Since Russian President Vladimir Putin invaded Ukraine, most of the attention has focused on Russia’s imagined security dangers on its western border, the threat of Ukraine’s democratic success as a model for an oppressed population, or simply the fantasy claim that Ukraine isn’t a sovereign nation. In truth, much like Lenin and Hitler before him, Putin covets Ukraine’s wealth. The war is largely economic.
By invading and laying waste to parts of Ukraine, Putin both harms a competitor in world markets and plunders its resources. Ukraine’s allies need to realize that the key to thwarting Russia is preserving and advancing Ukraine’s economic capacity during the war and after. That means providing Ukraine’s private sector with the security, capital, and market access it needs to thrive.
More immediately, it means ending the Russian blockade of Ukrainian ports and guaranteeing freedom of navigation on the Black Sea.
Among the few Western observers to recognize the economic war early on were Robert Muggah and Vadim Dryganov of the SecDev Group, a Canadian risk-management firm. “The far bigger prize eyed by Russia may be Ukraine’s extraordinary resource riches, including some of the largest energy, mineral, and agricultural assets in the world,” they wrote two months after the war began.
It's no coincidence that Russia invaded at a time when Ukraine was gaining as a competitor. For centuries, Ukraine has been the breadbasket of Europe, thanks in large part to a band of highly fertile black soil, known as chernozem, that is ideal for growing wheat and other grains. But only lately has Ukraine been improving farming techniques, and in 2019, it surpassed Russia–a country with triple the population and 25 times the area–as the top global grain exporter.
The year before the invasion, Ukraine was the world’s fifth-largest wheat exporter, with sales rising $1.3 billion from 2020 while Russia’s fell $1.2 billion. Ukraine ranked third in corn exports and first in sunflower oil, accounting for half the world’s shipments.
In recent years, agriculture has become a main source of foreign exchange earnings for both Ukraine and Russia. Ukraine’s farming success undoubtedly irked Vladimir Putin–and he set about to destroy the country’s grain-producing ability and steal wheat and corn by piracy at sea. Hoping to export more of Russia’s own food and fertilizer, Putin agreed to a deal allowing grain shipments from Ukrainian ports through his Black Sea blockade.
In July, the Russians called a halt to the agreement, but 30 vessels have since managed to leave Ukrainian ports successfully with grain and metals, taking a circuitous route along the western coast of the Black Sea. Whether hundreds more will follow depends on Western resolve.
The Dnieper-Donetsk region, where Russia has focused its troops, accounts for 80% of Ukraine’s proven natural gas reserves, according to the International Energy Agency. Ukraine is the third-largest gas producer in Europe, after Norway and the Netherlands, and it ranks sixth in the world for coal reserves.
The Donbas region in the far southeast, which Russia originally invaded in 2014, holds much of Ukraine’s critical industrial metals, which SecDev estimates could be worth as much as $11.5 trillion. Plans for active exploration of lithium (essential in electric vehicles) and for building a battery factory have been shelved because of the war. “Every day, Ukrainians are losing their economy,” said Mykailo Zhernov, whose firm was a partner in the lithium venture.
The destruction of the Azovstal and Illich steel plants, both owned by Ukrainian businessman and humanitarian Rinat Akhmetov’s metallurgical company Metinvest, last year significantly damaged the Ukrainian economy. In January 2022, just before the invasion, Ukraine was the 13th-largest steel-producing nation in the world. A year later, it was 35th. Prior to the war, Ukraine had been building up its steel exports, which doubled from 2016 to 2021, but in 2022, those foreign sales collapsed by 70%.
Ukraine’s prime asset–its people–remains bruised. However, through the exigencies of war, Ukrainians have become more productive than ever. The private sector has proven its mettle. A new report from the European Council on Foreign Relations points out that “private companies have played a huge role in this war,” and what Ukrainians have learned about quickly developing disruptive technologies will have uses long after the conflict is over.
Right now, Ukraine’s allies can help most by freeing Ukraine’s Black Sea ports–reinstituting the grain corridor, with or without Russian cooperation, and extending it to steel and other products. Allies can also provide insurance for vessels and freight or, if necessary, deploy NATO’s military might to protect shipping with surveillance or active convoys.
As they prepare to pour capital into Ukraine’s people, natural resources, and private business, the country’s supporters can show their faith by backing projects such as Mariupol Reborn, which–with backing from USAID, the European Bank for Reconstruction and Development, and private companies–is planning to reconceive and revive the port city that Russia has devastated.
Ukraine’s economy has been badly damaged by the war, but it has also shown remarkable resilience. Just as the key to understanding the Russian invasion is by viewing it through an economic prism, Ukraine’s key to winning the war is largely economic as well. A more robust economy will rely less on Western funding and will have a better chance to chase the Russians out completely.
James K. Glassman, formerly U.S. Under Secretary of State for Public Diplomacy and Public Affairs under President George W. Bush and fellow in economics at the American Enterprise Institute, is a senior advisor to SCM, Ukraine’s largest private investment group.
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