Starry Aspirant

In early November, under the auspices of martial law, the Ukrainian authorities commandeered privately held stakes in five prominent companies, handing responsibility for wartime management of the businesses to the Ministry of Defence. Of the five, significant shares in Ukrnafta (the country’s largest oil-producer) and in Ukrtatnafta (oil refining) were held by Ihor Kolomoyskyi, who heads the Private Group. For Zaporizhzhia’s Motor Sich, which makes aircraft engines, Vyacheslav Bohuslayev was the main shareholder. The vehicle producer, AvtoKrAz, was linked to Kostyantyn Zhevaho of the Finance and Credit group, while Zaporizhtransformator, which makes parts for electricity plants, was owned by Kostyantyn Hrihorishin. All of these figures may be described as “oligarchs”—that is, business leaders who, over a lengthy period, have been able to use their wealth and business networks to tilt political and economic rules and outcomes in their favour. Oleksiy Danilov, the secretary of Ukraine’s...

In early November the Ukrainian president, Volodymyr Zelensky, said that up to 40% of Ukraine’s energy infrastructure had been damaged or destroyed, following several waves of missile and drone attacks  by Russia  over the past month  on cities across Ukraine. Russia’s switch in tactics to targeting civilian utilities followed significant military reversals in September—most notably, a rapid counterattack by Ukrainian forces in Kharkiv region in the north-east. The strikes appear to be aimed at demoralising the population by subjecting them to additional adversity through the upcoming winter, probably in the hope that this will force the Ukrainian authorities to sue for peace, allowing Russia to retain some of territorial gains from the latest phase of the conflict, especially the “land bridge” to Crimea. In Ukraine, typically, the coldest months are from December to February, although the official weather forecaster predicts only a low probability of a severe winter in 2...

Around 6m Ukrainians displaced by the ongoing war with Russia had returned home, according to a survey by UN’s International Organisation for Immigration (IMO) published in mid-October. Of these, most had returned from the places within Ukraine they had fled to earlier in the war. Around 1.2m of them, however, or 22% of the total, had come back from abroad. According to sociological surveys, those who returned from abroad have done so for a range of reasons, including family disruption (since men of military age are not allowed to leave the country), depletion of savings, or a desire to take part in the country’s struggles at a crucial juncture in its history. In October, the total number of Ukrainians registered as refugees in Europe reached 7.65m, according to UNHCR, the UN’s refugee agency, with many going to Poland (1.4m) and Germany (almost 1m). There are, moreover, 2.85m “registered Ukrainian refugees” in Russia, subsuming both voluntarily and involuntary arrivals. Those bussed o...

Towards the end of October, Vladimir Putin, Russia’s president, signed a degree declaring martial law in the four regions of Ukraine (Luhansk, Donetsk, Zaporizhzhia and Kherson) that were annexed illegally by Russia in late September. At first glance, it is hard to see what practical difference this makes, since, in effect, the parts of Ukrainian regions still held by Russia are already under military rule, while in Ukrainian-held Ukraine, martial law has been in operation since the onset of Russia’s full-scale invasion of late February. However, this is one of a series of ad hoc responses by the Russian leadership to some recent adverse developments, including an ongoing Ukrainian offensive in Kherson, reportedly prompting the imminent withdrawal of Russian forces back across the Dnipro River; as well as the domestic political and economic fallout from a mismanaged and unpopular military mobilisation campaign. The earlier snap “annexation” of further Ukrainian territories was itself a...

In late September, EU bodies approved an additional €5bn in macro-financial assistance (MFA) to Ukraine, and in early October, Ursula von der Leyen, the president of the European Commission, announced that the first payment, of €2bn, would be made shortly, with the rest to follow by the end of 2022. This is the second instalment of a €9bn package first announced in May, and follows the delivery of €1bn in early August. It is designed to address the substantial budgetary shortfalls facing the Ukrainian government linked to the ongoing war with Russia, which has closed off access to capital markets, but led also to agreements with creditors for delays in debt repayments. The latest EU funding comes in the form of “highly concessionary” long-term loans—that is, at a low interest rate, but still adding to the stock of public debt. The form of the final €3bn of the facility—whether it will be offered as a loan or a grant—has yet to be decided among the 27 EU member states. As the EU Commiss...

