On the Home Front: Ukraine's War Economy and the Spirit of Defiance
These are challenging times for Ukraine’s resistance to the Russian invasion. Despite the success of the Kursk offensive, not only does the attritional war on Ukrainian territory still favour the aggressor, but a foreign power, North Korea, is mobilizing troops to support the Russian war effort, the first such state to do so. Ukraine’s Western allies are divided over the country’s “victory plan” and scrambling to prepare for a second Trump White House. Its declared intention to end the war in “24 hours,” regardless of what that means for Ukraine’s fight for freedom and the occupied territories, now casts a long shadow over the war’s fate.
Ukraine has formulated a plan for “internal resilience” that faces in one sense a classical problem. As the sociologist Charles Tilly famously argued, all wars come down to the need to mobilize people to fight them, to equip them with the necessary weapons and to meet their well-being and daily needs. This means that “total wars” of the type that Ukraine is fighting have a knock-on effect on civilian life. The entire economy is reorganized around the need to prioritize the war effort. For Ukraine this is complicated by the David-and-Goliath nature of the conflict. Its economy is around a tenth the size of Russia’s and less than half as wealthy in per capita terms, too. Ukraine’s war of self-defence requires a scale of financing that is simply unavailable in its domestic economy, making it dependent on its Western allies.
Ukraine is currently in the process of agreeing a package of assistance that should see it through 2025, even in the event of no fresh aid from the United States. A loan secured against sanctioned Russian assets and other international funding sources will mean that Ukraine has more than enough funds to cover next year’s budget deficit, even without further support from the United States. If Ukraine’s military falters in the year ahead, it will be the human costs of the conflict—the other side of the “people and money” equation in any war-effort—and not the lack of money, that forces it to adjust its goals and demands in the war.
The industrial heartbeat amid the turmoil of war
The strength of Ukraine’s remarkable economic resilience can be seen in the southeastern city of Dnipro. Historically a powerhouse of Soviet industry, it is still to this day a major centre of industry. One of the last outposts of Ukraine’s famous steel sector, much of which has been destroyed or occupied, the city is critical to what remains of the industrial economy.
Although it is only around 100 kilometres from the current frontline, Dnipro is largely intact, a testament to Ukraine’s successful military campaign, and the importance of its Western air defence systems, in sustaining daily life and infrastructure.
There are still, however, frequent reminders though that this is a city in a country at war. Arriving by train from Kyiv, crowds funnel out through a narrow side exit, a precaution designed to prevent large groups of people congregating and becoming a target for Russian bombs. The need for this can be seen immediately opposite the station. A building is currently undergoing repair work after a Russian bomb struck a couple of months ago.
On the street, vans await soldiers returning from leave, offering transport back to the front. Dnipro also has numerous ad hoc constructed bomb shelters on the roadside, something you do not see in central Kyiv, where the underground metro system provides the main emergency shelter during air raid sirens.
Our guide in the city is Lucy Novack, the Director of Communications at Interpipe, one of Ukraine’s major steel conglomerates. She has recently returned from Pokrovsk, a key supply hub for Ukraine’s forces in western Donetsk, about a two-hour drive from Dnipro. She was there as part of the company’s humanitarian assistance effort for frontline troops. As we drive from the station, we pass the Dnipro Bus Terminal, the site of one of many punitive attacks carried out by Russian forces on Ukraine’s Independence Day in August 2023. But having reopened earlier this year, it is one of many signs of Ukraine’s economic resilience.
Lucy launches into a cook’s tour of Dnipro’s sites and history. “You see this small restaurant,” she says, pointing, “It was most beloved by Brezhnev.” She refers to the Soviet Union’s second longest-serving leader, Leonid Brezhnev, who was a local of the city. His network of supporters was even called the “Dnipropetrovsk Mafia” (the old Soviet name for the city and still the name for the surrounding oblast). Like Nikita Khrushchev, who also climbed to the very top of the Soviet state through the Ukrainian Communist Party, Brezhnev symbolizes some of the complexity of Ukraine’s relationship to the fallen Soviet empire.
