Monthly Context Report - March 2023
5 Apr 2023
April 2022, Lviv, Ukraine. Valeria Stashkin plays with her one year-old daughter Eugenia on the mat where they have just spent the night. They were displaced by shelling near their home outside of Kharkiv, and now plan to meet family in Warsaw, Poland, and eventually move on to Austria to stay with friends and work until the war is over. She hopes she can go home soon. Like many of the 350 shelters in Lviv, this one used to be a cultural center. It has been operating since the beginning of the war, when up to 600 people were staying every night - that number is now down to around 300, though it fluctuates with the ebb and flow of the conflict.
Summary
Security & Access. Ukraine strengthened the defense of Bakhmut. Russia changed targets, likely to prevent Ukraine’s counteroffensive, and increasingly used weapons that Ukraine couldn’t intercept, increasing civilian casualties. Russia–U.S./NATO relations deteriorated further as a Russian aircraft struck a U.S. drone over the Black Sea. Moscow announced the deployment of tactical nuclear weapons to Belarus. Intensified Russian cross-border attacks caused a new wave of displacement. Uptick in mine-related incidents in farmland areas linked to the beginning of the planting season which starts in Spring.
Political & Legal Updates. The Ukrainian Government continues to tackle corruption to boost public trust and international support. The ICC—International Criminal Court issued an arrest warrant against Putin for the alleged war crime of unlawful deportation of children from Ukraine. Xi Jinping’s visit to Moscow underlined Chinese support to Russia. March saw an increase in the delivery of Western assault weapons to Ukraine. New regulations limited media access to the frontline and to de-occupied communities.
Economic & Development Updates. Ukraine’s military expenditures reached 50% of the budget. Hryvnia is at its highest since the summer of 2022. The Grain Deal was extended by 60 days. Farmers in neighboring countries struggled to compete with cheaper Ukrainian grain. There were shortages of vegetables, and prices increased by over 20%. Kyiv named Raiffeisen Bank as a sponsor of the war.
Social & Environmental Trends. The U.N. reported a 15% increase in civilian casualties in March as compared to February. The Moscow-linked Ukrainian Orthodox Church clergy was ordered to vacate the Kyiv Pechersk Lavra. Ukraine restored renewable energy production and considered restoring energy export. Military activities could have caused the death of up to 10% of the Black Sea dolphins.
Neighboring Countries. Ukrainian refugees fueled Poland’s labor market and GDP growth. Refugees now need to partially pay for government-provided accommodation. Conservative trends increased ahead of parliamentary elections. In Poland, the first person was sentenced for assisting abortion. Several arrests were linked to a Russian intelligence operation in Poland and destabilization efforts in Moldova.
Anti-government protests organized by Russia-linked movements continued in Chișinău. Renaming the official language from “Moldovan” to “Romanian” and the debate on a potential unification with Romania caused social tensions in Moldova.
Trends To Watch
Security & Access. Military mobilization in Russia and Ukraine and temporary exemptions for aid workers in Ukraine. Potential Ukrainian counteroffensive. Fuel shortages due to intensified Russian air raids against military and critical infrastructure. Further escalation of Russia–U.S./NATO tensions and incidents that might cause direct confrontation.
Evacuation and displacement from border and frontline communities. An increasing number of mine casualties, especially in agricultural areas. Security and safety of the Zaporizhzhia Nuclear Power Plant.
Political & Legal. Power balance changes affecting humanitarian operations. Official steps to address corruption. Ukrainian reactions to the increasing role of China, including Beijing’s “Peace Plan”. Western weapons deliveries to Ukraine and potential Russian attacks against transportation infrastructure. Potential regulations regarding aid actors’ access to frontline and de-occupied communities.
Economy & Development. Ukraine prioritizing military expenditures and increasing dependency on foreign funding to cover social spending. Hryvnia exchange rate and effects of strengthening national currency. Free trade agreements and their effects on the economic stability and social cohesion in the neighboring countries.
Debates over the Grain Deal extension and expansion. Market prices and availability of agricultural produce and their effect on food security. Further actions against Russia-linked banks and potential consequences for Ukraine’s financial sector.
Social & Environmental. Rise of domestic violence in Ukraine and sexual exploitation of displaced Ukrainians. Tensions over affiliations with different Orthodox churches.
Effects of ongoing hostilities on the ecosystem. Potential chemical poisoning from the debris of the destroyed buildings.
Neighboring Countries. Poland: Potential relocation of Ukrainian refugees to smaller towns or returns to Ukraine. Heightened rhetoric on social issues before autumn parliamentary elections, including toward Ukrainian refugees and organizations assisting survivors of gender-based violence. Attacks and sabotage against transportation infrastructure to prevent weapons deliveries.
Moldova: Russian provocations and subversions. Repressions against pro-Russian activists. Anti-government demonstrations. Changes in energy prices. Tensions in the breakaway region of Transnistria and Ukrainian military activity along its border.
Security & Access
Summary
No notable changes in the frontline. Ukraine strengthened the defense of Bakhmut, declaring that losing it may lead to political compromises.
Russia may be changing targets, prioritizing oil depots and military infrastructure, likely to prevent Ukraine’s counteroffensive. It is increasingly using weapons Ukraine can’t intercept.
Intensified Ukrainian attacks against logistical and military infrastructure in Russia-controlled territories in the south may aim at cutting military supply lines from Crimea.
A cross-border ground attack inside Russia attributed to a Ukraine-subordinated unit consisting of Russian citizens likely triggered the massive March 9 retaliation.
Escalation of Russia–U.S./NATO relations, as Russian aircraft struck a U.S. drone over the Black Sea and Moscow announced to place tactical nuclear weapons in Belarus.
Intensified Russian cross-border attacks in Sumy and Kharkiv oblasts resulted in a new wave of internal displacement.
The increased mine-related casualties are likely linked to the start of the agricultural season.
