War Severs Ukraine’s Industrial Arteries as Economy Sinks
By Agnes Lovasz and Daryna Krasnolutska Oct 2, 2014 8:16 AM ET
The bloody conflict in Ukraine’s east is severing the arteries that connect the nation’s economy.
The effects are being felt hundreds of miles from the unrest in industries as different as electricity and food processing. Power plants at the other end of the country are being starved of coal because of disruptions to mining, while in Kiev, one of Ukraine’s biggest poultry producers is looking abroad for incubatory eggs after output was halted at its facility near the war-ravaged city of Donetsk.
Months of fighting have left pro-Russian rebels in control of a swathe of Ukraine’s easternmost regions, which generated almost a quarter of industrial output at the start of the year. The knock-on effects of idle factories are seeping through an economy at risk of a 10 percent contraction in 2014, according to Ukraine’s central bank. The International Monetary Fund says $17 billion may not be enough to avert a default.
“Everything is interlinked and companies in the rest of Ukraine will suffer,” Liza Ermolenko, an analyst at London-based Capital Economics Ltd., said by e-mail. “That’s on top of the indirect channels through which the conflict in the east affects the rest of the economy -- the currency, banks, inflation and confidence channels.”
Power Cutoffs
The Donetsk and Luhansk regions that border Russia are home to the bulk of Ukraine’s steel mills and coal mines. August industrial production plunged 85 percent in Luhansk and 59 percent in Donetsk from a year earlier, resulting in a nationwide contraction of a fifth, the most since 2009, according to Ukraine’s statistics office.
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http://www.bloomberg.com/news/2014-10-01/war-severs-ukraine-s-industrial-arteries-as-economy-sinks.html
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