Much of the industry that developed in Dnipro in the 20th century was critical to Soviet progress in the space and arms race during the Cold War. In 1959, the city was even closed to foreign visitors by the authoritarian party-state on security grounds and known colloquially as “the rocket city” to Soviet citizens. There are plenty of visual reminders of this history in modern-day Dnipro. We pass an unfinished and crumbling Soviet-era hotel on the banks of the river. “Now, it is like a monument to the Soviet Union,” Lucy says jocularly.
Dnipro is, however, very far from an unreconstructed centre of old Soviet industry, let alone identity. Its cityscape mixes a Soviet-era modernism with newer developments, in a manner that is delicate, even refined. In fact, in a remarkable testament to the city’s can-do spirit, new apartments continue to go up in defiance of the war and the frontline’s proximity.
If Dnipro has a local identity, it is not so much fixed in history but continuously reinvented, at least that is how some locals like to see it. “We don’t have a fixed identity,” one activist tells me, “Change—making something new—is our local identity.” Change produced by violence is tragically part of this long history. The city has proudly rebuilt its Jewish population after its near-total destruction in the Holocaust. “We have a large Jewish population,” Lucy tells me, “We are multicultural.” Lucy’s daughter had once even returned from school assuming that their family would be celebrating Hannukah like her classmates.
The city council has also embraced the decolonization campaign towards landmarks associated with Russia. Some of the results are a little surprising. “You must look at this,” my translator says as we continue our journey, “That trolley bus is heading towards Queen Elizabeth II Street.” “Yes, it was renamed after the invasion,” Lucy confirms, as I chuckle.
Steel, survival and resistance: Dnipro defies Russia
While British visitors may recognize a street name or two, they will likely be surprised to find that industry in Dnipro, particularly heavy industry, still conveys a sense of affluence that is strikingly different to the towns and cities associated with these sectors back in Britain.
Our destination is Interpipe’s electric arc furnace complex. Established just over a decade ago, the high-tech facility claims to be the largest of its type in Eastern Europe and the first new steel production site in Ukraine built in “half a century.” The construction alone cost $700m, and the firm is well regarded by many experts as an investor in productive capacity. Belying the reputation of the wider Ukrainian steel industry for dirty and polluting products, the facility boasts green technology.
Interpipe is owned by Victor Pinchuk who like all of Ukraine’s oligarchs has a politically entangled past. A close associate of the former president Leonid Kuchma, and husband to his only child Olena, Pinchuk was part of the “Dnipro clan,” considered highly powerful in the first decade of Ukraine’s independence.
The Interpipe facility in Dnipro is certainly impressive. The arc furnace produces round steel billets which are then turned out into steel pipes and, at a connected enterprise next door, into railway wheels. This vertically integrated production has made them one of the world’s top ten seamless pipe producers and top three producers of all rolled railway wheels. “One in four train wheels in Europe is from us,” I am proudly told on the tour of the facility floor.
Like most firms in the industrial sector, the biggest challenge Interpipe faces in the war is the supply of labour. Of Interpipe’s 9,500 employees, 1,200 are now serving in the military. Tragically, 72 have been killed, 40 are missing, and five have been captured. Staffing has become a serious challenge. “We’re looking to fill 700 vacancies right now,” Lucy says.
Labour shortages have been acute across the industrial economy and a key barrier to further growth. Like in the world wars of the 20th century, this is also reshaping gender relations. With men mobilized to the military, women are increasingly filling roles once considered male-dominated. “Only a third of our staff are women,” Lucy remarked, “but that number is rising.”
The influx of internally displaced people from the war has, however, supported the city’s population over the last decade. “Today the city is booming,” Lucy says, pointing to new housing and redeveloped city squares.
The availability of skilled industrial jobs is not the only reason that Dnipro is an attractive relocation destination for those fleeing Russian occupied territory to the south and east. Russian is still the favoured language here. Our tour of the Interpipe shop floor is undertaken in Russian, effortlessly translated by one of Ukraine’s many skilled trilinguist.
Dnipro may encapsulate then the strategic failure of the Putin project. It was in cities like this one that the Russian army expected to be greeted as “liberators”, not conquerors. That the flame of the Ukrainian resistance burns bright here, testifies to the catastrophe this imperial chauvinism has been for any genuine Russian influence in Ukraine. It also may assist the construction of what the Ukrainian intellectual Denys Gorbach, who has studied these Eastern industrial cities extensively, hopes will flower into “an inclusive national project, based on the shared war experience, EU aspirations, and a redistributive agenda.”