Military Developments
In March, Ukraine’s eastern and southern contact lines did not see notable changes. Russian ground attacks in eastern Ukraine achieved limited tactical gains around Bakhmut (Donetsk Oblast) and in the direction of Kupiansk (Kharkiv Oblast). The epicenter of active hostilities remained the almost encircled towns of Bakhmut and Avdiivka (Donetsk Oblast). Russian forces currently control about 65% of Bakhmut. Zelenskyi called the fight over Bakhmut “existential,” as losing it would lead to a push for political compromises from the international community and Ukrainian society. As a result, Ukraine decided to strengthen the defense of Bakhmut by deploying additional forces.
As Russian forces slowly advance in the Bakhmut area, shelling and missile attacks against neighboring settlements are intensifying, with more civilian casualties than in February.
Source: U.K. Ministry of Defense, March 29, 2023
Postponed Ukrainian Counteroffensive?
At the end of March, Ukraine confirmed that preparations for a counteroffensive had started. Ukraine’s Western allies intensified the delivery of new assault weapons (see below). At the same time, Ukrainian authorities and military acknowledge that lack of well-trained military personnel, impairment of the Armed Forces due to the loss of the most experienced fighters, and the amount of military equipment needed put into question Kyiv’s readiness to mount the much-anticipated spring offensive.
Air Attacks: New Targets & Weapons
The State Intelligence Service of Ukraine announced that with the warm weather, Russia would change its targets from the energy sector to oil depots and military infrastructure, indicating a new tactic to prevent the Ukrainian counteroffensive and disrupt the spring sowing season. Air attacks during late March targeted military infrastructure in Lviv Oblast and an airfield reportedly used by Ukrainian forces.
Economically critical infrastructure was targeted twice in March, with UAV attacks damaging oil depots 20 km from Dnipro city (March 17) and in the Zhytomyr Oblast (March 22). Russia was systematically attacking oil depots and refineries in the spring of 2022, causing a fuel crisis in Ukraine.
In the early hours of March 9, the largest air attack in months targeted critical infrastructure in eight regions of Ukraine. Eighty-one missiles of various types (among which Kinzhal and S-300 missiles which Ukraine is not able to intercept) and eight drones were launched, killing at least nine civilians. As a result, the Zaporizhzhia Nuclear Power Plant was disconnected from the power grid for a few hours—the sixth time since the beginning of Russia’s full-scale invasion—posing a risk of a nuclear accident with radiation consequences. The Russian Ministry of Defense has framed the attack as a retaliation for an operation in Russia’s border Bryansk Oblast on March 2 (see details below).
As of March, Russian Forces increasingly use guided aerial bombs against targets 40–50 km beyond the frontline. These bombs are very difficult to intercept and were used for the first time in late February 2023 in the Chernihiv Oblast, in the Sumy Oblast on March 24 and 28, and in the Kherson Oblast on March 27, resulting in multiple civilian casualties.
War-Related Incidents Inside Russia & Russian-Held Territories
On March 2, a group of combatants from Ukraine entered two villages in Russia’s border Bryansk Oblast. This operation resulted in two civilian deaths. Russia’s President Vladimir Putin called it a “terrorist attack” and blamed Ukraine. While Ukrainian authorities rebuffed the accusations, a Ukrainian combat unit called the Russian Volunteer Corps (RVC) admitted their responsibility for the attack. RVC is a military unit consisting of Russian citizens, some with Neo-Nazi links, subordinated to the Ukrainian Armed Forces. The incident comes after a Russian A-50 early warning and control aircraft was seriously damaged at the airfield outside Belarus’s capital Minsk on February 26. Belarus partisans claimed responsibility, and authorities arrested a suspect on March 7, claiming he had links to Ukrainian intelligence. Ukraine denies the allegations.
On March 14 and 16, a drone and five missiles were shot down over Russia’s Belgorod Oblast. Debris damaged a private building, railway tracks at the Belgorod railway station and a power line.
On March 20, UAVs hit the railway infrastructure in Dzhankoi, Crimea, an important logistics hub for the Russian army. Ukrainian sources claim the explosion destroyed Russian Kalibr cruise missiles. On March 22, several drones reportedly attacked the Russian Black Sea Fleet in Sevastopol, Crimea. The Russian government reported that a UAV was shot down in the Simferopol region on March 29.
The March 21 UAV attack on the Novozybkov oil pumping station of the Druzhba pipeline in the Russian Bryansk Oblast might indicate a new trend with Ukraine targeting strategic Russian oil and gas infrastructure. A segment of the Druzhba oil pipeline—the largest in Europe—passing through Ukraine remained intact over the last year, with Kyiv benefiting from oil transit.
Russian-held Melitopol and nearby settlements of the Zaporizhzhia Oblast were attacked with multiple launch rocket systems (MLRSs) on March 27 and 29. Non-residential buildings, depot bases, an airfield, a locomotive depot, and electricity supply infrastructure were reportedly targeted by Ukraine. These attacks reportedly killed soldiers but also injured four civilians and damaged residential buildings.
Intensified Ukrainian attacks against logistical and military infrastructure might indicate a potential counteroffensive, as Russia uses the Crimea–Melitopol route to supply its contingent in southern Ukraine. The previous series of attacks in Crimea were reported in August and October, preceding major Ukrainian counteroffensive operations.
Deterioration of Russia–U.S./NATO Relations
On March 14, a Russian Su-27 aircraft struck a U.S. MQ-9 Reaper drone while conducting a routine operation in the international airspace over the Black Sea. Russia called the mere presence of a U.S. drone near the Crimean coast “a provocation” that creates a precondition for “an escalation of the situation in the Black Sea zone.” The U.S. called Russia’s behavior “unprofessional” and “unsafe” and said it would “continue to fly and to operate wherever international law allows”. Previously, on March 12, an American B-52 strategic bomber capable of carrying nuclear weapons conducted an exercise over the Baltic Sea, 200 km from Russian Saint Petersburg—a maneuver that could have triggered the Russian attack against the drone.
