Українська Priorities and Mechanisms of Industrial Recovery of Ukraine
Analysis of the damage caused by Russia: destruction of production facilities, loss of markets, decline in purchasing power and other problems that Ukraine will have to solve
Go to reportBefore the war, about 30% of Ukraine’s industrial output was produced in the fully occupied territories or territories where hostilities are ongoing. As of November, the damage to corporate assets in industry and business services was estimated at USD 13 billion. The metallurgical industry suffered the most significant damage, with Ukraine losing its best-known plants, Azovstal and Ilyich Iron and Steel Works in Mariupol in eastern Ukraine. These two plants produced 40% of the total industrial output of the Ukrainian steel industry in 2021. Another critical loss is in the oil industry – Russian aggressors destroyed the Kremenchuk oil refinery and significant oil reserves in several direct air attacks. In 2021, the refinery provided about 40% of gasoline, 15% of diesel fuel, and almost 60% of aviation kerosene in the country.
The destruction has made Ukraine completely dependent on imports of petroleum products across its western border. The Ukrainian League of Industrialists and Entrepreneurs estimates that one-third of Ukrainian industry has stopped working due to the war and the destruction of production facilities. The war has also disrupted logistics, preventing companies from receiving materials and raw materials and exporting finished products. The blockade of seaports had the most significant impact, as before the war, Ukraine carried 65% of its international trade in goods by sea. The massive outflow of labor (especially women) abroad also creates a risk that a significant portion of the population will not return to Ukraine.
Many previously active workers have joined the army. A decline in population and labor force will negatively affect supply and demand. The movement of people to the safer western regions and from the east and south has led to further dramatic changes in the regional distribution of labor. High military risks are scaring away investors, and ongoing investment projects are being frozen, postponed, or canceled. Ukraine will need a lot of resources to rebuild its infrastructure and industrial enterprises.