Real GDP fell by 37.2% year on year in April-June, according to the Ukrainian authorities, compared with a fall of 15.1% year on year in the first three months, linked to the multiple domestic and global impacts of the ongoing war with Russia. The steep fall in economic output, and so income, follows a relatively weak recovery last year from the downturn triggered by the Covid-19 pandemic in 2020. More recent information points to an ongoing pick-up in business activity, which nevertheless remains well below pre-invasion levels. For example, the share of firms surveyed that were still shut in August, and so conducted no work at all, fell to 11%, from 21% in June, according to the latest macroeconomy overview from the National Bank of Ukraine (NBU, the central bank). Similarly, firms working at below 25% capacity dropped to 10% of those surveyed in August, from 22% in June, according to the Institute of Economic Research (IER). However, there was considerable variation in capacity usage...

On October 4th, Kyrylo Shevchenko, the governor of the National Bank of Ukraine (NBU, the central bank), announced his resignation, which was formalised by the finance committee of the Verkhovna Rada (parliament) shortly after. Mr Shevchenko has been in the post since July 2020. Volodymyr Zelenskyi, the Ukrainian president, proposed Andriy Pishnyi, another career banker, to replace him, and this was confirmed by the Rada on October 7th. The consolidation and strengthening of the banking system in 2014-16 under the leadership of Valeriya Hontareva was one of the main policy achievements of the immediate post-Euromaidan era. Since then, however, as in many other areas of reform, there has been some back-tracking, with both Hontareva and her successor, Yakiv Smoliy, subjected to political pressure by vested business-political interests, raising concerns about the bank’s independence. In his resignation statement, Mr Shevchenko, 49, said that he was stepping down as NBU governor ow...

In a morning TV address to the nation, delayed from the night before, on September 21st Vladimir Putin, the Russian president, announced the onset of partial military mobilisation. It would affect, he stressed, only those who had previous military experience. New rules also appear to extend indefinitely the contracts of these new and currently serving troops. The measures were needed, Mr Putin said, to protect Russia’s sovereignty and territorial integrity, as, he claimed, Russia was now engaged in a war, not against Ukraine, but the collective West. The aim of the West, he said, was to destroy Russia, including through the use of unspecified “nuclear blackmail”. He again took the opportunity to draw attention to Russia’s own large nuclear arsenal, which he said he was ready to use. The previous day, a law greatly strengthening sanctions against Russian soldiers who desert or surrender was passed quickly through the Duma, the lower house the Russian parliament. This, in turn, followe...

On September 1st a team from the UN’s International Atomic Energy Agency (IAEA) arrived to inspect the Zaporizhzhia Nuclear Power Plant (ZNPP) in south-east Ukraine. Russia captured the facility in March, soon after its launch of its large-scale invasion. Since then, the Ukrainian authorities have accused Russia of using it as a military base, while both sides have accused one another of shelling the plant, raising the risks of a nuclear accident, and evoking comparisons with the Chernobyl nuclear disaster of 1986. While the design of the Zaporizhzhia plant is said to be much safer that of the ill-fated one at Chernobyl, it still needs constant power supplies to maintain the cooling systems for the remaining two working reactors, and it is the severance or interruption of some these power lines during in the conflict that has raised fears of a radiation leak. In late August, Volodymyr Zelenskyi, the Ukrainian president, warned that a nuclear catastrophe at the plant, threatening both U...

Since the end of July, a series of attacks, both large and small, have been reported on Russian military facilities across Crimea. The most spectacular were two large explosions at a Russian airbase near Saky on August 9th, followed a week later by the detonation ammunition depot at Dzankoy, further north. Before and after this, smaller-scale drone attacks have been reported on the headquarters of the Russian Black Sea Fleet in Sevastopol. Ukraine has not explicitly admitted responsibility of these actions, and it is not clear how all of them were achieved—whether by Ukrainian special forces, local resistance groups or long-range missiles—and, at first, Russia tried to play down their military significance, attributing some to negligence. However, alongside a broader switch in Ukrainian tactics over the same period, permitted by the supply of more modern long-range rocket artillery systems by Ukraine’s Western backers, the events in Crimea, annexed by Russia in 2014, underscore Ukraine...

