| Why shortly after the 2014 Euromaidan crisis and following stagnant military conflict between Ukraine and Russia,the Russian foreign direct investment(hereinafter FDI)in Ukraine increased? Against the background of the trade turnover decrease and comprehensive stagnation of the economic cooperation between two countries Russian FDI continued to increase from 2015 to 2017 and the amount of transferred money was even bigger than before 2014.This question is widely discussed by Ukrainian and Russian experts and analysts,whereas many people in Ukraine are unhappy and disappointed that after the Euromaidan crisis Russian business is still conducting its operation in Ukraine.On the other hand,many people in Russia do not understand why Russian government and business are investing money abroad,while recently Russia has faced the flow-out of investment.Thus,the research question of my thesis is “Why,in the years following the 2014 Euromaidan crisis and the massive deterioration of Russian-Ukrainian relations,did the volume of FDI from Russia to Ukraine start to grow again substantially and became even greater than before the crisis?”To answer the question I made a research,which let me find that over than 60% of the Russian FDI in Ukraine was directed to the banking sector,where Russian state and state-affiliated banks accepted the money and put it into their equity capital.So that the money was used to recapitalize Russian banks' subsidiaries and let them continue working in Ukraine despite the huge losses and sanctions imposed on the banks on behalf of the Ukrainian government.After the analysis of capital flows and comprehensive research,during which I looked through the nature of the Russian FDI in Ukraine,I found out how Russian government is using economic means to achieve the goals of its foreign policy.That's why my hypothesis is next one: “The unexpected rise in Russian FDI to Ukraine from 2015 onwards was almost exclusively due to large-scale transfers of capital by a number of Russian state-owned or state-affiliated banks to their Ukrainian subsidiaries.This was done in spite of the fact that sanctions imposed by the Ukrainian government effectively made the operation of these subsidiaries unprofitable,and the motives for doing so were ultimately primarily(geo)political rather than commercial and were due to decisions made by,or in coordination with,the Russian government”.In this thesis I argue that the recapitalization of the Russian state banks' subsidiaries in Ukraine was carried out with a purpose to maintain their performance.Which saved financial and economic control over some sectors of Ukrainian economy of behalf of the Russian banks' subsidiaries which in this way pursued Russian foreign policy goals towards Ukraine.Relations between Ukraine and Russia always have been the cornerstone for the well-being of two states.However,as soon as two nations became independent the course of their interaction was not stable.After the stage of partnership relations from 1991 to 2004 two countries faced so-called “gas crisis” in 2005,when the natural gas prices were used by Russia as the economic tool for the political pressure on Ukraine.However,both countries managed to come back to the pragmatically based cooperation from 2010 to 2013.After the 2014 Euromaidan crisis the adequate development of the bilateral relations almost stopped.In my thesis,the close ties between Russian banks' subsidiaries and Russian government are confirmed.After 2014,Russian banks' subsidiaries operation in Ukraine became very unprofitable due to different reasons.The first is that number of their Ukrainian customers significantly decreased,among Ukrainians it is not popular to use the services of Russian banks,and people do not trust banks,even despite the deposit interest rates were increased by the banks in order to attract money.The second is that National Security and Defense Council of Ukraine imposed sanctions over the subsidiaries of the Russian banks in Ukraine which prohibited them to send profit to the headquarters in Russia,so that from the commercial point of view their operation is unprofitable.The third is that the National Bank of Ukraine did not provide recapitalization to the banks,so that the Russian government had to invest money into the abroad subsidiaries of its banks.So that the costs were incurred just to keep the banks afloat.The subsidiaries will not be able to return any investment.The lack of logic in the increase of Russian FDI to Ukraine after 2014 persuaded me to make a profound research and my thesis provides a strong argument-there are no economic reasons for the maintenance of the Russian state or state-affiliated banks' subsidiaries in Ukraine,where their operation is unprofitable.There are political issues to leave banks in Ukraine as economic actors helping Russia to destabilize Ukraine and return it to the sphere of Russian influence.In my thesis,I use a theoretical approach known as Foreign Policy Analysis(FPA).While the analysis in my thesis was conducted according to the methodology of economic statecraft,profoundly presented by Michael Mastanduno,and process tracing in a form called by George and Bennett “analytic explanation”,where explicit theoretical forms are used instead of the detailed historical narrative.Chosen theory and methodology helped me to prove that the governments use banks to carry out their foreign policy.I believe that methodology offered me a valuable and practical approach that underlined connection between the state or stateaffiliated banks activity and the achievement of the foreign policy goals.Banks are economic actors promoting the goals and will of the government achieving its pragmatic goals.According to the approach,applied in my research,Russian state banks' subsidiaries appeared to be the providers of the Russian foreign policy.Despite the poor financial performance at the moment,in the near future they may continue spreading the financial influence and control over the Ukrainian economy,which will be used for the Russian government geopolitical goals achievement.To conclude,I suggest that Ukrainian government should continue its strict policy towards Russian banks' subsidiaries.The best choice for the owners of the banks is to sell them. |
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