Saturday, March 25

Steel boss at heart of Mariupol defense says economy is key to war effort | Ukraine

The Azovstal steelworks in Mariupol has become one of the symbols of the brutality of Russia’s invasion of Ukraine. Soldiers held out for weeks in the warren of tunnels, warehouses and cooling blast furnaces as they and hundreds of civilians sheltering with them were encircled and eventually forced to surrender.

The site produced 40% of Ukraine’s entire steel output and was the key asset of the country’s biggest pre-war employer, Metinvest. Now its owner has an important role to play in the parallel battle to sustain the economy via its other plants outside occupied territory, according to its chief executive, Yuriy Ryzhenkov.

Metinvest’s chief executive Yuriy Ryzhenkov. Photograph: Metinvest

“The war effort is not only what you supply to the army, but also how [the] economy functions,” the Metinvest boss says, speaking via videolink from a company office in Lviv, western Ukraine. “So the better the economy functions, the better the country can fight a war. In our view, in my personal view the people who are now at our steel mills are just as important to the victory of Ukraine as the soldiers on the frontline.”

Ryzhenkov was in the capital Kyiv when he first heard Russian weaponry signaling the start of the invasion and was stunned that Vladimir Putin’s regime would launch open warfare. The company has since adjusted to operating in a warzone, but at least 153 Metinvest employees have died in the fighting.

Beyond keeping money flowing through the economy, the metals and mining group is playing a direct role in the war effort, delivering steel for 1,500 bulletproof vests a week to Ukraine’s armed forces, and importing military equipment such as drones, night-vision headsets and helmets .

It is a remarkable shift for a company whose main shareholder – Ukraine’s richest man, Rinat Akhmetov – was as recently as November cited by the president, Volodymyr Zelenskiy, as a target to be recruited to back a possible coup attempt. Zelenskiy said Akhmetov was not involved in the plot, and the oligarch said claims of moves to draw him in were “an absolute lie”.

Akhmetov, who has links to the UK including past property investments in London, has remained hugely powerful in successive Ukraine regimes, both pro- and anti-Moscow, and has swung behind the current government, saying his allegiance is only to Ukraine and that Russian soldiers should be punished, adding that he would dedicate his wealth to rebuilding the country.

Ryzhenkov visits one of the company's operating blast furnaces in Kamianske.
Ryzhenkov visits one of the company’s operating blast furnaces in Kamianske. Photograph: Metinvest

Ryzhenkov says he is in regular contact with Akhmetov as well as the Kyiv government, but insists the company is not involved with the “political issues” of its owner. “We’re working as a single team towards Ukrainian victory.”

Before the war, the Azovstal steelworks employed 35,000 people producing 9.5m tonnes of steel a year – two-thirds of Metinvest’s output. That has all stopped. Given the scale of the human lives lost, it can be jarring to talk about daily business matters. Ryzhenkov raises an eyebrow when asked what Metinvest’s output will be this year, but responds that it will be down at least 60% compared with 2021.

Yet there has been “help from the market” in the form of strong steel prices, which have lessened the blow to the company’s finances, which were in any case in relatively good shape before the February invasion began, with high cash balances. Ryzhenkov says the company’s focus around Mariupol has now turned to providing temporary food and shelter for more than half of the workforce who have already left the city. Metinvest is running a “humanitarian hub” in the south-eastern city of Zaporizhzhia, offering medics and psychological help for adults and children.

Yet he estimates that 50,000 of its employees are still working in the country. Two more blast furnaces in Zaporizhzhia and the city of Kamianske to the north are working at about 50% and 60% capacity respectively, with most products going to European markets or ports. Iron ore mining facilities in Ukraine are operating at around 35% to 40% capacity, and a coking coal mine is at about 75%.

Metinvest workers unloading humanitarian supplies.
Metinvest workers unloading humanitarian supplies. Photograph: Metinvest

Running a humanitarian operation alongside one of the country’s largest businesses during wartime is not something most chief executives face, but Metinvest has had some preparation. It was forced to move its headquarters from Donetsk after Kremlin-backed separatists first invaded Ukraine’s east in 2014 and turn more towards European markets and non-Russian suppliers for fuel where possible. Then in the pandemic it switched to mostly remote working.

The issue is getting the goods to customers. There has been “quite a significant slowdown in the flow of goods”, Ryzhenkov says. Ukraine and EU governments could step in to provide subsidies for transport, he suggests. The situation for food exports is of particular urgency, not just for Ukrainians but for poorer consumers of imported wheat around the world.

“It is a big concern,” he says. “Logistics is the key bottleneck right now for many Ukrainian businesses. The government is trying to restart the economy, but without resolving these logistical difficulties, it’s going to be very difficult. We are concerned about the speed at which these bottlenecks are being ‘debottlenecked’.” Reopening Black Sea ports at Mariupol and Odesa is “the key for economy restart”, he adds.

Efforts to increase exports via rail are complicated by different railway gauges used in Ukraine and Poland, so Metinvest has set up reloading centers in Poland and Slovakia to move products more quickly on to Europe-compatible trains. There is a limit to what can be taken by road, and Ukraine is struggling with severe lack of fuel. Ryzhenkov says government efforts to cap prices have worsened the shortage instead.

A worker works at a Metinvest coke plant in the town of Avdiyivka near Donetsk.
A worker works at a Metinvest coke plant in the town of Avdiyivka near Donetsk. Photograph: Gleb Garanich/Reuters

From the images of Azovstal’s destruction that filtered out – some of them truly extraordinary – it seems like there cannot be much of it left, but the Metinvest boss cautions that the pictures could be “misleading”, with many showing less important auxiliary shops, not the key blast furnaces.

The brutality of the battle for Mariupol has contributed to the international isolation of Russia. (Ryzhenkov praised Boris Johnson’s backing for Ukrainian victory, saying the UK prime minister was sending a “very powerful message, and we can hear it and feel it”.) Putin’s apparent aim was to control Ukraine, but the invasion has prompted Metinvest and many other key parts of the economy to turn decisively away from Moscow.

The company is even looking at options to produce more steel in the EU using Ukrainian commodities and Ryzhenkov hopes that Russian steel exports will be targeted by sanctions.

Links with Russia of any kind are off the cards for the “foreseeable future”, he says and Metinvest will “absolutely not” operate from Russian-controlled territory. “Until [the] Russian regime changes I don’t see how that can be restored.”

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