On March 25, Putin said that Moscow would place tactical nuclear weapons (TNWs) in Belarus. He did not provide a deployment timeline, indicating that the TNWs storage facility should be completed by July 1, 2023. Belarusian armed forces already have ten aircraft capable of carrying TNWs and have received an Iskander short-range ballistic missile system, which is nuclear-capable. In February 2022, Belarus amended its constitution, renouncing its neutral and non-nuclear status.
According to Putin, the deployment of TNWs to Belarus is a response to British authorities supplying Ukraine with ammunition containing depleted uranium alongside Challenger-2 battle tanks. Observers believe Russia will likely keep control over TNWs in Belarus to formally maintain the non-proliferation regime, not allowing Minsk to spread nuclear technology or control nuclear weapons. As of March, neither Washington nor NATO declared any changes in the existing nuclear risk coming from Moscow. However, Putin’s announcement may lead to further militarization of the region and jeopardize the global arms control system.
Security & Access
Incidents Affecting Humanitarian Operations
In March, incidents affecting humanitarian operations were as frequent as in February. Humanitarian infrastructure was shelled at least three times: a “point of invincibility” in the Donetsk Oblast on March 24, and humanitarian distribution centers in Donetsk and Kherson oblasts on March 13 and 25, killing at least four civilians and injuring five. Four civilian volunteers delivering humanitarian assistance were injured on March 3. Another one, a Polish national, was killed on March 16.
Ongoing Conflict Incidents In The Border & Frontline Regions
Significant attacks occurred along the Ukrainian–Russian border, particularly in Sumy and Kharkiv oblasts. The Sumy State Administration recorded 177 hits with artillery and MLRSs on March 2, affecting ten communities across the oblast. In the Kharkiv Oblast, a mandatory partial evacuation was announced in the Kupiansk district due to daily shelling, including against transport infrastructure and civilian buildings (March 4–5), critical infrastructure (March 9) and other civilian infrastructure (March 15).
In frontline regions, heavy shelling continued. The Kherson City Council called Ukrainian-controlled frontline communities for evacuation following 65 shelling incidents reported by local authorities between March 6 and 7. The call was followed by several artillery attacks, including against a bus stop and a residential building in Kherson city on March 9, killing four civilians. Later, on March 18 and 24, Kherson Oblast was attacked with artillery and MLRSs, killing two civilians and injuring six.
The Zaporizhzhia Oblast suffered the heaviest casualties when a missile attack on Zaporizhzhia city killed 14 civilians and injured 34 on March 2.
Mine Incidents Inside Ukraine
Mines and explosive remnants of war (ERWs) caused an increase in civilian casualties. At least 22 people were killed in Ukraine-controlled territory compared to nine in February—almost half of them in the last week of March, likely linked to the beginning of the agricultural season. Most of the reported incidents occurred in frontline or de-occupied areas. The highest casualties were recorded in Kherson, Kharkiv and Mykolaiv oblasts.
Trends To Watch
Mobilization in Russia and Ukraine.
Further escalation of Russia–U.S./NATO tensions and incidents that might cause direct confrontation.
Intensification of Russian air raids against military and critical infrastructure, including oil depots, may cause fuel shortages.
Ukrainian attacks in Russia and the occupied territories and potential retaliation.
Potential Ukrainian counteroffensive.
Deterioration of the situation for civilians and aid workers in the border and frontline communities and evacuation/displacement from there.
The increasing number of mine casualties with the warm weather and the beginning of the agricultural season.
Security and safety of the Zaporizhzhia Nuclear Power Plant.
Political & Legal Updates
Summary
New appointments in the government coming from the private sector or linked to the army will likely boost the government’s ratings.
Kyiv continues addressing corruption, removing several regional and municipal officials and setting up new anti-corruption institutions, including in the reconstruction and defense sectors.
The International Criminal Court issued an arrest warrant against Vladimir Putin for the alleged war crime of unlawful deportation of Ukrainian children.
Chinese leader Xi Jinping visited Moscow and demonstrated support for Russia.
Western assault weapons deliveries, including tanks and fighter jets, have intensified.
Ukraine’s new Chief Military Commander order limits media access at the frontline and in de-occupied communities.
Political Developments Inside Ukraine
Changes In The Government To Increase Public Trust
In recent weeks, Ukraine has undergone several significant ministerial changes, including two new ministerial appointments and one expansion of capabilities for a current minister. The appointments of Oksen Lisovyi and Oleksandr Kamyshin as ministers for education and strategic industries bring new faces to the Ukrainian government. Mykhailo Fedorov, the current Minister of Digital Transformation, has also been given additional responsibilities as the Deputy Prime Minister for Innovation, Development of Education, Science and Technology.
Fedorov (32) and Kamyshin (38) come from private sector backgrounds and gained notoriety for their efficiency during the war. Kamyshin, who became the CEO of state-owned Ukrainian Railways (Ukrzaliznytsia) shortly before the invasion, is respected for ensuring uninterrupted rail operations. He is also known for cooperating with humanitarian organizations and setting up “points of invincibility” in train stations.
Lisovyi, an associate professor, was known for serving at the frontline since May 2022 while continuing to head the Small Academy of Sciences, a budget institution supporting extracurricular education for school students. The previous minister, Serhii Skarlet, was widely criticized by civil society for his unprofessional decisions and possible corruption schemes.
The new faces in the Ministry of Defense, headed by a civilian minister and recently criticized for possible corruption, likely help to increase trust in this institution. In late February, two new deputy Ministers were appointed. Vitalii Deineha, the founder of “Come Back Alive”, one of the best-known Ukrainian NGOs supporting the army, and Andrii Shevchenko, former journalist, civil activist and Ukrainian ambassador to Canada, whose brother was killed fighting at the frontline in 2022.
Appointing officials with military backgrounds or links to the army has been a trend in Ukraine’s recent governmental changes, as the army is considered the most trusted institution by the population. This move will likely boost the public’s trust in the current government.
