Now is not the time to let Russia off the hook. Its economy continues to slump. Growth is nugatory, business confidence sliding and the PMI is still trending down.
GDP up 0.4% year-on-year, including spending on the war with Ukraine.
The chart below shows business confidence and S&P Global's manufacturing PMI. Both are falling fast, with the PMI lower than it's been since the Covid Crash.
It isn't just these indicators. The growth rate in industrial production has slumped from a peak of 6.6% in late 2023 to around 1.5% now. Growth in the volume of retail sales has fallen from 14% in late 2023 to 1.3% now. GDP growth over the same period has fallen from 6.2% to 1.1%. And this is after the data have been massaged by the government.
Now is exactly the wrong time to give in to Putin. It's time to tighten the pressure, to push harder, to force him to withdraw from Ukraine.
The central mystery of our time is why, at a moment when the whole political and social system is out of control and in total chaos, no one seems able to imagine any alternative. The economic system is not delivering the good life it once promised, but is instead creating chaos and hardship for millions. Meanwhile, those in charge of the system are profiting massively from that chaos, feeding off the uncertainty. And the political class are in thrall to an economic theory that has become absurd and corrupted.
I’ve just made TraumaZone, a series of films about another time when that was happening. It was in Russia in the 1990s after communism collapsed. Those in charge began an experiment to create an extreme form of capitalism. I made it because I don’t think we in the west understand what the Russians went through: a cataclysm that tore apart the foundations of society.
The films are made using a unique source of material: thousands of hours of raw footage recorded by BBC crews in Russia during that time, much of it never seen before. What makes it so extraordinary is that it records the experiences of Russians at every level of society as their world fell apart: from inside the Kremlin to the frozen mining cities of the Arctic circle, from life in the tiny villages of the vast steppes to the strange wars fought in the mountains and forests of the Caucasus.
As I watched the footage I decided that I shouldn’t use my voice or paste music over it. The material was so strong that I didn’t want to intrude pointlessly, but rather let viewers simply experience what was happening, because it was out of this – the anger, violence, desperation and overwhelming corruption – that Vladimir Putin emerged. But as I made the films, the growing chaos here in Britain [and the USA] made me see parallels. There are of course vast differences between our society and the Russia of 30 years ago, but the more you find out about the extreme economic experiment there, and what is happening here now with the present government, the more you see that they both share very similar roots that have nothing to do with either capitalism or communism.
The clue lies in the man who imposed the “shock therapy” experiment on Russia. Called Yegor Gaidar, he was at the heart of the communist establishment. His grandfather was the most famous writer of children’s books in the Soviet Union, and Gaidar had married the daughter of one of the Strugatsky brothers, science-fiction writers who wrote the novel the film Stalker was based on. This economist who would become acting prime minister set out to create a perfect capitalist system in Russia. He had to do it fast, he said, to stop communism from ever returning. Overnight, he removed all controls over prices, while the government gave up on any attempt to manage the system. The aim, said Gaidar, was to create a new zone of perfect freedom in which, despite initial pain, the system would find its own natural equilibrium.
But if you look closer, you will see that his plan had little to do with freedom. It was in fact an odd, machine-like vision of the world driven by pseudoscientific ideas. Gaidar believed that by unleashing “free market forces” on an extreme scale, they would act as “market stimuli” that would then automatically lead people into “rational” patterns of behaviour. In reality, it was a simplified engineering system where human beings would be reshaped, turned into the right kinds of beings to make the new system work. In that way, it was like a reverse image of the Soviet plan. It was still a way of controlling behaviour through levers, but just a different way.
And it didn’t work. It led to total chaos.
Both the right and the left see [Friedrich von Hayek] as the man who masterminded the return of the free market, what is called “neoliberalism”. But I think Hayek, who was a powerful influence on Gaidar, was actually far stranger than that.
Hayek believed that economics was the key to the future of the world because it would stop governments trying to imagine new kinds of societies. He wrote a book called The Road to Serfdom, saying that in the new age of the mass, it was impossible to impose a vision of the future on to millions of people without leading to horror – like fascism and communism had. Instead, Hayek had an epic vision in which millions of people would together create a stable social system through the signals they send each other. At the heart of that was the pricing system. Governments should pull back and not control prices – and instead allow a “spontaneous order” without central control. The people, not politicians, would create the new society together as “economic actors”.
