<figure class="wp-block-image size-large"><img src="https://api.kyivindependent.com/storage/2022/05/279787111_369109875258512_1954977469097038780_n-1024x768.jpg" alt="" class="wp-image-36990"/><figcaption>Firefighters put out a fire in the museum of Ukraine's poet and philosopher Hryhoriy Skovoroda after Russia's missile attack on May 7, 2022. (State Emergency Service in Kharkiv Oblast/Facebook)</figcaption></figure>



In 1937, Pablo Picasso, widely acknowledged as one of the greatest painters in history, said after visiting an exhibition in Paris: “I bow down before the artistic miracle of this brilliant Ukrainian.”



He <a href="https://www.cnn.com/style/article/maria-prymachenko-paintings-ukraine-peace-symbol/index.html">was talking</a> about the folk painter Maria Prymachenko and her paintings in the “naive art” genre.&nbsp;



Eighty-five years later, on Feb. 26, a collection of 25 of her works almost burned up when the Russian military fired on a museum in the village of Ivankovo in Kyiv Oblast. 



The museum’s other exhibits, such as works of the Ukrainian embroiderer Hanna Veres, did not survive the fire.&nbsp;



“Putin wants to destroy European heritage and culture, wipe them off the face of the earth,” Ukraine's Culture Minister Oleksandr Tkachenko <a href="https://www.kmu.gov.ua/news/oleksandr-tkachenko-sotni-ni-v-chomu-ne-vinnih-zhertv-totalne-rujnuvannya-hramiv-soboriv-ta-muzeyiv-os-cina-ne-zakritogo-neba-nad-ukrayinoyu?fbclid=IwAR1iXZHpPfL1n88OOMaY-JX6Qm_wvkfZWQiBHSaz7zU4BA8_jpXAm3CMQsQ">said</a> in early March.&nbsp;



Almost 100 days into the Kremlin's large-scale invasion of Ukraine, hundreds of cultural heritage sites in the country have been destroyed and thousands of rare historical artifacts have been stolen.



As of May 27, the Culture Ministry has <a href="https://mkip.gov.ua/news/7196.html">documented</a> 367 war crimes against Ukraine's cultural heritage, including the destruction of 29 museums, 133 churches, 66 theaters and libraries, and even a century-old Jewish cemetery. This cemetery in Hlukhiv, Sumy Oblast, which is a site of pilgrimage for Jews, was hit by two Russian missiles on May 8.&nbsp;



“Russians have the precise aim of destroying our culture as part of our identity, something that distinguishes Ukraine from Russia,” Bloomberg <a href="https://www.bloomberg.com/news/features/2022-03-26/ukraine-s-museums-are-leading-a-cultural-rescue-mission?fbclid=IwAR2lKENZrwF2C9HsuYeT3CiA_7SVTuR0E0NWjX0NZL9wM5jA_yT1DGq8hpw">quoted</a> Olha Honchar, co-founder of Ukraine's Museum Crisis Center, as saying. “It has become quite clear now for the whole world that Russia bombs museums, archives, and theaters not by accident.”



Wave of destruction



The destruction of the museum in Ivankovo was just the beginning. Russia's barbaric bombing barrage has wrecked many iconic artifacts of the nation's storied past. 



In three months of the all-out war, Kharkiv Oblast, which borders Russia, saw the most damage to art and landmarks. By mid-May, every fourth crime against Ukraine's cultural heritage was recorded there.



Most of these crimes in the region, 79 cases, took place in Kharkiv itself, the regional capital and Ukraine's second-largest city. In early March, a Russian fire smashed the windows of the Kharkiv Art Museum, which housed 25,000 masterpieces by Ukrainian and world artists.&nbsp;



A version of the famous painting “Cossacks Write a Letter to the Turkish Sultan” by Ukrainian-born artist Ilya Repin was evacuated from the museum, according to Marina Filatova, the head of the foreign art department. The main version of the painting is in a museum in Russia, like many artworks created by Ukrainians during the Russian Empire times. 



However, the state of many other rare and old paintings displayed in the museum can only be assessed after the war. Museum workers had to remove them from the walls in a rush.



On the night of May 7, Russian missiles hit the museum and historic home of Ukraine’s famous poet and philosopher Hryhoriy Skovoroda, located in the village of Skovorodynivka in Kharkiv Oblast.&nbsp;The building was severely damaged, and a number of valuable exhibits were buried under the rubble.&nbsp;



“Not every terrorist will even think about targeted missile strikes on museums,” President Volodymyr Zelensky <a href="https://t.me/V_Zelenskiy_official/1544?fbclid=IwAR2I7AYAcQhLoGnYXmpLNagJ5igOUAmPI_trlvI6uj5EdueGQMYvgPvGAGE">said</a> in response to the destruction. “And this is the kind of army that is fighting against us.”



Some of the worst of the devastation hit the city of Mariupol in Donetsk Oblast. It lost 53 historic sites, including its drama theater, built in the late 1880s. This theater was destroyed on March 16 by a bomb dropped by a Russian aircraft, <a href="https://apnews.com/article/Russia-ukraine-war-mariupol-theater-c321a196fbd568899841b506afcac7a1?utm_source=Twitter&amp;utm_medium=AP&amp;utm_campaign=SocialFlow">which reportedly killed</a> at least 600 civilians that were taking shelter there. 



<figure class="wp-block-image size-full"><img src="https://api.kyivindependent.com/storage/2022/05/newFile.jpg" alt="" class="wp-image-36992"/><figcaption>A man passes by the Mariupol Drama Theater bombed by the Russian military on March 16, 2022. At least 600 people reportedly died in the blast. (Reuters)</figcaption></figure>



A month later, the city council <a href="https://t.me/mariupolrada/9310">reported</a> that Russian occupiers had looted a unique 700-piece collection of coins and medals from a local museum in Mariupol. They allegedly transported the collection to the Russian-occupied part of Donetsk Oblast.



An art museum named after Arkhip Kuindzhi, a famous Mariupol-born landscape painter of Pontic Greek descent, was robbed as well.&nbsp;



On April 27, invaders <a href="https://t.me/andriyshTime/513">took</a> all valuable exhibits from the museum, including three Kuindzhi paintings and “Near the Shores of the Caucasus,” an original painting by famed marine artist Ivan Aivazovsky.



The looted Kuindzhi piece called “Red Sunset,” painted over 115 years ago, alone costs more than $700,000, according to Tatyana Buli, the head of the museum, who evacuated the city and is now in Kyiv.



“What I hid (in the basement of the museum), it survived,” Buli <a href="https://www.bbc.com/ukrainian/features-61472927">told</a> the BBC. “But you see, everything was handed over to the occupiers.”



Russian media reported that more than 2,000 exhibits were taken out of Mariupol museums for “temporary storage” in occupied Donetsk.&nbsp;



In four other Ukrainian oblasts – Kyiv, Chernihiv, Sumy, and Luhansk – the ministry recorded almost 160 war crime cases against historical heritage.



In the 1,300-year-old city of Chernihiv, the Russian military destroyed the former museum of Ukrainian antiquities, a 19th-century building built in the Gothic Revival style, most recently serving as a youth library.



<figure class="wp-block-image size-large is-resized"><img src="https://api.kyivindependent.com/storage/2022/05/da095a712c0c1d978b071dae17c43285-1024x640.jpeg" alt="" class="wp-image-36993" width="840" height="525"/><figcaption>A 19th-century building in Chernihiv built in the Gothic Revival style was destroyed by a Russian missile on May 7, 2022. (Ministry of Internal Affairs of Ukraine/Facebook)</figcaption></figure>



“The building survived shelling by the Bolsheviks in 1918 and 1919 and World War II under the bombs of the German Nazis,” <a href="https://www.facebook.com/laievsky/posts/5316862998347717">wrote</a> Serhiy Laevsky, the director of the history museum in Chernihiv.&nbsp;“The Moscow Nazi horde came and ruined a monument of local history.”



