Realtor Pavlo Kaliuk, 34, worked in the Ukrainian capital buying and selling properties to clients in the United States, France, Germany and Israel. But in November, when Russia began deploying troops along the country’s border, his business stalled.
“Almost all deals involving mid-range or high-end apartments in Kiev are on hold, because we don’t know what tomorrow will be like,” he says.
Ukraine has been in conflict with Russia since 2014 and is now in a climate of fear again. The US estimates that 190,000 Russian and Moscow-backed separatist troops are deployed around the country and within rebel-held territories. President Joe Biden says an invasion or attack could occur at any time.
Without going so far as to openly declare war or take action that triggers the strong sanctions promised by the West, President Vladimir Putin has once again managed to destabilize Ukraine and make it clear that Russia has the power to devastate the country’s economy.
The orientation for US, British and Canadian citizens to leave the country last week generated panic. Several international airlines have suspended their flights. Russian naval exercises in the Black Sea exposed the vulnerability of Ukrainian ports crucial for transporting goods. And what about the real estate sector?
“The number of orders decreases with each passing day,” says Kaliuk.
The mood of anxiety that has gripped Kiev is exactly what Putin wants, according to Pavlo Kukhta, an adviser to the Ukrainian energy minister. “What the Russians want to achieve is the equivalent of winning the war without firing a single shot. For that, they want to provoke mass panic in that country,” he says.
Timofiy Mylovanov, president of the Kiev School of Economics and former Minister of Economic Development, said his institution estimated that the crisis had already cost Ukraine “several billions of dollars” in just the past few weeks. A protracted war or siege would only exacerbate this situation. “Either we will have an invasion or our economy will be hit.”
The first blow came last Monday (14), when two Ukrainian airlines said they could not get insurance for their flights. The Ukrainian government was forced to create a $592 million fund to keep the planes flying. On February 11, London-based insurers had warned companies that they would no longer be able to take out policies for flights to the country or overflying its territory.
KLM responded by saying it would suspend its flights to Ukraine. Many Dutch passengers were aboard Malaysia Airlines flight MH17 when the plane was shot down in 2014 over territory controlled by pro-Moscow rebels. The German Lufthansa announced that it is studying a possible suspension.
On Tuesday (15) Ukraine suffered a cyberattack. Hackers invaded the servers, overloading them and forcing them to suspend their operations. Officials blamed the episode on Russia, but the Kremlin denied involvement. Even so, Kiev said it was the largest distributed denial-of-service attack in the country’s history, targeting state ministries and banks.
“They want to provoke a run on the banks,” says Kukhta. “War is a hybrid that the Russians are waging in a number of areas, including the economy.”
Earlier this week, Irina Gorovaya and other businessmen organized the “Stay in Kiev” campaign, which aims to mobilize the population in support of local enterprises damaged by economic instability. CEO of the Mozgi Group agency, Gorovia said festivals and other events are losing money quickly because the climate of uncertainty is discouraging ticket purchases. “People are sitting at home, thinking about what might happen tomorrow.”
On Ukraine’s southern coast, the arrival of the Russian Navy to carry out exercises in the Black Sea was another factor that highlighted the country’s military and economic vulnerability, as, in the event of a war, crucial ports can face blockades. So far Moscow is leaving an open corridor for the transport of goods, and there have been no problems with Ukrainian operations.
“But we don’t guarantee anything,” says Alexander Mukhin, who works at the Mikolaiv port development office. The Odessa terminal, the country’s largest oil and gas terminal and a major hub for grain exports, is also considered a possible target — especially given the city’s strong support for separatists in 2014. Military analysts estimate that if an invasion takes place , Russia may try to take Odessa.
Even without an attack or outright blockade, ports can still be heavily crippled by fear of risk among insurers. Last week, the London market classified Russian and Ukrainian waters in the Black Sea and Sea of ​​Azov as high risk, which raises the cost of transporting goods and increases economic pressure on Ukraine.
Retired US Army General Ben Hodges recently likened Russian land and naval forces that are besieging Ukraine to “a boa constrictor, stifling its economy and threatening its sovereignty even more”. Hodges wrote that the Kremlin aims to “turn Ukraine into a failed state, something it believes it can achieve by applying constant pressure without actually launching a new offensive.”
But the US response also infuriates some, whether by creating panic with alarmist warnings of an imminent invasion, or by the decision to withdraw staff from the embassy in Kiev.
“When someone decides to move the embassy to Lviv, they have to understand that this news will cost the Ukrainian economy several hundred million dollars,” said David Arakhamia, leader of the ruling Servant of the People party. “Every day we count the losses of the economy. We cannot borrow abroad because the rates are absurd. Exporters reject us.”
The Ukrainian economy was forecast to grow by almost 4% this year, but the crisis has halved the figure — so far.
Even so, investors see Ukraine as better off economically than it was in 2014. Its foreign exchange reserves are at an all-time high, and the country has largely shut off its economy from Russia (excluding imports of oil and metallurgical coal for the industrial sector). steel).
Ukraine is also preparing to detach from the Russian energy grid, according to Kukhta, and financial assistance from the European Union and the US is helping to reassure apprehensive investors and insurers. “We’ve been living in unstable conditions for eight years,” says broker Kaliuk. “I’ve gotten used to it.”