Transparency & Corruption
On March 4, Semen Kryvonos was appointed the director of Ukraine’s National Anti-Corruption Bureau (NABU) despite reservations by activists. Although he has a reputation as a reformer, he was investigated for corruption in 2014 and allegedly tied to the head of the President’s Office. NABU is among the key state anti-corruption institutions set up after the 2014 “Revolution of Dignity”. The appointment of the new Director of NABU was on the list of E.U. requirements to start the accession negotiations with Ukraine, as the position has remained vacant since July 2022.
Experts characterize corruption in Ukraine as still endemic despite reforms. With 50% of the Ukrainian budget spending now covered by Western countries, Kyiv is expected to take serious measures to address the issue.
Following the appointment of Mustafa Nayyem, former journalist, activist and MP, as head of the newly created Reconstruction Agency on January 27, the Ukrainian Ministry of Defense established a Department for Prevention of Corruption on March 15. In the same month, the Ministry also approved regulations for a public anti-corruption council comprising 15 members. Inspector General of the U.S. Department of Defense, Robert Storch, said that his agency has not yet identified cases of misuse of U.S. aid allocated to Ukraine. The approved aid packages have faced scrutiny from the Republican Party, which took control of the House of Representatives in January and has promised stricter control over how financial and military aid to Ukraine is used. Measures include dispatching military personnel to Kyiv to conduct on-site inspections and opening a hotline for reporting fraud and misuse of aid.
Changes at the regional and municipal level continue the recent trend. Dozens of high-level officials were removed in 2023 after President Zelenskyi declared zero tolerance for corruption.
On March 2, the elected city mayor of Poltava was removed by the High Anti-Corruption Court, as he was found guilty of appropriating public funds of $15,000.
On March 15, the heads of Luhansk, Odesa and Khmelnytskyi Oblasts were dismissed. While there is no official justification from the authorities, it is believed that cases could be linked to corruption at least in two instances—in Odesa and Khmelnytskyi. Observers note the conflict between the powerful mayor of Odesa Hennadii Trukhanov, holding the position since 2014, and military officer Maksym Marchenko, appointed as the head of the oblast a year ago, could play a role in the removal of the latter one.
International Context
ICC Arrest Warrant For Putin
On March 17, the International Criminal Court (ICC) issued two arrest warrants against Russian President Vladimir Putin and Commissioner for Children’s Rights Mariya Lvova-Belova. They are allegedly responsible for the war crime of unlawful deportation and transfer of children from occupied areas of Ukraine to Russia.
States parties to the Rome Statute of the International Criminal Court. Source: Wikimedia.
According to Ukrainian authorities, 19,514 children, including 4,390 orphans and children deprived of parental care, are considered to be deported to Russia. Reportedly, only 328 of them returned to Ukraine. Lvova-Belova has spoken openly of efforts to indoctrinate Ukrainian children and claims she adopted a 15-year-old boy from Mariupol, one of 380 Ukrainian children adopted in Russia.
Putin is the third serving president targeted by the ICC arrest warrant, after Sudan’s Omar al-Bashir and Libya’s Muammar Gaddafi. Russia doesn’t recognize ICC’s jurisdiction, as it has never ratified the Rome statute and later withdrew the signature.
The ICC does not enforce the law itself. Instead, it relies on the law enforcement of 123 countries that recognize its authority. The list includes some of Russia’s allies, such as Tajikistan, a Russia-led Commonwealth of Independent States member, and BRICS members Brazil and South Africa. The latter will host the BRICS summit later this year, which Putin is supposed to attend. The warrant might limit Putin’s ability to travel internationally and affect Russia’s influence in Africa and South America—two continents where most countries recognize the Rome Statute and Russia has been actively promoting its positions.
President Of The People’s Republic Of China Visits Russia
Just hours before the news of the ICC arrest warrant broke, Chinese leader Xi Jinping announced his upcoming visit to Russia. The March 20–22 visit came mere weeks after Beijing released its Peace Plan for Ukraine and U.S. President Biden visited Kyiv. Many have interpreted it as part of the broader U.S.–China contest.
Vladimir Putin supported Xi’s peace initiative, although many believe the plan lacks a roadmap and is unrealistic. But it follows another major and unexpected Chinese diplomatic victory in March, when Beijing helped to restore diplomatic relations between two regional powers, Iran and Saudi Arabia.
On the same day as this event, Japanese prime minister Fumio Kishida visited Kyiv and stated that Russia’s aggression against Ukraine is not just a European matter but a challenge to the rules and principles of the entire international community.
Many observers believe Russia now plays a role of a junior partner, helping China to strengthen its position globally. Over the last year, Moscow has been forced by Western sanctions to reorient its hydrocarbons to the Chinese market at a lower price, while the yuan has become the dominant regional currency in northern Eurasia. Yet experts doubt Beijing would directly violate Western sanctions and supply Russia with much-needed weapons.
Assault Weapons Delivery To Ukraine
Western assault weapons deliveries have intensified, with the first shipment of 18 German Leopard-2 tanks arriving just before the end of March. In mid-March, Poland became the first NATO member to pledge Soviet-made MiG-29 fighter jets to Ukraine. Slovakia promised to donate all 13 of its MiG-29s, and North Macedonia approved the delivery of twelve Mi-24 attack helicopters. Several jets From Poland and Slovakia have reportedly been delivered by early April. Ukraine has been asking for fighter jets from Western allies for a long time, especially for more recent U.S.-made F-16s. Ukraine reportedly had 43 MIG-29s at the end of 2022.
Legal Updates
Ukrainian civil society, trade unions and the European Union have voiced concerns over Ukraine’s labor law reform. According to the critics, the new regulations, such as easing rules for mass layoffs, undermine workers’ rights. At the same time, business circles have welcomed them as a stimulus for the local business environment.
The new order by the Ukraine Chief Commander from February 27 limits media access at the frontline and in de-occupied communities. The military will designate and daily update areas where journalists can operate:
Green zone: Accredited journalists can work freely without an escort or guide.
