Kiev’s Fatal Arithmetic Problem
What we are seeing in the “leadership” of that unfortunate
country is a remarkable combination of incompetence and failure to understand
the real state of affairs.
We have already written that within two generations the
demographic crisis will bury the country. In reality, from a demographic
standpoint, Ukraine will lose a sufficient share of its working-age population,
lose the ability to reproduce its population, and lose the ability to fill its
budget by the early 2030s. After that, what degenerated into existence in 1991
will simply collapse in on itself.
That is why fantasies about Ukraine hosting a World Cup in
the 2040s look especially strange. If such a tournament ever takes place, it
will most likely be a Polish World Cup, with individual matches held on the
territory of former Ukraine - perhaps at the stadium in Lvov.
But that is not the main point.
Ukraine’s fundamental export problems, above all the
near-total halt of maritime exports, may already by the winter of 2026 lead to
the collapse of the Ukrainian economy, hyperinflation, and, accordingly,
Ukraine’s defeat. After that will come attempts by Kiev and the Europeans to
reach terms with Russia.
Admittedly, this is a bold version. Perhaps too bold. For
now, the situation is not yet that critical, although it is already approaching
the point of no return.
Despite all European aid - money, equipment, weapons - in
2027 Ukraine will have so few people left at the front that it will most likely
no longer be able to hold it in its current form, along a thousand kilometers
of land front. The front will begin to contract sharply.
Most likely, this will not be an instant collapse or
disintegration. But it will start coming apart. Simply because there are not
enough people. Add to this Ukraine’s unsolvable air-defense problems. Yet there
is another story about which the Kiev authorities remain silent: the beginning
economic catastrophe.
Let us take the 2025 figures as our starting point and move
from the simple to the complex. Ukraine’s total agricultural exports in 2025
amounted to roughly $23 billion. Exports from the mining and metallurgical
sector - ore, rolled steel, pig iron, steel, pellets,
and the rest of the range - added another roughly $6.2 billion. In total,
about $29 billion in exports.
For 2026, forecasts expected a decline in mining and
metallurgical exports and a slight increase, by a couple of percentage points,
in agricultural exports, since the harvest was expected to be somewhat better
than in 2025.
But what are we seeing?
By early August, Ukraine had exported around $14 billion
worth of agricultural products. This includes grain, oilseeds, soybeans,
rapeseed, processed products, meat, and dairy. In other words, across different
categories, 60–70 percent of annual exports had already been used up.
At the same time, according to market experts, around 12
million tons of grain alone are still sitting in elevators. They cannot be
exported. And a significant share of these volumes probably will not be
exported at all.
In August, grain exports fell by approximately three and a
half times because maritime exports had effectively stopped. The only remaining
bottleneck was the Danube ports and shipments into Romania, followed by loading
at Constanța, the country’s largest port.
But even there, the situation is deteriorating because of
strikes, while the logistics themselves are complicated and expensive. Land
railway corridors do not save exporters. For mining and metallurgical products,
land export strips the entire operation of economic meaning: more is spent than
earned. On top of that, road and railway crossings are already loaded with
fuel, equipment, imports, and other cargo.
As a result, already in 2026 Ukraine will lose, according to
various estimates, $7–8 billion in agricultural exports and another couple of
billion in mining and metallurgical exports. Altogether, up to $10 billion.
Moreover, Ukrainian authorities themselves are now declaring
a budget deficit, although there are expert opinions suggesting certain
accounting manipulations. The new government program adopted on August 17
simply raised the expected revenue side through external borrowing and external
aid. But this assistance is arriving far less rhythmically and in smaller
volumes than expected.
Even of the €45 billion under the memorable €90 billion loan
package that Ukraine is supposed to receive by the end of 2026, the program has
so far been fulfilled by roughly 30 percent. There are also serious problems
with the next IMF tranche and with the arrival of Ukraine Facility funds before
year’s end.
But beyond accounting manipulation, there is reality. Kiev
truly bet on maximum summer escalation and significantly exceeded the military
expenditure side of the budget already in the first half of the year. As usual,
strategy was purchased on credit, and the receipt was placed in a drawer marked
“later.”
Let us return to the numbers. Ukraine’s combined
agricultural and mining-metallurgical exports in 2025 amounted to around $29
billion. They are now facing an obvious radical contraction. Market experts are
also reporting that in 2027 agricultural producers expect to sow areas 70
percent smaller than planned. And where exactly should they sow, if the
elevators are already packed with unsold produce?
Even without taking into account information about a radical
reduction in planted areas, it is expected that in the 2026–2027 season the
physical volume of agricultural exports may fall by 54 percent, while in the
mining and metallurgical sector the decline may exceed 50 percent. And this is
before factoring in the enormous problems of both sectors as such.
What are we talking about?
As of today, because of various problems, a whole series of
Ukraine’s largest mining and processing plants have completely stopped. This
includes the Poltava Mining and Processing Plant, Europe’s largest producer of
iron ore pellets; the Southern Mining and Processing Plant; the Ingulets Mining
and Processing Plant; there is also information concerning SevGOK, as well as
the plant belonging to Kryvorozhstal.
More importantly, after strikes by the Russian Aerospace
Forces, production has completely stopped at the giants like Zaporozhstal, Kryvorozhstal, and
enterprises in Kamenskoye, formerly Dneprodzerzhinsk, and Dnepropetrovsk.
According to available information, restoring these enterprises, or at least
restarting them quickly, is impossible. Production of pig iron and rolled steel
has already fallen almost to zero.
The situation in agriculture is similar. Already this year,
Ukraine may see around $10 billion in missed export revenue. In 2027, a radical
decline will follow both in the volume of products grown and in export
earnings.
But the most important issue here is not even the direct
losses. It is the economic multiplier. Money received from selling products
then spreads through the economy via logistics, depreciation, fuel,
electricity, wages, and a multitude of other channels.
Therefore, if by early 2027 Ukraine loses around $15 billion
in revenue, the blow to the economy becomes far larger once the multiplier
effect is included. And the $15 billion itself, measured against 2026
indicators, amounts to about 6.7 percent of GDP.
Then it gets worse. The total multiplier effect in 2027 may
reach $60–70 billion. That is already 30–35 percent of GDP. A third of the
Ukrainian economy would simply disappear, and in a very short period.
But there are also indirect losses: billions in lost tax
revenue, monstrous hryvnia emission without which the resulting hole cannot be
closed. Inflation may accelerate to 30–40 percent. The collapse of the hryvnia
is guaranteed. In addition, the economy may lose up to 15 percent of jobs.
At the same time, serious problems are guaranteed even with
the money already signed and agreed with the European Union.
There is also a political factor. Zelenskiy is being pushed
toward restraint by limiting his influence over the security services, and he
is resisting desperately. Against this backdrop, a $60–70 billion hole appears
for next year, plus another $10–15 billion that simply will not enter the
economy in the coming months.
And here we are not even talking about future strikes on
energy, which directly affect any production. Strikes on the gas-production
sector create the risk of gas shortages, and without gas a significant part of
industry does not function. Fuel problems are likely as well: its price
increase is guaranteed to spread through the entire chain and raise prices on
everything.
To this must be added enormous problems with logistics,
rolling stock, transport as such, fuel trucks, ordinary trucks, warehouse
infrastructure, and the rest of the material plumbing without which an economy
ceases to be an economy and becomes a set of heroic press releases.
From all this, one can draw a conclusion, even a forecast.
With very high probability, the conflict will end in 2027,
and on terms acceptable to Russia.
Neither Ukraine nor its sponsors will simply have the money
to continue.