Each day, embassies in Kyiv and international offices were closed. Insurance companies refused to cover flights arriving in Ukraine, and flight after flight was cancelled. Within weeks, hundreds of millions of dollars of investment were lost.
Large and small Ukrainian businesses cannot plan for the future because of Russian troops invading large parts of the country. They can’t even foresee what might happen week to week.
The threat to war is not affecting Russia but Ukraine. Ukraine was the largest loser in the slow-motion aggression even before Russian troops entered rebel-held areas of the country’s eastern.
“Why is it that we’re already suffering consequences?” And Russia, who is in fact threatening the entire world, in Europe is not suffering any consequences?” asked Andrey Stavnitser CEO of TIS Group.
The government calls “hybrid war” a strategy to destabilize Ukraine’s economy. The Ukrainian president is also managing state-sponsored cyberattacks and a Russia-backed separatist movement, as well as the threat of 150,000 Russian troops surrounding his country from three sides.
Restaurants that can’t keep enough food on hand for several days, stagnant plans for a hydrogen production facility that could wean Europe from Russian gas, and unfavorable shipping conditions in the Black Sea where containers ships must navigate around Russian military vessels are some of the economic problems.
Stavnitser stated that the Black Sea ports are still operating as normal for the moment, but it is only a matter time before the same insurance issues that have cut off commercial flights begin to affect the shipping industry. The world’s largest grain exporter, Ukraine loads container ships that transport 12% of its wheat and 16% of its corn.
Alex Riabchyn, a former member Ukraine’s parliament, is now leading a project to build hydrogen plants for the Naftogaz national energy company. This is a plan to provide Europe, and particularly Germany, with a stable source of hydrogen that can be used for transportation, industry, and other purposes.
He says that European investors are telling him now that they can buy all the products you produce, but it is too risky to invest in these plants.
Over the weekend, Annalena Baerbock, the German Foreign Minister, acknowledged that Ukraine’s constant threat is having “very real effects” on investments, air traffic, jobs, and daily life.
She stated that the Group of Seven ministers of industrial nations had promised to help Ukraine achieve financial stability.
The hryvnia has been steadily losing value since January’s crisis. It plunged 1% Tuesday when Russia recognized two regions that were led by Russia-backed separatists. Last week, the United States offered a $1B loan guarantee and the European Parliament approved $1.3Billion in loans to Ukraine to meet its financing needs.
Late January saw Volodymyr Zelenskyy, the Ukrainian President, announce that $12.5 billion had been taken from Ukrainian accounts. He called for members of parliament as well as businessmen to return home last week. Last week, more than 20 private and charter jets flew from Kyiv carrying some of the most important executives in the country.
Volodymyr Sidenko from the Razumkov Center, an analyst, said that “the more the government urges businesses not to panic, then the more nervous they are.”
Margarite Simonyan (head of state-owned Russian RT News Network) boasted last week that Kiev’s economy was in “tatters” and called it “a small, but pleasant, thing.”
Olga Stefanishyna, Deputy Prime Minister, said that the Russian threat is the main reason for the economic destabilization in Ukraine. It undermines the faith of the government and forces Ukraine to divert resources and attention from necessary reforms. She said it is an essential pillar in the “hybrid warfare” Russia is waging.
“It is vital that we are as resilient as ever before, and we do everything we can to maintain stability. She said that the Ukrainian economy could become weaker if tension and escalation continue for too long.
According to the Centre for Economics and Business Research, Ukraine lost $280 billion in gross domestic product due to conflict with Russia between 2014 and 2020. These losses are expected increase this year.
On Tuesday, the United States and Europe agreed to a number of limited sanctions. These included targeting Russian officials and banks that finance the Russian armed force and restricting Moscow’s access financial and capital markets.
Russia and the breakaway countries are unlikely to benefit from any additional plans to increase trade. They have been isolated from the international community since 2014.
Former U.S. diplomat Daniel Fried said that the difficulty in creating any new sanction is Russia’s success in “the slow strangulation” of Ukraine.
“When we saw the airlines leave Kyiv, it was clear that they are not leaving Russia. They are pulling out of Kyiv. Putin is getting what he wants, but without war.
Ievgen Klopotenko, a Kyiv restaurateur, said that he only keeps a few days’ worth of stock in the kitchen to prevent his money from literally going away if the crisis gets worse. He said that planning for the future beyond a year is foolish.
He said, “If anything happens, I don’t know, but I will be open,” gesturing out the window that overlooks one of Kyiv’s wide sunlit streets, as if he was imagining a day when they would be crowded with soldiers and not families looking for brunch. “If I have to cook for my army, I will.”
