Paths for Ukraine

Article excerpt

Economic and Political Choices for the Next Century

The fall of the Soviet empire and the post-Soviet economic transition are undoubtedly the most crucial events of the last decade of the twentieth century. Ukraine, the largest East European country, has been a key participant in this process. The political stability and economic performance of Ukraine, a significant player in the post Soviet arena, will set the parameters for European security and prosperity.

However, only a small amount of attention was paid in Western political literature to Ukrainian problems and to their significance in the context of mainstream economic and political theory. Recently, two books have been published that aim to bridge this gap: Economic Interdependence in Ukrainian-Russian Relations by Paul J. D'Anieri and Ukraine: At the crossroads: Economic Reforms in International Perspective, edited by Axel Siedenberg and Lutz Hoffmann. The authors of these two books, who are personally engaged in research on Ukrainian political economy, try to highlight Ukraine's economy as a special case in the process of post-totalitarian transformation. Interestingly enough, the dilemmas that are considered in one book find their solution in the other.

D'Anieri constructs his analysis of economic relations between Ukraine and Russia around three dilemmas: prosperity versus autonomy, prosperity versus sovereignty, and autonomy versus sovereignty. The key feature of these relations is "interdependence," and the consequences are measured in terms of the sensitivity and vulnerability of Ukraine to dominance by its eastern neighbor.

This approach allows the author to involve both the older realist and newer liberal doctrines in defining Ukrainian-Russian relations. D'Anieri describes these relations as "asymmetric interdependent," a relationship in which Ukraine trades with Russia for essential goods and markets; Russia's size makes it inherently powerful; Russia's intentions are suspect but Ukraine has few cheap substitutes; and Ukraine is unable to mobilize its society to reduce its vulnerability. While this analysis is accurate, D'Anieri uses it to press a much more debatable and surprising point. He argues that restoring Ukraine's trade with Russia within the Commonwealth of Independent States (CIS) to the levels reached during the soviet period will lead to prosperity and economic efficiency in Ukraine. What D'Anieri argues, however, amounts to a quasi-total dependence of Ukraine on one trade partner. In 1991, for example, 85 percent of Ukraine's total exports went to Russia. Contrary to D'Anieri's position, such dependence would o nly increase Ukraine's vulnerability and insecurity.

According to neoclassical theory, economic integration can be effective only when the industrial structures of the two participants are mostly similar and competitive, not complementary as in the case of Ukraine and Russia. An illustration of the Russo-Ukrainian economic partnership is provided by the metallurgic industry. While mineral inputs from Russia are used in the manufacturing industry in Ukraine, the products of this industry are not exported to Russia. This type of unilateral trade induces little progress in Ukraine. Trade is efficient only when it causes the diffusion of technology and therefore substantially increases the productivity of the industry. These features are absent in trade within the CIS, hence the very low economic success of Ukraine's integration in this region.

D'Anieri gives a good illustration of Russia's strong wish to preserve asymmetric economic interdependence with Ukraine by describing the energy war of 1993-94, which has resurfaced in the last year. Power politics is a suitable concept in analyzing economic relations in the post-Soviet space. …