Ukraine Market Report — Q4 2015
Gas imports from the eastern direction ceased entirely in November, the free trade area with the EU took effect on 1 January, and the deepest two-year contraction since independence reached its end.
Overview
Gas imports from the eastern direction stopped entirely in late November. From that point Ukraine's gas imports came exclusively from the European direction.
The deep and comprehensive free trade area with the EU entered force on 1 January 2016.
The end of the import relationship
A supply relationship that had defined Ukrainian energy policy, industrial competitiveness and a substantial part of its foreign policy since independence ended in this quarter.
It ended in three stages, each traceable in this archive. The 2006 price increase removed the subsidy. The 2012 reverse-flow test proved an alternative existed. The 2014 supply halt forced the switch. By late 2015 the alternative was simply the arrangement.
What made this possible was not policy vision. It was that the technical alternative had been demonstrated before it was needed. When the dependency had to end, the route already existed.
That is a transferable lesson about single-supplier dependencies of any kind: the value of proving an alternative is not in using it, it is in having proved it before the day you must.
The free trade area
Entry into force on 1 January meant tariff reductions applied and the certification work that determined actual market access became urgent rather than theoretical.
As the archive's later reports record, the market access that followed took years to materialise because tariffs were never the binding constraint — conformity assessment was.
Macro position
Output contraction for the second consecutive year, deeper than 2014. Inflation very high for the year as a whole. Currency stable in the second half. Reserves rebuilding.
Sectors
Agriculture — the sector that carried the economy through both crisis years.
Metals — reduced capacity, disrupted supply chains.
Banking — clean-up continuing.
IT services — grew through both crisis years without interruption.
What the quarter settled
That the two structural questions which had shaped Ukrainian economic policy for two decades — the energy relationship and the trade orientation — were both closed within eighteen months of each other, and neither by negotiation.
Related in this archive
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