July 31 (Bloomberg) -- When Nataliya Krivitskaya decided to boycott Russian products three months ago, she had no idea how much it would complicate her life.
With a bloody conflict against pro-Russian separatists raging in east Ukraine, the 27-year-old public-relations manager vowed to rid her Kiev home of brands made in Russia -- even if that means giving up her favorite Pampers diapers, churned out for Ukrainian households by a Procter & Gamble Co. unit 114 miles south of Moscow.
“At first, it was difficult not to buy Russian medicines,” Krivitskaya said. Then came the “irreplaceable things, like Pampers.”
As the Ukrainian government balks at joining U.S. and European Union sanctions against Russia to protect the economy that imports $23 billion in products and services each year from Russia, shoppers in the second-most populous former Soviet republic are scouring store shelves to find replacements for goods such as Lukoil gasoline, Chistaya Lina cosmetics made by Unilever NV’s Russian unit and RotFront sweets.
The war, in which the United Nations High Commissioner for Refugees said 1,229 have died, is taking its toll on Ukraine’s economy, forecast to shrink 6.5 percent this year, making it the worst-performing economy in Europe.
The crisis started with November protests that eventually ousted Kremlin-backed President Viktor Yanukovych, then morphed into Russia’s annexation of the Crimean peninsula and the eastern military struggle against breakaway rebels. The death toll doesn’t include the 298 killed onboard Malaysian Air’s flight downed over rebel-held territory on July 17.
The escalating war is more likely to hurt Ukraine more than Russia as production is disrupted in the industrial heartland of Donetsk and Luhansk, where the conflict is centered, said economists including Dmitry Sologub, the head of research at the Ukrainian unit of Raiffeisen Bank International AG.
Gross domestic product shrank 4.7 percent in the second quarter, the state statistics committee reported yesterday, mainly because of trade halts in the war-torn east.
At the same time, any informal, non-targeted boycott of Russian goods by households would have little impact on Russia, said Sologub.
Though Russia remains Ukraine’s No. 1 source of imports, with the value of total goods topping that of the next four countries combined, Ukraine is Russia’s seventh-biggest export destination, behind Germany, China, the Netherlands, the U.S., Turkey and Japan, according to data compiled by Bloomberg.
“A blanket no-buy policy on Russian goods, such as gasoline and natural gas, among Ukrainian households is impossible,” Sologub said. Unless a state-sponsored ban on Russian imports is introduced, Ukrainian citizens’ boycott of consumer products “won’t have a serious effect on the Russian economy,” he said.
The knock-off effect on Ukraine from the Russian sanctions, or a widespread boycott of its goods, would be felt more in Ukraine than in Russia and in ways yet to be identified, said Dmitriy Boyarchuk, the head of the Kiev-based CASE-Ukraine economic research institute.
“We will have a number of indirect consequences, although a lot of them are not obvious for us yet,” said Boyarchuk. “All that will make Ukraine’s economic recovery slower, even after the military conflict in its eastern regions is over.”
Even so, Ukrainian consumers interviewed in Kiev said they reached a turning point in their decision to shun Russian goods after the land grab in Crimea, once Ukraine’s most popular summer resort, and the resulting deadly military conflict in the east. Buying Russian-made goods in Ukraine would boost corporate revenue in Russia, which would then raise tax receipts used to finance the military, they said.
The share of Ukrainians who view Russia positively plummeted 26 percentage points from February to 52 percent in May, before the Malaysia Air shooting, according to a Kiev International Institute of Sociology survey of 2,022 people from April 29 through May 11. The margin of error doesn’t exceed 3.3 percent, the institute said.
While Ukraine hasn’t taken steps to introduce a formal ban of Russian-made goods, the larger former Soviet partner has halted Ukrainian imports of cheese, potatoes, pork, canned fruit, vegetables, fish and dairy products.
Still, ordinary Ukrainians believe they can make a difference, even a small one, in a country where the most visible Russian-made product is gasoline.
Serhiy Vovk, the 36-year-old head of the Center for Transport Strategies, a Kiev-based research institute, said the only thing from Russia he used to buy was gasoline for his car. Now he avoids Russian stations as much as he practically can and tries fills his car up at stations supplied by Lithuanian refiner Orlen Lietuva, owned by Poland’s PKN Orlen SA.
Oksana Misyura, the 34-year-old manager of an online shopping service, said she was at first surprised to learn how many Russian-made products she bought, from cosmetics to sweets and food.
“I replaced all of that now, with the exception of shoes,” because Russian shoes are more comfortable, she said. “But I believe that I can also find a way around that. Even my three-year-old son knows now that I won’t buy him something if it’s a Russian product.”
The anti-Russian mood can be seen along Kiev streets, where T-shirts and tote bags with anti-Putin slogans have become a hit.
At the high-end of the shopping chain, the made-in-Ukraine fervor has helped local designers in Kiev.
Alina Kocharovska, the daughter of a Kiev-based designer and maker of leather goods, said the number of clients who buy their $100 handmade leather bags and shoes has risen by half since March.
“It’s very trendy now to buy Ukrainian-made goods,” she said at the showroom on the second floor of a residential building in downtown Kiev. “We have clients who come here carrying Prada bags and dressed in other designer labels. But they come here and want to buy our shoes. People desire to support Ukrainian products.”