Up to that point, economics had been important in government, but only as a tool to help manage the societies politicians wanted to build. But in 1979, when Margaret Thatcher came to power, she began an experiment that brought economic logic into the very heart of the political system. The problem was that it almost immediately went haywire. It not only created massive inflation but was one of the main reasons for the de-industrialisation of British society. As her senior advisers admitted, Thatcher very quickly gave up on the experiment and turned instead to the banks to lend people money. And a wave of cheap money and debt covered up the problems until the financial crash of 2008.
In reality, the grand ideas of Gaidar and Hayek had very little to do with ideas of the free market. They were actually rooted in old dreams born in the 19th century that science and rational systems could be used on a grand scale to replace politics, because that would avoid the human messiness and uncertainties that continually push politics off course. In fact, the system Gaidar set out to replace – the Soviet plan – was also rooted in those pseudo-scientific dreams. It had little to do with communism.
In the 1930s, in the Soviet Union under Stalin, the old ideology fell away and was replaced by a giant experiment. Human beings became simplified into components in a system that could be managed in a rational way with predictable outcomes. Those ideas also flourished in America in the 1930s. A mass movement called “technocracy” rose up. Hundreds of men and women, dressed “rationally” in grey outfits, travelled through the US calling for what they called a “Technate”, a new kind of society that would be run rationally by engineers. One of their leading members was Elon Musk’s grandfather.
But all these movements were really the product of a weird overreach of science attempting to grab and colonise the political realm. And in reality, those experiments always failed. Whether in the Soviet Union, or in 1980s Britain, or under Gaidar’s shock therapy, and now with [Elon Musk], it never creates a rational system. It actually creates the opposite: a system that becomes increasingly unequal and open to exploitation by a small elite. And there are no political levers to stop them.
In Russia, the films show moments that capture the terrifying speed with which the chasm between rich and poor opened up. Thousands couldn’t even afford food or pay for heating while the health service collapsed around them. Bewildered shoppers are told “there are no potatoes in Moscow”, while the new elite re-stage elaborate 18th-century balls in old palaces outside St Petersburg.
We see the ruthless self-interest of managers and gangsters as they discover more and more ways to loot the failing state, with machines in the oligarchs’ “banks” endlessly counting millions of rouble notes before they are moved into offshore zones. And no one in the political system could stop them. At the heart of all this was an increasingly drunken president Yeltsin who sat in the Kremlin staring at the wall saying to his bodyguard: “They are stealing Russia.”
And in Britain, quantitative easing and the extreme rise in asset prices and property it brought about are as destructive to the lives of millions of ordinary people as were the oligarchs in Russia in the 1990s. The kind of freedom that this sort of technate offers is always very limited: people are just components in a system, free to do what they want, but only within the narrow logic of the iron cage of pseudoscientific economics. A world where they dance, but only in those chains.
At this time of economic chaos, it feels imperative to reassess what both the west and Russia actually went through in the past 50 years. Perhaps it was neither communism nor the free market that failed, but the Technate. We should clear away the pseudoscience of economics that has politicians trapped in a death grip – and look again at both capitalism and communism for the human values and aspirations they contain. And from that could come real alternative visions of the future.
[Lightly edited]
Neo-liberalism destroyed Russian society, and led to the rise of Putin, who brought "order". Gorbachev hoped that communist Russia would be turned into a social democracy on Scandinavian lines. Instead it became an oligarchy with vast inequality, and a steady growth in tyranny. In the USA, a similar process has taken place, driven by far-right theorists and politicians. Oligarchy is becoming the norm there too. And Elon Musk wants to export this toxic system to the rest of the world.
The problem with unfettered capitalism is that it inevitably gets more and more extreme, and more and more dangerous for democracy. It's like a top spinning out of control. And one day it falls over.
Billionaires might reflect on how the increasing inequality of the late 19th century led inexorably to Communism and Nazism, and how the post-war consensus produced high growth, low inequality, and prosperity for all.
And the Left might reflect that the only way it is going to get back into power is to ditch neo-liberalism and increase equality and the prosperity of the working class. Raise the minimum wage, build housing for the poor, make sure everybody gets a good education which allows them and society to get more prosperous over time. In America, do something about the evils of health insurance.