This vision is perhaps already being constructed “from below” in the culture of active citizenship. Ukraine’s famous “do-it-yourself” spirit, which has long been a feature of a society sceptical of its state and elites but with deep bonds of trust towards fellow citizens, underpins resilience. Still, the war may also be changing public perceptions of the state among the populace. Tax revenues have been robust, indicating perhaps how citizens increasingly see them as part of a social contract that supports their security and way of life.
An entire ecosystem of volunteers is also raising funds directly for the military. One of these fundraisers accompanies me on my visit to Dnipro. On the train, he shows me a video of a recently purchased commercial drone, now on route to support Ukrainian troops.
Workers, wages and war: Ukraine’s turn to military Keynesianism
Back in the capital, Kyiv, I visit the famous Trade Unions Building on Independence Square. The large, imposing Soviet-era building was opened in 1980. In the post-Soviet era, the centre has been an organizing hub during Ukraine’s twenty-first century revolutionary days. A plaque on the wall at the main entrance commemorates its role in the Maidan revolution (2013– 2014) and its precursor, the Orange Revolution (2004)—a history that does not fit the depiction of the unions in some Ukrainian elite discourses as dinosaurs of the old Soviet system.
I am here to meet Vasyl Andreyev, the president of the Construction and Building Materials Workers’ Union, to discuss the situation facing the labour force. His sector has been profoundly impacted by the war. The ongoing mobilization has led to severe labour shortages. “We estimate that about a fifth of our members are serving in the armed forces,” Andreyev notes. The union view aligns with the assessment of industry experts and employers’ organizations. The latter report shortages of up to 40% of required workers on many construction sites in the country. These conditions have made many trade unions and business owners sceptical of estimates for the unemployment rate that puts it at some 15.1%.
Andreyev’s members have more bargaining power as a result. “Hourly rates have about doubled from last year to this year,” he says. The officially registered construction workforce is now 300k, though the sector has long had a problem with off-the-books contracting. There is anecdotal evidence that this has become worse in the war. Keeping workers off registered contracts removes them from the declarations sent to the military draft office. While estimates of the precise number vary, all agree that the construction sector has made a considerable contribution to Ukraine’s armed forces, now numbering 1.3m people.
The extraordinary increase in the size in the armed forces has been critical to Ukraine’s development of a type of “military Keynesianism,” where government spending on the war effort offsets falling private-sector demand to support the economy. This turn to intervention is something of an irony for a government that had once thought of itself as “economic libertarian.” At the outset of the full-scale invasion, Kyiv had even contemplated huge tax cuts before turning to a more orthodox state-led war economy. Increased government spending funded through tax increases is now the new normal. Government procurement increased by 162% between 2021 and 2023, with this overall rise driven by a huge increase in defence-related tenders (up by some 2150%).
I travel to Vyshhorod, just north of Kyiv, where several industrial enterprises are based. For some of these firms, survival depends on state orders. For Karat Lift Komplect, a Ukrainian elevator manufacturer, about 90% of their orders are coming from the state. For most businesses though it is the indirect effect of government spending that has been more impactful. Here, the critical factor is the military draft. With wages for frontline troops above average, many households of drafted soldiers have seen increases in their spending power. For the wider economy scarce labour means that wages climb, sustaining consumer demand and supporting tax revenue. The National Bank of Ukraine reports that on average wages saw big real-term increases in the first quarter of this year. But there are major differences between sectors. Labour shortages in blue-collar work sit alongside declining job vacancies in IT and subdued education and arts sectors. With the war the overriding priority non-military government spending has also seen real-term cuts.
In Vyshhorod, Ukrainian enterprises adapt to new wartime realities with grit and determination. Vartan Saroian, general director of MKM Service Ltd, described the surreal experience of working just 10 kilometres from Russian forces in the war’s early months. “I don’t know how we did not become alcoholics,” he says wryly. “Bucha is about 10 kilometres from here,” Saroian notes. “Our chief accountant was living under occupation,” he tells us, “They fled through the fields to escape, only for the Russian army to withdraw a few days later.”
