Ukraine: the path to the “German economic miracle” through international support and security

The war in Ukraine fundamentally changed the country’s economic landscape. Russian aggression has created new challenges, where economic recovery directly depends on international support and security guarantees from the West. Yuriy Ryzhenkov, executive director of the metallurgical company “Metinvest”, expressed his vision of the economic revival of Ukraine, which, in his opinion, may resemble the “German economic miracle” after the Second World War. At the same time, he noted that this prospect remains extremely fragile due to global political uncertainty.

The statements of the newly elected US president, who promises to end the war “in one day”, deserve special attention. Such rhetoric raises more questions than answers. The political decisions of the great powers add to the drama of the situation. If Trump does withdraw US military support, it will significantly change the balance of power in the region and jeopardize the stability of Ukraine.

At the same time, the head of Metinvest, like most business leaders of the country, strives for clarity and stability. Ryzhenkov emphasized that the key for Ukraine is not only the cessation of hostilities, but also obtaining reliable security guarantees. Only under such conditions, investors interested in the country’s strategic resources, in particular lithium and uranium, will be able to risk investing.

Despite the significant loss of production capacity due to the war, the leader of Ukrainian metallurgy does not expect a miracle, but bets on specific actions. “Metinvest” supports workers in the rear and at the front, pays taxes to the budget and looks for ways to recover in the conditions of modern realities.

War is not only destruction, but also a test of endurance

Before the war, Metinvest Group was one of the leading players in the domestic metallurgical industry. However, during the full-scale Russian invasion, Mariupol Azovstal and Ilyich MMK, which previously provided 90% of the group’s steel production and were the core of its vertical integration, were destroyed.

Last year, the production of steel and cast iron fell by about a third, and finished products – by almost 1/5. Due to the loss of the Mariupol plants, the production of flat products decreased by a third, although the production of long products increased slightly due to the stabilization of the work of other enterprises.

Despite the loss, the company with partial loading continues to work at the Zaporizhstal, Zaporizhkoks, Zaporizhvognetriv and Kametstal factories in Kamiansk. Logistical difficulties due to blocked ports and damaged infrastructure remain a huge problem holding back exports and adding to costs.

Despite all the challenges, “Metinvest” remains the largest taxpayer and one of the largest employers in Ukraine, supporting 43,000 workers in the country and another 9,000 military personnel. From the beginning of the full-scale invasion until September of this year, the company transferred more than 50 billion hryvnias of taxes and fees to the budgets of all levels.

Of course, the war made its adjustments. The company’s cumulative losses from the war are estimated at more than $3.5 billion, in particular, in 2022 “Metinvest” suffered a net damage almost $2.2 billion. If in the pre-war year 2021 “Metinvest” paid 52.7 billion hryvnias in taxes, then in war conditions its contributions to the budget decreased to 20.5 billion hryvnias in 2022 and 14.6 billion hryvnias in 2023.

Metallurgy, which has long been the backbone of the economy, is now experiencing hard times due to a global steel glut and falling prices. But this crisis can be an opportunity for change. Ryzhenkov believes that with the right policy, Ukraine will not only be able to restore its industry, but also become an important player in the field of technology and extraction of valuable resources.

German economic miracle

So, what is the “German economic miracle” that the head of the metallurgical giant appealed to in his thoughts, expressing the hope that Ukraine would be able to follow this example under certain conditions? After World War II, West Germany lay in ruins. Cities were destroyed, infrastructure was destroyed, and the economy was in agony. The future looked bleak, but the country made a quantum leap, becoming one of the world’s leading economies in less than two decades. This renaissance illustrated how determination and innovation can rise from the ashes of even the most devastated state.

The recovery began with the return of confidence in the economy. In 1948, a currency reform was carried out: the devalued Reichsmark was replaced by the new Deutschmark. It stopped inflation and became a symbol of new opportunities. At the same time, the USA launched the Marshall Plan to restore the European economy and prevent the spread of communism. One of the main beneficiaries of the program was the destroyed Germany. Thanks to financial aid of more than 13 billion dollars, equivalent to 140 billion dollars today, the country was able to rebuild industry, stabilize the economy and return to active participation in international trade. This support became the trigger for the “economic miracle” of Germany and gave a start to its future growth. The Marshall Plan rebuilt the devastated country and helped bring about an economically stable Western Bloc.

These measures were only the beginning. The basis of the recovery of West Germany was the system proposed by the Minister of Economy, Ludwig Erhard. His project combined business freedom with state concern for people. The business received carte blanche to operate in the conditions of a free market, which contributed to competition, new ideas and lower prices. At the same time, the state monitored compliance with the rules of the game and helped those who needed it. That is, it provided pensions, education and medical care.

Economic recovery relied on industry. Thanks to significant investments, the country quickly rebuilt its plants and factories, becoming a leader in the production of steel, machines and cars. IDPs and those returned from captivity actively worked on reconstruction. Also, the country began to actively trade with the world, selling high-quality goods.

The results exceeded all expectations: in the 1950s, GDP grew by 8-10% annually, the unemployment rate fell sharply, and the standard of living rose significantly. The German mark has become one of the most stable currencies in the world, and West Germany is the economic leader in Europe.

This success proved that even after great difficulties it is possible not only to recover, but also to achieve prosperity. West Germany has become an example of how to properly combine economic freedom, innovation and social care.

How metallurgy will solve the dilemma: change or lose positions

Metallurgy, which has long been a key component of the economy, is currently experiencing a crisis. The surplus of steel on world markets and falling prices put the industry at a crossroads: change or lose its position. However, the crisis also opens up new opportunities for development.

Currently, the demand for cheap bulk steel is decreasing and quality products with high added value are coming to the fore. Metallurgy can reorient itself to specialized markets – the aerospace industry, green energy or medicine. This will reduce dependence on volatile markets and ensure future stability.

The crisis also stimulates the implementation of environmental and technological innovations. Reducing energy consumption and emissions not only meets the demands of the times, but also helps companies stay competitive. Those who are the first to adapt to the new standards will have an advantage.

The industry can also diversify its business by investing in related areas – metal processing or composites production. The introduction of automation and digital technologies will make production more efficient and resistant to market changes. “Factories of the future” equipped with artificial intelligence will be able to work economically and productively. In addition, metallurgy can refocus on local markets, reducing logistics costs. Cooperation between companies, governments and investors through joint projects will help to overcome the challenges.

Thus, the crisis is a chance for metallurgy to change, adapting to new conditions. Focusing on modern trends – environmental sustainability, innovation and specialized markets – will allow the industry not only to overcome difficulties, but also to create a basis for long-term success.

…The war is exhausting, but it also becomes a catalyst that can turn the Ukrainian economy into a success story, provided that this chance is used correctly.

Tetyana Viktorova