Yellow zone: Journalists can only enter with an official military escort. Their movement and reporting are monitored. (that includes Kherson and Mykolaiv cities)
Red zone: Journalists are prohibited from working in this zone. (places like Bakhmut)
The Ministry of Defense explains the rules are meant “to improve interaction with representatives of the mass media while working in combat areas,” as there has been a lot of criticism for media revealing sensitive security-related information. Media workers have underlined that the new rules don’t take into account their vision of how journalists should operate in a frontline environment.
Trends To Watch
Government changes leading to power balance changes and affect humanitarian operations.
Government’s steps to address corruption.
Ukrainian reactions to the increasing role of China in the conflict and its Peace Plan.
Western weapons deliveries to Ukraine and potential Russian attacks against transportation infrastructure.
Potential regulations regarding aid actors’ access to frontline and de-occupied communities.
Economic & Development Updates
Summary
Ukraine’s military expenditures have reached 50% of the budget.
The retail price of the dollar fell to its lowest exchange rate since mid-summer 2022.
The Grain Deal has been extended by 60 days instead of 120, with Turkey and China reportedly playing an important role.
Farmers of Romania and Poland struggle to compete with cheaper Ukrainian grain after the E.U. suspended customs duties and eased access to the common market.
Attacks against energy infrastructure, loss of 25% of cultivated land and the Turkish earthquake resulted in the shortage of vegetables and an over 20% price increase in the last two months.
Kyiv included the systemically important Raiffeisen Bank International in its list of international sponsors of the war.
Main Indicators
Ukrainian Budget Changes: Military Expenditures Mounting Up
Prime Minister Denys Shmyhal announced that all taxes generated internally would go to the defense and security sector. Before this, the Cabinet of Ministers endorsed the draft law on increasing state budget expenditures by ₴537 billion ($15 billion), 97% covering military spending. The total security and defense sector funding will amount to ₴1.67 trillion ($45 billion), or 26.6% of GDP (25% in 2022).
Ukraine collects ₴80 billion ($2 billion) in monthly taxes, whereas monthly military expenses alone account for ₴130 billion ($3.5 billion). Military expenditures already accounted for over 50% of the budget in January 2023. The government had to cut some extra payments soldiers received after February 2022. This rather unpopular move came as a corruption scandal on inflated procurement prices to supply the army unfolded. The government almost entirely relies on donor support to cover social spending, as 50% of the state budget spending has been covered by foreign partners.
Hryvnia Appreciation
Since the beginning of this year, the retail price of the dollar fell by almost 3 hryvnias, from ₴40.5 to ₴37.7. It is the lowest exchange rate since the summer of 2022. It was influenced by increased foreign currency supply as agriculture enterprises prepared for the sowing campaign. The National Bank of Ukraine (NBU) also increased the sale of dollars from the reserves by 30%. The NBU plans to gradually abolish restrictions on the foreign exchange market, introduced after February 2022, and so far, sees no reason to change the official exchange rate of ₴36.6.
Free Trade Expansion
The Ministry of Economy is expanding the customs-free regime for Ukrainian entrepreneurs. Ukraine plans to sign a free trade agreement with the United Arab Emirates and to continue the liberalized regime with the EU, Great Britain and Canada. On March 20, Ukraine and the U.K. signed the Digital Trade Agreement vital for the domestic IT sector. Now Ukrainian companies will have no barriers to accessing the largest digital ecosystems.
The next priority for Ukraine is to join the Pacific Regional Free Trade Agreement, which includes Japan, Australia, New Zealand, Singapore, Vietnam, Malaysia, Mexico, Canada, Chile and Peru.
Key Sectors
Agriculture
Agriculture plays an increasingly important role in Ukraine’s economy, despite the Russian blockade of the seacoast that hampered the export. In 2021, agricultural products amounted to 40% of export income. In 2022, that number increased to 53%, despite an overall 16% decrease in value.
Export-Oriented Production
The Grain Deal, signed in July 2022 to allow export through Odesa ports, has been extended by 60 days instead of 120. The deal will expire on May 18, 2023, just before the winter crop harvest in Ukraine—the biggest harvest of the year. It brings uncertainty for farmers planning the upcoming spring sowing season as it can prevent them from exporting their produce.
Source: State Customs Service of Ukraine
The Deal has broad support globally, including from Turkey and China (the countries are among the top three exporters benefitting from the grain deal). China emphasized the need to maintain agricultural exports from Ukraine in its twelve-point Peace Plan. The Turkish government has reportedly put some pressure on Russia by abruptly stopping the transit of sanctioned goods to Russia on March 1 amid the European Union and the U.S. pressure to comply with sanctions. The transit partially resumed just a few days before signing and for European products only. Goods produced in the U.S. and Canada are prohibited from re-export, and Russian companies have reportedly recently worked with Kazakhstani firms to import banned items
The “Danube grain route”, an alternative to the Black Sea Grain Initiative, has become one of the core export routes as it is unaffected by the blockade of large ports in Bulgaria and Romania. The share of the Danube River ports during 2018–2021 was insignificant, with only 2.5%–4.2%. The Ukrainian river ports of Reni, Izmail and Kilia tripled their cargo-handling volume in 2022.
The Constanța port in Romania has registered the maximum volume in its history and has become a main Black Sea port. The river Port of Giurgiulești, Moldova’s only port, has seen a record in transshipped goods in 2022 and is a primary entry point for fuel imports to Moldova and Ukraine. Ukraine, Romania and Moldova have ambitious modernization projects.
Farmers of Romania and Poland struggled to compete with cheaper Ukrainian grain after the E.U. suspended customs duties and eased access to the common market. Polish farmers resumed protests this month, arguing that the grain that was supposed to go to Africa is staying in Poland, affecting their interests. The European Council proposed using the agricultural reserve to support Bulgarian, Romanian and Polish farmers impacted by imports of cereal, rapeseed and sunflower products from Ukraine.
Spring Sowing Season
Spring sowing started at the beginning of March. The most cultivated plants are cereals (wheat, rye, barley, buckwheat, millet), legumes (peas, beans) and oilseeds (sunflower, soybean). Considering the very high logistics cost and limited export capacity, it is now more profitable to grow oil crops, which are two times more expensive than grain crops.
