The European Union’s (EU) trade relationship with Ukraine is a complex and evolving one, significantly impacted by the ongoing conflict. While the EU consistently maintains a trade surplus with Ukraine, the specifics of this relationship are constantly shifting.
What are the current trade trends?
- Recent Quarter (Q4 2024): EU exports to Ukraine surged by 9.3% compared to the previous quarter, while imports from Ukraine slightly dipped by 1.8%. This resulted in a substantial EU trade surplus of €5.8 billion. This surplus, however, is not a new phenomenon. Since early 2021, excluding the first quarter of 2022 (immediately following the Russian invasion), the EU has held a consistent trade surplus with Ukraine.
- Year-on-Year (Q4 2024 vs. Q4 2023): EU exports to Ukraine saw a robust increase of 16.7%, while imports rose by 9.2%, indicating a strengthening of trade ties.
- Pre-War Context: Before the Russian invasion, the EU was already Ukraine’s largest trading partner, and this remained true throughout 2023. In that year alone, total trade in goods between the EU and Ukraine exceeded €61.9 billion. This represents more than a doubling of trade since the Deep and Comprehensive Free Trade Area (DCFTA) of the EU-Ukraine Association Agreement came into effect in 2016.
What are the key product exchanges?
- EU Exports to Ukraine: The most significant increases in the EU’s exports to Ukraine during the latter half of 2024 were explosives and arms and ammunition. Other major exports include mineral fuels and mineral oils, motor vehicles, machinery, and electrical machinery. These highlight the EU’s significant role in supporting Ukraine’s defense capabilities and post-conflict recovery.
- EU Imports from Ukraine: Ukraine’s exports to the EU predominantly comprise agri-food products (cereals, vegetable oils, oil seeds, and iron and steel). The EU’s imports of agricultural products from Ukraine experienced a surge following a temporary full trade liberalization enacted in early June 2022. This measure, while expiring in mid-September 2023, significantly increased agricultural imports from Ukraine, although it also led to market distortions in neighboring countries, resulting in the temporary imposition of restrictions on Ukrainian agricultural exports in May 2023. These measures were lifted in September 2023. Despite a decline in Ukraine’s share of sunflower oil in the extra-EU market (from 94% to 79% between Q4 2022 and Q4 2024), imports of products such as rape/colza seeds, soybean oil, maize, sunflower oil, and iron and steel increased between 2023 and 2024. Imports of wood, however, decreased during this time. The decline in iron and steel imports, specifically, represents a 48-percentage point drop from Q4 2021 to Q4 2024.
Are there significant challenges and impacts?
- Russian Invasion: Russia’s invasion significantly disrupted trade flows, particularly during the first quarter of 2022. While exports bounced back, it impacted on agricultural exports, as neighboring EU countries experienced a surge in imports leading to restrictions imposed on certain agricultural imports for a period.
- Logistics and Infrastructure: The war heavily impacted Ukraine’s infrastructure, disrupting both exports and imports. The Black Sea grain corridor was crucial in restoring some export routes. However, significant challenges remain in terms of infrastructure, ports, and transportation.
- EU Support: The EU has provided substantial financial assistance to Ukraine, including a €3.5 billion package in late 2024 (an advance on a larger €50 billion aid fund established in early 2024) to alleviate budget strains and support military procurement. The supply of weaponry beyond the summer of 2025 remains uncertain.
What does the future of an EU-Ukraine trade relationship look like?
The EU-Ukraine trade relationship will continue to evolve in response to the war’s progression and the evolving geopolitical landscape. The EU’s ongoing support, both financially and in terms of trade facilitation, will play a crucial role in Ukraine’s economic recovery. While agricultural exports remain important, the long-term trajectory depends on rebuilding infrastructure, securing safe export routes, and managing market fluctuations. The EU’s role in supporting this growth is significant, and the relationship is expected to remain crucial for both sides.
Source: Euronews.com