Alexander Okhrimenko

President of the Ukrainian Analytical Center, Ph.D. in Economics, on the economy and business, latest trends and forecasts.

Economic interests have joined Ukraine and Germany long ago. Although on the results of 2012 the volume of foreign investments in Ukraine from German investors decreased from $ 7.3 billion to $ 6.3 billion, Germany remains the second country in the rating of foreign investors in Ukraine. Its share accounts almost 15% of all foreign investments of the EU to Ukraine.

Reduction of German investment in Ukraine in 2012 was the result of selling of Ukrainian bank “Forum” by the German Commerzbank , that probably was the only right solution at that situation. Unfortunately, Ukrainian economy has gone through a very difficult crisis of 2008-2009. A significant devaluation of the hryvnia at the end of 2008 created an unfavorable situation in the Ukrainian economy as a whole. So 2009 was a year of economic collapse. The fall in GDP in 2009 was at the level of 14.6%. It has significantly reduced income of the business and, especially, the income of the population. And it is not surprising that German investors of the “Forum” bank, in spite of all their efforts and attempts to normalize the situation, decided not to increase the losses and simply sell the bank. Though it is possible that the situation can still change, and German investors will again be interested to work in the banking sector of Ukraine. Ukrainian history knows cases when the French bank “Société Générale” several times came, left and came back again to the Ukrainian banking market.

Perhaps, the banking market of Ukraine actually isn’t the most attractive for German investors. But in the meantime accents have changed. For instance, a German company Claas KGaA mbH has planned to invest 160 million Euros in Ukraine to create a co-production of high-tech harvesters at the Kherson Machine-Building Plant. First co-produced harvesters have been already released by the plant. In general, now there is a rise in the agricultural market of Ukraine. Therefore, investment in agricultural production as well as in food production and agricultural machinery has become a priority for foreign investors. Upon this already functioning foreign companies continue to work in Ukraine – altogether about 400 of them. Among them: Leoni AG, SSI Schäfer Shop GmbH, Big Dutchman International GmbH, Bayer AG, Rheinmetall AG, Rhenus Logistics, YKK GROUP, BASF SE, HELM AG, Dyckerhoff Zement International Gmbh, HeidelbergCement AG, Praktiker Bau- und Heimwerkermärkte Holding AG, Siemens AG, Meffert AG Farbwerke, Heidelberger Druckmaschinen AG, Brinkmann GmbH & Co. KG, Ratiopharm International GmbH and Rehau AG.

But the keynote of cooperation between Ukraine and Germany is the “gas project”. Karl-Georg Wellmann, a member of the Committee on Foreign Affairs of the German Bundestag, said that Germany is ready to take part in the modernization of Ukraine’s gas transportation system. This is a win-win decision for both Ukraine and Germany. Without such a decision there will constantly arise a problem of the assured supplying of gas to the EU countries. Well known that Russia wants to get full control of the Ukrainian gas transportation system to be able to supply gas to the EU without the Ukrainian side. And at that to use non-market methods for imposing unfavorable contracts on purchasing gas upon other countries.

For many years, Ukraine was dependent on the monopoly of gas supplies from Russia. This has made its economy (and not just the economy) very vulnerable. This year, for the most part thanks to the cooperation with Germany, Ukraine has managed to break down the Russian gas monopoly. Now Ukraine can buy gas in the EU countries too. But for the normal operation of the gas transportation system of Ukraine there must be no provocations and diktat on the side of Russian Gazprom. It is necessary to carry out the modernization of this system. It will allow Germany and other EU countries to receive gas from Russia without problems and conflicts, and it will allow Ukraine to sign an Association Agreement with the EU.

Perhaps some German investors under the influence of false information had the wrong idea about the political force, which is now in power in Ukraine. Political opponents of the current Ukrainian president often accused him of a pro-Russian orientation and abandonment of European integration. But it’s probably just political intrigues. Three years, during which Viktor Yanukovych is the President of Ukraine, have shown that he is univocally a supporter of European integration. And for the leadership of the state at the moment, the main goal is namely to sign an association agreement with the EU. Upon this the Russian initiatives on the Customs Union and the Eurasian Union – is not the Ukrainian path. Ukraine is a European country and it aspires to join the EU. Although one have to take into account the fact that this process can’t pass on smoothly and without any problems. In fact, there is a great anti-European lobby in Ukraine consisting of the businessmen and politicians who want to impose a pro-Russian orientation upon the leadership of the country. But this does not mean at all that the Ukrainian leadership is tied to the chariot of this lobby.

It is quite reasonable that the government of Ukraine and the Ukrainian business expect that this fall the Association Agreement with the EU will be signed. This will expand the opportunities for German investors to operate in Ukraine. There will be an opportunity to solve more quickly and easily the problems that arise before foreign investors in Ukraine. Germany’s Foreign Minister Guido Westerwelle stated that Germany has a strategic interest in European development of Ukraine and welcomes Ukraine’s efforts to achieve the criteria necessary for the signing of the Association Agreement. Indeed, Ukraine’s leadership is taking active steps in this area to have time to fulfill all the necessary requirements for the signing of the agreement before the EU Eastern Partnership Summit, which is to be held in Vilnius on 28-29 November 2013.

It’s no surprise that Russia is extremely sensitive to the Association between Ukraine and the EU. A piece of information has recently appeared in the Russian media that the signing of the Association Agreement between Ukraine and the EU could be interfered with the elections to the German Bundestag. Russia would be very glad if on the results of the elections the new leadership of Germany became more pro-Russian and would help Russia to upset the signing Association Agreement. This shows once again how difficult it is for Ukraine to stand against the Russian pressure and none the less meet all the requirements necessary for the signing of the agreement with the EU. In the current situation without understanding and support from the German politicians it is very complicated for Ukraine to fight for an Association Agreement with the EU.

In any case it is necessary to understand that the EU needs Ukraine as much as Ukraine needs the EU. And it is a strategic goal – to have a tight integration between Ukraine and the EU in the future.

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