The rouble is plunging, to lows last seen immediately after the invasion of Ukraine began. Inflation (and the data are almost certainly massaged down) is rising.
The wheels are coming off in Russia. Putin is waiting desperately for Trump to take office and prevent Ukraine from continuing its struggle for freedom. Because if he doesn't, Putin is finished. Russia is running out of resources to fight the war.
Yesterday was the 30th anniversary of Ukraine, Russia, Great Britain, and the United States signing the Budapest Memorandum. To celebrate, Russia massed thousands of troops on Ukraine’s southern border, preparing for another massive and bloody invasion.
Donald Trump, meanwhile, continued to ignore the situation, much to the delight of Putin and Xi, increasing the chances of a third world war.
While countries around the world are trying to create and build nuclear weapons stockpiles (particularly China, Iran, and North Korea) only one country in the history of the world has ever given up their nuclear hoard and unilaterally denuclearized their military: Ukraine.
And former President Bill Clinton — who brokered the deal during the second year of his presidency — feels terrible about it.
“I feel a personal stake because I got them [Ukraine] to agree to give up their nuclear weapons,” Clinton said in an interview with the Irish media company RTÉ. “And none of them believe that Russia would have pulled this stunt if Ukraine still had their weapons.”
Clinton can be forgiven his naivete: in 1994 Russia had not yet been turned into a fascist dictatorship. Boris Yeltsin was president and Russians — and the world — were giddy about the possibility of the country becoming a western-style democracy.
The deal Clinton brokered is known as the “Budapest Memorandum of 1994,” an agreement worked out just three years after the Soviet Union dissolved and Ukraine had again become an independent nation.
Through much of that year the UK, US, and Russia met repeatedly with Ukraine at a venue in Budapest provided and blessed by the UN to try to secure and remove from Ukraine the world’s third-largest stockpile of nuclear weapons.
Ukraine, the largest country in Europe (about the size of Texas), had inherited from the old Soviet Union a massive collection of nukes, including almost two thousand SS-19 and SS-24 Intercontinental Ballistic Missiles (ICBMs), in silos scattered from border to border. Between 1991 and 1994, Ukraine owned the world’s third largest nuclear weapons arsenal.
Every one of those thousands of missiles had warheads containing nuclear bombs in the 400-550 kiloton range: each missile’s warhead was 27 to 37 times more powerful than the weapons we used to destroy Hiroshima and Nagasaki.
This Ukrainian stash of nuclear weapons was six times the size of what China has today, capable of destroying — both because of the missiles’ ranges and the size of the warheads — every town and city in the United States with more than 50,000 people, as The Brookings Institution notes, “three times over, with warheads left to spare.”
Most were pre-targeted at the United States, but those missiles — and the long-range jets and nuclear bombs Ukraine had as well — could just as easily have been re-positioned to take out Moscow and every major population center in Russia, or every consequential city in Britain and continental Europe, with plenty of firepower left over.
And Ukraine was reluctant to let go of their nukes. As Clinton told the Irish broadcaster:
“They were afraid to give them up because they thought that’s the only thing that protected them from an expansionist Russia.”
But the US, UK, and Russia — on behalf of the United Nations and the world — really, really wanted those nuclear weapons to be secured.
Ukraine was ultimately willing to give them up to advance world peace — particularly after being so traumatized by the meltdown of their Chernobyl nuclear power station in 1986 — so they entered the Budapest negotiations with Yeltsin and Clinton in good faith with only three simple demands.
— First, they wanted an absolute assurance from, at least, the US, UK, and Russia that their territorial integrity would be both respected by those three nations and defended in the event of an invasion.
— Second, Ukraine wanted some financial help to safely dig the missiles out of their bunkers and transport them to Russia for decommissioning and destruction. The job would cost more than Ukraine’s economy could bear at the time.
— Third, they still had 15 functioning nuclear reactors operating in Ukraine, a legacy of the Soviet nuclear power program (which also provided some of the materials for those 1900 nukes), and the nuclear material in the warheads could be reprocessed into high-quality fuel for Ukraine’s power stations. They wanted an equivalent amount of nuclear fuel from the US, UK, and Russia so they could provide themselves with low-cost electricity for a few decades.
The three nations negotiating with Ukraine agreed to all the terms:
— Russia took most of the responsibility for relocating and decommissioning the ICBMs and their nuclear warheads, and providing Ukraine with nuclear power-station fuel.