In late April, Ivan Fedorov, the mayor of the occupied city of Melitopol in Zaporizhzhia Oblast, reported another shocking news: Russian invaders stole a “unique and priceless” collection of 2,300-years-old Scythian gold from the local history museum in Melitopol.&nbsp;



Gold artifacts were discovered in massive burial mounds, known as kurgans, by archaeologists in the 1950s. In all, the occupiers stole 198&nbsp;items, including floral ornaments and breastplates, <a href="https://www.facebook.com/CTRC2015/posts/3157292147884147">according</a> to the Crimean Tatar Resource Center.&nbsp;



They also took non-Scythian exhibits, like 48 pieces of historical weaponry from the 17th through the 20th centuries, as well as 76 items made at least 1,500 years ago.



“This is one of the largest and most expensive collections in Ukraine,” said Fedorov.&nbsp;



Poor preparation



While Russian forces are to blame for the destruction of so much of Ukraine's cultural heritage, some Ukrainian experts believe the country hasn't done enough to protect its art and history before the escalation. 



Eight days before Russia's invasion of Ukraine, art historian Konstantin Akinsha was horrified at what might happen to museums if war broke out.



Most museums were not prepared. 



“In a full-scale Russian invasion, practically all significant museum collections would be in danger,” Akinsha <a href="https://www.wsj.com/articles/ukraines-museums-in-the-crosshairs-russia-invastion-kyiv-odessa-vasily-kandinsky-ilya-repin-golden-pectoral-scythian-gold-11645038773">wrote</a> in his column for the Wall Street Journal.&nbsp;



“The majority of museums have miserable budgets and would not even be able to afford the necessary crates,” he said. Underfunding has made the notion of evacuating exhibits to safer facilities under guard even hazier.



Moreover, the Culture Ministry had not prepared any plans for the centralized evacuation of museum exhibits or instructions on how to act during a war, according to Tetyana Rud, chief curator of the Kharkiv Literary Museum.



The decision to save the collections fell on the shoulders of each museum separately.



“Most of the buildings have basements, where many directors heroically spent the first two weeks of the war,” said Yana Barinova, the head of Kyiv City Council’s cultural department.



The highest levels of government made no other publicly-known efforts to preserve the museum collections in the days leading up to the war. Barinova believes the protection of museum collections was not a top priority for the government. 



It was “part of President Volodymyr Zelensky’s efforts to prevent panic,” Akinsha believes.

In 1937, Pablo Picasso, widely acknowledged as one of the greatest painters in history, said after visiting an exhibition in Paris: “I bow down before the artistic miracle...

Russia destroys Ukraine’s historic heritage, steals rare collections from museums

<figure class="wp-block-image size-large"><img src="https://api.kyivindependent.com/storage/2022/05/278832152_7268747553198434_3496890909191458701_n-1024x683.jpg" alt="" class="wp-image-33932"/><figcaption>The first batches of bulletproof vests from Israel and other countries arrived in Lviv IT Cluster in mid-April as part of an ongoing project to equip Ukrainian defenders. (Facebook/Stepan Veselovskyi)</figcaption></figure>



Unlike Ukraine's manufacturing plants, warehouses and stores, many of which lie in ruins, its IT sector has had much better luck. 



The tech industry reacted with lightning speed to the new reality dictated by Russia's all-out war against Ukraine.



Early in the invasion and even before it, companies started to relocate whole teams into safer western Ukrainian regions. Other IT specialists continued to work remotely even in dangerous areas close to the front line.



The results surprised many. In the first quarter of 2022, the industry’s export revenue hit a record $2 billion despite martial law and mobilization, up 25% year-over-year, according to Danylo Hetmantsev, the head of the parliament's finance and taxation committee.&nbsp;



In March, exports of IT services fell by just 4% compared to 2021, “despite the shock of the hottest phase of the war,” he said.&nbsp;



Since they need access to only two things – a laptop and a stable Internet connection – Ukrainian techies turned out to be as efficient at work as they were before the war, according to Natalia Koliadko, head of human resources at EPAM, the largest tech company in Ukraine by the number of employees, 14,000 people.&nbsp;



“We were astonished at how timely our employees completed their projects for clients, sitting in Kharkiv basements and other horrible places,” <a href="https://www.youtube.com/watch?v=RDpMhVt7jmQ&amp;t=913s">said</a> Koliadko.&nbsp;



According to Konstantin Vasyuk, head of the IT Ukraine Association, 77% of IT companies in Ukraine were able to attract new clients and nearly 60% expect that they will grow up to 30%.&nbsp;



He forecasted that in 2022 the industry will pay 20-25% less in taxes, which would still be a hefty $4-5 billion.



“Today, the IT industry is one of the few that support the economy of the state and will help the future recovery,” said Vasyuk.



But experts also predict that the war may yet severely damage Ukraine's IT sector. 



Industry’s new realities



The war caused a massive domestic relocation of tech professionals. As of May, 35,000 IT specialists of the country's 285,000 had moved to Zakarpattia Oblast alone, according to Ulyana Kratko, the IT Expert Lead at Ukraine’s online recruitment service Robota.ua.



The western city of Lviv typically employs 30,000 techies. That number has more than tripled. 



In addition, some IT specialists decided to join the Ukrainian military to defend the country against Russia's invasion.



According to a survey that the IT Ukraine association conducted among 30 companies employing 34,000 techies, almost 700 of their employees joined the Ukrainian army as of mid-April.



Meanwhile, the war put future contracts in the sector at risk.



Currently, every fifth IT company in the country lacks orders from clients due to the war and expects more tax breaks from the government, according to a survey conducted by Robota.ua in April.



While almost 30% of IT companies did not suffer losses due to the war, every 10th company has already lost up to $50,000. According to Kratko, some have lost up to $1 million.&nbsp;



“Over the past month and a half, the company has added perhaps two new clients, four times less than before the war,” said Intellias CEO Vitaly Sedler. “They postponed decisions to enter the Eastern European market and started to&nbsp; reconsider whether to work with Ukrainian companies.”



As a result of the all-out invasion, 2% of all IT companies in Ukraine were forced to close their businesses, the study said.



Still, the falling revenues did not push most companies into mass layoffs or deep wage cuts. Only 6% of IT companies in Ukraine had to cut up to 60% of salaries, while just 4% of companies laid off up to 25% of their staff.



Instead, four big tech companies – Intellias, Genesis, Squad, and Parimatch – have already opened offices in Uzhhorod, the capital of Zakarpattia Oblast, and are looking to hire and grow their teams.



Future risks



In spite of solid performance, the IT sector in Ukraine may be looking at an uncertain future. Experts believe that the relocations will not stop in western Ukraine.



“It’s only the first wave of the relocation, it won’t be the last one,” said Tetiana Laduba, head of Employer Brand Development at Ciklum, one of the largest software developers in Ukraine headquartered in the UK. “The second wave of relocation of IT professionals abroad may also take place."&nbsp;



Currently, men between the ages of 18 and 60 can't leave the country due to martial law. After the war, some IT developers are likely to depart, according to HR specialists. Some are already signing contracts with global IT companies, which will have them relocate as soon as they are allowed to leave the country.



