Ukraine’s economy is struggling as Russia’s air war targets industries, logistics networks and ports needed for exports
KAMIANSKE, Ukraine –The furnaces are cold, the factory floor deserted, and twisted metal litters the grounds of Kamet Steel, a vast industrial complex that once helped power Ukraine’s economy but closed after a Russian attack.
Across the country, grain — a key export — piles up in fields and silos as farmers struggle to find routes safe from airstrikes and wait for prices to rise.
Russia’s intensified air campaign is slowly strangling Ukraine’s economy, targeting industrial and energy plants and the logistics networks, railways and export routes that keep it afloat. The near-daily strikes with ballistic missiles and jet-powered drones disrupt production and drive up transport costs.
As a result, Ukraine’s government faces a deepening cash crunch as the air war chokes its revenue from steel, agriculture and other keyKyiv faces uncertainty over future U.S. support
Ukraine’s central bank last week forecast a 0.4% economic contraction in 2026, reversing its previous projection of 1.8% growth, due to the attacks and a surge in global energy prices. Gov. Andriy Pyshnyy said the bank had also raised its inflation forecast to 12.5%, from 10% in July.
Ukraine spends some 40% of its gross domestic product on defense — far beyond what it can cover alone, notes Torbjörn Becker, director of the Stockholm Institute of Transition Economics. Raising taxes only would bring in a fraction of what is needed.
Missile strikes have halted steel production across Metinvest Group, the country’s mining and metals giant.
Kamet Steel, in the industrial city of Kamianske, accounted for more than a quarter of Ukraine’s steel output in 2025. The complex employed thousands producing steel and pig iron for domestic construction. It also supplied semi-finished steel to Metinvest’s facility in Bulgaria for the market there and elsewhere in Europe.
But five ballistic missiles struck the site on Sept. 5. Its closure has hurt Ukraine’s industrial economy, affecting construction, mining, engineering, energy and logistics.
Ukrzaliznytsia, the national railway operator, relies heavily on steel transport and other freight revenue. Businesses that rely on the plant could lose jobs and face bankruptcy, said Oleksandr Tretyakov, Kamet Steel’s CEO. European Union trade restrictions could hinder recovery by narrowing the market for Ukrainian steel exports, he said.
“This is the worst situation since the Second World War,” Tretyakov said, noting that steel once accounted for about 6% of Ukraine’s GDP.
“It did,” he said. “Right now, it’s zero.”
Agriculture accounts for up to 60% of Ukraine’s foreign currency earnings, making it critical to the wartime economy.
But Russian attacks on Black Sea shipping have sharply reduced traffic through Ukraine’s deep-water ports just as farmers need cash to prepare for the next planting season.
Ukraine’s Black Sea trade has collapsed with attacks on ports, vessels and logistics infrastructure, according to maritime data and analytics company Lloyd’s List Intelligence. There were only 21 ship arrivals at Black Sea ports in August, down about 90% from a year earlier.
Soaring insurance premiums and the constant threat of Russian strikes deter shipowners. Dozens of sailors have been killed in attacks this year.
“All our developments and all the innovations we achieved will be crossed out by this situation and we will need to start from zero later,” said Volodymyr Scavinskyi, trade director at Nibulon, one of Ukraine’s leading agricultural exporters.
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Ship traffic from Ukraine’s lower-capacity ports on the Danube River to the Black Sea has surged, even under the threat of Russian bombardment. But it is costly. The Danube delta’s Sulina Channel is too shallow for the largest vessels, and dozens of ships often wait days to enter or leave the river.
Record low Danube water levels due to drought also constrain the route. Barges that once carried 1,500 tons are loading only 800 to 900 tons, Scavinskyi said. Nearly twice as many barges are needed to move the same volume, raising costs. Transporting each ton of corn from central Ukraine to Spain cost up to $50 earlier this year. Now, it can reach $150, he said.
“It’s still risky and you don’t have any guarantees that your voyage will be successful,” Scavinskyi said.
For Olena Shelest, commercial director at HarvEast, a major agricultural holding, the immediate challenge is finding buyers.
HarvEast is holding wheat in enormous silo bags, waiting for market prices to stabilize. But the grain must be sold by year’s end to free up cash for next year’s planting. The company risks running out of money to sow the next crop, turning today’s export bottleneck into next year’s production crisis.
Corn prices have fallen sharply, from an average of $210 to $230 per ton last year to around $130, further squeezing farmers, Shelest said.
About 60% of HarvEast’s sales used to go through Black Sea ports. The Danube ports of Reni and Izmail can handle only about 15% to 20% of overall national export volumes, Shelest said. Land routes through Poland and elsewhere in Europe offer alternatives but have higher transport costs.
The pressure is forcing farmers to cut spending on seeds and fertilizer, risking future yields.
Roksolana Pidlasa, head of the parliament’s budget committee, said Ukraine is facing its worst cash squeeze since Russia’s 2022 invasion. Falling tax revenues have left the treasury struggling to cover planned spending despite international funding commitments.
Ukraine faces a gap of just under $25 billion in funding for 2026, with dozens of bills tied to international commitments requiring parliamentary approval by the end of the year. In 2027, the gap is expected to reach about $32.6 billion, plus around $45 billion for in-kind military support.
The loss of U.S. budget support has compounded the pressure. Washington provided $50 billion in purely budget support under President Joe Biden between 2022 and 2024, helping fund teachers and doctors’ salaries and pensions, according to the U.S. Government Accountability Office.
Since President Donald Trump returned to office, there has been no authorization of significant aid to Ukraine. Some aid appropriated under the Biden Administration is still in the pipeline, though the Trump administration has temporarily paused some deliveries, according to the Council on Foreign Relations.
Europe has become Ukraine’s largestn) in financial, humanitarian and military aid since the start of the war, compared with 115 billion euros ($129 billion) from the U.S., according to the Kiel Institute for the World Economy
Defense, public sector salaries, pensions and social assistance take priority. The government has postponed construction, reconstruction and some winter preparation projects.
If Ukraine doesn’t find a way to cover the deficit next year, “it will mean that we will not be able to pay teachers and doctors’ salaries and maintain hospitals,” Pidlasa said.
Associated Press Business Writer David McHugh in Frankfurt, Germany, and AP journalist Volodymyr Yurchuk in Kyiv contributed to this report.
Related Topics
- Ukraine
- Russia