Due to the military invasion, the cultivated area has decreased by 25%, with Kherson and Mykolaiv regions’ farmers—historically producing most of the country’s vegetables—facing the most difficulties.
Vegetable prices peaked in March, with tomatoes, cucumbers and onions being the most affected. Prices increased by 21.2% in just two months of 2023. A kilogram of tomatoes costs ₴115–₴250 ($3.1–$6.8), and cucumber—reaches ₴250 ($6.8), making fresh vegetables unaffordable for many.
The price increase is due to three factors: the energy crisis, the occupation of Kherson and Zaporizhzhia oblasts, where many vegetables, primarily tomatoes, onions and carrots, were grown and limited supply from Turkey—the core importer—due to the aftermath of the earthquake.
Attacks against energy infrastructure contributed to the shortage of vegetables, as greenhouses started planting and harvesting later. Even with an expected increase in vegetable production by small farms, the shortage is expected to last until April.
Banking
The National Agency for the Prevention of Corruption (NAZK) included one of the largest Austrian banking groups Raiffeisen Bank International (RBI), in the list of international sponsors of the war. The bank has continued its operation in Russia, reportedly handling up to 50% of all money flow between Russia and the rest of the world. NAZK has only a preventive function, so this won’t impact the Ukrainian subsidiary. Raiffeisen is considered a systemically important banking institution in both Ukraine and Russia.
The United States sanctions authority is already investigating potential sanctions violations, and the European Central Bank reportedly has pressured the bank to quit Russia. Amid growing pressure, on March 30, RBI announced the plan to sell or spin off its Russian record profit-making subsidiary.
Trends To Watch
Ukraine prioritizing military expenditures and increasing dependency on foreign funding to cover social spending.
Hryvnia exchange rate and effects of strengthening national currency.
Free trade agreements and their effects on economic stability and social cohesion in neighboring countries.
Debates over the Grain Deal extension and expansion.
Market prices and availability of agricultural produce affecting food security.
Further actions against Raiffeisen Bank and consequences for Ukraine’s financial sector.
Social & Environmental Trends
Summary
U.N. reported a 15% increase in civilian casualties. Males are more likely to be affected.
Men were affected in 64% of cases of conflict-related sexual violence verified by the U.N.
The Moscow-linked Ukrainian Orthodox Church clergy was ordered to vacate the Kyiv Pechersk Lavra, a major center of Eastern Orthodox Christianity.
Ukraine restored renewable energy production and considering restoring energy exports.
Military activities could have caused the death of up to 10% of the Black Sea dolphins.
Social Trends
Civilian Casualties
The Office of the United Nations High Commissioner for Human Rights (OHCHR) verified 8,401 civilians were killed and 14,023 injured between February 24, 2022, and March 26, 2023. 159 were killed and 644 wounded in March, a 15% increase compared to February. Men and boys are more likely to be affected, making 61% of all adult casualties and 57% of all children casualties (of those whose sex is known). The OHCHR specified that actual figures could be higher.
Displacement
The International Organization for Migration (IOM) has recorded a decrease in registered IDPs in many regions over February, including the most significant in Kharkiv Oblast (−42,430). The largest increase was registered in Chernivtsi (+20,486), Zakarpattia (+12,531) and Sumy (+8,103) oblasts—in the latter one due to increased shelling along the Russian border and displacement within the oblast.
Same-Sex Partnerships Debate
Draft Law No. 9103 on the Institute of Registered Partnerships providing legal rights to same-sex couples is being worked on by the Parliament’s Legal Committee. A petition to the President of Ukraine to support the law has gathered 4,000 votes against the 25,000 needed. MP Inna Sovsun, the law’s author, reported threats via social media.
Sexual & Gender-Based Violence
The OHCHR documented 133 cases of conflict-related sexual violence committed from February 2022 until the end of January 2023, mostly during detention, “filtration” processes or in the residential areas of villages. 82% of cases have been attributed to Russian armed forces, law enforcement and penitentiary staff. In 64% of cases, victims are men. The Ukrainian General Prosecutor’s Office opened a special unit last year to investigate conflict-related sexual violence.
Meanwhile, even if the war does end in 2023, experts say Ukraine will face an influx of domestic violence for years to come. With soldiers seen as heroes defending the country, there is a reluctance to criticize those who are also abusers.
Ukrainian refugees are increasingly targeted for sexual exploitation, research finds. While there was evidence of sexual exploitation and trafficking of some Ukrainians before 2022, the latest data shows a significant increase. There was a 200% increase in searches for “Ukrainian escorts” in the U.K.
The Ukrainian Orthodox Church of the Moscow Patriarchate Faces Eviction
The Moscow-linked Ukrainian Orthodox Church of the Moscow Patriarchate (UOC-MP) clergy has been ordered to vacate all premises of the iconic Kyiv Pechersk Lavra, also known as the Monastery of the Caves, by the end of March. The 11th-century monastery in Kyiv has been a major center of Eastern Orthodox Christianity in Eastern Europe and has been included in the UNESCO World Heritage List. It has the status of a national museum and is owned by the state.
In January, the authorities announced the termination of the free-of-charge lease agreement with the UOC-MP, starting March 29. Ukrainian authorities insist that eviction is a continuation of an unfinished decolonization process rather than an infringement of the freedom of religion.
Earlier, three draft laws were registered in Parliament, banning the Russian Orthodox Church and religious organizations that are linked to it. Renting state or private property in Ukraine to be prohibited for them. The draft law also forbids the term “Orthodox” in the names of religious organizations unrelated to the Orthodox Church of Ukraine.
Ukraine law enforcement conducted hundreds of searches at UOC-MP’s premises across the country recently, suspecting some priests of treason, and launched 61 criminal investigations against UOC-MP priests. Seven have been convicted. OHCHR is concerned that “the State’s activities targeting the UOC could be discriminatory”.