“Competition at this market will only grow,” said&nbsp;Laduba. “And the demand for digital transformation remains high.”



The military threats will have a strong impact, changing people’s plans. In the mid-term perspective, for up to five years, IT professionals will choose the location, not the company.



“People are under stress,” said Laduba, explaining the urge for relocation.



Vladislav Savchenko, head of the European Software Engineering Association, sees another worrying trend: There are 20,000 vacancies in the tech sector, which is less than half the number of job seekers, 45,000. Before the war, it used to be the other way around. 



“This is a very bad trend, if we talk about the prospect of 3-6 months,” Savchenko <a href="https://www.bbc.com/ukrainian/features-61241033">said</a> in an interview with BBC News.&nbsp;&nbsp;



Plus, many investors already fear that Ukraine may experience problems with the Internet and that IT specialists may be mobilized if the war escalates.&nbsp;



This could result in billions in losses for the sector in the long run. While it took decades for the Ukrainian IT industry to become world-famous for its tech talent, the country “could lose it in a year, and that's sad,” Savchenko said.

Unlike Ukraine's manufacturing plants, warehouses and stores, many of which lie in ruins, its IT sector has had much better luck. The tech industry reacted with lightning speed...

Ukraine's resilient tech industry doing well in spite of war

<figure class="wp-block-image size-large"><img src="https://api.kyivindependent.com/storage/2022/03/GettyImages-1239530301-1024x694.jpg" alt="" class="wp-image-22308"/><figcaption>Civilians evacuate along humanitarian corridors from the Ukrainian city of Mariupol on March 26, 2022. (Stringer/Anadolu Agency via Getty Images)</figcaption></figure>



After Ukraine ended 2021 with a historically high gross domestic product (GDP) of $195 billion, top officials issued optimistic forecasts for the coming year.



Then the war began, killing all of the country's economic plans.&nbsp;



As of late April, the Russian military has destroyed 30% of Ukraine’s infrastructure, causing $100 billion worth of damage. 



Total losses to the economy, both direct and indirect, have already reached over $560 billion, according to the head of President Volodymyr Zelensky's office, Andriy Yermak.



Russia's full-scale invasion has forced more than five million people to flee Ukraine. Around 60% of small- and medium-sized businesses are currently closed or suspended.



<a href="https://www.worldbank.org/en/region/eca/publication/europe-and-central-asia-economic-update">According </a>to World Bank estimates, Ukraine’s economy will contract by 45% in 2022.&nbsp;



“This is already terrifying,” said Deputy Director at the Center for Economic Strategy <meta charset="utf-8">Maria Repko. “This means that we no longer have a third of our economy.”



According to Ukraine's State Statistics Service, inflation in Ukraine may quadruple to 15-20% by the end of the year.



The blocked ports of the Azov and Black seas killed maritime shipping and cut half of the country’s exports, as well as 90% of grain trade with foreign countries.&nbsp;



As of early May, around 4.5 million tons of grain were stuck at Ukrainian ports, according to Martin Frick, the World Food Programme director in Germany.



“(Logistics) were ruined. Old supply chains through the ports are not working and won’t resume operation in the nearest future,” <a href="https://www.youtube.com/watch?v=15n9Pwrd8xw">said</a> Repko.



In March, Ukraine exported just 5.97 million tons of goods worth $2.7 billion. Imports fell by two-thirds to 1.6 million tons worth $1.8 billion due to an unprecedented decline in consumer demand.



Russia’s invasion is already “sending shockwaves throughout the globe,” according to Kristalina Georgieva, managing director of the International Monetary Fund.



“The economic consequences from the war spread fast and far, to neighbors and beyond,” Georgieva said during her curtain-raiser <a href="https://www.imf.org/en/News/Articles/2022/04/14/sp041422-curtain-raiser-sm2022">speech</a> to the IMF–World Bank Spring Meetings.&nbsp;



Russia’s war will be among the top reasons for the decline in global growth this year and the next, she said. The Fund will downgrade their forecasts for 143 economies, which account for 86% of global GDP.



Budget deficit



Fending off the war has cost big bucks for Ukraine.&nbsp;



According to Danylo Hetmantsev, the head of the Ukrainian parliament's finance and taxation committee, budgetary spending has quadrupled compared to that of peacetime.&nbsp;The monthly budget deficit currently ranges from $5-7 billion, most of which goes to the military and social support.



At the same time, the state's main sources of income are in trouble.&nbsp;Total budget revenues have fallen by 75%.



Dividends paid by state-owned enterprises, which previously covered 30% of all revenues, are going down. Other forms of income are also expected to decline. Before the war started, Ukraine's Finance Ministry planned to collect $18 billion of taxes on imported goods, $14 billion in value added tax, and $2.6 billion in excise taxes in 2022.



After one month of all-out war, the country's customs managed to collect only a fifth of the planned revenues – $240 million instead of the expected $1.3 billion.



In addition, the government has allowed businesses to switch to a simplified taxation system, allowing them to pay 2% of turnover instead of all other taxes, including income tax and VAT, among others.



In mid-March, the government dropped fuel VAT from 20% to 7% tax so farmers could buy enough for the season's sowing campaign and to enable the delivery of critical supplies like food and medicine.



The government is already planning to restore some taxes. A bill has been registered in the Verkhovna Rada proposing to raise VAT back up to 20%



According to Hetmantsev, import taxes will return soon as well, as this is already negatively affecting domestic producers who have resumed operations.



“These tax benefits have already reached their goal, filling our market and stores with goods,” he said. “Now we need to move to normal business and tax conditions.”&nbsp;



The Russian military destroyed or damaged many of the country’s 500 largest companies that accounted for 30% of the nation’s GDP.&nbsp;



As of mid-April, the total amount of destroyed assets reached $80 billion.&nbsp;



<figure class="wp-block-gallery columns-1 is-cropped"><ul class="blocks-gallery-grid"><li class="blocks-gallery-item"><figure><img src="https://api.kyivindependent.com/storage/2022/05/Screenshot-2022-04-24-at-15.04.02-1024x379.png" alt="" data-id="30997" data-full-url="https://kyivindependent.com/wp-content/uploads/2022/05/Screenshot-2022-04-24-at-15.04.02.png" data-link="https://kyivindependent.com/?attachment_id=30997" class="wp-image-30997"/></figure></li></ul><figcaption class="blocks-gallery-caption">Charts showing the economic damage of Russia's war. (Center for Economic Strategy)</figcaption></figure>



Although the National Bank decided to cover the March deficit with 2021 profits, the risks of deficit expansion in the future are high, according to Daryna Marchak, head of the center for analysis of public finance at the Kyiv School of Economics.



“Revenues will fall even more. Now the main focus should be on borrowing,” Marchenko said.



If the deficit is covered only via emission of the national currency, as opposed to foreign tranches, it will only lead to an increase in inflation.



According to Repko, Ukraine needs to attract grants, not loans, from international donors. If the government still decides to take loans, they must be long-term, with very low interest rates.



Reviving economy



Rebuilding ruined infrastructure and cities is among Ukraine's top priorities.&nbsp;



In order to achieve this, the country will need up to $1 trillion, according to Alex Nikolsko-Rzhevskyy, Professor of Economics at the U.S. University of Lehigh.



He proposes to use Russian assets as collateral for reconstruction loans.



For Nikolsko-Rzhevskyy, the question is not whether the West can collectively "afford a trillion-dollar bill," but of Russia's obligation to pay for its crimes.



“Only in this way a lesson will be learned and justice will be served,” <a href="https://voxukraine.org/en/marshall-plan-and-reparations/">said</a> Nikolsko-Rzhevskyy.



