On a recent weekday at the Lila Cake café in central Kyiv, five employees milled about in the gloom waiting for a lunchtime rush they said was unlikely to materialise.
The power was out and the staff had to manually open the sliding glass doors to anyone wanting to enter. For three days in a row, the café had operated without electricity for 10 hours at a time.
Manager Iryna Mykhailuk said a wave of Russian attacks on energy infrastructure that have necessitated rolling blackouts were the latest blow to the business, which reopened recently after shutting down following Moscow’s full-scale invasion of Ukraine in February. About 20 of its 50 staff have been laid off and Mykhailuk is not sure how long the business can stay afloat.
“We have the moral spirit and desire to stay open,” she said. “But for how long?”
Ukrainian officials say the Russian attacks, which have damaged 40 per cent of its energy infrastructure, have exacerbated an already dire financial situation as the resulting power cuts force many companies to scale back their activities. The capital Kyiv has been the hardest hit.
The country is already facing significant budget shortfalls stemming from the war. It will need $55bn in international assistance for next year, including $38bn to cover the forecast budget deficit and $17bn to rebuild infrastructure, Ukrainian president Volodymyr Zelenskyy told global finance ministers at the World Bank and IMF annual meetings last month.
Economy minister Yulia Svyrydenko warned that the energy crisis could increase the contraction in Ukraine’s gross domestic product beyond a previous official forecast of 35 per cent for 2022. Economists estimate the fall in GDP could now be up to 40 per cent. The government seized control of five strategic companies last week, with officials saying it could take over more companies if they did not back the war effort.
Some sectors of the economy in cities away from the front lines, such as retail, had reported activity returning to near prewar levels in September, according to Ukraine-based investment bank Dragon Capital. But the power outages have threatened the recovery.
Dragon Capital said that since October 11, when Russia began to focus its assault on Ukraine’s energy infrastructure, footfall had dropped 15 per cent across five malls it owns around Kyiv and in western Ukraine, after rebounding to near prewar levels the month before.
The company is buying generators to keep its malls, offices and warehouses operating and to attract people to them as destinations for power, warmth and internet connections. “Blackouts take out half of the working day,” said Tomas Fiala, chief executive of Dragon Capital.
Restaurants, retailers and small businesses that do not have generators or benefit from prioritised power supplies have suffered the most. Hospitals, public transport and other critical infrastructure are given priority.
But sectors such as IT, where many workers require little more than a charged laptop and stable WiFi, have proven more resilient. Kulraj Smagh, chief executive of UK-based IT outsourcing company Ciklum which has 1,500 Ukrainian employees who have remained in the country, said its projects had been largely unaffected and staff had been able to make up any missed work out of hours if necessary.
Manufacturers, meanwhile, have shifted production to accommodate scheduled outages. The KMZ factory in the Poltava region east of Kyiv, which makes grain handling and storage equipment, runs its production lines mainly at night to avoid being subject to daytime power restrictions on the industrial sector.
Yuriy Ryzhenkov, chief executive of Ukraine’s largest steel producer Metinvest, said its two largest steel mills, the Azovstal plant and Ilyich Metallurgical Plant, were in Mariupol and were heavily damaged in the fierce fighting when Russia seized the Black Sea port city in March.
Its remaining plants, at Zaporizhzhia in southern Ukraine and Kamianske in the centre of the country, were operating at 50 to 65 per cent of normal capacity, he said, adding that both had their own generating capabilities that could be deployed if the sites lost power.
Industry representatives met regional administration officials each day to plan power usage based on available capacity and industry needs, he said.
Maksym Timchenko, chief executive of Ukraine’s largest private power producer DTEK, said energy shortages were likely to continue for some time. “Partial improvement is possible, but we will definitely not live like before the shelling,” he said in a recent interview on Ukrainian television.
Officials said Russia’s infrastructure attacks were designed to damage Ukrainians’ morale, even as Kyiv’s forces made battlefield gains. This week, Russian troops withdrew from Kherson following a counteroffensive in the south, and Kyiv has also regained territory in the east.
Energy minister German Galushchenko said the infrastructure to provide electricity and heating could be repaired by the end of the year if Russia halted the strikes, but he was not optimistic. “It will be hard in the winter, that is for sure, I feel that they won’t stop,” he said.
“Putin is waging a new type of cold war which is literally cold,” said Arseniy Yatseniuk, a former prime minister.
Kyiv city officials said they were making preparations for a complete loss of heat, water and power in the capital should the attacks intensify. But, for now, residents say they are learning to live with the new normal.
In an electronics shop in an underground Kyiv mall last week, salesman Andriy Krainukov said the store had lost about eight hours of power over the day. For much of the time, the shop was completely in the dark, with only a propped-open door indicating that it was not closed. The outages had decreased average business by about 80 per cent, he said.
“People get used to it, what else can we do?” he added. “It’s easier for us compared to those on the front lines.”
Additional reporting by Sylvia Pfeifer in London
