Starry Aspirant

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 at around 3.5

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, inclu

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