New and old challenges. How is Ukrainian infrastructure holding up during the war?
Daria Sichkar
The EBA Logistics Committee Manager
Transport infrastructure was one of the first to take the blow of a full-scale war, and the enemy attacks against it do not subside. Along with the physical damage, the sector suffers less visible, but no less painful losses, of financial and economic nature.
So what are the losses?
As a result of russian aggression, nearly 33% of infrastructure across the country was damaged: 305 bridges, 19 airports, 110 railway stations, and 24 thousand km of roads. According to preliminary estimates, the total amount of infrastructure losses in Ukraine amounted to $35.3 billion, and this figure is increasing every day.
Aviation infrastructure. In the first weeks of the war, russian troops carried out massive shelling of aviation infrastructure. In total, 19 out of 35 airfields were damaged, including 12 civilian and 7 dual-purpose airfields. The amount of losses is $2.14 billion according to preliminary estimates from the Kyiv School of Economics.
Railway infrastructure. Later, the railway infrastructure, particularly electrical substations, became the target of active attacks. In general, during the period of full-scale aggression of the russian federation, 6km of railway tracks were damaged or out of control. According to the Ministry of Infrastructure of Ukraine, a preliminary review of the condition of roads in the de-occupied regions shows that on average about 10% of the total number of roads in the areas where hostilities took place suffer from damages. According to last year’s estimates provided by Ukravtodor, the reconstruction of destroyed roads can cost an average of UAH 29 million per 1 km of a road or about $26.6 billion in total. If we take into account the restoration of bridges, then it is another $1.9 billion on top.
It should be noted that all the above figures are only preliminary estimates. The accurate calculations can be made only after the end of active hostilities when experts will have direct access to the facilities to assess their technical condition.
Maritime infrastructure. Ukrainian port infrastructure has also suffered significant damage and losses. Kyiv School of Economics estimated the total direct losses of port infrastructure and related enterprises at $496 million. Also, out of 13 Ukrainian ports, 4 are temporarily under russian occupation, namely Mariupol, Berdiansk, Skadovsk, and Kherson. The occupiers have most likely already stolen all valuable property in them. However, they still kept the ports working to illegally transport Ukrainian grain to russia and other countries.
Meanwhile, the largest ports (Mykolaiv, Olvia, Odesa, Chornomorsk, Pivdennyi) remain under the control of Ukraine, but their full-fledged work is prevented by russia. This causes huge losses to business because before the war more than half of all Ukrainian exports and 90% of grain exports were transported by sea. Part of the Dnipro River, which is Ukraine’s main inland waterway, is also blocked in Kherson and Zaporizhzhia regions. The recently launched reform to restore inland waterways is unfortunately on hold.
There are no easy alternatives to blocked sea routes. The only means to continue exporting goods and raw materials are currently railways and trucks. Unfortunately, however, Ukraine does not have the same gauge railroad tracks as the rest of Western Europe, which means that each wagon needs to change its wheelsets. This leads to long queues of rail wagons at borders and increased logistics costs. For some types of cargo, logistics costs exceed the cost price. Therefore, one of the options for expanding export opportunities offered by the business is the construction of a 1520 mm gauge railway line through Poland, which will connect the Ukrainian railway and the port of Gdansk, as well as the Lithuanian railway network. And now business is ready to use this transport corridor to export agricultural goods, metallurgy products, mining and chemical industry, construction materials, oil and oil products, etc.
After all, the load on the railways is growing significantly: in the pre-war period, the volume of freight traffic was within 300-400 million tons per year, and now to cover the export needs of the country it is necessary to almost double this figure − up to 500-800 million tons per year. However, another problem is that the infrastructure of the EU countries is not designed to handle such large volumes of goods exported by Ukraine. And to solve this problem, capital investments are needed not only in the development of border infrastructure, but also in the port infrastructure of European countries, as Ukrainian grain is mainly transported through these ports to Asia or Africa.
Is it a chance for modernization?