The UOC-MP is one of the two major Eastern Orthodox ecclesiastical bodies. It has the most parishes—over 12,000—and is seen by the authorities and many patriotic activists as representing Moscow’s interests. (The Head of the Moscow Patriarchate, Kirill, fully supported and blessed Russia’s invasion.) The other church, the autocephalous Orthodox Church of Ukraine (OCU), was established in 2019 by the decision of the Ecumenical Patriarchate of Constantinople in Istanbul with the support of Ukrainian President Petro Poroshenko and is not recognized by UOC-MP.
While OCU has already appointed a new head of the monastery, UOC-MP monks have refused to leave. They challenged the eviction in court, with hundreds of parishioners gathering near the monastery to protest the authorities’ decision. Meanwhile, a Kyiv court put the abbot under house arrest on suspicion of justifying Russian aggression. The conflict can result in more parishes being pressured to change the affiliation, property redistribution and further jeopardizing social cohesion in many communities nationwide.
Environmental Trends
Energy Efficiency
DTEK, Ukraine’s largest energy company owned by the wealthiest man in the country, Rinat Akhmetov, has built the first stage of a new wind power plant in Mykolaiv Oblast with a capacity of 114 MW and has restored 50% of the generation capacity of the solar power plant in the Kherson Oblast, doubling monthly solar energy production in February. 90% of all solar and wind power generation capabilities were in the territories initially occupied by Russia in the south of Ukraine.
With decreased attacks against energy infrastructure and reduced consumption due to the warmer weather, Ukraine is considering restoring energy exports, suspended in November, including from solar power plants. The government named energy security one of its top priorities for 2023, including developing green energy.
At the same time, most Ukrainians lost—at least partially—their income and are not ready to invest in an environmentally friendly lifestyle. Only 17% are prepared to pay extra for “green” energy, 24%—to get clean drinking water, and 28% to invest in modern sewage treatment facilities. Only 26% support the idea of post-war reconstruction with energy-efficient technologies. Although in February, Ukrainians bought 40% more electric cars than in January, the number is still tiny, just over 400.
War effects on the ecosystem
Scientists estimate 50,000 dolphins, or 10% of the Black Sea population, might have died due to military activity, with sonar activity being the leading cause. The number of dead dolphin bodies washed into the shore has increased by several dozens.
Fish suffocated and died in mass in the Zaporizhzhia Oblast. The water level in the Kakhovka Reservoir is the lowest in three decades after Russian troops reportedly opened spillways at the Kakhovka Hydropower Plant. (For more on this, see CAT’s February brief.)
The U.N. Environmental Program has raised concern over potential chemical poisoning from the debris of the destroyed buildings, as around 90% of the roofing materials in Ukraine contain highly toxic asbestos. The Ukrainian government plans to crush the debris and use it in road construction.
Trends To Watch
Rise of domestic violence and sexual exploitation of displaced Ukrainians.
Tensions over affiliations with different Orthodox churches.
Effects of ongoing hostilities on the ecosystem.
Potential chemical poisoning from the debris of the destroyed buildings
Neighboring countries
Summary
Ukrainian refugees have fueled Poland’s labor market by 2.1% and contributed up to 1.2% to GDP growth.
Ukrainian refugees need to partially cover government-provided accommodation in Poland.
Conservative trends are getting more visible ahead of Poland’s parliamentary elections. The coalition of far-right parties is the third most popular political force.
First person has been sentenced for assisting abortion in Poland.
Several arrests linked to the potential Russian intelligence operation in Poland and destabilization efforts in Moldova.
Anti-government protests organized by Russia-linked political forces continue in Chișinău.
Renaming the official language from “Moldovan” to “Romanian” and debating potential unification with Romania have caused social tensions in Moldova.
Poland
Integration Of Ukrainian Refugees
According to recent UNHCR and Eurostat data, 1.56 million refugees from Ukraine currently make up for 4% of Poland’s population—the third highest in the EU after Estonia (4.8%) and Czechia (4.7%) and lower than in Montenegro (5.2%) and Moldova (4.1%).
The Organization for Economic Co-operation and Development (OECD) estimates that the influx of refugees from Ukraine has fueled Poland’s labor market by 2.1% without a pushback for local workers and lower wages due to pre-existing workforce shortage. According to the National Bank of Ukraine, refugees potentially contribute 1.2% to GDP growth annually. Independent observers estimate further annual GDP growth from 0.2% to 3.5% (the risk advisory firm Deloitte and Oxford Economics), depending on the refugee influx variation.
Ukrainian refugees now need to partially cover government-provided accommodation. The move comes as part of the Polish government program, Mutually Needed, aiming at refugee integration and lessening the refugees’ impact on housing, the labor market, and preschool and school infrastructure in large cities. According to the government, the goal of such a move is the “activization of refugees”, encouraging them to find jobs, especially in smaller towns with lower living costs.
As of March 1, refugees who spent more than 120 days in Poland must cover 50% of their stay in state-funded temporary accommodation sites (currently, around 80,000 people are staying there). The upper cap for daily contribution by a refugee is 40 złoty ($9). A refugee must also have a Polish identification number PESEL to stay at the site. The Polish government will continue covering the total cost for the most vulnerable, such as the disabled, elderly, and large families.
Conservative & Far-Right Trends Ahead of the Parliamentary Elections
Confederacy, the coalition of three far-right parties, has become the third most popular party ahead of the autumn parliamentary elections with 11% support. A recent poll suggests that the ruling national-conservative Law and Justice party (PiS) could stay in power in a coalition with Confederacy.
Confederacy is a pro–free market populist party situated far on the right of the political spectrum. Being anti-EU and NATO, it is the only Polish party openly displaying pro-Russian sentiments and speaking against Ukrainian refugees. One of its leaders, Sławomir Mentzen, is the most popular politician among voters aged 18–39 (34.2%).