The Ukrainian government is also working to keep the country's surviving companies afloat.



For this purpose, Ukraine's economy and finance ministries have launched an <a href="http://relocate.prozorro.sale/">online platform</a> to help businesses relocate to safer, western regions. Around 400 of 1,500 enterprises have managed to move their operations to western Ukrainian regions, according to Hetmantsev.



“We are fighting for every hundredth, every thousandth share of GDP that we are now losing,” he said. “This is a saved part of the economy.”

After Ukraine ended 2021 with a historically high gross domestic product (GDP) of $195 billion, top officials issued optimistic forecasts for the coming year.Then the war began, killing...

Russia’s war may halve Ukraine's economy, increasing budget deficit by billions

<figure class="wp-block-image size-large is-resized"><img src="https://api.kyivindependent.com/storage/2022/01/48831370952_d61a09a08e_k-1-1024x683.jpg" alt="" class="wp-image-7220" width="840" height="560"/><figcaption>A man prints out banknotes of the Ukrainian national currency hryvnia at Ukraine's National Bank banknote factory on Oct. 1, 2019 in Kyiv. (Yelyzaveta Serhiienko / Press office NBU)</figcaption></figure>



As Russia was preparing to invade Ukraine, experts feared that the Ukrainian banking system would collapse in the event of an all-out war.



The closure of Ukraine's main banks, cashless ATMs, and free fall of the national currency were expected by many.



Yet, the Ukrainian banking system proved the opposite, remaining functional two months into Russia's ongoing war.



“For everyone, it is just a miracle how Ukraine was able to keep the banking system alive and make it work during the war,” Ruslan Chernyi, the chief editor of Financial Club news outlet, told the Kyiv Independent.



He estimated that around 70% of bank branches continue to operate across the country. The rest cannot work due to their proximity to the war zones in the east and south. People can easily use online banking apps and non-cash payments without limits.&nbsp;



Banks do not have liquidity problems, according to Yevhen Dubogryz, an expert at the nonprofit CASE Ukraine think tank. Only four out of a total of 69 banks currently face significant liquidity risks, while another three have slightly higher risks due to the majority of their portfolio focusing on retail lending or operations in war-torn regions.



And for the next six months, no changes are expected in this aspect.



"Banks have enough resources to keep cash outflow even in the worst-case scenarios," said Dubogryz during an&nbsp;<a target="_blank" href="https://www.facebook.com/cost.ukraine/videos/1035673987331684" rel="noreferrer noopener">online</a>&nbsp;webinar.



In March, Ukraine’s international reserves grew by 2% to $28.1 billion, mainly due to the tranches from the International Monetary Fund, the World Bank, and the EU.



And the tendency may persist.



“The dynamics of filling the reserves should be the same,” Pervin Dadashova, director of the central bank’s financial stability department, told the Kyiv Independent.



At the same time, the chances of restoring the pre-war scale of earnings in the banking sector are decreasing daily.



“If the war continues at a similar pace, the banks will start to close at some point,” said Chernyi.&nbsp;



Right decisions&nbsp;



Two key factors played a vital role in Ukraine’s “banking miracle” – effective central bank policies and a major clean-up of the system launched after the 2014 economic crisis, which too was sparked by Russia's illegal occupation of Crimea and invasion of the Donbas.



Nearly 100 insolvent Ukrainian banks were liquidated, while some were nationalized, like the country's largest PrivatBank, previously owned by oligarchs Ihor Kolomoisky and Hennady Boholyubov.



The Covid-19 pandemic also helped Ukraine's banking sector, speeding up digitalization and normalizing remote work, according to Dadashova.&nbsp;



On Feb. 24, when Russia started an all-out invasion, the National Bank had a concrete plan on how to act.



The Bank immediately froze the exchange rate of the national currency – 29.25 hryvnias for one U.S. dollar. It also banned the online purchase and sale of foreign currency by banks to individuals.



“It became clear very fast that there would be no foreign exchange earnings coming to Ukraine. It would affect the stability of the (financial) market,” said Dadashova.



On April 14, the central bank eased the ban and allowed banks to sale foreign currency in cash to people. The move was made to reduce illegal exchange points across the country and secure exchange operations for citizens.



Additionally, quick refinancing and a ban on foreign exchange transactions eased pressure on the hryvnia, according to the&nbsp;<a target="_blank" href="https://ces.org.ua/wp-content/uploads/2022/04/UKR_%D0%95%D0%BA%D0%BE%D0%BD%D0%BE%D0%BC%D1%96%D0%BA%D0%B0-%D0%A3%D0%BA%D1%80%D0%B0%D1%97%D0%BD%D0%B8-%D0%BF%D1%96%D0%B4-%D1%87%D0%B0%D1%81-%D0%B2%D1%96%D0%B9%D0%BD%D0%B8.pdf?fbclid=IwAR1AGXs7v7ucqiR1Fm4A30MSsJjryRpADrTbkqX78XMkZf3MNcYHW9G4mi8" rel="noreferrer noopener">report</a>&nbsp;by the Center for Economic Strategies.



In addition, each bank, as part of the country’s critical infrastructure, had a list of essential workers who couldn't be conscripted for military service for the next six months.



“The banks proved to be stable and reacted quickly,” said Chernyi, adding that most banks were able to move their staff and documentation to safer locations. “They made sure the banks kept working.” 



The National Bank put a lot of pressure on banks to operate via cashless payments, excluding a number of risks, as the possible attacks on the banks' premises.&nbsp;



Moving into cloud technologies has helped banks save time and money, for example, when they had to move their servers to a new place.



Despite ongoing cyberattacks, Dadashova says banks did not lose any critical data about their assets and the number of loans issued.



Threat to business



However, the situation is obviously far from ideal, with problems pilling up as the war progresses.



<a target="_blank" href="https://uspp.ua/news/ostanni-novyny/2019/na-bazi-uspp-stvoriuietsia-antykryzovyi-shtab-dopomohy-biznesu-promyslovosti" rel="noreferrer noopener">According</a>&nbsp;to the Ukrainian Union of Entrepreneurs, up to 70% of businesses have already stopped operating. This dramatically increased the level of non-performing loans. Currently, the non-payments on loans range from 40% to 80% in different banks, according to Chernyi.



On the other hand, as banks revenues plummeted, banks began to cut back on lending to businesses.



Agricultural companies complained in early March about not having access to loans they required to purchase the seeds for the sowing campaign, according to Andriy Dykun, head of the All-Ukrainian Agricultural Council.



On March 17, President Volodymyr Zelensky announced a zero interest rate for loans of up to $2 million for businesses under the government's 5-7-9% lending program for the period of martial law.



However, after a month, enterprises, especially small and medium-sized, are complaining en masse. They still can’t take loans, according to Economy Minister Yulia Svyridenko.



“Banks are reluctant to respond to emerging problems,” she said in an <a href="https://forbes.ua/inside/krediti-pid-0-ne-zapratsyuvali-yak-tsogo-khotiv-zelenskiy-a-biznes-zvinuvachue-banki-v-sabotazhi-yak-uryad-khoche-zmusiti-ikh-davati-bilshe-groshey-12042022-5389">interview</a> with Forbes.



While almost 1,400 loans <a href="https://www.kmu.gov.ua/news/minfin-za-period-2102-11042022-pidpriyemci-otrimali-1391-kredit-na-395-mlrd-grn-u-mezhah-programi-dostupni-krediti-5-7-9">totaling</a> $127 million had been issued to enterprises under the program as of mid-April, most of them were focused on three sectors – agrarian, food production, and pharmaceuticals – as they were prioritized by the state.



