later, the needs of the national economic development will make it understand the necessity of diversifying foreign economic ties, and restoring contacts with Russia and other CIS countries. Perhaps, cooperation with the SCO will again become relevant for the country’s leaders. And this path could be the salvation of Ukraine.