Ukraine’s economy, another victim of Russian “hybrid war”

[Nota de la redacción: Este artículo fue elaborado antes del inicio de la invasión de Rusia a Ucrania, pero dado su interés periodístico en este contexto lo compartimos con nuestros lectores.]

One by one, the embassies and international offices in Kiev closed. The flight cancellations followed after insurers refused to cover planes landing in Ukraine. Hundreds of millions of dollars in investments went up in smoke in a matter of weeks.

With Russian troops encircling much of the country, Ukrainian companies, large and small, are no longer planning for the future: they can hardly foresee what will happen next week.

It is in the Ukraine, and not in Russia, that the economy is eroding the fastest in the face of the threat of war. Even before Moscow’s troops entered the country’s rebellious eastern parts and Russian President Vladimir Putin recognized the breakaway region’s independence, Ukraine was the biggest loser in the agonizing slow-motion aggression.

“Why are we already suffering the consequences? And Russia, which is really threatening the whole world, Europe, does not suffer any consequences?”, wondered Andrey Stavnitser, general director of the port operator TIS Group.

The pressure on the Ukrainian economy is a key destabilizing tactic in what the government describes as a “hybrid war” aimed at corroding the country from within.

President Volodymyr Zelenskyy is also juggling state-sponsored cyberattacks, a Moscow-backed separatist movement and the threat of 150,000 Russian soldiers surrounding the country on three sides.

The economic problems include restaurants that dare not have food for more than a couple of days, the stalling of plans for a hydrogen production plant that could alleviate Europe’s dependence on Russian gas, and uncertainty over the conditions of the shipping in the Black Sea, where merchant ships must carefully navigate Russian military ships.

According to Stavnitser, Black Sea ports are operating normally for now, but it is only a matter of time before the insurance problems that cut off commercial flights start to affect shipping.

Ukraine is one of the world’s leading grain exporters and loads container ships that move 12% of the global supply of wheat and 16% of that of corn.

Alex Riabchyn is a former Ukrainian parliamentarian who is now leading a project to establish hydrogen plants for the national energy company, Naftogaz.

The idea is to give Europe — and especially its biggest economy, Germany — a new, stable source of hydrogen, which can be used to produce low-emission power for transportation or industry, among other uses.

What you hear now from European investors is “we can buy whatever they can produce, but to go and invest to build those plants is too risky.”

German Foreign Minister Annalena Baerbock acknowledged over the weekend that the constant threat to Ukraine is “having very real effects on investment, on air traffic, on employment and on people’s daily lives”.

The ministers of the Group of Seven (G7), which includes the world’s most industrialized nations, pledged to ensure that Ukraine receives help to maintain its financial stability, he said.

Since the start of the crisis in January, the national currency, the hryvnia, has steadily devalued, plummeting 1% on Tuesday after Russia recognized the two secessionist nations led by pro-Russian separatists.

The United States last week offered a $1 billion loan guarantee, and the European Parliament approved a $1.3 billion loan to Kiev to cover the country’s financial needs this year.

But by the end of January, Zelenskyy said that $12.5 billion had been withdrawn from the country’s bank accounts.

Last week, he called for the return of parliamentarians and businessmen who have left. More than 20 charter flights and private planes have departed from Kiev in the past week with some of Ukraine’s most prominent executives on board.

“The more the government insists not to panic, the more nervous the companies are”, stated Volodymyr Sidenko, an analyst at the Razumkov Center.

In Russia, Margarite Simonyan, the director of the state news network RT, was pleased last week that “Kiev’s economy is in shambles”, calling it “something small but nice”.

But Ukrainian Deputy Prime Minister Olga Stefanishyna pointed out that the destabilization of her economy is not a collateral effect of the Russian threat, but the goal.

It undermines faith in the government and forces Kiev to divert attention and resources from the reforms it needs. This is, he said, an essential pillar of the “hybrid warfare” that Russia is waging.

“It is really important that we are more resilient than ever before and that we do everything we can to preserve stability. But the longer this tension and escalation lasts, the weaker the Ukrainian economy will become.”, he added.

The Center for Economic and Business Research estimated this month that the conflict with Russia has cost Ukraine a loss of US$280 billion in its Gross Domestic Product (GDP) between 2014 and 2020, and the losses are expected to worsen this year. anus.

The United States and Europe announced a series of limited sanctions on Tuesday, including some against Russian officials and banks that finance the country’s armed forces, as well as limiting Moscow’s access to EU financial and capital markets.

The breakaway regions’ additional anti-trade plans are unlikely to have much effect on them or Russia, as they have been virtually cut off from the international community since 2014.

Daniel Fried, a former US diplomat who helped draft the sanctions in 2014, noted that the challenge in designing new ones is that Russia is already succeeding in what he called “the slow strangulation of Ukraine”.

“When we saw the airlines withdrawing from Kiev, they were not withdrawing from Russia. They were withdrawing from Kiev. Putin is getting something he wants without a war“, said.

Ievgen Klopotenko, a restaurant owner in the Ukrainian capital, says he only has a few days’ worth of stock in his kitchens to prevent his money from literally rotting if the crisis worsens. Planning more than a year in advance, he added, is crazy.

“If something happens, I don’t know, I’ll open”, he said pointing out a window that overlooks one of the wide and sunny streets of Kiev, as if imagining a day when they would be filled with soldiers and not families looking for lunch. “If I have to cook for the army, I will cook for the army”.