According to Svyridenko, banks have even unofficially divided Ukraine into several colored zones of “investment security.”



The red zone, for instance, means zero chances for business to get a loan due to the proximity of the front line, while the green one will indicate a relatively safe region, like western Ukraine.



At the same time, although many banks have introduced payment holidays for both individuals and businesses, and the law now bans any penalties, the risk that banks could be on the verge of bankruptcy is high.



Defaults and the inability to repay debts may continue even after the war ends. “At least half of the banks may be liquidated after the war,” said Chernyi.



However, the National Bank’s top officials are trying to calm those expecting turmoil.



“It’s not right to say there's a high risk of a mass withdrawal of banks from the market due to the war,” said Dadashova, stating that the National Bank is ready to overcome the potential crisis.



“Everyone is in the same boat and everyone is interested in the same goal," she says, adding that a healthy banking sector is vital for the recovery of the country's economy.&nbsp;

As Russia was preparing to invade Ukraine, experts feared that the Ukrainian banking system would collapse in the event of an all-out war.The closure of Ukraine's main banks,...

Ukraine’s 'banking miracle': How its banking system keeps operating amid invasion

<figure class="wp-block-image size-large"><img src="https://api.kyivindependent.com/storage/2022/04/IMG_3096-1024x911.jpg" alt="" class="wp-image-23729"/><figcaption>Natalia Datskevych's three daughters on the train in Germany, heading to their temporary home after they fled the war in Ukraine. (Natalia Datskevych)</figcaption></figure>



Editor's Note: Natalia Datskevych is a journalist with the Kyiv Independent. 



An endless feeling of fear that seems to never go away. Every loud sound, every sudden spark in the sky, causes panic.



My life, together with the lives of millions of Ukrainians, turned into hell when Russia launched a full-scale invasion of Ukraine.



This is the story of how I was trapped near the Russian border with my husband and my three daughters and how we were able to finally escape.



Hours after the war began and the Hostomel Airport, northwest of Kyiv, turned into a warzone, we decided to flee the capital. We left for our family home in a village in the northern Chernihiv Oblast, not far from the Russian border. In the beginning of the war, many chose to leave big cities for rural areas, thinking that they will remain quiet. So did we. 



Soon we understood that this was a mistake.



As we got settled in our new place – formally a town, but looking more like a village – the situation began to look dire.



The nearby Chernihiv, Kyiv, and Sumy were bombarded day and night. So was Kharkiv to the east. Cities hundreds of kilometers south – Kherson, Mykolaiv, and Mariupol – had come under deadly attacks as well. Soon, Mariupol would become the site of a horrendous tragedy, with thousands of civilians, including women and children, killed by Russian shelling.



A particular video from a morgue in Mariupol, where the doctor showed journalists a lifeless body of a one-month-old baby, will stay in my memory forever.



In our village, people were on the verge of panic. The locals told me that we are surrounded by Russian tanks and soldiers. “It's too dangerous to leave now,” they said. “You’d better think twice before you try to leave, you have three children.”



The fear grew as I read the news that Belarusian soldiers were about to cross the border into Ukraine and join the war. This would have cut our village off from Kyiv.



Russians had been shelling a nearby village. During the shelling, we would go down to the basement. I remember how, during one of those times in the basement, I was holding my crying one-year-old daughter in my arms, and trembling myself, knowing that my family is in grave danger and help isn't coming. 



But on the warm sunny morning of March 21, a slim hope appeared.



My husband went out to find some milk. Ten minutes later he called back.



“Pack our stuff, we have an hour. One man agreed to take us to Kyiv," he said briefly over the phone.



The escape that could have cost us our lives had begun. Leaving was terrifying: We saw in the news many reports of Russians attacking and killing civilians driving to safety, including families with children. 



Our family of five got into the car and followed a minibus that was heading to Kyiv to get bread for our village.



We’ve been told to prepare all the documents, including children's birth certificates, to show at every checkpoint along the way.



The kids were quiet as never before.



Leaving our village, we saw the first checkpoint within a few minutes. Thank God it was a Ukrainian checkpoint. After looking thoroughly at our documents, a Ukrainian soldier wished us a safe journey to Kyiv.



There were more than twenty checkpoints on our way. I never considered myself a religious person but I prayed every time we drove past a checkpoint.



Passing by another one, somewhere deep in the forest, I saw a soldier who looked no older than my eldest daughter. He looked like he was 15 or 16-years-old. He was tightly gripping an assault rifle.



“He is probably very brave,” said my middle daughter, a six-year-old. 



“He is,” I whispered back.



We drove for five hours, through an unfamiliar forest. Before the war, the drive to Kyiv would take an hour and a half.



Burned cars lying on the side of the road, checkpoints, and mines – everything pointed to the new Ukrainian reality.



Finally, we reached the city.



In Kyiv, we passed a memorable place damaged by Russian missiles – a TV tower and the nearby Babyn Yar Holocaust memorial site, where five people were killed by a missile strike on March 1.



Nearly every street we passed was partly blocked with anti-tank hedgehogs.



The numbing, incredibly strong fear didn't leave my body, as missiles and shells continued to strike near Kyiv. The fighting in Kyiv's northwest suburbs of Irpin, Bucha and Hostomel was heard from our Kyiv apartment.



We kept thinking about Kharkiv and Mariupol, and the thousands of innocent people slaughtered by Russia. We knew that we might be next. 



So we decided to go to the central train station and try to flee.



After passing several checkpoints, I heard the long-awaited announcement: “Boarding for the evacuation train from Kyiv to Lviv.”



There were a lot of empty seats on the train, which contrasted sharply with the first two weeks of the war when people had to stand or lay down on the train floor, holding their loved ones, children, and pets.



Eight hours later, our family finally got to Lviv late at night, amid curfew.



After sleeping on the floor of the train station for several hours, side by side with dozens of exhausted children and their mothers, we continued our journey.



<figure class="wp-block-image size-large"><img src="https://api.kyivindependent.com/storage/2022/03/IMG-2976-1-scaled-e1648683907889-1024x761.jpg" alt="" class="wp-image-22986"/><figcaption>Women with children sleep at the Lviv railway station on March 22, 2022.</figcaption></figure>



We decided to leave the country.



The train from Lviv to the Polish city of Przemysl was so packed with refugees that even the famous Tokyo Metro System, during rush hour, would be jealous of the crowd.



By that time we heard that 3.5 million Ukrainians fled the country, escaping the war. I recalled it as I was watching thousands of refugees cramming into the train to Poland, about to join the grim statistics.



The trip from Lviv to Przemysl usually takes slightly over an hour. Ours took seven hours. All I could think about is how much I wanted to breathe in some fresh air. 



As we arrived, we had to wait for 40 minutes before the doors opened. Many had lost their nerve. Older women began to cry to be let out, the children sobbed, and someone simply stayed silent.



But as soon as our feet touched the platform, I felt that my mission to save my children from the war was completed.



Moments later, a question from my eldest daughter caught me off guard.



“Mom, can we get back on this train and return to Lviv?” she asked me with tears in her eyes.



“When the war is over we will, we will,” I responded, sobbing.

Editor's Note: Natalia Datskevych is a journalist with the Kyiv Independent.  An endless feeling of fear that seems to never go away. Every loud sound, every sudden spark...

