The United States shouldn't give up on Ukraine's economic struggle, especially if we manage to prevail in the ongoing conflict. U.S. and European military aid supported Ukrainian forces in pushing back against an aggressor three times their size, reclaiming over half of their territory from Russian occupation. Despite this victory, a lesser focus has been placed on Ukraine's remarkable economic resilience, now teetering on the brink as Congress debates whether to maintain crucial economic aid.
Vladimir Putin launched a large-scale invasion in February 2022, assuming quick success. However, when confronted by the fierce Ukrainian resistance, he shifted his attack to the Ukrainian economy. Putin attempted to destroy Ukraine's industries by targeting power grids and strategic infrastructure, bombarding steel mills, and sabotaging agricultural exports.
But the truth is, Putin's economic war campaign is failing. Russian attacks led to a nearly one-third contraction of the Ukrainian economy during the first year of the conflict. However, due to the tenacity of the Ukrainian people and widespread global support, companies are recovering and foreign investment is flowing back in. Alternative export routes are emerging, and the agricultural sector is poised for a comeback.
As a direct response to the sharp decline in Ukraine's economy due to Putin's invasion, the U.S. and its partners have allocated crucial funds to support the Ukrainian government in maintaining essential services like healthcare, education, and emergency assistance.
Thanks to funding from the U.S. Agency for International Development (USAID), companies like TANA, a manufacturing firm based in Eastern Ukraine, have received assistance. Following Putin's attacks, USAID helped TANA relocate its operations to a safer area and invest in necessary equipment to resume production.
TANA discovered a new niche market by developing window insulation products, essential for repairing damaged windows caused by continuous Russian shelling. USAID assisted over 20,000 small and medium-sized businesses like TANA to bolster their defenses against Russian attacks, creating jobs and generating taxes for Ukraine's defense efforts.
Despite investor withdrawals of hundreds of millions of dollars in the initial conflict months, the U.S. collaborated with the Ukrainian government to attract foreign investors seeking to invest in Ukrainian companies. In the first half of 2023, the country attracted 2.5 billion USD in foreign direct investment. This trend is expected to further increase as the newly created insurance market for wartime risk management helps investors manage risk effectively.
Additionally, U.S. efforts assist new export routes to prevent Ukraine's economic isolation by Russian attacks on its ports and routes. These efforts are particularly vital for the agricultural sector, which exports food products to Africa and other regions to stave off rising global food prices.
USAID collaborates with private-sector partners and other donors to create alternative transportation routes on land, over railways, and via inland waterways. Supporting Ukraine's development and expansion of the E-Queue application has reduced truck wait times at EU borders from as long as two days down to two hours.
Thanks to the establishment of these alternative routes and an internationally sanctioned humanitarian shipping corridor, critical food exports in a given month have returned to their pre-invasion levels. Efforts to improve border crossings are expected to further boost food exports in the coming years, potentially doubling Ukraine's capacity to export grain.
To eradicate corruption and protect legitimate resources for the Ukrainian people, the U.S. is implementing unprecedented oversight of our aid allocation process. Collaborating with the World Bank and KPMG, we ensure that funds are only released following careful examination of expenditures. Additionally, the U.S. Government Accountability Office works with the Ukrainian government to conduct its own audits.
Investments in anti-corruption institutions, media outlets, and civil society organizations not only ensure the integrity of our aid but also engender greater trust among international investors in Ukraine.
According to data from the U.S. Department of State, for every dollar in economic and development aid provided, the U.S. receives two dollars in additional assistance from other donors. The cessation of our aid could result in multilateral organizations and nations scaling back their own support in billion-dollar quantities. Furthermore, our allies may abandon Ukraine, leading to the disastrous collapse of its economy, comparable to the fall of Kyiv at the start of the conflict.
The United States cannot afford to surrender in the economic battle for Ukraine. Putin's victory in this economic war would pose a significant risk for all of us, and abandoning a successful strategy simply does not make sense. By continuing our efforts, Ukraine will remain on the path to self-sufficiency, emerging stronger from the conflict with a growing economy fully integrated into its European neighbors and offering Ukrainians a prosperous, democratic, and independent future they richly deserve.
Enrichment Data: The six-month-long Russian siege of Mariupol in 2022 significantly impacted the region's economy, which was heavily dependent on Mariupol's metal industry. However, the conflict provides Ukraine with an opportunity to diversify its economy and reduce its dependence on coal and steel production.