— The US and the UK kicked in around $3 billion cash to cover the costs.
— And all three nations kicked in to an additional $3 billion fund to pay for a modern Ukrainian military, promised to never attack Ukraine, and to defend its borders if anybody else did.
Ukraine, trusting our word that their borders would never be violated, gave up their nuclear weapons. All of them.
We can all see how poorly that memorandum, signed in Budapest on December 5, 1994, has worked out, starting with the Obama administration’s failure to defend Ukraine when Russia invaded and took Crimea in 2014.
So can children and civilian adults in Ukraine who are literally dying from Russian missiles and bombs as you read these words.
The memorandum doesn’t have specific language about exactly how the US, UK, and Russia would protect Ukraine and its borders in the event of an attack, but it was backed up by at least the appearance of the moral force of the United Nations.
(I’ve appended the entire text of the Budapest Memorandum at the end of this article: it’s short and worth taking 2 minutes to read.)
It does, however, contain language that the Ukrainians were convinced would protect them. In it, the US, UK, and Russia “reaffirm their obligation to refrain from the threat or use of force against the territorial integrity or political independence of Ukraine.”
The three nations and, by proxy, the UN, additionally promised to “refrain from economic coercion” against Ukraine and, should things break down, to “seek immediate United Nations Security Council action to provide assistance to Ukraine” if any nation were to initiate an “act of aggression” against Ukraine.
By 1996 Ukraine was completely denuclearized, weapons-wise, and until 2014 thought they were safe, as the country blossomed into a western-Europe-like vibrant regulated capitalist economy, having twice rejected attempts by political elites to corrupt the government as they built a sturdy middle class and a technologically modern nation.
When Russia illegally annexed Crimea back in 2014, Ukraine went before the UN and, citing the Budapest Memorandum, demanded the world act to protect its territory from Russian aggression.
As Clinton noted in his interview:
“When it became convenient to him, President Putin broke it and first took Crimea. And I feel terrible about it because Ukraine is a very important country.”
The United States and Europe, not wanting to piss off Putin over what seemed like a small slice of Ukrainian land, passed on doing anything militarily and let Russia get away with the land grab.
It was a fateful betrayal, as Bill Clinton pointed out. And the Ukrainians know it and are asking the world to acknowledge it.
In the past years, President Zelenskyy has repeatedly referenced the Budapest Memorandum when demanding the world — or at least the US and United Kingdom — keep their agreement to guarantee the integrity of Ukraine’s borders.
“Since 2014, Ukraine has tried three times to convene consultations with the guarantor states of the Budapest Memorandum. Three times without success. Today Ukraine will do it for the fourth time.
“I, as President, will do this for the first time. But both Ukraine and I are doing this for the last time. I am initiating consultations in the framework of the Budapest Memorandum. The Minister of Foreign Affairs was commissioned to convene them.
“If they do not happen again or their results do not guarantee security for our country, Ukraine will have every right to believe that the Budapest Memorandum is not working and all the package decisions of 1994 are in doubt.”
President Zelensky mentioned it again on March 4th, 2022 as the Russian invasion turned into an orgy of slaughter, when he said to the world:
“All the alliance has managed to do so far is to carry 50 tons of diesel fuel for Ukraine through its procurement system probably so that we can burn the Budapest Memorandum.”
The consequences of that betrayal are now echoing across the planet. Our failure to act in 2014 has literally made the world less safe.
As the editorial board of The Wall Street Journal, a Murdoch-owned publication that had previously supported Trump in his repeated sucking up to Putin, noted in an opinion piece published on February 22, 2022:
“Don’t be surprised if Japan or South Korea seek their own nuclear deterrent. If Americans want to know why they should care about Ukraine, nuclear proliferation is one reason. Betrayal has consequences, as the world seems destined to learn again the hard way.”
On top of that, China is watching how this plays out and must be considering what might be the results of a similar effort to seize Taiwan.
The crisis caused by the failure of the Budapest Memorandum today and in 2014 has been terrible for Ukraine and has now damaged Russia by its own hand, both militarily, economically, and in their standing among the nations of the world. It has shaken the world order.
On this grim anniversary, as Putin’s campaign of murder, rape, and destruction has turned into genocide, America has both a moral and a legal obligation to defend Ukraine and honor the Budapest Memorandum.