Natalia Datskevych: My rescue mission to flee Russia’s war with three kids

<figure class="wp-block-image size-large is-resized"><img src="https://api.kyivindependent.com/storage/2022/03/KCH_4535-1024x683.jpg" alt="" class="wp-image-15484" width="840" height="560"/><figcaption>Ukrainians fleeing war wait at the Lviv Main Railway Station on Feb. 28, 2022. (Kostyantyn Chernichkin)</figcaption></figure>



Millions of Ukrainians have been forced to flee their homes as Russian forces continue to bombard residential areas across the country.



While more than 3 million have gone abroad, many have relocated to western Ukraine, which is currently safer than the rest of the country.



English teacher Oleksiy Shpak and his wife were among those who arrived in western Ukraine escaping the front lines of Russia's war.



Yet two weeks in, the family took a train back to Odesa Oblast. They say it was impossible to find an apartment to rent for a reasonable price across the western Ukrainian regions.



“As soon as a new rental offer appears, dozens of people call realtors,” Shpak told the Kyiv Independent. “Often they don’t even pick up the phone.”&nbsp;



Since Russia launched its all-out war on Feb. 24, many Ukrainians have stepped in to <a href="https://kyivindependent.com/national/in-nations-darkest-hours-ukrainians-look-out-for-each-other/">look out for each other</a> through various initiatives.



Many residents in western Ukraine help refugees by providing housing for free, buying food and other goods. But such kind offers are like hot cakes. And if one is not lucky enough to come across caring locals or get help from volunteers, finding affordable housing becomes a true quest.



Shpak says that he was shocked by the $3,750 price to rent a one-room apartment for two months in downtown Uzhhorod, the capital of Zakarpattia Oblast. The cheapest option his family found in the city was $950 to rent a room for two months.



Before the war, apartment prices in Uzhhorod, Ukraine's westmost regional capital, didn't exceed $200 a month for a one-room apartment.



Shpak believes that Ukrainians in the west don't fully realize the scale of the war since they haven't been affected by it as much as other citizens.



“I think that local people don’t feel that danger,” Shpak said.&nbsp;



In Lviv, another western Ukrainian city, $1,000 a month to rent a studio apartment is the new normal.



According to Lviv Mayor Andriy Sadovyi, since the start of the all-out invasion, more than 200,000 people have arrived in the city, increasing its population by almost a third.



While the authorities have provided more than 500 buildings — schools, museums, churches — to house refugees, the demand turned out to be much higher than expected. The temporary shelters are overcrowded, mostly with women, children, and elderly people.



“This is extremely difficult for the city,” Sadovyi said.



Before the invasion, the average rental price for an apartment in Lviv was around $25 per night. On the first day of the war, Feb. 24, local landlords doubled it. In many areas, prices have continued to grow since then, forcing some refugees to change apartments four to five times.



“They see huge demand and are trying to make money on the war," Shpak said.&nbsp;



Relatives of another Ukrainian, Serhiy Belov, rented a studio for $450 a month in Lviv. But when his mother was evacuated from Kharkiv after five days of bombing and joined the family in Lviv, the landlord demanded another $150 for an extra person.



“People lost their jobs there, are sitting under bombardment every day, and here we see such attitude," Shpak said. "It is very frustrating." 



Aside from the high prices, there is also the chance to fall for a scam. Some swindlers ask to send a deposit to confirm the booking but as soon as the money is received, they disappear.



“There are many scammers in Lviv now. In one day, I came across four of them,” Lviv resident Iryna Svishch wrote in a Facebook group created for those searching for apartments.



Local authorities have decided to fight back against landlords who unfairly raise prices.



On March 3, mayor Sadovyi encouraged locals to report inflated prices via a governmental <a target="_blank" href="https://1580.lviv.ua/" rel="noreferrer noopener">hotline</a>. Since then, more than 80 housing offers have been reported. 



Sadovyi said he forwarded the information from reports to the Lviv Oblast military administration. The mayor suggested that the housing from the list is used to accommodate military personnel or other people who need it, claiming that the military administration has the authority do that.



In a Facebook <a href="https://www.facebook.com/andriy.sadovyi/posts/535059457982162">post</a>, Sadovyi called on Ukrainians to be united "because only together we will win."

Millions of Ukrainians have been forced to flee their homes as Russian forces continue to bombard residential areas across the country.While more than 3 million have gone abroad,...

Rental prices soar in western Ukraine amid influx of refugees

<figure class="wp-block-image size-full"><img src="https://api.kyivindependent.com/storage/2022/03/GettyImages-1238962998-2.jpg" alt="" class="wp-image-17784"/><figcaption>A burned and overturned truck lays on its side in the field with explosive munition spilled out and scattered around it, in an area where there was recent heavy fighting between the Russian and Ukrainian forces, near Sytniaky, Kyiv Oblast, on March 5, 2022. (MARCUS YAM / LOS ANGELES TIMES)</figcaption></figure>



Spring. As the winter softens, Ukraine’s farmers used to take to their fields, sowing the seeds of wheat, sunflowers, and buckwheat and tending to poultry farms whose yields are sent across the world.



This year, planting has become a luxury, in many cases fields and livestock have been abandoned. Millions of hectares will be empty, or otherwise overrun by tanks emblazoned with the letter Z.



While the world watches one humanitarian crisis after another brought by Russia’s war, a no less critical casualty is the mounting impact on the food Ukraine supplies the world.



Huge swaths of the global food supply, including wheat, corn, sunflower oil, soybeans and barley as well as poultry and eggs, come from Ukraine, accounting for 15% of the global food market. India, China, Egypt, Turkey, Poland and Germany are among the largest importers.



This season, the engine of Ukraine’s food supply has ground to a halt.



“This will be a problem not only for Ukraine but for the whole world,” Dykun said. “Global hunger could worsen dramatically.”



Andriy Yarmak, an economist and agricultural expert, has a similar forecast. He believes that the Russian invasion may result in many deaths due to malnutrition worldwide.



“Ukraine is already missing the planting campaign in the south, where huge hordes of Russians are ruining the fields with their tanks and shooting randomly at civilians,” Yarmak says.



He estimates that Ukraine won’t be able to export anything for many months and says it will take years to reach pre-war production levels.



As many as 400 million people may be affected globally, according to the Kyiv School of Economics.



Domestic shortages



Much of Ukraine’s most agricultural land, such as the typically lucrative oblasts of Kherson and Mykolaiv, are in eastern territories where fighting is most intense. It is clear this year that farmers won’t be able to sow their fields as in years past.



Alex Lissitsa, head of the Ukrainian Agribusiness Club, estimates that in total, no more than half of Ukraine’s agricultural land, or 10 million hectares, this year, will be planted.



To meet anticipated shortages, the martial law imposed shortly after the Russian offensive began included a ban on key agricultural exports.



“We must provide Ukraine with everything the country needs,” said Prime Minister Denys Shmyhal.



The ban includes oats, buckwheat, rye, millet, beef, sugar and salt. A number of other products including wheat, sunflower oil, corn, poultry and eggs now require special permits from the Ministry of Economy when exported.



Prices have already ballooned in response. After the first week of war, wheat prices in Ukraine jumped by 25%, reaching $290 per ton.&nbsp;



Worst-hit cities like Kharkiv, Kherson and Sumy are running out of food and water and on the verge of humanitarian catastrophe. Kyiv has already been urgently provided with additional food from other oblasts as supplies diminished.



“We brought thousands of tons of grain there,” Dykun told the Kyiv Independent. “It’s a huge reserve.”



Andriy Dykun, head of the All-Ukrainian Agricultural council, says this harvest too will only be enough to satisfy domestic demand. For the time being, Ukraine’s agricultural exports are a thing of the past.&nbsp;



Second front



This looming tragedy in the agricultural sector represents a second front against Russian aggression – one that could actually rally global support, helping to stop the war, Dykun believes.



