In addition to the human cost of the war, Ukraine’s efforts to defend itself from Russia are placing a severe financial burden on the country that it can only bear with the help of outside support cost, a top Ukrainian government economist said Thursday.
The speed of victory, however, will depend in large part on the pressure that Ukraine's allies place on Russia, said Oleg Ustenko, chief economic advisor to Ukrainian President Volodymyr Zelenskyy.
Ukraine is currently running a monthly fiscal deficit of 5 billion euros (dollars), compared with a shortfall of 7 billion euros the country had projected for the whole of 2022 before the war started.
Prewar forecasts of 3-4% economic growth in 2022 have also been dashed, and gross domestic product is expected to shrink by 30-40% this year as factories lie in ruins and vast tracts of Ukraine's fertile land are inaccessible or too dangerous to farm, Ustenko said.
“The damage to our economy because of this war is on the level of 1 trillion euros,” he told The Associated Press during an interview in Berlin. That's five times the country's entire GDP in 2021, he added.
But while Ukraine is hoping for further monetary help from its allies, the country also desperately wants tougher sanctions imposed on Moscow to squeeze the Russian war machine, Ustekno said.
“Providing financing for us and actually providing us with ammunition and with weapons is extremely important,” he said. “But equally important is continuing to make sure that the country which is doing this aggression against us is really cut off from all possible financing.”
With current energy prices at a high, Russia was receiving more each day from exporting oil, gas and coal than it's spending on the war, said Ustenko.
Much of that money is coming from Europe, he said. “This is ridiculous.”
"On one hand, we are talking about necessity to help Ukraine financially as well. On the other side, you know, people in Europe still sending money to Russia."
In Berlin to press German politicians to back tougher sanctions on Moscow, the economist said this included bringing forward the EU's embargo on Russian oil currently scheduled to take effect on Dec. 5.
On natural gas, Ustenko said a proposed price cap should ensure that payments are limited to the cost of production. Several European countries that have relied strongly on Russian gas over the years, such as Germany, have already been cut off from supplies by Moscow.
Ustenko said many of the businesspeople and politicians he had spoke to in Germany were wary of talking about further sanctions, perhaps concerned about the economic impact at home.
High energy prices have become an election issue in Europe and governments have lined up considerable support packages for citizens to fend off fuel poverty this winter.
Ustenko said he understood those concerns, but believes most ordinary Europeans are prepared to put up with higher energy costs to help Ukraine.
“They really want us to win this war as soon as possible,” he said. “They know why they’re paying this price.”
He urged European politicians to consider how they would justify their actions to voters once the war, which he confidently predicted Ukraine would win, is over.
“And if you did nothing?” he asked. “Do you really think that you have a political future as a politician? No way.”
