Ukraine’s economy braces for impact as war with Russia looms

KYIV, Ukraine—Dobrobut, one of Ukraine’s largest private healthcare providers, is preparing for a Russian invasion.

The company, which operates 20 clinics in and around the Ukrainian capital, has topped up fuel reserves, prepared generators and stocked up on medical supplies. It is also for the moment suspending its preliminary plans to open a new clinic in Kharkiv, the largest city in eastern Ukraine, located near the Russian border.

“Having an unstable neighbor to the north affects your long-term plans,” said Vadim Shekman, chief operating officer of Dobrobut. “We hope it doesn’t come to that, but if war breaks out we will be ready to offer whatever we can to help those in need.”

Despite American warnings of an imminent Russian invasion, there are few signs of panic in Ukraine. Shops are well stocked, banks are operating normally and there is no rush for plane tickets. But the psychological pressure of a possible all-out war is already hurting Ukraine’s economy, which is one of the poorest in Europe and suffered a severe blow when Russia seized the Crimean peninsula and regions of the Donbass in 2014.

Healthcare provider Dobrobut, which runs this clinic in Kyiv, has prepared for the possibility of a Russian attack.


Anastasia Vlasova for The Wall Street Journal

The value of the Ukrainian hryvnia has fallen 4% against the dollar since the start of the year, making it one of the worst performing currencies in the world along with the Russian ruble, even as the central bank has spent more than a billion dollars to support it. Many investors have frozen funding and suspended expansion plans, waiting to see how this crisis will end. In some companies, expatriate managers have left the country, heeding warnings from Washington and other Western capitals.

The West “signals that tomorrow there will be war…means panic in the markets, panic in the financial sector,” Ukrainian President Volodymyr Zelensky said on Friday. “We can’t handle this alone.”

Western countries are rushing emergency aid to Ukraine, including 1.2 billion euros, or about $1.35 billion, pledged by the European Union last month. According to Ukrainian officials, destabilizing the Ukrainian economy and possibly triggering internal unrest could achieve Russia’s goals in the country even without a single Russian soldier needing to cross the border. “One of Russia’s goals is to hit the Ukrainian economy,” said Tymofiy Mylovanov, an adviser to Mr. Zelensky and a former economy and trade minister. “In fact, it might be one of the highest priorities.”

The value of Ukraine’s currency, the hryvnia, took a hit amid uncertainty over Russia’s next move.


Anastasia Vlasova for The Wall Street Journal

Ukraine’s economy entered a deep recession and its currency lost around 70% of its value following the 2014 conflict. Many Ukrainian businesses suddenly cut off contact with their long-standing counterparts in Russia. Direct flights between the two countries have ceased and divisions over Russia’s role in the war have driven a wedge between companies that have collaborated for years. “One side was not eager to sell and the other was not eager to buy,” said Hlib Vyshlinsky, director of the Center for Economic Strategy, a Kyiv-based think tank.

Mr Zelensky, a former comedian, came to power in 2019 on a promise to root out corruption, boost economic growth and bring peace.


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Ukraine’s economy has since rebounded as the country has made significant progress in moving away from Russia, expanding trade with the EU and China. In 2013, about a quarter of Ukrainian merchandise exports went to Russia. By 2020, Russia’s share had fallen to 5.5%, while that of the EU had risen from 26% to 38%, according to Ukraine’s national statistics office. Ukraine and the EU signed a free trade agreement in 2014.

The currency has remained stable due to steady exports, especially of agricultural products, in recent years and foreign currency reserves have reached $31 billion. It is Ukraine’s largest rainy day fund since 2011 and well over the $5 billion the country had at the height of the conflict in 2014.

The United States, NATO and Russia are locked in a diplomatic stalemate over Moscow’s troop build-up on the border with Ukraine. The WSJ examines what Russia wants and how Ukraine and its allies are preparing for a potential crisis. Photo: Andriy Dubchak/Associated Press

According to a recent survey by the European Business Association, which surveyed 136 companies operating in Ukraine, 45% plan to continue operating as usual in the event of a Russian military attack. Some 17% said they were considering moving to western regions that are less likely to be occupied by Russia, and only 10% are considering leaving the country. “Old investment projects are still ongoing but new investments are being postponed,” Mylovanov said.

Dale Perry, a longtime U.S. investor in Ukraine and director of ERU Management Services LLC, which has an energy trading business in Kyiv, said his company was looking to invest in a few renewable projects, but is now in wait-and-see mode. . “Business has virtually ceased and all new investment is on hold,” Mr. Perry said.

“Would I make a new investment today? Of course not,” he said. “It doesn’t take a great entrepreneurial spirit to decide that in the current circumstances.”

Tanks line up at a Ukrainian base in the Kharkiv region after a mission in the east of the country.


Sergey Bobok/Agence France-Presse/Getty Images

To the rhythm of alarming headlines, Western citizens have also left Ukraine. Departures include families of diplomats, but also many who took embassy advice to exit and posted their reasoning and even photos of the departures gate online. However, not everyone follows this advice.

Last week, the day the United States Embassy in Ukraine urged American citizens to leave the country amid the threat of a Russian invasion, Petro Rondiak recorded a video address reassuring his colleagues at Winner, the second car importer from Ukraine.

“I am an American,” said Rondiak, who leads the company’s board of directors, in the message to its 850 employees. “But I stay in Ukraine.”

Write to Georgi Kantchev at [email protected]

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Christi C. Elwood