Attitudes will shift as soon as the countries that import Ukrainian food products realize the toll the supply shortage will have on their people, he says.



While anticipated shortages have already echoed across global markets, such shortages are still not on the agenda of some of the leading global food organizations. Notably, the United Nations’ Food and Agriculture Organization (FAO) has ignored the crisis.



“The FAO has to sound the alarm all across the world about the global food supply issue,” Dykun says. “But they don’t make any big statements that will indicate that Putin provoked famine.”



For now, the leader for Europe and Central Asia at the FAO remains the long-time Russian diplomat Vladimir Rakhmanin.



On March 3, the United Nations General Assembly overwhelmingly voted to denounce Russia’s invasion of Ukraine, urging immediate withdrawal of its military forces.&nbsp;



Some countries abstained, including two of Ukraine’s leading importers: India and China.



At the end of the day, countries that did not vote to support Ukraine will suffer from Russia’s war too, Dykun says.



"If the world wants to have something to eat, make peace here so farmers can work.”

Spring. As the winter softens, Ukraine’s farmers used to take to their fields, sowing the seeds of wheat, sunflowers, and buckwheat and tending to poultry farms whose yields...

Russia's war on Ukraine jeopardizes global food security, increasing famine risk

<figure class="wp-block-image size-large"><img src="https://api.kyivindependent.com/storage/2022/02/Screenshot-2022-02-22-at-03.02.12-e1645491874513-1024x630.png" alt="" class="wp-image-12026"/><figcaption>President Volodymyr Zelensky delivers an address to the nation in the early hours of Feb. 22, following Russia's recognition of the occupied territories of eastern Ukraine as independent states.</figcaption></figure>



Companies in Ukraine are about to receive temporary tax and legal relief amid growing threats of a full-scale war with Russia. 



On Feb. 22, Ukrainian President Volodymyr Zelensky <a href="https://www.president.gov.ua/news/prezident-ukrayini-iniciyuye-programu-ekonomichnogo-patrioti-73065">announced a program</a> on “economic patriotism,” which will ease the tax burden, including possibly reducing value-added tax from current 20% to 8% on petrol and diesel, and fewer inspections. 



“Business should protect our economy, finances, and create jobs. We need to be strengthening the country together, each on its own front,” he said.



According to Yaroslav Zheleznyak of the 20-member Voice party, the government plans to generate funds for the program by raising rent payments for gas producers.



This will happen after the parliament passes in the second reading the bill No. 7038. The announced program was submitted in the form of amendments to the bill. 



Although there are still no clear details on the program, with the help of such incentives the government plans to gain economic independence, “especially in the energy sector,” said Zelensky.



However, some experts doubt the VAT reduction on diesel and gasoline will be an effective tool since Ukraine imports 80% of all fuel mostly from Russia and Belarus.



According to Oleg Nivievskyi, an assistant professor at Kyiv School of Economics, lower fuel prices will only raise demand and “worsen (energy) dependence.”



Plus, only car owners, especially owners of expensive cars that burn a lot of fuel, will benefit from such steps,&nbsp; Nivievskyi believes. The economist also noted that fuel prices usually fall less that the tax will be reduced.&nbsp;



For instance, in the EU, the price is usually reduced by only a third of how much the tax has been reduced.



“It’s better to reduce the VAT rate in all sectors of the economy, rather than for specific products,” said Nivievskyi.



At the same time, the&nbsp;expert was sure that fewer inspections and lower tax burden for businesses may have a positive economic impact.



Truce with oligarchs



On Feb. 23, owners of Ukraine’s top 50 businesses, including oligarchs Rinat Akhmetov and Victor Pinchuk, met at the President’s Office.



Citing an unnamed participant, who was invited to the meeting, Ukrainska Pravda reported that he said that “business is ready to help the country in this difficult time and let go of grudges.”



Ukraine’s richest man Akhmetov, whose fortune reached $11.7 billion last year, announced that his holding SCM will pay $34 million (Hr 1 billion) in taxes in advance to support the country.



“More than ever, Ukraine needs stability of the state finances,” he said, SCM <a href="https://www.scm.com.ua/news/rinat-ahmetov-yednist-zaraz-pitannya-vizhivannya-krajini-mi-pidtrimayemo-ukrajinu-i-splatimo-1-mlrd-grn-podatkiv-napered">reported</a>.&nbsp;



SCM’s assets include a metallurgical plant in Mariupol, a Ukrainian-controlled industrial city in Donetsk Oblast. The city is one of the closest to the Russian-occupied territories.



Zelensky asked top business people to stay in Ukraine while he “does his best for peace.”



Among other speakers at the meeting were the chief of general staff, head of that nation's defense intelligence agency, and defense minister. Prime Minister Denys Shmygal was also present, but did not speak.



“It was productive. Business owners are ready to lend a hand,” said Serhiy Nikiforov, the spokesperson for the president, Interfax <a href="https://interfax.com.ua/news/general/801010.html">reported</a>. 



Andriy Stavnitser, co-owner of TIS Group, Ukraine’s largest private sea port, said that he was satisfied with the meeting.



"I think that after the meeting each one of us are feeling more confident," Stavnitser <a href="https://www.facebook.com/stavnitser/posts/10159311477457572?__cft__[0]=AZUQjWFD-tX8qzzeV_2NXMYwatnq6JHaGBEIW3E524B-z6QrWBINwtWQAkYMJ8naFK5OQrt1EsAHGEm7GvKtpED2AVerqwGWLAVq7iBB6UMOwmy5dbTBByRqESqAITaHjNQ&amp;__tn__=%2CO%2CP-R">said</a>.

Companies in Ukraine are about to receive temporary tax and legal relief amid growing threats of a full-scale war with Russia. On Feb. 22, Ukrainian President Volodymyr Zelensky...

Zelensky announces ‘economic patriotism’ program, meets with top 50 businesses

<figure class="wp-block-image size-full"><img src="https://api.kyivindependent.com/storage/2022/02/273635171_2648971735246674_2983517278269194772_n.jpg" alt="" class="wp-image-10632"/><figcaption>Minister for Digital Transformation Mykhailo Fedorov speaks during the Diia Summit in Kyiv on Feb. 8, 2022. (Facebook/Mykhailo Fedorov)</figcaption></figure>



On Feb. 8, the Diia City,&nbsp;a special <a href="https://kyivindependent.com/tech/zelensky-signs-diia-city-bill-that-changes-taxation-for-tech-firms/?fbclid=IwAR1AgYtmClRLVP5spb76DNsFiMkbVEyCri40ChlF20py5NlA_nni0a7RPiQ">legal and tax regime</a> for IT businesses, came into force.



With Diia City, the government wants to raise the share of the IT sector in the country's gross domestic product to 10% from the current 4%.&nbsp;



As of Feb. 11, three days after the launch, 52 companies had applied to join Diia City.



Among the best-known applicants were: the U.K.-based banking tech startup Revolut, artificial intellegence (AI) investor Roosh, Ukrainian security system maker Ajax, Ukrainian AI startup Reface, and Fintech Band, the company behind Monobank, a popular mobile-only bank.



“We want to invest in Ukraine, we want to create jobs here,” said Dmitry Strelchuk, Revolut’s operations manager, during the Diia City launch day, welcoming the new regulations.



In addition to the special economic regime, officials announced the launch of a fund that will cover half the cost of online courses for IT specialists.



“One of the world’s best tax systems is now available for small startups as well as big IT companies at any location across Ukraine,” said Minister for Digital Transformation Mykhailo Fedorov, the main advocate of Diia City. “Talented developers will be able to implement their ideas here, at home.”



