Ukraine has regained momentum in the war over its country. Putin therefore does not waste any time and annexes his previous land gains. He wants to use it to secure gigantic deposits of raw materials. That would be an unbearable loss for Ukraine.
The Ukrainian army is advancing ever further in the east and south of its own country and is gradually recapturing areas from Russian troops. The heaviest fighting is raging near Cherson in the south, in the east before Donetsk in Donbass and in the administrative region of Luhansk. If the recovery fails, Ukraine will be weakened forever.
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With sham referendums, Putin has usurped the four Russian-controlled areas in Ukraine. “I want the government in Kyiv and their masters to hear me,” he said during a speech in the Kremlin on Friday. “The people who live in the People’s Republics of Dontsek and Luhansk, Kherson and Zaporizhia will become our citizens. Forever.”
As a basis for the referendums, Putin always cited the high proportion of the Russian-speaking population in these regions. What he really wants, however, lies dormant beneath the surface of the earth. He squints at the country’s gigantic raw material deposits. Losing these regions would be fatal for the Ukrainians. Because that is where the economic heart of the country beats. About two-thirds of their raw material deposits are currently occupied by Russia.
It is the building blocks of Ukraine’s future that lie underground to the east and south: oil, gas, coal and metals. Added to this are the huge agricultural areas in the contested regions. Despite the comparatively small land gains of Russia – about a fifth of the Ukrainian territory could be conquered – this loss is already enormous.
The regions are among the richest in minerals in Europe. The country’s titanium and iron ore deposits are among the largest in the world. Huge lithium fields in Donbass are still undeveloped and waiting to be exploited. In addition, there are gigantic coal deposits, on which Russian tanks are currently parked, as well as lots of oil and gas, which once kept the economy running.
According to an analysis by Canadian geopolitical venture firm SecDev for The Washington Post, Russia already controls at least $12.4 trillion in energy resources, metals and minerals. A value that, however, only refers to deposits that have already been developed.
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Since the invasion began in February of this year, Russia has already occupied significant parts of Ukraine’s economic output and set the country back by years. According to SecDev and Ukrainian mining and steel industry executives, these are:
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occupied by Russian troops, writes the Washington Post. According to estimates by SecDev, the hard coal deposits alone of around 30 billion tons in the Russian-occupied territories have a total commercial value of 11.9 trillion dollars.
The occupation of important Ukrainian ports and a blockade of the Black Sea are also hurting Ukraine. Some experts consider the loss of sea transit routes even more significant than lost mineral reserves. Anders Aslund, an economist who has studied Ukraine for a long time, told the Washington Post: “If Ukraine didn’t have these ports anymore, it would have to build a whole new infrastructure for exports.” The country’s entire export economy is aimed at her. If Ukraine is cut off from access to the sea, it will cause permanent economic damage.
The war also scared off investors. Already in 2014, when Russia invaded Crimea and the east, the Ukrainians lost about seven percent of their territory and with it planned investments from the West in the energy and mining sectors. Today, there are also investments in lithium deposits, for example. Construction of a lithium battery factory construction: stopped. The progress of the country lies on ice. Day by day Ukraine is losing a piece of its economy.
Economic experts assume that Ukraine can mitigate the long-term effects of the war even if it cedes large parts of its territory. To do this, the technology and service sectors would have to be fully involved and alternative energies expanded. However, the challenges would be immense.
The territories then occupied by Russia would freeze the war. Foreign investors should continue to be put off by the threat of renewed Russian attacks. In addition, the country would be cut off from much of its energy supply capacity.
89 percent of the expensive and intensively developed wind power in the east of the country is already in Russian hands. Likewise the huge coal deposits. The seizure, damage or destruction of key infrastructure in the east affects nuclear industries such as Ukraine’s steel industry. Two large factories have already been destroyed. The Azov Steel Works in Mariupol symbolizes the war over raw materials that Putin is waging in Ukraine.
If the Ukrainians lose the battle for the economically most important parts of their country, they will permanently lose access to almost two-thirds of their reserves. Losses of raw materials, ports and investments are already having an impact today. Without exports, the country lacks money. Without raw materials, domestic industry comes to a standstill. Without coal and gas there is no electricity and the heaters stay cold.
If Putin can hold the territories, Russia’s position in the world’s commodity and food markets will be further strengthened. With “only” one-fifth of territory occupied, he can bleed Ukraine dry economically. A stalemate would be like a win for him.
