As the war enters its third year, Ukrainians are defending their homeland with 880,000 troops, rockets, tanks, and drones. But they also have a secret weapon: the nation’s remarkably robust private sector.
Right from the initial invasion, Ukrainian businesses stepped up with critical support – to defeat Russia militarily, ease the suffering of the families of the wounded and dead, and keep vital supplies like food, heat, and electricity flowing on the home front.
This level of support is not unprecedented in history. During World War II, U.S. automakers transitioned to making tanks and aircraft engines, and citizens were encouraged to surrender metal to use for ammunition. But the U.S. homeland wasn’t attacked, and businesses thrived. In Ukraine, on the other hand, factories and infrastructure have been devastated – yet the private sector’s stellar performance has kept the economy running and set the stage for an essential role in the reconstruction that will follow.
Consider SCM, a diversified company owned by Rinat Akhmetov whose holdings include Metinvest, which owns the Azovstal Iron and Steel Works. Azovstal held out for nearly three months as the last redoubt against the Russian invaders in the port of Mariupol. The plant was destroyed, as was another Metinvest plant in Mariupol. But Metinvest continues not only to produce steel for commercial uses but to manufacture metal command posts and bunkers for the military, among many other contributions.
SCM’s DTEK subsidiary, Ukraine’s largest private investor in the energy sector, has managed to keep the lights and heat on during the most challenging winter in the country’s modern. DTEK has repaired over 700 energy facilities, fixing damage from 348 missile attacks and restoring power to 8 million customers.
In another example of the private sector going beyond their regular functioning of business – ATB, a retailer with more than 1,000 stores, used its 750-vehicle fleet to deliver essentials to besieged cities, opened its stores’ basements for bomb shelters, and launched a project that provided “free urgent humanitarian parcel deliveries” to cities like Odesa and Kharkiv.
ATB, which paid nearly half the taxes of all Ukrainian retailers, also launched charitable programs like The Unbreakable, a rehabilitation center for the treatment and recovery of children with blast injuries.
Another retailer, Fozzy Group, immediately lost $75 million in goods through destruction and Russian looting, but transformed its retail chain Silpo into a critical distributor of food, medicine, and humanitarian aid, keeping the vast majority of its 750 stores open.
Fozzy has also donated more than 1.3 million tons of food and basic necessities to the Ukrainian military, hospitals, and orphanages, and nearly 500 tons of foreign aid have been held and distributed through its warehouses.
Additionally, before the war, Ukraine was by far the largest sunflower oil exporter in the world. Kernel, its biggest company in the sector with $5 billion in annual revenues, was severely harmed by Russian attacks. But in the first nine months of the war alone, Kernel donated tons of tactical equipment for the military, including armor, helmets and drones; 577 vehicles; 5,000 tons of grain; and 800,000 units of medical equipment.
Private businesses outside Ukraine are helping, too. Global accounting and consulting firm Deloitte reports “the resurgence of Foreign Direct Investment (FDI) in Ukraine stands as a testament to its indomitable spirit and promise.”
Ukraine’s economy contracted by nearly 30% in 2022 but is expected to have grown by 5% last year, according to a Reuters report, which added that “Ukrainian businesses and foreign businesses have adapted to new wartime realities with some even announcing new production facilities in central and western regions.” But more capital is needed.
The creativity, courage, and humanitarian spirit shown by these private Ukrainian businesses in wartime will almost certainly encourage significant international investments to support Ukraine’s reconstruction. This capital will help ensure that the nation will be a bulwark of freedom and prosperity, driven by the private sector, when the Russian invaders are driven out.
James K. Glassman, formerly U.S. Under Secretary of State for Public Diplomacy and Public Affairs under President George W. Bush and fellow in economics at the American Enterprise Institute, is a senior advisor to SCM, Ukraine’s largest private investment group.
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