Will Donald Trump, in his eternal effort to grovel before and gain the approval and admiration of Vladimir Putin, betray America’s solemn commitment to Ukraine after he’s sworn in on January 20th?
If he does, will China take that as permission to invade Taiwan? Will Putin figure Moldova, Poland, Latvia, Lithuania, and Estonia should be next? Finland and Sweden?
The Budapest Memorandum is not just a broken promise to Ukraine; it’s a warning to the world that the price of appeasement is paid in blood — and the bill is still coming due.
I would not be surprised if Ukraine is already building its own new nuclear weapons, bringing old technicians out of retirement. Nor would I be surprised if Taiwan is working on nuclear weapons either. In a world where a clown runs the world's most powerful country, a clown who is too dim to understand geo-political risk, who routinely breaks his word, and will appoint incompetent loyalists to run everything, every country must be doing some hard thinking about how they can protect themselves.
Professional investors who invest in the stock market have their ears close to the ground. A falling stock market is a sign of declining confidence, a sign that well-connected and intelligent people have concerns about the future.
At the same time, if investors lack confidence about the future, expecting rises in inflation and a jump in debt issuance, bond yields rise (i.e., bond prices fall).
In Russia, the stock market is sliding, and bond yields are surging. The Putin régime is starting to look very shaky.
I (and Bloomberg and Trading Economics) can no longer find the MOEX stock exchange index for Russia, or the yield on Russian bonds. Trading Economics makes an estimate of the index value, but warns it might not be 100% accurate. An absence of information is invariably a bad sign. People are happy to share good news, not so much bad news.
Meanwhile, inflation is picking up. (The central bank of Russia's inflation target is 4%.)
The 2014 inflation was caused by a collapse in the oil price, leading to a plunge in the rouble. The 2020 spike was of course caused by the invasion of Ukraine, once again leading to a collapse in the rouble. Given the loss of life and overall casualties among young men, now estimated at over 500,000, and the tightness of the labour market (real wages are still rising fast--one way Putin is buying off his population), the only surprise is that inflation isn't higher.
Insiders are selling the share market (foreigners can no longer buy or sell Russian shares because of exchange control and American sanctions), while bond yields were trending sharply higher (until the data were no longer available), usually an indication of worsening problems.
The rouble has strengthened moderately from its lows, which seems unsustainable given the inflation build up. If oil and gas prices start to fall, as happened in 2014, the wheels will come off.
I don't know whether oil and gas prices will plunge in the short term, but the medium-term future is surely very bleak, given the global growth of EVs. And the short-term may be no better. There was no major economic event that caused the 2014 oil price plunge, just a moderate decline in global economic activity. Given the impending Chinese recession/slowdown, and sluggish recoveries in Europe and the US (?), a near-term plunge in the oil price, comparable to 2014, is surely at least possible.
After Russia's invasion of Ukraine, the rouble initially plunged, then recovered sharply after the Bank of Russia imposed exchange controls. But, since then, it has slid inexorably. In a currency market where there are exchange controls, the currency is driven by the balance of trade. The government has stopped publishing trade data. I suspect many official Russian statistics are massaged by the authorities. This is one they cannot massage.
Well, at last I have updated all my databases. Almost all!
This chart shows the CPI inflation rate for the Big 8 economies (US, UK, Europe, China, Japan, India, Brazil, Russia) weighted by GDP, alongside the percentage of 43 world economies where the CPI inflation rate is above 6%. The moral of the story is that inflation is falling in the Big 8, and also in the world as a whole.
Inflation is falling because the impact of Russia's invasion of Ukraine is fading (in the sense that it's not making inflation worse, so year-on-year rates are falling); because commodity prices are declining; because growth is slowing; and because China's inflation rate has gone negative (one sign of just how weak China's economy really is). It'll prolly take another year, perhaps longer, for Big 8 inflation to get back to 2%.
I think it quite likely that the longer-term underlying inflation rate has risen, because the key reason it got so low is offshoring and just-in-time manufacturing. Goods were efficiently assembled from parts in different countries. The progress of offshoring has stopped and reversed. The war has shown that relying on other countries for key parts of your own country's manufacturing could be problematic, even disastrous. Even in the absence of war, the lockdowns in China showed just how dependent manufacturing in developed countries was on the free flow of parts. Tesla, which produces all its own chips, was unaffected by supply-chain breakdowns. There is a lesson there for other CEOs.