At the same time, there are also positive aspects, particularly, it is worth mentioning the “grain agreement”, which was signed at the end of July. Through the agreed “grain corridors” it was possible to unblock exports from three Ukrainian seaports, and this is a significant breakthrough. The business strongly supported the decision of the Joint Coordination Center in Istanbul to extend the agreement and leave the corridor operating on a permanent basis after November 2022. At the same time, entrepreneurs expect the opportunity to export not only grain but also other goods, such as metal. This will immediately reduce the load on the railway, simplify and reduce the cost of logistics.
But what are the “buts”?
Now we see problems with the extension of this Agreement. Since September, a huge queue of ships has formed near the Bosphorus Strait, which is going to the ports of Ukraine for grain cargoes or has already been loaded and is on the way to their final destination. Since September, russian representatives involved in the inspection started to artificially create such queues. Recently, we have already heard from russia about its refusal to continue the grain corridor. However, even after the calls of russia, the Joint Coordination Center in Istanbul without the participation of russian representatives agreed on the movement of 16 vessels within the grain initiative.
The European Business Association has already appealed to the UN and the Embassy of the Republic of Turkey in Ukraine with a request to do everything possible to extend the Grain Initiative, including consideration of the Mykolaiv seaport hub, as well as increasing the number of inspections of vessels with Ukrainian agricultural products per day.
How can the situation be stabilized?
In parallel with the restoration of shipping in Ukraine, it is time to think about how to build long-term cooperation between Europe and Ukraine in the field of logistics and supply chain development. Already now, we can facilitate the normal functioning of the infrastructure and speed up the processing of goods from Ukraine. The measures include modernizing and expanding railway tracks, building 80 km of the narrow-gauge railway with terminals at Ukrainian stations, deploying at all EU-Ukraine border crossings the points of switching the rolling stock from wide to narrow gauge (bogies, wagons, covers), simplifying customs procedures at border crossings with the EU to reduce the time for cargo clearance by rail. And, at the same time, it is necessary to introduce joint border and customs control of freight trains and synchronize railway transportation systems between the EU and Ukraine. This will enable businesses to have a comprehensive transport plan for each route with information about operators, terms, and prices.
The need to ensure exports by other means of transport also contributed to the modernization of the road infrastructure. For its part, Ukraine has completed reconstruction, started full-fledged work, and introduced a pilot project on simplified vehicle clearance at several border-crossing points with Poland. Besides, additional points for the passage of empty trucks were allocated and the “Electronic Queue” project for trucks was launched. However, the problem of queues on the Ukrainian-Polish border remains unresolved. Thus, in August, in some places, the queues of trucks reached up to 60 kilometers. This situation has a negative impact not only on Ukrainian businesses engaged in foreign economic activity but also on partners in the EU, exporters of Ukrainian products, and manufacturers who use materials from Ukraine in their production. The Ministry of Infrastructure has already offered the Polish side several options to resolve the situation, particularly, the abolition of phytosanitary and veterinary control of certain transit cargo groups. Also, if possible, to transfer these services to 24-hour operation on the Polish side of the border. However, the settlement is still pending for this issue.
As long as the war continues and the sky is closed for flights, it is impossible to talk about the resumption of air transportation in Ukraine. However, there are issues that the state and, in fact, Ukrainian air carriers should think about now. Unfortunately, a large number of workers in the aviation sector are currently idle, many pilots are losing their flight hours and licenses. This may lead to a shortage of personnel in the country after our victory, and the recently signed Open Skies Agreement with the EU will lead to the fact that foreign carriers and pilots will quickly displace Ukrainians from the market. Therefore, the Ministry of Infrastructure and airlines need to start developing a program that will help our pilots to start working as soon as the skies over Ukraine open. The first step in solving this problem has already been made – the Government has recently adopted a decree that allows pilots to travel abroad, which gives them the opportunity to continue mandatory simulator training or work in other countries for a certain period in order not to lose their flight hours and licenses.
So, we can see that Ukrainian infrastructure faces a range of both obvious and non-obvious war challenges. However, even in these conditions, business continues to work and look for alternatives to the usual logistics routes. We cannot just fold our arms and wait for the end of martial law, because the loss of infrastructure is enormous and it will take a lot of time to restore it. We need to think about the future now and work on mistakes, business and government need to listen to each other. After all, every thought-out decision advance the victory of Ukraine.
