Potential economic losses the Ukrainian crisis may bring
People in Armenia like to blame the financial crisis for different failures. Since 2009-2010 everyone blames the financial crisis in all their individual failures.
It is true not only about the Armenian government that still continues to put the blame for their failures on the financial crisis. Even companies and individuals refer to the crisis when they want to refuse people in doing something they do not want. For example, people would be late in returning their debt, and explain it with the crisis that made it difficult for them to pay off.
Now, the factor reasons of the crisis have been replaced with the Ukrainian crisis. Many people say that the processes that are happening in Ukraine have affected their business. There are people who say that they have sent products to Ukraine but cannot get their money from there. The impression after such statements is that Ukraine is Armenia’s largest trade partner.
Certainly Ukraine is in good relations with Armenia, however whether Ukraine is in such bad situation that it affects relations with us is under question. Are our economic relations so close that we feel the impact so much?
Ukraine is really an important trade partner for Armenia. Last year the bilateral trade volume was $241.8 million, which is Armenia’s external trade’s 4.1%.
In Armenia’s export of $241.8 million Ukraine’s share is 15.2 million. According to the state income committee of Armenia, the annual volume of Armenia’s export to Ukraine is 14-15 million dollars. During 2013 Armenia exported 70 types of products to Ukraine (with a value of 15.2 million dollars). Most part of this export is cognac (9 million). We also export crayfish for a million, and fruit for 600k dollars. This means that Ukraine is not one of the largest trade partners of Armenia. During January of this year the export volumes to Ukraine have increased twice. There is no official statistics for February – the period when the crisis escalated in Ukraine.
Armenia imports different products from Ukraine. In 2013 Armenia’s import from Ukraine amounted $226.4 million, which covers 5 per cent of Armenia’s entire import volume. Ukrainian products are important in Armenia’s economy and may have some influence on the domestic market.
Main products Armenia imports from Ukraine are cigarettes ($35.2 mln), metal sticks ($13.8 mln), food products containing chocolate and cocoa ($10.7 million), sunflower oil ($10.1 mln), corn ($8.4 mln), condensed milk and milk powder ($4.7 million), etc. Generally Armenia imports 500 types of products from Ukraine.
What will happen to import from Ukraine? If we assume that there is less money in Ukraine now but still there is production, the price of import may even fall. If the situation grows into a deeper crisis to the extent of creating problems for freight forwarding, the first group of businesses that will suffer losses will be those that import products into Ukraine.
Impact is also measured with fluctuation of investments and money transfers. There will be no significant impact on investments in Armenia because there are no major investors from Ukraine in Armenia. However, money transfers may suffer as there is a large Armenian community in Ukraine. According to official information, there are 130-140,000 Armenians in Ukraine, however, non-official sources estimate this number is 350-400,000. However, the volume of money transfers from Ukraine is not very big. In 2013 the volume of money transfers from Ukraine was $18.2 million (from Russia, for example, the amount of money transfers was $1.7 billion). In 2013 money transfers from Armenia were more to Ukraine by $3.5 million ($21.7 million). This means that it is not the Armenian community that helps Armenians in Armenia, but the vice versa, and unfortunately in the future we may have to help them even more.
By Babken Tunyan