We will never get back to the two decades of low inflation we have come to regard as the norm. Whereas central banks struggled to raise inflation over these two decades, it is likely that they will now struggle to keep inflation at 2%. Central to this is the realisation by the West that relying on China could be as strategically perilous as our naïve belief that Russia could be trusted and that we could rely on her for all our gas and oil. I remember when Stephen Roach in 1989 (or thereabouts), when he was at Morgan Stanley, pointed out that the fall of the Iron Curtain, and the opening of Eastern Europe and China to world trade would drive the long-term rate of inflation down, and it did. What we are seeing now is the partial reversal of this trend. We no longer trust that politics will not impede trade. Globalisation is no longer fashionable.
Moreover, global warming has pushed up food inflation. Who would have thought that alternating droughts and floods would push up food prices? Amazing. Well, greenhouse gas emissions continue to rise. It will only get worse.
In other words, the fall in world inflation may be slower than in the cycles of the last 30 years, even if we have a deep recession, and underlying inflation will remain stubbornly high. This has important implications for bond yields and PE ratios. The major bull markets in asset prices were driven by a secular downtrend in inflation. If that trend is over, valuation rates for all asset classes will rise, and that will keep their prices from rising.
I’ve been talking about clean, distributed energy as a national security strategy for years. See my interview with General Richard Zilmer conducted in 2019, below.
Russian airstrikes on Ukraine’s power grid plunged many parts of the country into darkness last fall, but one water company was able to keep its pumps going. Its field of solar panels, installed as an environmentally friendly measure before the war, turned into a tool to resist the Kremlin’s attacks.
Now a growing number of Ukrainian hospitals, schools, police stations and other critical buildings are racing to install solar power ahead of what many expect will be another hard winter later this year.
A less carbon-intense, decentralized energy system is emerging as a key elementof Ukraine’s reconstruction efforts. Seven months of Russian attacks on the energy grid have left itseverely damaged. Ukrainian doctors, teachers and others have discovered that efforts to boost sustainability can also improve security by making it harder to knock power offline. Ukrainian policymakers, meanwhile, are setting ambitious clean energy goals, trying to shake off their prewar reputation as lagging on climate issues.
Ukrainian deputy energy minister Yaroslav Demchenkov said renewable energy, along with small modular nuclear reactors, are among the country’s priorities for its rebuilding effort. Both would help distribute power generation away from the heavily centralized system the country had before the war, making it more resilient in addition to lowering emissions.
Renewable advocates want solar power to be a sizable chunk of the new capacity. Although solar panels can’t easily rival the power generation of a nuclear plant, proponents say they are cheaper, faster to install and more useful as a quick solution to Ukraine’s immediate energy and security needs than nuclear power, which can take years to build and install.
If the efforts to spread renewable power are successful, advocates hope that they can speed Ukraine’s green future far faster than had been expected before the war. Some hope that installing solar panels might be the impetus for some Ukrainians to take even more actions to reduce their carbon footprint, strengthen their self-sufficiency and improve their ability to resist Russian attacks.
“It will be much more difficult to destroy this kind of decentralized system,” said Kostiantyn Krynytskyi, the head of the energy department at Ecoaction, a leading Ukrainian environmental organization. “You cannot bomb all the installations. And bringing self-sufficiency will help. We saw now what centralization in our energy system means.
Even though Ukraine recently approved resuming electricity exports to its neighboring countries — a sign that its ability to generate power has recovered, for now, from the wintertime bombardment on the energy system — the solar work still has intense urgency, officials say. Ukrainian and allied officials warn that the cold months later this yearcould be even harder than the winter that just ended, since the grid will be starting from a more damaged level than last year. Getting enough diesel to power all the backup generators is also a challenge.
“The situation in the energy sector is still very fragile,” Demchenkov said in an interview. “It’s a very important challenge for us right now, during this period of time, to have enough equipment and allow a fuel stock, because we have information that Russia will use winter as a weapon again. For us, it is really important to have the physical protection of energy facilities.”
In the meantime, advocates hope the current solar installations can serve as examples that build interest in a greener future.
