Ukraine lost | before the war began Attached is the timeline of the Russian-Ukrainian conflict

Consolidation | Box lunch jun

Source | Ukraine: The Decline of the Military-Industrial Empire, Zhang Xiaodong

"Ukraine's industrial adjustment is full of difficulties" He Wei

"The Impact of the Ukrainian Crisis on ukraine's defense industry" Song Bo and Cai Pengming

Cebr, study on the costs of conflict between Ukraine and Russia

I didn't think about Ukraine's military strength, but I didn't expect it to be so bad.

According to russia's TASS news agency, Putin delivered a televised speech at 6 a.m. local time on the 24th, announcing the adoption of special military operations to protect the Donbass region in eastern Ukraine. He also urged Ukrainian servicemen to lay down their arms and go home immediately.

The news that followed was: the Russian representative to the United Nations confirmed Putin's declaration of war on Ukraine; the Russian army had broken through the border of the Kharkov oblast of Ukraine, the command posts of the Ukrainian army in Kiev and Kharkov were attacked by rockets; the infrastructure and air force of the Ukrainian air force were incapacitated... In less than half a day, the Russian army landed on Ukrainian territory and destroyed many Ukrainian military facilities, dealing a heavy blow to its military strength.

Ukraine, which now looks so fragile, was once one of the world's largest military-industrial empires.

In 1991, when the Soviet Union collapsed and Ukraine became independent, there were as many as 3,594 Ukrainian military enterprises and 3 million employees. In less than 20 years, however, that number had shrunk to about 700 factories and 500,000 workers. Even before the 2014 Ukraine crisis, Russia was very dependent on Ukraine for its military industry. Ukraine's Defense Express believes that more than half of Russia's weapons come from Ukrainian factories.

Antonov, which owns transport aircraft far exceeding the carrying capacity of the Airbus family and the Boeing family, the Markchev tank factory, which has five bases and three tank design bureaus, the Southern Machinery Factory, which designed and built more than half of the intercontinental ballistic missiles and several types of launch vehicles for the Soviet Union, and the Nikolayev Black Sea Shipyard, which manufactures the aircraft carrier "Liaoning", the predecessor of the "Varyag", these military enterprises were once located in the first echelon of the world's military industry.

The Ukraine crisis that erupted in late 2013 and early 2014 and the political turmoil it triggered had an important impact on the economic and industrial landscape, and the border conflict between Russia and Ukraine is bound to make Ukraine, which is not rich, worse.

According to a study released by the Uk's think tank Centre for Economics and Business Research (Cebr), the long-term conflict between Ukraine and Russia between 2014 and 2020 led to a sharp decline in the Ukrainian economy, costing Ukraine $280 billion in seven years, or $40 billion in GDP per year, which is equivalent to 19.9% of the annual GDP before the crisis.

Ukraine lost before the war broke out.

After reading this article you will understand:

At the beginning of the collapse of the Soviet Union, what was the status of Ukraine's military industry?

How hard has the Crimean crisis hit Ukraine's military forces?

How much impact does the Russian-Ukrainian conflict have on Ukraine's economy?

01 Military Empire

The disparity in strength and strength is visible to the naked eye.

The British "Sky" news website said on February 20 that the total strength of the Russian army is as high as 900,000, far exceeding the 196,000 of the Ukrainian army. "This gap in strength is most acute in the navy, which is 10 times the total number of Ukrainians, which has 74 warships and 51 submarines, while Ukraine has only two slightly larger warships."

According to the Global Network report: In the army, Russia's equipment advantage is also obvious. The number of Russian artillery is 5934, more than 3 times that of Ukraine; the number of tanks is 13367, which is 6 times that of Ukraine; and the number of armored vehicles is 19783, almost 7 times that of Ukraine. A similar situation exists in air power: the Russian army has 10 times as many fighter jets and helicopters as Ukraine. As for long-range strike firepower, Russia has a clear advantage, with more than 500 land-based ballistic missile launchers.

This gap, at the beginning of the collapse of the Soviet Union, was not so large.

At the beginning of the collapse of the Soviet Union, Ukraine's conventional armed forces ranked second in the Soviet Union, with a total strength of 720,000 troops, 6500 main battle tanks, 7150 armored vehicles, 3400 artillery, 1430 combat aircraft and 285 combat helicopters, and the degree of mechanization of the Ukrainian army even exceeded that of the Russian army.

During the Soviet period, in order to ensure the comprehensive development of the national economy, the Alliance established a nationwide division of labor system on the basis of giving full play to the advantages of resources, technology and talents in each region. At that time, the supply of raw materials, machinery and equipment, and the sale of products were all planned in a unified way, forming an integrated national economic system with strong interdependence.

The status of Ukrainian military enterprises was extremely special during the Soviet period: Ukraine, as a union republic, concentrated 18% of the scientific research strength and 17% of the production capacity of the Soviet defense industry at that time, including 3594 military enterprises and dual-use enterprises, providing 3 million jobs. Among them, there are more than 700 enterprises, 205 production consortiums, 139 scientific research consortiums, and more than 1.45 million people working in them.

