Ukraine's Economy Hampered by Black Sea, Energy Disruptions, Says EBRD

By Paul Hannon

An agreement with Russia to halt attacks on energy infrastructure would deliver a significant boost to Ukraine's battered economy, as would the restoration of grain exports through the Black Sea, the European Bank for Reconstruction and Development said Thursday.

In a report on the outlook for the economies in which it invests across parts of Europe, Asia and Africa, the development bank lowered its growth forecasts for Ukraine to reflect the damage caused by continued Russian attacks on its energy system. Ukraine has in turn attacked Russia oil refineries, causing shortages of fuels.

The EBRD estimates that Ukraine's economy stagnated in the first six months of this year, having grown by 1.8% last year. It expects growth for this year as a whole to be 1.5%, having forecast an expansion of 2.2% in June. It now expects growth to pick up to 2.2% next year, below the 4% seen in June.

In response to the attacks on its refineries, Moscow has forbidden most diesel exports, pushing prices higher around the world, including in the U.S. In an interview published Tuesday, Ukrainian President Volodymyr Zelensky said he believes the U.S. will pursue a deal to halt attacks on energy infrastructure.

"An energy ceasefire would be enormously helpful because the disruption to energy infrastructure has had a profound impact on the Ukrainian economy," said Beata Javorcik, the EBRD's chief economist.

Javorcik said the EBRD has deployed 10.8 billion euros ($12.37 billion) in support of Ukraine since Russia's invasion in early 2022, much of which has gone to maintain the country's energy infrastructure.

U.S. President Trump on Tuesday said he is considering following Russia in limiting diesel exports, and Javorcik warned against such a move, which could prompt others to follow suit and push prices even higher.

"Previous experience shows that once a country introduces restrictions there is a domino effect and that could fuel inflationary pressures," she said. "Diesel fuels the cost of everything."

The EBRD also lowered its forecasts for Russia, and now sees economic growth at 0.5% this year and 0.7% in 2027, having previously projected expansions of 0.8% and then 1%.

The development bank said that while the economies it invests in have shown greater-than-expected resilience in the face of higher energy prices, the pressures are building. Some of those pressures arise from the U.S.-Iran war and the disruption to the Strait of Hormuz, but Javorcik said attacks on shipping and ports in and around the Black Sea are the source of growing strains.

The EBRD estimates that Ukraine's grain exports are now at levels last seen in April 2022, shortly after the war began. Low water levels in the Danube and damage to railway networks have made it expensive to use alternative ways of getting wheat and other grains out of the country.

The country could lose grain exports worth between $3 billion and $3.5 billion, Javorick said, while a further $1.5 billion in exports of metal ores may also be blocked. That combined loss of as much as $5 billion is equivalent to 2.5% of the country's annual economic output.

But the loss of grain supplies from one of the world's leading exporters is having a global impact that could be compounded by the impact of the El Nino weather pattern on harvests in other parts of the world. Javorcik said the inability to find buyers for this year's harvest could lead to a reduction in planting in the coming season.

"All eyes are on the Strait of Hormuz," she said. "Fewer people are paying attention to what is happening in the Black Sea."

Write to Paul Hannon at paul.hannon@wsj.com

(END) Dow Jones Newswires

September 24, 2026 01:14 ET (05:14 GMT)