Named by President Volodymyr Zelensky “a digital capital of the electronic state,” the Diia City is expected to triple IT industry revenue from the current $6.8 billion in the next few years, putting Ukraine among the largest IT hubs in Europe. The government pledges to keep the tax regime in force for 25 years.



“Diia City is not only about making business, but also about people, as the most valuable asset,” Andriy Oksenyuk, chief financial officer at Ciklum, an IT giant of over 3,500 employees, with the core team working from Kyiv, told the Kyiv Independent.



According to Business Ombudsman Roman Waschuk, the Diia City was designed with a “whole-system approach,” something that “rarely happens” in other Ukrainian industries.



“It would be great to see other examples, like Diia Selo (village), or Diia Utility payments,” said Waschuk.



At the same time, just a few months before the launch the new legislation sparked controversy among a number of companies in the IT industry. The industry's rapid development in Ukraine is often attributed specifically to the lack of attention from the government and regulators.



According to the survey conducted by the Lviv IT cluster, only 5% of IT developers welcomed Diia City. With the new system being non-mandatory and companies free to join and leave at will, local city budgets will benefit less from tax changes.



“We will constantly track any attempts from the state to violate this compromise (between IT business and government needs). We will protect the interests of IT companies,” said Stepan Veselovskiy, head of the cluster, news agency Espresso.TV <a href="https://zahid.espreso.tv/cherez-diyasiti-lviv-vtratit-chastinu-nadkhodzhen-do-byudzhetu">reported</a> on Feb. 11. 



Oksenyuk from Ciklum believes that the stability of the new regime amid political instability is crucial for the country. If the new regime proves its efficiency over the next year, there will be another “round of digital ecosystem development in the country.”



“It may bring massive changes into education, the evolution of the market of talents, and Ukraine's position in the global IT arena,” said Oksenyuk.&nbsp;



Still, Ciklum is in no hurry to join Diia City, considering this a “serious step.” "It is important for us to hear the opinion of our colleagues and evaluate the experience of the 'pioneers'. Only after this we can move toward concrete plans," said Oksenyuk.

On Feb. 8, the Diia City,&nbsp;a special legal and tax regime for IT businesses, came into force.With Diia City, the government wants to raise the share of the...

Over 50 IT companies join Ukraine's 'special tax regime' Diia City in first three days

<figure class="wp-block-image size-large"><img src="https://api.kyivindependent.com/storage/2021/12/harvester-3562476_1920-1024x678.jpg" alt="" class="wp-image-5220"/><figcaption>A combine harvests wheat in Ukraine, one of the world's largest grain&nbsp;exporters. (stanvpetersen/Pixabay)</figcaption></figure>



As Ukraine is facing the threat of a renewed, possibly all-out invasion by Russia, another risk arises.



Dozens of countries, including Egypt, Yemen, Lebanon, Tunisia, Indonesia, Malaysia, and even China rely on Ukrainian harvests to feed their people.&nbsp;&nbsp;



The Middle East and Africa absorbed nearly 40% of Ukraine's exports of corn and wheat in 2021.



Ukraine, the world’s fourth largest grain exporter, supplied 3 million tons of wheat to Egypt alone, providing 15% of the total consumption for the country of over 100 million people, according to the Food and Agriculture Organization of the United Nations.&nbsp;



But if Russia attacks Ukraine with more than 130,000 troops that it massed along its borders and in the occupied areas inside the country, the world may face a catastrophic interruption in food supply.&nbsp;&nbsp;



“The risk of war is a threat to food security not only in Ukraine but also in the whole world,” Alex Lissitsa, head of Ukrainian Agribusiness Club, told the Kyiv Independent.



Ukraine’s agrarian policy ministry <a href="https://interfax.com.ua/news/economic/753826.html">eхpects</a> grain exports to reach 56 million tons in 2022, which mainly goes through the Black Sea ports of two cities, Odesa and Mykolaiv.&nbsp;



One of the <a href="https://kyivindependent.com/national/will-russia-launch-large-scale-war-or-limited-invasion-analysis-of-3-popular-scenarios/?fbclid=IwAR2UjUqe38CaqlXlVbgTcCdkZv4Z9VT9nHVN3WBFWu07tkrPMA5nzc1bgtk">most-discussed scenarios</a> of Russian invasion envisions Russia invading the south of Ukraine or blocking the Ukrainian ports.&nbsp;



If Ukraine’s agricultural industry is cut off the ports, it may “literally hit the plates and fridges of almost 400 million people in different countries,” <a href="https://www.facebook.com/752792571/posts/10159256168542572/?d=n">according</a> to Andriy Stavnitser, co-owner of TIS Group, Ukraine’s largest private sea port. “No one in the world wants this to happen,” Stavnitser argued.



The grain markets have already reacted to the threat of a further invasion.



On Feb. 1, wheat prices jumped by 7% to $8 per bushel (equivalent of 35 kilograms), the Wall Street Journal <a href="https://www.wsj.com/articles/russia-ukraine-tensions-drive-global-wheat-prices-higher-11643630790?mod=itp_wsj&amp;ru=yahoo">reported</a>. It got close to last year's price, which was the highest in a decade due to the Covid-19 pandemic.&nbsp;&nbsp;



If the importing countries have no access to wheat and corn from the Black Sea region, the cost could easily increase by 20-30%, according to Nikolai Gorbachev, head of the Ukrainian Grain Association.



<a href="https://www.nasdaq.com/articles/wheat-prices-are-getting-rattled-by-russia-ukraine-tensions">According</a> to the Nasdaq stock market news platform, even a limited incursion into Ukraine, not even an all-out war, could raise wheat prices by 15%.&nbsp;



In the event of a large-scale invasion, prices could double, hurting countries already struggling with food shortages, like Yemen. In this desert country, where every fifth kilogram of imported wheat comes from Ukraine, more than 16 million people, or half the population, suffer from acute hunger, <a href="https://www.wfp.org/news/wfp-forced-cut-food-assistance-yemen-warns-impact-hunger-rises">according</a> to the World Food Programme.



“Food insecurity would be exacerbated in the many developing countries that depend on Ukraine,” Alex Smith, a food and agriculture analyst at the Breakthrough Institute, <a href="https://foreignpolicy.com/2022/01/22/russia-ukraine-war-grain-exports-africa-asia/">wrote</a> for the Foreign Policy magazine.



The avalanche of other problems, like ethnic tensions and local conflicts, will follow the food crisis, he forecasted.



At the same time, some experts are more confident in the Ukrainian agro sector.



According to Andriy Yarmak, an investment officer at the Food and Agriculture Organization of the United Nations, Ukraine has enough food stock to keep the supply coming.



“The private sector has an excellent supply of grain and processed products,” said Yarmak.



However, he believes that the food prices will grow significantly this year due to other reasons: a 70-80% increase in the cost of nitrogen fertilizers, and a 3-4 times increase in logistics costs.



“Food prices are record high today both in Ukraine and globally,” he said.

As Ukraine is facing the threat of a renewed, possibly all-out invasion by Russia, another risk arises.Dozens of countries, including Egypt, Yemen, Lebanon, Tunisia, Indonesia, Malaysia, and even...

Possible escalation in Ukraine may undermine global food security, provoke sky-high food prices

Natalia Datskevych is a business reporter at the Kyiv Independent. Before joining the team, she worked as business reporter for the Kyiv Post. She studied economic theory at Kyiv National Economic University and holds a Ph.D in economic science.

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Natalia Datskevych