Inside the Russian occupation The US authorities have information that Russia continues to prepare “mock referendums” in the areas of Ukraine that it holds, according to John Kirby, a national security official, speaking in late August. Soon after the launch of a full-scale invasion of Ukraine in late February, Russian forces quickly took control of large areas of Zaporizhzhia and Kherson regions in the south-east. These were among the most notable successes of the early phase of Russia’s military campaign, which it has found harder to replicate elsewhere. Since then, there have been regular reports, including from the local administrations installed by Russian forces, that referendums on joining Russian—along the lines of the flawed plebiscite organised in Crimea ahead of its annexation in March 2014—are to be organised in newly taken areas, as well Luhansk and Donetsk regions, where Russia has been in de facto control since 2014-15. One plan envisions merging these areas into a sing...

In early August the US authorities signed off on large packages of military and fiscal aid to Ukraine, worth US$5.5bn in total. This is the latest funding drawn from the US$40bn sum agreed by the US Congress in May. The security assistance element, worth US$1bn, provides significant quantities of munitions and equipment, ahead of a planned Ukrainian counter-offensive in the strategically important south-eastern region of Kherson. This is the largest such drawdown of military aid under US presidential authority so far. In particular, the US will supply ammunition for the modern surface-to-air systems (NASAMS) and mobile long-range rocket systems (HIMARS), the deployment of which in recent weeks has produced some success for Ukrainian forces in destroying ammunition dumps, control-and-command posts, and rail links in Russian-occupied areas, so making it difficult for amassed Russian artillery to sustain a high intensity of fire. This takes to US$11.8bn the total of US military assistance...

Black Sea “grain corridor” agreement looks shaky after Russia bombs Odesa port Towards the end of July, a deal to resume Ukrainian grain exports through the Black Sea, following a five-month naval blockade by Russia, was brokered with Ukraine and Russia by Turkey, backed by the UN. According to the deal, Ukrainian vessels are to guide cargo ships of its grain through the protective mines laid around Ukrainian ports; Russia is to refrain from attacking ports and ships storing and carrying grain; and Turkey will check cargo ships to allay Russia’s concerns that they might be carrying weapons. To oversee the process, two co-ordination centres are to be established, attended by representatives of all four parties to the deal. Ukraine, like Russia, is a major grain supplier, with some countries in Africa and the Middle East highly reliant on imports of Ukrainian wheat in particular, according to the UN. Normally, up to four-fifths of Ukraine’s grain exports reach global markets through its ...

“Lugano declaration” sets out ambitious reconstruction plans, but lacks focus A high-profile “Ukraine Recovery Conference” was held over two days in early July, hosted by the Swiss authorities in the city of Lugano. Bringing together representatives from some of the big industrial economies, such as the US, the UK, France and Japan, with ministers and civil society leaders from Ukraine, the purpose was to set out and discuss detailed plans for Ukraine’s economic recovery, in alignment with its EU integration goals, which received a boost at the end of June with the award of EU candidate status. The reconstruction plan itself was put together by Ukraine’s National Recovery Council, a new body established by Volodymyr Zelenskyi, the Ukrainian president. It envisages a three-stage process, of immediate economic repair, short-term post-war reconstruction and long-term modernisation, focusing on five key areas of infrastructure, the economy, digitalisation, the environment and society. Amon...

Belarus will not be considered as a route out for Ukrainian grain In early June, Alyaksandar Lukashenka, the Belarusian leader, said that he was ready to permit the transit of Ukrainian grain across Belarus to ports in northern Europe, so long as Belarus was also allowed use the same facilities to export its own goods. Ukraine is one of the world’s leading suppliers of wheat and other food staples, so that Russia’s seizure or blockade of its key port cities has prevented the shipment of large quantities of Ukrainian grain to world markets through the Black Sea, the main traditional export route. Reports suggest that between 18m and 22m tonnes of grain may be held up in Ukrainian ports as a result. This has major implications for food prices and food security elsewhere in the world. Most pointedly, following several years of drought in some African countries, the war in Ukraine has raised the risk of starvation for up to 20m people, according to the International Rescue Committee (IRC),...

In Ukraine, Russia's war generates elite unity, within limits (for the EIU) In late May, Rinat Akhmetov, a prominent Ukrainian business magnate, announced his intention to sue the Russian government for up to US$20bn in compensation for the physical damage and lost business at his Azovstal steel plant in Mariupol resulting from Russia's bombardment of the city, which it now controls. Akhmetov is not the only figure from Ukraine’s economic elite to come out strongly in support of the country’s wartime authorities, while publicly condemning the Russian invasion. By early May, according to Ekonomichna Pravda , a local business news website, 14 of Ukraine’s leading business figures had between them donated US120m in military and humanitarian aid since late February. Of this, Akhmetov alone is reported to have contributed just over US$70m, following his earlier payment of US$30m in taxes in advance to support government finances. Many of those listed as acting similarly—including Vi...

