Being an Export-Oriented Nation in Times of War: Ukraine as a Unique Case

November 6, 2023
Ukraine has lived through tyranny, autocracy, and various -isms, and knows the price of liberty - civil, political, and economic.

Even during the war, it was able to create a web of economic interactions.

UkraineWorld spoke with Hennadiy Chyzhykov, President of the Ukrainian Chamber of Commerce and Industry. Key points in our brief, #UkraineWorldAnalysis

How did Ukraine deal with the challenge of war-induced export restrictions?

Ukraine is an export-oriented country. There are countries with a higher share of GDP from exports than Ukraine, such as the Netherlands, Estonia, and Finland. However, Ukraine is heavily reliant on exports, particularly during the war. We have the natural capacity to produce more agricultural products, steel, ore, etc.

We are probably the only country in the world that is at war and does not ask for food aid but provides it.

At one of the meetings, an interesting thesis was voiced: Eastern Europe and Ukraine are the future of democracies and Europe. Because Ukraine has experienced tyranny, autocracy, and various -isms, and we know the price.

Ukrainians fleeing the war abroad prove that the Ukrainian nation has a very high level of adaptive potential, which is why we hear that Ukrainians contribute to the GDP of the countries that have given them shelter. And this adaptive potential is not only manifested externally.

As a nation, Ukraine has transitioned from communism to capitalism in 30 years, and Ukrainian business has been able to respond to the COVID's challenges.

Despite the war, lack of fertilisers, the occupation of 20% of the territory, mining, and shelling, Ukraine has set a unique example: we have grown more grain than the world expected. More than we could have hoped for.

What are the transfer capabilities of current export routes?

Ukraine is a big country in terms of opportunities. Before the large-scale invasion, every year, Ukraine had exported almost 100 million tonnes of goods. This cannot all be exported by rail or truck. For this, we had about 18 ports, including Odesa and Mykolaiv, which were used for agricultural products, and Berdiansk and Mariupol, which were mainly used for our steel products.

Thanks to our exports, we had very interesting trade and economic relations because of our exports; for example, we are separated from China by 7,000 km, and exports and imports were in first place (15%).

During the war, the EU became our most important trading partner, accounting for roughly 60% of our exports. The products are currently passing through the Danube ports of Remi and Izmail. And, of course, there are the western borders.

But for comparison, before the escalation of the war in 2022, we were exporting almost 7 million tonnes per month, while Bulgaria, for example, was exporting 6 million per year. That is why we say the EU was unprepared for a sudden influx of Ukrainian exports because Polish ports could only handle 8 million a year, whereas Romania's largest port, Constanta, is designed to handle 25 million.

In terms of track, equipment, and purpose, European railways differ from those in Ukraine; they are not 50 trade wagons, but passenger cars. The Danube ports were able to handle 2.5 million tonnes. However, we must recognize that Danube ships are not Panamaxes (capable of carrying 40-60,000 tonnes), which used to call at Ukrainian ports on a regular basis.

Our export culture has not changed: agricultural products, iron ore and steel remain in the first place. However, with a Panamax capacity of 40-100,000 tonnes, the cost of transporting this grain to Asia was minimal, and they received up to 40% of Ukrainian grain.

Grain delivery to Romanian or Bulgarian ports is now difficult. Producers' high expectations and cautious optimism are being restored as a result of the Ukrainian sea corridor, which has been operational since autumn.

The cost of growing corn in Ukraine is 140-150 USD. The European shipping price from the port to Romania is 210 USD, and the cost of delivering corn to the ports is almost 100 USD, plus 10 USD of transshipment cost. Thus, the final price is less than the cost of production.

How does assistance to Ukraine help to develop other countries’ economies?

Assistance to Ukraine is actually a good investment for the countries that help because it is an opportunity to make money together. During the war, railway tariffs in Europe increased. In other words, a win-win game model is being built with a non-zero-sum.

However, along with the development of new routes, Ukraine must remain a maritime power.

This year, we plan to export 50% of the nearly 60 million tonnes of grain we have harvested. And, based on the total capacity of the export routes during the war, we can export 2.5 million tonnes via the Danube, 800,000 tonnes by rail, 1 million tonnes by road, and 500,000 tonnes by rail. This is a huge challenge.

Before the war, there were about 20 major players who controlled 90% of the grain flow from Ukraine, but during the war, small and medium-sized businesses emerged. The development of trade relations with our neighbours is becoming more and more noticeable, with Ukrainian companies opening in Bulgaria, Romania and Moldova. The Solidarity Roads are working, they are changing and modernising Europe while also supporting Ukraine.

Daria Synhaievska, Analyst at UkraineWorld

Hennadiy Chyzhykov, President of the Ukrainian Chamber of Commerce and Industry