'There's nothing left to sell'

Labor shortages, privatization, poverty, pensions, energy crisis. June 8-15

Labor deficit

According to Forbes.ua, as of June 13 the labor deficit in the construction sector has reached 40%. Ukraine will need more African, Asian migrants in construction. According to the Confederation of Employers of Ukraine, the number of officially registered workers in the construction sector decreased by 25.4% over the past two years, reaching less than 300,000 people.

Strana.ua published an interesting article on June 12 regarding the economic consequences of the new mobilization law. Among the results have been mass resignations and problems with reservation of employees. While certain sectors are legally entitled to have their employees reserved from mobilization, in reality mobilization officers have acted otherwise.

On June 5, the American Chamber of Commerce and Citi.Ukraina conducted a poll regarding the economic effects of mobilization. 81% of businesses polled said that mobilization had affected their business and employees. The reservation of their employees from mobilization was named as the most important (80%) challenge for business, outstripping Russian rocket attacks (45%) and energy shortages (50%).

Our latest survey showed that the conscription of military-eligible personnel is currently the main challenge for businesses in Ukraine. It significantly affects the business performance results. We will continue to work with the Government to find the right balance — the army gets what it needs, the economy and business continue to operate, and taxes are paid, said the president of the American Chamber of Commerce in Ukraine, Andriy Gunder.

According to the robota.ua website, already 75% of companies are experiencing a shortage of specialists.

Wise reforms

In another case of first world generosity, it emerged on June 13 that Ukraine will only receive the other half of aid promised by Japan after it conducts ‘reforms’.

Meanwhile, the New York Times wrote on June 12 that mass privatizations are planned. Nothing new for Ukraine’s unique, patented invention - war liberalism. I wrote more on this topic here, here, and here.

Perhaps the titanium privatization has something to do with Lindsay Graham’s infamous recent remarks about Ukraine’s mineral bounties?

I also call my reader’s attention to the fact that the NYT article quotes the opinion of representatives of Dragon Capital, a highly important Czech business group partnered with George Soros.

They saved the best for last. The article ends by lamenting the fact that ‘There isn’t much to sell now’.

In a recent post I wrote about the ministry of social policy’s Darya Marchak and her innovative ideas about the pension system. On June 10, she argued in an interview that Ukrainians should be happy to have a later pension:

We need to explain why everyone should be interested in retiring later. Firstly, it will significantly increase your own pension (by 0.5% for each additional month after 60 years old and 0.75% if the postponement is more than 5 years). Secondly, it will currently increase the volume of the unified contribution paid by working individuals to the Pension Fund, and thanks to this, the Pension Fund will be able to pay higher pensions to those who are already retired.

In this context, the reader should understand that of Ukraine’s 10.5 million pensioners, as of 2024 51% of them received a pension of less than 4000 hryvnias. That is less than $100 USD.

Poverty

A June 13 National Bank report found that over the past year, the average cheque has fallen from 344 hryvnia to 327 hryvnia. The reason - Ukrainians are buying less food.

But young Ukrainians, like their peers across the world, are still keen on shoes. On June 15, the following video made the rounds on telegram. It shows the arrival of second-hand shoes at Lesnaya, Kiev’s largest clothes market, which chaotically sprawls the proletarian left-bank of the Dnepr river, at the end of the metro line.

This phenomenon is common in Ukraine. Whenever new arrivals come into the second-hand store, they are swamped by crowds of young people.

Energy Crisis

Not only cheap shoes, but also bread is in high demand.

On June 9, President of the "All-Ukrainian Association of Bakers," Yuriy Duchenko, in a statement to AgroPortal warned that the ever-worsening energy crisis is likely to increase the price of bread by 30%. He noted that even bakeries which are officially considered ‘critical infrastructure’, and should thereby not be turned off from electricity during blackouts, still suffer from a chaotic supply of energy.

On June 13, the state company Energoatom announced that the energy situation will worsen due to the repair of a large nuclear power plant. One June 14, the head of the Ukrainian Association of Renewable Energy Stanislav Ignatyev stated in an interview with Kyiv 24 that in one week, five more nuclear power plants will be turned off for repairs. Apparently in 2023, the energy crisis was softened with the help of solar energy, but cloudy weather has reduced its supply by 20%.

It’s only summer, and the blackouts are already very serious. According to Vladimir Kudritsky, head of the state energy company Ukrenergo, summer energy consumption is generally 35% lower than the winter level.

On 14 June, Ukrenergo announced that electricty would be limited from 8:00-23:00 the following day, due to urgent rebuilding. From 16:00-20:00, electricity would be limited for most consumers.

Kudritsky stated that the repairs needed to prepare for winter would cost $1.5 billion USD. But according to him, much more - tens of billions of dollars - are necessary for the resumption of operations for the many energy plants destroyed by Russian attacks. He stated that the energy situation would be much worse the following week.

Prime minister Denis Shmyhal had this to say on June 7:

“42 power units have been practically destroyed, and another 20 hydroelectric power units are damaged. Additionally, 73% of thermal power plants are out of operation”

Shmyhal also stated that air conditioners in Kyiv consume 350 megawatts, which is half of the total consumption. In a recent post I wrote about the air conditioner scandal wracking Ukrenergo.

The limits of energy imports

On June 14, the European Network of Transmission System Operators for Electricity released a worrying report (my bolding):

Ukraine’s national analysis for summer 2024 demonstrates significant risks to the energy system. The system faces planned load-shedding activation for both industrial and household consumers daily. Under these circumstances, urgent efforts are carried out to restore damaged generation capacities and implement small-scale distributed generation connecting to the distribution grid, but also be dispatchable and simultaneously cover local electricity demand. Unpredictable but systematic everyday attacks causing the transportation grid’s infrastructure elements damage require Ukrenergo and generation companies' staff’s significant effort to maintain the grid and generation units in proper state and operation. The interconnector transfer capacity has reached limits for the current conditions, and options for further increase are explored.

Energy imports have been one of the main lifelines for Ukraine’s energy system. According to the Energy Minister Herman Galushchenko, international transfers allow Ukraine to export up to 550 megawatts and import up to 1700 megawatts. But given the fact that Ukraine has lost more than 9 gigawatts of generation capacity, imports will not be capable of solving the crisis.

The cold future

Apart from chastising the population on the use of air conditioners, the government also stated on June 15 that all citizens are being removed from the energy lines that service critical infrastructure. This will in theory allow the latter to continue working during blackouts.

And on June 7, prime minister Shmyhal announced a new credit line for Ukrainians wishing to buy their own generators. The government also plans to reduce tariffs and other import restrictions on generators and solar panels. Given the financial cost of these apparatuses, not to mention their possible physical limits, it is hard to be optimistic for the coming winter.

Generally, Yury Romanenko, a relatively pro-Zelensky political commentator, tries to stay positive regarding the energy crisis. Dooming about it is considered a sign of pro-Russian inclinations. But in his latest videos, he hasn’t shied away in his descriptions - ‘Energy apocalypse today’, for instance. I listened to his recent interview with Mikhail Shuster, a veteran of the energy industry. It is titled ‘Ukraine’s energy finale: save yourself if you can’. He spends much of the video advising how to choose the best generator and how to plan for one’s energy consumption.

Most depressingly, he argues that many Ukrainians will simply be unable to do anything. He singles out impoverished pensioners in aging Soviet apartments in particular. They will suffer mass death this winter. During blackouts, they and the ill will simply be unable to use the lift and enter their house, or leave. On June 12, the minister of health announced that heart attacks have become common among Ukrainians aged 10-15 years younger than the usual victims.

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