Ukraine’s victory in the Battle of Kyiv in early April 2022 is arguably one of the most consequential events in the war. Coming before the major influx of Western military aid, it was a truly remarkable battlefield achievement against the odds. Vyshhorod’s industrial enterprises have since adapted effectively to their role on the economic “home front.”
Some are thriving despite the war. The Canpack factory’s high-tech production line churns out cans at dizzying speed. Some 2,700 cans per minute to be precise. “We make 1 billion cans per year,” Yurii Yurov, the General Director, tells me. They have 204 staff on the production line and are operating at full capacity. “So that’s about 4.9 million cans per worker, per year?” I ask doing the arithmetic on my phone. “Yes, something like that,” he replies. Reminders of the war are never far away though. A commemorative poster in the reception areas memorializes 28 workers killed or missing. Grimly, the poster has space for more. It is a sombre acknowledgment of the sacrifices Ukraine’s working class is making.
The war has recentred Ukraine’s industry, for many years somewhat marginalized in a policy space where new sectors like IT were often favoured. This new “activist”, investing state has fuelled an industrial renaissance. Off the back of state orders Ukraine’s defence industries have grown their output exponentially. They are developing a capacity to produce $20 billion in defence products per year. A push to spend “aid for Ukraine in Ukraine” is also driving billions from the country’s allies into the domestic military industrial complex.
This political landscape has given Volodymyr Vlasiuk’s ideas a hearing in the corridors of power. He runs Ukraine Industry Expertise, an advice and research centre that have produced pathbreaking analyses on how industrial policy can support the real economy. The government has launched a “Made in Ukraine” subsidy scheme to incentivize the localization of supply chains. Vlasiuk argues that there is a balance to be struck between making the most of access to European and global markets and recognizing that wartime conditions mean Ukraine’s enterprises often cannot compete on a level playing field. “We must support Ukrainian production while capitalizing on our relatively open economy and the opportunities it creates for exports,” he says.
Lviv’s unity in diversity recalls its multicultural history
The Western Ukrainian city of Lviv is enduring the war in relative safety. Far removed from the frontline, Russian air raids only occur every so often, though the city has hardly been untouched by them. There was a brutal and deadly attack a few weeks before I arrived, a grim reminder that no city can be considered safe from Russian bombs.
Like many European cities in the borderlands of nations and empires, Lviv has a history of conflict among competing ethno-nationalisms and imperialisms contesting its sovereignty and identity. The Ukrainian historian Yaroslav Hrytsak once observed that the city had a “unicultural” present but one shaped by its “multicultural heritage.” He hoped that efforts of historians to highlight the complexity of this multicultural history would contribute to an inclusive identity overtime.
The new Russian imperialism tragically recalls some of the darkest chapters of Europe’s shared history. But Ukraine’s democratic resistance is perhaps creating the kind of inclusive community that Hrytsak envisioned. Lviv plays a vital role as a sanctuary for internally displaced peoples from Ukraine’s eastern regions.
Sasha Dovzhyk is the Director of the recently established INDEX centre in Lviv, a centre for intellectual exchange for cultural producers and researchers. A key mission of the centre is to support those documenting Russian aggression. “Generation after generation of Ukrainians has been forced to resist colonial violence and institutional erasure,” Sasha tells me, “while envisioning a just, free, and open future for their country.” INDEX, she suggests, is an act of preservation through the renewal of a democratic and inclusive Ukraine. “We counter Russia’s war of annihilation with the commitment to permanence,” she explains.
Ya Mariupol is a humanitarian organization that exists to support IDPs from the Eastern Ukrainian city, now occupied by Russian forces. They have 29 offices in towns and cities across Ukraine. Originally set up by the municipality leadership in exile, it is now a vibrant network assisting 60,000 people, from meeting their humanitarian needs to supporting re-entry into the job market. “There is no real limit to the support we offer IDPs; it could be anything,” I am told. They also put on cultural events to keep alive the Mariupol identity in Lviv, despite now living more than 1,000 kilometres from their home city.