The Rada permits the seizure of Russian and Belarusian property (for the EIU) In the first half of May, the Verkhovna Rada, the Ukrainian parliament, approved a bill, proposed by the president, Volodymyr Zelenskyi, to permit the confiscation of Russian and Belarusian property. The bill applies to the assets of individuals or organisations found to have contributed to threats to Ukraine’s security, sovereignty or territorial integrity. The legislation is wide-ranging, applying to assets both inside and outside Ukraine, albeit at present only for duration of martial law, introduced following the Russian invasion of late February. Property so taken is to be transferred to a new National Investment Fund, with the proceeds from any sales to be used to strengthen national defence and to restore war damage. The new law paved the way for the immediate seizure of the assets in Ukraine of Sberbank and Prominvestbank—the first, the largest Russian bank, majority-owned by the Russian state...

As economic war damage mounts, president’s team sketches a reconstruction plan (for the EIU) The direct cost of economic war damage is high and mounting, but unevenly spread across Ukraine’s regions.  Amid the large-scale destruction, signs of economic resilience and recovery have started to appear in areas where Russian forces have been pushed back. The president’s team has set out a preliminary plan of priorities for post-war reconstruction.   1. Three months into the current, most destructive phase of the Russo-Ukrainian war, the cost of war damage to Ukraine’s infrastructure and physical capital has continued to mount at a rate of US$3bn-4bn per week, according to the Kyiv School of Economics (KSE). As of May 19th, the total accumulated cost of direct economic damage since late February came to just over US$97bn, with the highest losses accruing in the categories of housing, roads and factories. This is high a share of the country’s domestic national wealth (estimated...

Germany approves the supply of heavy weapons to Ukraine (for the EIU) At the end of April, the Bundestag, the lower house of Germany’s parliament, voted 586:100 in favour of supplying heavy weapons to Ukraine, amid its ongoing war with Russia. The proposal was backed both by the coalition government and by the main opposition party, the Christian Democrats. This was something of an about-turn on the issue, as only shortly before, Olaf Sholz, the German Chancellor, had been defending his administration’s unwillingness to take this step for fear of stoking the conflict. The decision represents a further stage in the transformation of German security policy in the wake of the Russian invasion of February 24th. Prominent among the military items now said to be sent to Ukraine by Germany are 50 Gepard anti-aircraft tanks. The development was welcomed in Ukraine, where Germany has been viewed, perhaps unfairly, as among the least supportive of the European states, not only for its reluctance...

Foreign trade falls precipitously in March, while accumulated war damage will hinder post-war recovery (for the EIU) In March, the value of Ukraine’s goods exports tumbled by almost 50%, to US$2.7bn, from US$5.3bn in February, according to the economics ministry. Goods imports fared worse still, dropping by two-thirds, to just US$1.9bn, from US$5.9bn a month earlier. While Russian attacks on key Ukrainian ports, alongside its erection of naval blockades in the Azov and Black seas, in large part explain the precipitous decline in foreign trade, another factor will have been the Ukrainian government’s restrictions on agricultural exports to try to prevent food shortages at home. Nevertheless, for a relatively open economy such as Ukraine’s, in which the exports and imports each tend to equal 40-50% of GDP, a drop in trade on this scale corresponds to severe cut in income, while signalling also severe disruption in production supply chains. Based on estimates of this kind, Ukrainian offic...

President Zelenskyi renews call for fast-track EU membership for  Ukraine (for the EIU) In a video address to Swedish MPs on March 24th the Ukrainian president, Volodymyr Zelenskyi, again made the case for his country to be offered full EU membership. Almost a month earlier, the president made a similar appeal to the European Parliament, calling for Ukraine’s case to be fast-tracked. Soon after he signed a formal membership application, Georgia and Moldova followed suit. At a meeting of EU leaders held at Versailles in France on March 10th, however, no formal commitment by the EU on Ukraine’s membership statement was made. Instead, the European Commission was tasked with assessing Ukraine’s application. The chances of Ukraine’s rapid advance to full EU membership appear slim, therefore. This is mainly because of the size of the task involved, which involves the replication and implementation of the full range of political and economic regulations built up in the EU over decades, i...

