Ukraine’s economy has become another victim of Russia’s “hybrid war”

KIEV – Embassies and international missions in Kyiv were closed one after another. Flight after flight was canceled when insurance companies refused to cover aircraft arriving in Ukraine. Hundreds of millions of dollars of investment have dried up in a matter of weeks.

As Russian troops surround most of the country, Ukraine’s large and small businesses are no longer planning for the future – they can hardly predict what will happen week by week.

This is Ukraine, not Russia, where the economy is eroding the fastest threat of war. Even before Russian troops entered rebel-held areas in the east and Russian President Vladimir Putin recognized the independence of the separatist region, Ukraine was the most unsuccessful. painful, slow aggression.

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“Why are we already suffering from the consequences? And Russia, which actually threatens the whole world, in Europe, has no consequences? ” – asked the General Director of the port operator TIS Group Andrei Stavnitsar.

Shrinking Ukraine’s economy is a key destabilizing tactic in what the government describes as a “hybrid war” designed to eat the country from within. The Ukrainian president also controls state-sponsored cyberattacks, a Russian-backed separatist movement, and the threat of 150,000 Russian soldiers surrounding his country from three sides.

Economic problems include restaurants that dare not keep food on hand for more than a few days, suspended plans to set up a hydrogen plant that could help wean Europe off Russian gas, and uncertain conditions for shipping in the Black Sea, where container vessels need to be careful. bypassed Russian warships.

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Stavnikar said that the ports in the Black Sea are still operating normally, but it is only a matter of time before the same insurance problems that stop commercial flights, will begin to affect shipping. Ukraine is one of the world’s leading exporters of grain, loading container vessels carrying 12% of the world’s wheat and 16% of corn.

Alexei Ryabchin is a former member of the Ukrainian parliament who is currently leading a project to build hydrogen plants for the national energy company Naftogaz. The idea is to give Europe – and especially Germany’s largest economy – a new stable source of hydrogen that can be used to produce low-emission energy for transport, industry and other purposes.

Now he hears from European investors: “We can buy everything you can produce, but coming and investing in the construction of these plants is too risky.”

Last weekend, German Foreign Minister Annalena Burbock acknowledged that the constant threat to Ukraine “has very real consequences – for investment, for air traffic, for jobs and for people’s daily lives.”

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She said that the ministers of the Big Seven leading industrialized countries promised to provide assistance to Ukraine for financial stability.

Since the crisis began in January, the national currency, the hryvnia, has been steadily losing value and falling 1% on Tuesday after Russia recognized two separatist regions led by Russian-backed separatists. Last week, the United States offered a $ 1 billion loan guarantee, and the European Parliament approved $ 1.3 billion in loans to Ukraine to cover funding needs this year.

But by the end of January, Ukrainian President Volodymyr Zelensky had said $ 12.5 billion had been withdrawn from his accounts. Last week, he called for the return of MPs and businessmen who had fled. Last week, more than 20 charters and private planes took off from Kyiv, carrying some of the country’s most famous leaders.

“The more the government urges not to panic, the more nervous business is,” said Vladimir Sidenko, an analyst at the Razumkov Center.

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In Russia, Margarita Simanyan, head of Russia’s state-run RT news network, said last week that “Kiev’s economy is in shambles,” calling it a “small but pleasant thing.”

But Deputy Prime Minister Olga Stefanishina said that the destabilization of Ukraine’s economy is not a side effect of the Russian threat, but the essence. This undermines faith in the government and forces Ukraine to divert attention and funds from the necessary reforms. According to her, this is the most important support of the “hybrid war” waged by Russia.

“It is very important that we are sustainable as never before and do our best to maintain stability. But the longer this tension and escalation lasts, the weaker the Ukrainian economy may become, ”she said.

A study by the Center for Economics and Business estimated this month that the conflict with Russia cost Ukraine $ 280 billion in gross domestic product losses between 2014 and 2020 – and those losses are expected to grow this year.

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The US and Europe have developed a series limited sanctions on Tuesday, including against several Russian officials and banks financing the Russian armed forces, and imposing restrictions on Moscow’s access to EU capital and financial markets.

Additional plans to target trade from separatist regions are unlikely to have a significant impact on them or Russia, as they have been largely isolated from the international community since 2014.

Daniel Fried, a former U.S. diplomat who helped write sanctions in 2014, said the challenge in developing any new sanctions is that Russia is already pursuing what he called a “slow suffocation of Ukraine.”

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“When we saw airlines leaving Kyiv, they did not leave Russia. They are leaving Kyiv. Putin gets what he wants without war. “

Kiev restaurateur Eugene Klapatsenko said he keeps stocks in their kitchens for only a few days to avoid his money literally rotting in the event of a worsening crisis. Planning for more than a year in the future, he said, is nonsense.

“If something happens, I don’t know, I’ll be open,” he said, pointing to a window overlooking one of Kyiv’s wide sunlit streets, as if imagining a day when they would be full of soldiers, not families. looking for brunch. “If you need to prepare for the army, I will prepare for the army.”

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Yuras Karmanau contributed to this report.

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