Source: Ipsos (CATI) survey for OKO.press and TOK FM, March 20–23, 2023
A report on pro-opposition news channel TVN24 on John Paul II’s role in covering up pedophilia in the 1970s has shaken the country. The report accusing the bishop of Cracow and future pope Karol Wojtyła was aired on March 4 and caused a strong adverse reaction from the Polish government. On March 9, the Sejm (parliament) adopted a resolution “defending the good name of John Paul II” and condemning “the media’s disgraceful campaign.” Public TV now airs John Paul II’s homilies (sermons) daily in prime time after the evening news broadcast.
Poland-born Pope Saint John Paul II is widely revered in the country as a religious and patriotic figure credited with defeating the communist regime. For a long time, any criticism of his legacy was taboo. The government’s defense of his authority is widely interpreted as a part of the campaign for the autumn elections.
On March 14, an activist fighting for women’s reproductive rights, Justyna Wydrzyńska, became the first person sentenced for assisting abortion. She received eight months of unpaid community work. Wydrzyńska’s Aborcyjny Dream Team initiative helped women abort pregnancies by financing abortion abroad and providing pharmacological means domestically.
Poland has one of the strictest legislations on abortion in Europe. Under the 2021 law, abortion is legal only when the woman’s life or health is endangered or when the pregnancy results from a criminal act. Persuading a woman to carry out an illegal termination of her pregnancy is a criminal act, as is carrying out an abortion on her. Women themselves are not subject to penalties.
Increased Russian Espionage Activity
Polish authorities detained six people accused of working for Russian intelligence, who reportedly planned to sabotage transportation routes for delivering weapons to Ukraine, including near the Rzeszów–Jasionka airport. The activity is likely linked to intensified weapons delivery to Ukraine, including jets and tanks. On March 21, a foreign citizen was detained for spying for Russia. The person is suspected of collecting information on security authorities and critical infrastructure. The Prosecutor’s Office launched several investigations into espionage for Russia and Belarus.
Several alleged Russian illegals have been detained across Europe since the invasion began. The last incident before was recorded more than a decade ago when deep-cover spies were detained in the U.S. in 2010. Observers believe increased counterintelligence activity in the West might be a reason behind it, along with illegals doing riskier tasks, as many Russian diplomats have been expelled.
Trends To Watch
Potential relocation of Ukrainian refugees to smaller towns or return to Ukraine associated with the new requirement to partially cover the living cost.
Heightened rhetoric on social issues ahead of autumn parliamentary elections, including toward Ukrainian refugees and organizations assisting survivors of gender-based violence.
Attacks and sabotage against transportation infrastructure to prevent weapons delivery.
Moldova
Mounting Assertions Of Russian Destabilization Attempts
On March 10, Moldovan law enforcement arrested seven suspects for organizing violent and reportedly Russian-funded anti-government protests. The same day, the media revealed the U.S. intelligence data of Russian intelligence’s plan to organize an insurrection against the current government.
On March 12, members and supporters of the Russian-linked Șor Party and the so-called Movement for the People gathered in Chișinău against the ruling government and high energy costs. It resulted in clashes between protesters and police. Fifty-four protesters were detained. In parallel with the protest, the Chișinău Airport was evacuated over four bombing threats. No explosives were found. Speaker of the Parliament Igor Grosu accused the protesters of trying to stage a coup and disrupt Moldova’s European integration process.
On March 15, several German media published an alleged copy of a Russian ten-year strategy to bring Moldova under its control. The document drafted in 2021 outlines how to form a negative attitude towards NATO and increase the role of the Russian language and Russian-language media. The means include pro-Russian groups, the Orthodox Church, threatening to cut off natural gas supplies, stirring up social conflict, and trying to block Moldova’s efforts to gain influence in Transnistria.
Transnistria Alleged Assassination Attempt
On March 9, the Transnistrian Security Service reported the prevention of an alleged terrorist attack on the head of the unrecognized and Russia-backed breakaway Republic Vadim Krasnoselsky and several other officials, accusing the State Security Service of Ukraine (SBU). Russian sources reported the alleged plans to blow up Krasnoselsky, leading to mass casualties in Transnistria’s capital of Tiraspol. SBU has denied the allegation.
Language & Unification Debate Strains Social Cohesion
On March 2, Moldova’s parliament approved the first reading of a new language bill formally renaming the country’s only official language from “Moldovan” to “Romanian”. Romanian is native to 80% of Moldova’s population. The name of the language has been hotly contested since the country’s independence in 1991, as it touches on the question of Moldova’s national identity. The parliament’s decision was welcomed by pro-Western groups favoring closer relations with the EU and NATO, while it was vehemently opposed by pro-Russian opposition and some national minorities.
Discussion over potential unification with Romania is another issue splitting Moldovan society. On March 26–27, supporters and opponents of the decision gathered on the streets of Chișinău. Only 47% of Moldova’s citizens support the idea, while 35% speak against it, strikingly different from Romania, where 74% favor unification. The head of the Ministry of Foreign Affairs and European Integration of Moldova, Nicu Popescu, called the unification with Romania, which happened 105 years ago on March 27, 1918, and lasted till 1940, “a historic moment that influenced the future of our country. (…) [S]aving Moldova from war, communism, dictatorship, Gulag and terror, it allowed us to enjoy peace and development in subsequent years.”
The rise of the nationalist movement and debates over renaming the language and re-unification with Romania following the dissolution of the Soviet Union sparked political tensions and were among the factors contributing to the 1990–1992 armed conflict in Transnistria
Moldova Resumes Gazprom Gas Purchases
On March 20, Moldova resumed gas purchases from Russian state company Gazprom following a three-month-long hiatus. Moldova had relied nearly entirely on Russia for gas and energy imports. Since December, Russia had been supplying gas only to Transnistria, contributing to Moldova’s dramatic increase in energy tariffs (see February monthly brief).
Trends To Watch
Russian provocations and subversions.
Anti-government demonstrations and repressions against pro-Russian activism.
Tensions in the breakaway region of Transnistria.
Ukrainian military activity along the border with Transnistria.
Changes in energy prices.