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Ukraine’s unconsidered losses from the annexation of Crimea: What should we account for in the DCFTA forecasts?

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  • Olekseyuk, Zoryana
  • Schuerenberg-Frosch, Hannah

Abstract

In March 2014 Crimea unilaterally declared its independence from Ukraine and joined the Russian Federation. The separation of a part of a state's territory and economy is an interesting matter to look into. Not only the economy of Ukraine has shrunk, it has also changed its structure as Crimea had a quite distinct production pattern compared to the rest of Ukraine. Moreover, policy measures that have been initialized before the separation may have different effects once applied only to a part of the former economy. This paper proposes a strategy to model the separation of part of an economy and its inclusion into another country and applies this strategy to the case of Crimea, Ukraine and Russia. After having constructed a model for the new geographical and economic situation we re-investigate the possible effects of a Deep and Comprehensive Free Trade Agreement (DCFTA) between Ukraine and the EU and compare the results for the situation with Crimea as part of Ukraine. We find that the annexation of Crimea leads to severe economic losses for Ukraine which are partly over-proportional compared to Crimea's economic size. These negative effects can be compensated by implementing the DCFTA with the EU as we also show in our model results.

Suggested Citation

  • Olekseyuk, Zoryana & Schuerenberg-Frosch, Hannah, 2016. "Ukraine’s unconsidered losses from the annexation of Crimea: What should we account for in the DCFTA forecasts?," Conference papers 332717, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:332717
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