Although the industrial structure inherited from the Soviet Union in Ukraine is characterized by a high degree of diversification, it also has the defect of serious imbalance. Ukraine's role in the division of labor in the former Soviet Union was to vigorously develop heavy and military industries that consumed a lot of energy.

Relying on this advantage, Ukraine's arms export business has been booming.

Even around 2014, after the confrontation between Russia and Ukraine, the military-industrial cooperation between the two countries has not been fully interrupted.

Data released by the Stockholm International Peace Research Institute in 2017 shows that Russia is still the largest arms purchaser in Ukraine, with Russia purchasing $169 million in equipment from Ukraine that year, an increase of 72% over 2016.

Among them, the Ukrainian Motorcic Company is Russia's most important partner, and Russia still needs to purchase the engines produced by the company to meet the order demand of 3,000 domestic and 260 helicopters abroad, respectively. Motorcic also supplied its fist product, the АИ-222 turbofan engine, to Russia for assembling the Yak-130 series of military trainer/light attack aircraft, and for the Sino-Russian joint development of heavy helicopter projects, АИ-136Т engines.

The company also repaired the An-124 transport aircraft for the Russian Air Force in the name of maintaining civil airliners. In the navy, although Russia has mastered the manufacturing technology of gas turbines, it still relies on The supply of transmissions from Ukraine.

02 Great contraction, passive transformation

Under the Crisis in Ukraine, these problems and contradictions have been magnified.

The Crimean crisis and the Wudong crisis have seriously damaged the "existing family base" of the Ukrainian defense forces. The Crimean crisis caused the Ukrainian Air Force to lose 17% of its combat aircraft, 25% of its anti-aircraft equipment and 2 of its 10 aircraft maintenance bases, and lost nearly half of its equipment to the Ukrainian Navy, including 8 capital ships, 26 auxiliary ships, 35 aircraft and 8 anti-submarine helicopters. Because of the loss of Berbek Airport, the troops of Uganda Airlines basically survived in name only.

The main combat equipment of the Ukrainian Marine Corps, including 40 main battle tanks, 170 armored vehicles, and 50 guns of more than 100 mm caliber, was also lost in the Crimean crisis. The 2014-2015 Battle of Wudong caused heavy damage to the equipment of the Ukrainian Army. From 2014 to 2017, the Ukrainian army received only 787 pieces of main battle equipment (including 42 aircraft, 97 infantry fighting vehicles and 607 sets of artillery systems), and in august 2014, the Ukrainian army lost more than 1,000 pieces of main battle equipment in the Battle of Ost-Uilovsk.

Before the crisis, Ukraine's defense industry had shrunk by one-fifth of its independence in 1991, and the number of employees had shrunk to one-seventh.

In 2012, there were only about 160 Ukrainian military enterprises left, and most of them were merged into the Ukrainian defense industry Kanzern. After the crisis, the scale of the Conzern was further weakened, with the current number of employees at 80,000 and the number of affiliated companies reduced to 104, of which more than half were in the red.

Because the Ukrainian government has not provided supporting financial remedies for the integration of military enterprises, nor has it proposed a clear support policy for the energy and public utility service fees of enterprises, the debt burden of enterprises has been increasing. From 2011 to 2013, the Ukrainian government provided financial support to some military companies to help them tide over the difficulties, but this move was suspended after the Ukraine crisis. After the crisis, the triangular debt became one of the most serious problems facing the Ukrainian defense industry. Due to the large amount of debt accumulated by the government and the cooperating units, the cash circulation of various enterprises is in trouble, and the Ukrainian government can only promote the restructuring of enterprise assets and debt through legal litigation. In July 2018, Ukrainian courts ordered Ukrainian military companies not to repay the $146 million they paid before September 2014 in an attempt to save the company by escaping debt.

Ukraine's economic structure has always been hung with two sharp blades: one is the imbalance in structural proportions, too dependent on heavy industry and the military industry, and the other is the huge expenditure on armaments, which is difficult to maintain.

Compared with heavy industry, Ukraine's light industry and service industry are relatively weak and account for a small proportion of the national economy. In 1990, the proportion of fixed production funds in heavy industry was as high as 89.1% of the total industry, accounting for 69.3% of the total industrial output value, while the above-mentioned proportion of light industry was 10.9% and 30.7% respectively.

After the collapse of the Soviet Union, the competitiveness of Ukraine's defense industry did not continue to develop on the original basis. In the 1990s, due to the "equipment dividend" left by the Soviet Union, Ukraine became one of the world's top ten arms exporters by exporting surplus equipment inherited from the Soviet army.

However, Ukraine's national strength can hardly afford the cost of huge armaments, and its own security does not require it to maintain a strong offensive mechanized combat force. Therefore, successive Ukrainian governments have made the reduction of military posts and equipment the main direction of defense force building. Before the Ukrainian crisis, the Ukrainian national defense forces, like most Eastern European countries, adopted a "small and refined" military model, due to the abundant equipment "family foundation", the equipment procurement of the Ukrainian army is also based on the rhythm of "small quantities and many batches", focusing on the procurement of high-tech equipment. After the crisis, major adjustments have taken place in Ukraine's national defense construction.

