© www.chathamhouse.orgEmployee walks through scrap metal area at a steel plant in Ukraine. Trade volumes between Russia and Ukraine plummeted as a result of sanctions and embargoes.
Two years ago, in April 2014, the Ukraine crisis escalated into a full-scale war between Russian-backed separatist forces and Ukrainian regular and volunteer forces in the Donbas. Over the past six months, the recent terror attacks in Paris and Brussels, together with the military campaign in Syria, have, for the most part, knocked Ukraine out of the headlines. Yet the war continues.
In March, I traveled to Kiev and government-controlled Luhansk province in Eastern Ukraine and found that recent reports on the conflict, such as they are, have given short shrift to the
economic crisis facing the civilian population of Eastern Ukraine. There, the old industrial centers of Severodonetsk and Lisichansk, as well as the scores of front line villages located in the immediate vicinity of the ceasefire line, are in danger of economic collapse, unless something is done to put an end to the war and to revive the Ukrainian economy.
To get a sense of the toll that the war has taken on the Ukrainian economy, one could hardly do better than to speak with Vladimir Vlasiuk of Ukraine Industry Expertise (UEX), an industrial policy research firm in Kiev, which has tracked the
shrinking industrial and manufacturing base in Ukraine over the past two years.
The overall picture Vlasiuk painted of the Ukrainian economy, despite his best efforts, was not encouraging. According to UEX's estimates,
Ukraine's GDP has contracted by 16.5 percent since the beginning of the crisis in 2014. And if one includes the loss of Crimea and rebel-held territory, Vlasiuk says it's closer to 24 percent.The war and the
loss of access to the Russian market have resulted in a
steep decline in exports, which have fallen to $38.1 billion in 2015, from a high of $68.8 billion in 2012. The hope that greater access to the European market would make up for the loss of access to the Russian market remains unfulfilled; since 2011
exports to the EU have fallen by roughly $5 billion.Nowhere is the economic decline more acutely felt than in the country's industrial heartland in the east. Since the beginning of the war,
a wave of plant closings in Ukraine has resulted in the
loss of 700,000 industrial jobs in 2015 alone.
Comment: But this the Western, pre-emptive response: