“It will be the worst winter in our history,” Yuri Vitrenko, head of the Ukrainian utility Naftogaz, told Handelsblatt: “We expect constant power outages and problems with heating.”
Ukraine is therefore placing great hopes in the federal government: This Monday, a German-Ukrainian economic forum in Berlin with top representatives from both countries will be about the reconstruction of Ukraine. A day later, Chancellor Olaf Scholz (SPD), as President of the seven leading democratic economic powers (G7), together with EU Commission President Ursula von der Leyen, attended an international reconstruction conference in Berlin invited.
“Reconstruction will be a big, big task,” said Scholz in a video podcast published on Saturday. “We will have to invest a great deal in order for this to work well.” According to Scholz, one has to think about how the reconstruction of Ukraine can be financed over “many, many years, yes, decades”. Ukraine and the EU cannot do this alone. “Only the whole world community, which is now supporting Ukraine, can do that.”
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“Russian energy blackmail will fail”
Before the start of the conference, Ukraine’s Prime Minister Denys Shmyhal warned of a “migration tsunami” if Russia continued to bomb the country, saying that there was no electricity, heating or water in Ukraine. There is a threat of “a humanitarian catastrophe” in which many people could freeze to death.
Svitlana Michailowska, deputy director of the European Business Association (EBA) in Kyiv, also fears a fatal winter. She cites “Russian energy blackmail in the vain hope of breaking the will of the Ukrainians” as the aim of the repeated Russian attacks on the energy infrastructure.
And the manager adds pathetically: “You will fail. The Ukrainian defenders will persevere, the energy sector who are now heroically doing their best and the Ukrainians will persevere.”
The economic damage of the past attacks cannot yet be estimated.
(Photo: Reuters)
Michailowska cannot yet estimate the extent of the economic damage caused by the most recent campaign of annihilation against power plants, power lines and heating plants in many parts of the largest territorial state. However, it is certain that many companies will experience both “business interruptions and additional financial burdens”. According to Michailowska, “how we get through the winter depends on our resilience and our preparation”.
In view of the dramatic situation in Ukraine, the German economy promised help in the run-up to the reconstruction meeting in Berlin. The head of the Association of German Chambers of Industry and Commerce (DIHK), Peter Adrian, said: “Many of our entrepreneurs are ready to actively support the reconstruction of the country.”
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A report by the International Monetary Fund (IMF) on Ukraine published on Thursday also shows how urgently help is needed. In it, the IMF experts state “the enormous impact of the war on economic activity”.
“Real gross domestic product fell sharply, inflation soared, trade was severely disrupted and the budget deficit widened to unprecedented levels,” the report said. Now there are “possible additional damage to critical infrastructure or new disruptions in the agricultural and energy sector,” write the IMF experts.
Central bank warns of national bankruptcy
The IMF expects the economy to slump by 35 percent this year. The National Bank of Ukraine (NBU) predicts that Ukraine’s economic output will fall by 31.5 percent in 2022. The NBU still sees the grain exports of the last few weeks as a small driver. After all, NBU boss Andri Pyschniy sees the chance of four percent growth in the coming year and 5.2 percent in 2024. However, due to the recent escalation in Russia, this forecast is already below earlier forecasts.
However, according to the central bank, Ukraine must succeed in rescheduling current state bonds, but also state-owned companies such as the gas producer Naftogaz and the electricity company Ukrenergo, and receive further financial aid from international organizations such as the IMF and Western countries. Otherwise there is a risk of national bankruptcy.
>> Read here: “Even the Iron Dome wouldn’t help” – How Ukraine and the West react to Putin’s cold war
The NBU expects inflation to reach 30 percent this year and left interest rates unchanged at its latest central bank meeting, which was increased to 25 percent in early June.
In addition, the targeted Russian attacks on the energy infrastructure have also destroyed economic prospects for the time being.
Russians mine dam
For example, Ukraine has been exporting electricity to EU countries for the first time since the end of June, after the Ukrainian energy system was synchronized with the continental European Entso-E grid in March. In the first two months, the Ukrainian electricity supplier was able to earn over 100 million euros. Electricity revenue made up the second largest contribution to government revenue.
“Since October 11, however, rocket attacks on the Ukrainian energy infrastructure have forced Ukraine to suspend electricity exports to the EU in order to stabilize its own energy system,” said EBA Deputy Head Mikhailowska.
And now things could get even worse: according to Ukrainian findings, Russian troops have mined the dam at the Kakhovka hydroelectric power station in the Cherson region, which Russia has officially annexed, but which is being recaptured by Ukraine in increasing parts. The dam that crosses the Dnipro River should be destroyed to stop the advancing Ukrainian army crossing the river.
According to Ukrainian calculations, blasting the dam would inundate dozens of towns and villages under six-meter waves. The Soviet Army had already blown up a dam over the river in 1941 to stop an advance of the Wehrmacht – with 20,000 flood victims at that time.
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