At a small hospital in the Kyiv suburb of Horenka, the medical staff learned the difficulty of operating without electricity in the first hours of the war last year. Horenka is next door to Hostomel, whosemilitary airport was one of the first targets that Russian paratroopers attempted to capture. The town faced heavy Russian shelling. The hospital never closed its doors, but it lost power on the second day of the invasion and didn’t regain it for more than two months. Without power, its heating system partially failed. And then a shell landed on the street just outside thebuilding, blowing out its windows and damaging the front facade.
Now the hospital has been rebuilt. This winter, along with much of Ukraine, it used diesel generators to keep going during blackouts. But diesel generators consume vast quantities of fuel, they are prone to breaking down, and their noise and fumes make them inconvenient for long-term use at places like hospitals. [If you are already using diesel, adding solar is a win-win: diesel becomes the back up, and you save money by installing solar]
Natalia Tsipura performs an ultrasound on a patient at a health clinic powered by solar energy in Horenka. (Ed Ram for The Washington Post)
Next winter, the medical personnel in Horenka hope to avoid them. In February, workers screwed solar panels onto its steeply pitched roof, completing a project that is expected to cover about half the hospital’s typical power needs — enough to ensure that critical equipment stays online even if the grid fails. A battery will extend the reach of the solar panels into the night. And an electric-powered heat pump can keep the hospital warm even if it gets cut again from the grid. The solar panels and battery cost $11,700 for a 12.6 kilowatt system — comparable in size to what might go on a house. [The average Ozzie house has about 7 kilowatts of solar panels]
“We need long-term solutions for such hospitals,” said Denys Tsutsaiev, who works for Greenpeace Central and Eastern Europe in Kyiv and, along with Krynytskyi, helped organize the hospital’s solar project.
One of the first questions Tsutsaiev gets from foreigners, he said, is whether it makes sense to push forward with renewable projects at a time when Russia is still shelling the country. But, he said, that misunderstands the need.
“People are back,” he said. “People cannot live at the moment without hospitals. They can’t live without schools.”
Nor did he and others expect solar panels to become targets. Given the small scale of the projects, it would not make sense for Russian to use one of its expensive and scarce missiles to go after solar panels on roofs, he said.
“It’s much more expensive to hit it with a missile than for us to rebuild it if it’s damaged,” he said.
Large-scale renewable projects have proceeded despite the war, including a wind farm in the southern Mykolaiv region that just completed its first phase of construction in March.
The effort to expand solar power isn’t always straightforward. Winters in Ukraine can be long, and the country is far enough north — roughly the same latitude as southern Canada and the northern United States — that daylight hours get short in December and January. Solar advocates say the panels still generate enough electricity during those months to be useful.
Ukraine doesn’t have a net-metering law, which would allow owners of solar panels to sell their excess power back into the system, although the parliament is working on legislation and Demchenkov, the deputy energy minister, said he hoped it would be finalized by autumn.
German Vice Chancellor Robert Habeck visited the hospital in Horenka last month to announce his government would offer $1.1 million toward eight similar solar pilot projects around Ukraine, and he urged German companies and philanthropies to follow suit. Ukrainian environmental organizations have identified dozens more hospitals, schools and public buildings where administrators would like to install solar panels or find other ways to be more self-sufficient.
The community where the municipal water utility installed solar panels already proved the value of renewable energy in a time of war, said Sakalyuk, who met with Habeck during his visit. After the power went out for more than a week across much of the southern Mykolaiv region late last year [i.e., mid-winter], the utility in the town of Voznesensk was able to keep water flowing even though most other activity ground to a halt. The waterworks had installed a 50 kilowatt solar power plant in 2020 as part of a green initiative.
“People have changed how they think about solar power,” Sakalyuk said. The resilience of the pumping station inspired a wave of new inquiries from businesses and homeowners who want their own solar panels, he said.
If the solar advocates are successful, they hope to make an impact that will last long beyond the war. Solar panels on schools, for instance, could make climate-friendly practices an ordinary part of children’s lives, said Anastasiia Vereshchynska, the international development manager at Energy Act for Ukraine, a group that installed solar panels on a school in the Kyiv suburb of Irpin late last year and has lined up 15 more projects this year across Ukraine.
“Our big goal is to change the culture in this country,” she said. “We want kids to be part of the sustainable development of Ukraine in the future, especially in the postwar period.”
This chart of Ukraine's solar resources comes from SolarGis
