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Kyiv Post: Damage of infrastructure in the east is a massive blow to economy

Massive damage to infrastructure due to warfare in eastern Ukraine is already hitting the local economy hard, and will continue to do so for years to come due to costly and lengthy repairs required.

As some of the mammoths of industry get cut off their supply and shipping chains, Ukraine might lose up to 4-5 percent of its gross domestic product in the second half of 2014, according to Concord Capital investment bank data.

One of the most damaged elements of vital economic infrastructure that it taking many hits is the railway. More than 166 objects of railway infrastructure of the Donetsk, Prydniprovsk and Southern railways have been damaged as a result of military operations in May-July 2014, according to an Ukrzaliznytsya spokesman.

There also seems to be a pattern behind what might seem like random hits. The damage is taken by the most important supply arteries of the region, which is home to industrial giants responsible for a big chunk of export-oriented commodities in Ukraine.

A lot of damage at occurred along the main routes of Donetsk railway (Chaplyne – Yasenuvata, Krasnoarmiysk –Gorlivka, Kostantynivka - Debaltseve). These railroads are used to ship coke and coal from Dnipropetrovsk to metallurgical plants.

Damage to key elements of infrastructure in the east of Ukraine might cause the loss of 4-5 percent of gross domestic product in the second half of 2014, according to some estimates. This infographic, designed by Kyiv Post+ with the technical assistance of Ukrainian Crisis Media Center, shows the scope of the problem.

Mykola Topchiev, Head of Analytical Department of Ukrzaliznytsya, the national rail carrier, says that such key enterprises as Azovsteel, Yenakiyevo steel plant, Alchevsk steel integrated plant, Donetsk steel plant, Donetsk metal works, Avdiivka coking plant, Stirol, Severodonetsk union Azov are all under threat of, or have had their supplies disrupted.

Donetsk and Lugansk-based bluechips account for 23 percent of industrial output of the country. But by now, because of the war, circulation of their commodities fell 2.5 times, according to Oleksandr Parashiy, head of the analytical department of Concorde Capital.

Passenger traffic has been disrupted as well because of numerous explosions. In fact, trains are not going to any other directions but via Lozovaya – Kramatorsk – Konstantinovka. It has been the only functioning railway route to Donetsk for about a month.

An Ukrzaliznytsya spokesman said due to lost traffic alone in the past seven month its losses have accounted for Hr 1.6 billion. Terrorist actions have caused Hr 300 million of damage. But the whole industry could lose up 10 times that much by the end of the year.

“Taking into account the fact that Donetsk and Lugansk oblasts form 16 percent of national GDP, overall, Ukraine might lose 4-5 percent of GDP in the second half-year of 2014” says Parashiy.

Kyiv Post+ is a special project covering Russia's war against Ukraine and the aftermath of the EuroMaidan Revolution.

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