In the 1990s, Ukraine suspended about 90 percent of its research and development programs due to lack of funding, and fewer than 600 scientific projects were retained. In addition, because more than half of the military enterprises in Ukraine have been privatized, and the management of the enterprises has forced more than 70% of the fixed assets to depreciate in order to reduce the acquisition cost in the process of privatization, the basic production capacity of the military enterprises has been seriously weakened. Due to the above reasons, Ukrainian military enterprises can only receive 2.5% of the state's productive investment in that year every year.

By the 2000s, Ukraine's "equipment dividend" was close to exhaustion, and its military enterprises began to develop weapons and equipment for the export market. This path dependence makes it possible that 97% of today's Ukrainian military products are exported to the international market. At that time, Ukraine's defense industry rarely got the care of its own budget, and the share of the Ukrainian military procurement budget in the total investment of the military industry was still 21.6% in 2006, which fell to 7% in 2009 and barely rebounded to 14.5% in 2012.

However, the effect does not look so dramatic.

03 How much impact does the Russian-Ukrainian conflict have on Ukraine's economy?

Ukraine is the second largest country in Europe, it is located in the east of Europe, located at the intersection of Western Europe, Central Europe and Russia, and its geographical location is very important. Before the collapse of the Soviet Union, Ukraine occupied a very important position in the Soviet economy, second only to Russia, ranking second among the Republics of the Soviet Union.

In 1989, before independence, Ukraine produced 25% of grain and 40% of steel production for the Soviet Union with 2.7% of the total land area of the Soviet Union.

However, after independence in Ukraine, the economic growth rate showed a negative growth trend compared with the Soviet union, and the gap between the level of economic development after independence and global economic growth was widening.

In 1989, Ukraine's GDP accounted for 0.41% of global GDP; 29 years later, in 2018, Ukraine's GDP accounted for only about 0.15% of global GDP, and its economic growth rate was much lower than that of most former CIS countries.

The Ukrainian economy is undoubtedly an important factor affecting the military, and the military conflict in eastern Ukraine has long made the Ukrainian economy more difficult.

The Centre for Economic and Business Studies (Cebr), a British think tank, released a study on the costs of conflict between Ukraine and Russia in February 2022, showing that the conflict between Ukraine and Russia between 2014 and 2020 led to a sharp decline in the Ukrainian economy, as well as the loss of assets and taxes.

The conflict, which actually began in 2013, has put serious political and economic pressure on Ukraine over its EU alliance agreement. According to statistics, Ukraine lost $280 billion during the seven-year conflict, or $40 billion in GDP lost annually, which is equivalent to 19.9% of the annual GDP before the crisis.

(Image from Cebr's "The Cost of Conflict between Ukraine and Russia" research report)

The study focused on three indicators: the loss of economic output in Ukraine, the cost of capital loss or destruction, and the net impact on the public finances of the Ukrainian government.

The loss of Economic Output in Ukraine reflects three main factors: 1. the impact of Russia's annexation of Crimea, 2. the direct impact of Russia's military operations in eastern Ukraine, and 3. the indirect impact on the economy, including sanctions on Ukrainian trade and weak investment prospects.

The cost of capital reflects the loss or damage previously suffered by assets previously held by the Ukrainian government or Ukrainian entities. This is due both to Russia's illegal annexation of Crimea and to Russia's direct military operations in eastern Ukraine.

The net impact on the financial situation of the Ukrainian Government is then considered through two main channels: 1. Reduced tax revenue due to overall economic losses, and 2. Increased military expenditures related to the conflict.

Of the $40 billion figure, the channels of loss identified include: losses of up to $8.3 billion in Crimea and Sevastopol; losses of up to $14.6 billion in output in the Donbass region; exports lost up to $20.3 billion in value; and lost investments worth up to $10.3 billion.

In addition to reducing economic output, the conflict has caused severe damage to the capital stock, such as buildings and industry. In the affected areas, long-term effects in the form of asset losses have been calculated, and these costs are separate from the impact on GDP. The cost of assets lost in Crimea and Sevastopol amounted to US$42.4 billion in total capital assets and up to US$74.8 billion in the Donbass region.

Finally, the Centre for Economic and Business Research (Cebr), a British think tank, considered the impact on public finances, which was caused by reduced tax revenues and increased demand for military spending. These results are also separate from the impact of GDP. This includes tax losses of up to $48.5 billion between 2014 and 2020; additional military spending of up to $14.9 billion between 2014 and 2020; and a cumulative net deterioration of public finances of $63.3 billion between 2014 and 2020.

It can be seen that the long-term conflict between Ukraine and Russia continues to hit the Ukrainian economy hard. Today, the head-to-head confrontation between the two may have far more economic impacts than that.

The following is a summary of the latest news on the situation in Russia and Ukraine on February 24, and the subtitle time is Beijing time.

February 24