Global
Ukraine is experiencing a noticeable escalation in the Russian aerial campaign targeting its vital economic infrastructure. Scenes of rising smoke plumes over Kyiv, sounds of anti-aircraft defenses, and a shortage of some goods in stores have become familiar to millions of residents. These developments are part of a strategy Kyiv states aims to exhaust the Ukrainian economy and undermine its capacity to continue resisting the war. In recent weeks, Moscow intensified its missile and jet drone attacks, targeting shopping centers, warehouses, and main distribution hubs. These strikes significantly disrupted major companies in the retail, publishing, pharmaceutical, and logistics sectors. The first signs of product shortages in the capital's stores have appeared since 2022, with signs on empty shelves in some "Novus" chain branches reading: "Russia destroyed this product," according to the Financial Times. Conversely, Ukraine is launching its own campaign of long-range drone attacks, targeting Russian refineries, warehouses, and shipping vessels. Ukrainian officials aim to reduce Moscow's revenues and pressure Russian President Vladimir Putin to return to the negotiating table. The Russian strikes have caused severe losses to the country's logistical infrastructure. According to Ukrainian businessman Ruslan Shostak, approximately 2.1 million square meters of modern warehouses out of 5 million in Ukraine have been destroyed; about 900,000 square meters of these were destroyed in the last few months alone. Officials believe targeting storage and distribution centers directly harms internal supply chains, leading to a rise in goods transportation and storage costs. Heavy industries have not been immune to these attacks; the steel sector has been particularly hard hit. In early September, ballistic missile attacks incapacitated the last three major steel plants in eastern and southeastern Ukraine. These assaults killed 17 workers and jeopardized a sector that formed an economic pillar for Ukraine for decades. The strikes continued; the Zaporizhzhia steel plant suffered a new attack last Thursday, marking its fourth targeting in less than a month. In this context, Oleksandr Vodovyz, an official at the Metinvest mining and steel company, declared that Ukraine "practically no longer possesses a steel industry." He added that the attackers were "fully aware of the technical structure of the plants and specifically targeted the blast furnaces." He further explained that Metinvest plants and the ArcelorMittal facility in Kryvyi Rih, which together accounted for about 90% of the country's steel production, have completely ceased operations. Vodovyz warned that the extent of the damage makes determining when production can resume difficult, highlighting widespread repercussions for jobs and tax revenues. Russian attacks were not confined to industrial facilities and distribution centers but extended to other critical infrastructure. Drones targeted railway infrastructure in western Ukraine last week, including a train line shelled minutes after prominent foreign dignitaries crossed the Polish border. Fuel stations have also been hit, a pattern becoming more frequent even in areas far from direct front lines. These strikes entail significant tax losses and exacerbate the budget deficit. Ukrainian Prime Minister Serhii Korytskyi estimated the government could lose around $1.5 billion in tax revenues due to them. This occurs as Kyiv faces a new funding gap estimated at $27 billion for the current year. Russia continues to impose navigation restrictions in the Black Sea, costing the Ukrainian economy losses equivalent to approximately 1.5% of its GDP, according to government estimates. The agricultural sector, another vital artery of the Ukrainian economy, faces a severe export crisis. Agriculture Minister Taras Vysotskyi confirmed that alternative export routes enable Ukraine to export only about 40% of its usual agricultural product volumes. Anton Himerdeiev, commercial director of the agricultural company "Tas Agro," described the situation, stating that export bottlenecks forced the company to store wheat in huge bags scattered across open fields. Himerdeiev added: "We now feel as if the country is closed off from all sides. Ports are non-operational, and the Danube River route is almost halted due to strikes and labor shortages." Analyzing the situation, Olena Bilan, chief economist at Dragon Capital investment bank in Kyiv, observed that the Ukrainian economy is not expected to achieve growth this year. She noted that companies impacted by warehouse targeting will be compelled to pass on some additional costs to consumers. Bilan concluded that the war is no longer limited to the military front but has also transformed into an "economic war of attrition," where Russia seeks to inflict maximum damage on the Ukrainian economy, while Kyiv, in turn, attempts to influence the Russian economy through its long-range attacks. It is noteworthy that since the conflict began in February 2022, Ukrainian infrastructure has been subjected to extensive attacks targeting power stations, transport networks, and industrial facilities, concurrently with Ukraine intensifying its drone use to strike targets within Russian territory to weaken Moscow's economic and military capabilities.
