For millions of Kyiv residents, plumes of smoke over the city, the rattle of anti-air fire and sporadic gaps on supermarket shelves have become reminders of Russia’s new air campaign targeting Ukraine’s economy.
Missiles and new jet-powered drones hit shopping malls, warehouses and distribution centres in late August and early September, disrupting companies including major Ukrainian retailers, publishing houses, pharmaceutical groups and Nova Poshta, the country’s biggest private postal carrier. “Russia wants to kill the Ukrainian economy and, through that, break our resistance,” President Volodymyr Zelenskyy said last week.
The strikes have also caused the first supermarket shortages in Kyiv since the early weeks of Russia’s 2022 invasion. In some Novus shops, shoppers have found signs on empty shelves reading: “Russia destroyed this product.”
The Russian attacks follow Ukraine’s own long-range drone campaign against Russian refineries, warehouses and cargo ships, which Ukrainian officials say is intended to curb Moscow’s revenues and force Vladimir Putin back to the negotiating table.
When a jet-powered drone hit a warehouse near Ukrainian toy retailer Budynok Ihrashok (“House of Toys”), chief executive Maria Nazarenko rushed to the scene. At first, she believed the company’s new distribution centre, due to open this month, had been spared. But ongoing drone attacks in the Kyiv region meant firefighter crews were unable to intervene.
For hours, Nazarenko watched as the fire spread through her warehouse, while the air raid alert was raging. By the early afternoon, she said, “it was clear there was nothing left to save”.
As a consequence, she said the toys company would “rethink our logistics model completely”, including by handling online orders through its 67 stores rather than distribution centres, while spreading out its stock among smaller warehouses. 2.1mn sq m of the country’s 5mn sq m of modern warehouses have been destroyed, with 900,000 sq m alone hit in recent months, according to Ruslan Shostak, a Ukrainian entrepreneur and founder of the Eva and Varus retail chains.
Earlier this month, ballistic missile strikes disabled Ukraine’s three major remaining steel plants in the industrial heartlands of the Zaporizhzhia and Dnipropetrovsk regions, killing 17 workers and threatening an industry that helped drive the country’s growth for decades after independence. Two ballistic missiles struck the Zaporizhzhia site again on Thursday, the fourth attack against the steel plant in less than a month. “As of today, [Ukraine] doesn’t have a steel industry any more,” Oleksandr Vodoviz, head of the chief executive’s office at Metinvest, a steel and mining company that owns two of the three plants targeted in the recent attacks, told the FT. “They knew everything about the plant, they knew exactly where to hit,” Vodoviz said. Ballistic missiles targeted the blast furnaces at the three plants, including two owned by Metinvest and an ArcelorMittal factory in Zelenskyy’s native city of Kryvyi Rih.
Metinvest and ArcelorMittal said the factories — which together made up 90 per cent of the country’s steel output — were now idle. “Right now we do not understand how long it will take to make the repairs, days, weeks, months or years,” said Vodoviz. He said the shutdown of the plants, which together have more than 15,000 workers, could have major knock-on effects “and a huge impact on taxes”. Russian drones also hit railway infrastructure in western Ukraine last weekend, including a train line minutes after foreign dignitaries had crossed the Polish border.
The raids included some 800 drones over the space of 24 hours and also hit petrol stations — an increasingly frequent occurrence beyond frontline regions. Firefighters spray water on a burning train carriage damaged by a drone strike Ukrainian prime minister Sergii Koretskyi said the state could lose some $1.5bn in tax revenue because of the Russian attacks, as Kyiv faces a renewed budget shortfall it estimates at $27bn this year.
Russia’s blockade of the Black Sea is also costing Ukraine about 1.5 per cent of GDP, according to government estimates.
Agriculture minister Taras Vysotskyi said alternative routes allowed Ukraine to export only 40 per cent of its normal agricultural volumes.
Anton Zhemerdeev, commercial director of Ukrainian agricultural company TAS Agro, said the export bottlenecks had forced it to store wheat in huge silo bags laid out in empty fields. “Right now it feels like it is closed from all sides,” he said. “We have closed port terminals, the Danube [route] is mostly closed as well because of strikes and the lack of people.”
Olena Bilan, chief economist at Kyiv-based investment bank Dragon Capital, said that Ukraine was unlikely to post any economic growth this year. Companies affected by the strikes on warehouses will have “no choice but to pass on the cost to consumers”, she warned. “There is a war of attrition, and now an economic war of attrition — Russia is trying to hurt Ukraine’s economy as much as possible,” Bilan said.