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Ukrainian Economy - a View from the Ground Up

Serge AMay 19, 2022 (0)

Ukraine's economy is in shambles. War has caused across-the-board job losses, agricultural crises, and metallurgical disasters. The once thriving construction industry is at a standstill. The service industry, mainly IT, has fallen into the abyss.

1. The closure of access to the Black Sea

Ukrainian businesses make the bulk of their revenue exporting goods like wheat, steel and raw materials, and by extension, so does the government, in the form of taxes on those goods and businesses. These goods require large haulers - the bigger, the better. Ships are the largest bulk carriers in the modern economy. These ships have not carried Ukraine's products since the Russian military seized control over the Black Sea. Ukraine as a sovereign state never established its own battle fleet. We can't protect ourselves at sea from Russian aggression. Attempts to reinstate old battleships from the Soviet era were shelved because of budget shortfalls and other government priorities. Today, Ukraine can no longer export the goods that brought in those huge sums. The resulting job losses are staggering. The maritime industry primarily employed Odessa locals, and those workers are out of a job, regardless of whether they were hired by Ukrainian or international companies.

No ships in the Black Sea port.

2. Nothing to export anyway

Even if the ships could sail, there isn't anything to export. This year Ukrainian farmers underplanted, because it's not easy when the fields are full of mines and rockets fly overhead. Some brave farmers and equipment operators drive tractors in bulletproof vests, running and hiding every time they feel a shockwave or an explosion. Then why risk it at all? Ukraine still must plant enough for its own needs in the fields that are still available. The crops will go toward human consumption as well as livestock. Otherwise, Ukraine will not only be unable to supply food to other countries, but Ukrainians will go hungry themselves.

How Ukrainian farmers work. The sign says "Stop Mines!"

Fields full of missiles

3. Steel plants are at a standstill

Not only did Russia inflict horrific genocide on Mariupol, its army also demolished the Azovstal iron and steel works, the country's largest metallurgical facility. Steel mills employ tens of thousands of people. Distributors supply ferroalloys and other ingredients for steel manufacturing, and these industries also are at a standstill. Of those steel plants that are still functioning, only some can count on stable supplies of raw material. Steel manufacturing cannot function with shortages. Everything must arrive just in time. Steel mills cannot start a melting process only to find out it lacks components. Furthermore, Marten furnaces, which are still used to melt steel, must be kept going at all times even if there is nothing to produce, because once you put it out, the whole furnace must be rebuilt from scratch. Steel furnaces that run on electricity have fewer problems but are still affected by raw material shortages.

Azovstal Plant after bombardment.

4. Construction also at a standstill

Why build a tower when it can be destroyed with a missile strike? Also, the materials used to manufacture concrete are in short supply. A hard grade of concrete is used to make a foundation, while concrete for columns and walls doesn't require such rigidity but instead incorporates plasticizers. These are difficult to manufacture and are imported from Western Europe and the US. The Black Sea is closed, so just as nothing is getting out, nothing is coming in either.

Construction halted on a 25-story building in Dnipro since the beginning of the war.

5. Information Technology

Companies that outsourced tech work to Ukraine are reluctant to do so now because of risk perception. Investors in publicly traded companies are afraid they'll lose their tech team altogether. The risk cascade is that if a company loses its tech team, not only will there be no one to continue with software development, there will also be no tech support to maintain what has already been done. In light of such investor sentiments, Western companies have pulled out of the Ukrainian IT market. I personally spoke to developers who said their Western employers gave them a choice: get out of Ukraine or lose your job. That may be an option for women, but not for men of military age.

These are numbers, and industries, not the personal element. People who were never shot at are enduring hardship. Unemployment is skyrocketing, even if the exact rate is unknown. The Ukrainian government is doing what it can to mitigate this problem, but the country itself has money problems. Recently, it launched a campaign to provide Ukrainians with cash. But how far will $210 go, spread out over almost three months? I can answer that - not very far.

I met up with a friend a couple of days ago in a hardware superstore much like Home Depot in the States. A third guy was describing his personal financial situation. He had lost his job. “Well, that's how it is, I have 8,65 left on my account and that's it,” he said. That's eight hrivans and 65 cents in Ukrainian currency, or 29 U.S. cents. Here, a loaf of bread costs 50 U.S. cents. This is our reality. This is what Ukrainians have lived with every day, for 81 straight days.

Serge A is of Ukrainian descent, grew up in Brooklyn and is volunteering in Ukraine as a legally armed member of a Territorial Defense Group. He was a columnist for the newspaper at Pace University which he attended as an undergrad.


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