It is a sign of the proliferation of local identities that make up modern Ukraine. Forced displacement means these identities now coinhabit the same spaces. Members of the network maintain personal links in one form or another with those that they left behind. Oksana, one of the staff, tells me, “Almost everyone still knows someone in the city; getting out is very expensive.” Oksana does not personally know people among her contacts who are happy with Russian occupation. “Those I know wait for liberation,” she says.
In one of Lviv’s many curb side bars, spreading out onto the city’s cobbled streets, I meet a group of young people, part of Ukraine’s small cohort of left-leaning progressive activists. The majority are IDPs from Eastern Ukraine. We talk about the “true” start date of the Russian war, the 2014 annexation of Crimea and the entry of irregular proxy forces into the Donbas. They recall these events from different vantage points. Dasha was a student in the Philosophy Department at the East Ukrainian National University in Luhansk. This area was at the centre of the small secessionist, pro-Russian uprising that would lead to the so-called “People’s Republic.” Dasha’s experience calls into question the idea that this movement had a popular dimension. “We were all instructed to attend the anti-Maidan protests by the management of the university,” she says. Regretfully she adds, “We went along with it; I wasn’t political at the time.” She describes a strange protest of anti-fascist chants in the service of an autocratic and chauvinistic state—a tragic precursor to the use of “anti-Nazi” rhetoric when Putin launched his war of annihilation in February 2022.
Some of the others in the group were from Kharkiv. Despite generally being seen as a centre of pro-Russian feeling, its local elites always favoured stability over the violent turmoil of secessionist uprisings that Putin was offering in 2014. When Russia declared an all-out war in 2022, the city formed part of a wider pattern of rallying to the Ukrainian resistance. Expecting to be greeted as liberators in such places, Putin seemingly believed his own propaganda. This mistook the feelings of attachment towards Russia, sometimes expressed by some older Ukrainians citizens as a nostalgia towards the Soviet Union, with support for Great Russian chauvinism. Valerii is a socialist of the modern variety, decidedly lacking in romanticism towards the old Soviet Empire, but he explains a trend he has observed among others. “I notice with some of my older family members who are nostalgic for the Soviet Union that the full-scale invasion didn’t lead to a dramatic change in their view,” he explains. Instead, “they now emphasize that the Soviet Union was anti-Nazi, and today’s Nazis are in the Kremlin.”
Denys Gorbach identifies a similar trend in Kryvyi Rih. Local politics has long been run by the Vilkul family, seen as close to Viktor Yanukovych, the corrupt former president overthrown in the Maidan protests. But the family sharply rebuked those that made overtures to them to side with Russia in 2022. Oleksandr Vilkul, the son of the mayor, became head of the local military administration. Gorbach notes how Vilkul’s public statement declaring for Ukraine opened with the words “Every generation has its own Brest fortress,” referring to the first Soviet stand against Nazi Germany’s surprise attack in June 1941, and was peppered with various other oblique references to speeches of Joseph Stalin during the war. It is a curious articulation of different discourses, one profoundly “alien” to most Ukrainians, never mind outsiders. But it is revealing of the depth of support for the Ukrainian resistance.
Ukraine holds steady, for now
War-weariness is not hard to come across in Ukraine. The passage of time and the complexities and uncertainties of Ukraine’s path forward is generating more public debate on the strategy for ending the war. But polling from Kyiv International Institute of Sociology shows that a large majority still believe in Ukrainian victory, ranging from 67% in the more war-impacted East to 87% in the West. My conversations reveal both optimism and fatigue.
Many are reluctant to discuss the question of negotiations and the war’s end with a Western intellectual at all. For some there is definitely a sense of self-discipline towards any semi-public discussions of such issues. For others there is simply uncertainty towards the future. “Anything could happen. Putin could even die tomorrow,” as one interlocutor put it to me. “We must focus on unity and the small contributions that we can each make.”
Ukrainians recognize both the power of their collective defiance and the heavy toll of the sacrifices they have made. But despite the great uncertainties hanging over the present moment, its economy—and its people—hold steady, for now.
This publication represents the views of the author(s) and not the collective position of the Institute for Human Sciences (IWM Vienna) or the “Europe’s Futures” project.