What will be the economic fallout for Ukraine? (Feb 2022, for the EIU) On February 21st the Russian president, Vladimir Putin, signed a decree recognising the independence of the “People's Republics” in Ukraine’s Donetsk and Luhansk regions. The following day, he ordered regular Russia troops into these areas, on “peacekeeping duties”. Even before Russia’s latest move, heightened geo-political tensions were costing Ukraine US$4bn-5bn per month, according to the estimates of officials from the presidential administration, reported in Ekonomichna Pravda , a Ukrainian business news outlet. They cite the dampening effect on investment, the impact on tourism and air traffic, as well as of higher inflation and the cost of supporting the exchange rate. To scale this figure, Ukraine’s GDP last year came in just below US$200bn. Following an earlier rally, the hryvnia had already begun to depreciate again from the middle of February, perhaps in line with the failure of Russia to withdraw its...

European Parliament approves emergency financial assistance ( for the EIU) In mid-February, the European Parliament voted to extend to Ukraine an emergency EU loan worth Euro1.2bn. This clears the way for the swift disbursement of half the sum, following the earlier approval of the loan by the European Council, as long as the political and economic reform conditions attached to the funding are judged to have been met, which is likely. The purpose of the loan in to help to cover Ukraine’s external financing gap, thereby supporting financial and economic stability in the country, undermined in recent months by the impact of geo-political tensions with Russia. Most recently, this showed itself as the withdrawal of coverage of Ukraine by some international commercial insurers, affecting airlines and shipping, and forcing the government to set up a new HRN16bn (US$592m) insurance fund of its own.  Although the level of public debt in Ukraine has come down substantially since 2015—to 54%...

Reserves fall, amid strong downward pressure on the hryvnya (for the EIU) Ukraine’s international reserves came to US$29.29bn at the end of January, down by US$1.65bn on a month earlier, according to the National Bank of Ukraine (NBU, the central bank). Correspondingly, reserve coverage of imports fell to 3.6 months, from 4.1 months at the end of 2021. The level of reserves held by the NBU is an indicator of the authorities’ capacity to meet their debt commitments and to protect the financial system from destabilisation—in particular, to smooth out sharp movements of the hyrvnya exchange rate to the US dollar. In 2021, Ukraine’s international reserves rose by US$1.8bn, or 5%, to US$30.94bn. The NBU was able to achieve this owing to a mix of favourable price and demand trends for key Ukrainian exports, alongside continuation of loan inflows, including from the IMF and the European Commission (EC). Since December, however, the NBU’s net currency purchases have turned negative, quite shar...

Investment recovered weakly in 2021, while the outlook remain subdued amid heightened geo-political tensions (for the EIU) The volume of capital investment in Ukraine grew by 9.7% year on year in the first three quarters of 2021, according to latest data from the State Statistical Service.  Against the backdrop of a year-on-year fall in investment by almost a quarter in 2020, as the pandemic and official responses to it hit economies worldwide, the pace of investment recovery looks weak. Nonetheless, according to a survey of almost 1,500 industrial firms by the Ukrainian statistics agency in October 2021, business expectations for production, sales prices, employment and capacity usage in the fourth quarter of last year remained on a broad upward trend. Meanwhile, construction growth, as an indicator of firms’ confidence in realising a return on investment, slowed relatively abruptly in final months of 2021, against a strengthening base a year earlier. Towards the end of January th...

The course I propose provides an overview of the modern Ukrainian oligarchy as the country’s dominant post-communist political economy institution. Starting from an outline of how the institution was formed from a developing relation between political elites and regional business networks in the 1990s, students will examine what the oligarchy is, how it operates, and how it has managed to reproduce itself across crises, despite the country’s perennially poor economic performance. The course is comprised of 3 lectures and seminars which introduce political economy and a subject, focusing on a comparison between neo-classical and institutional economics. It is followed by 7 lectures/ seminars on key empirical themes concerning the modern Ukrainian oligarchy, based on a book-length monograph of my PhD dissertation, The Ukrainian Oligarchy After the Euromaidan , as well as key readings on the political economy of modern Ukraine on which it draws. It will, however, include more of an extern...