Ukraine: The Economic Benefit to EU Integration

Since November 12th of 2013, Ukrainians have been taking to the streets in droves to protest the authoritarian government led by President Yanukovych. As with other similar episodes of civil unrest, such as the Arab Spring, Ukranian protesters have utilized social media, hash tagging “Euromaidan”, which has become the unofficial name of the movement. As the AP explains in “Ukraine’s Euromaiden: What’s in a name?” the name refers both to the physical location of the protests, which have centered around Maidan Nezalezhnosti or Independence Square in Kiev, the capital of Ukraine, and also to the demonstrators’ demand for the country to integrate more closely with Europe.

Euromaiden has become even more relevant over the last week as protesters have clashed violently with police and at least two deaths have occurred according to the Wall Street Journal. While the protests still remain relatively small, the escalation to violence does bring about the potential for Ukraine to collapse into all out revolt. As the Economist points out, “Opponents of the government believe the new laws introduce Russian-style authoritarianism, and see them as part of a plan by Vladimir Putin, Russia’s president, to lock Ukraine into Russia’s orbit.” Essentially the conflict has been framed on two sides: the pro-European demonstrators and the pro-Russian institution. Many believe that a pivot towards Europe is the only way to bring democracy and rule of law to Ukraine, and indeed there is likely a great deal of truth to this. From purely a civil rights perspective, there is much to be gained from European integration.

From an economic perspective, however, the case for European integration is slightly more ambiguous. Ukraine is a former Soviet state and has retained very close ties with Russia after gaining independence. The country has been faced with a dilemma in modern times – whether to retain ties with the Russian Customs Union – an economic alliance between former Soviet states, led by Russia – or join with the EU in a free trade agreement. According to the Kyiv Post, maintaining ties with Russia over the EU, have several significant negative impacts on the Ukranian economy:

  1. The Customs Union is seen by many as a way for Russia to exert an inordinate amount of control over former Soviet states and the agreements typically force members countries to become reliant on Russia.
  2. Corruption and bribery is wide-spread across the Customs Union states and this limits the attractiveness of foreign direct investment in Ukraine.
  3. Ukraine’s trade with Russia has been steadily decreasing, while trade with the EU has been rising.

Europe provides both economic and political benefits to Ukraine and the spread of the pro-European protests shows that citizens want these benefits. While the conflict has been framed as a civil rights fight up to this point, the economic impact could be huge if Ukraine were to ultimately enter an agreement with the EU. This could modernize their domestic industry as they would have a huge trading partner next door and help boost national income, which according to the World Bank is relatively poor compared to Europe and Central Asia as shown in the chart below.

Ukraine GNI

It remains to be seen whether the protestors will see their demands met, if the country will be thrown into an all out revolution, or if the current regime will stamp out the revolt but it is something to see people, in our modern time, fighting for their liberty.

2 thoughts on “Ukraine: The Economic Benefit to EU Integration

  1. lippmanb

    I also agree that Ukraine joining the European Union would be beneficial to the country. Free Trade modernizes a country. Furthermore, Ukraine’s development is hurt by the its absence. The growth of Ukraine could be helpful to the rest of the European Union.

  2. dslavin

    Good post, I especially liked the organized way you presented the drawbacks of a Russia-Ukraine partnership. It’s interesting to observe the economic and political conflict currently happening between Russia and the EU. It seems that Russia is trying to rebuild the sphere of influence it lost after the collapse of the Soviet Union. I think a possibly interesting case study that relates to Ukraine is Latvia. Although civil unrest did not escalate nearly as much in Latvia as it did in Ukraine, Latvia was faced with a similar decision of joining the Euro or keeping closer economic ties with Russia. What do you think are some benefits for closer Ukraine-Russia relations, both political and economic?

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