Direct trains from Uzhhorod to Vienna, Budapest, and Bratislava start running on 12 September 2025, marking Ukraine’s first step toward abandoning its Soviet-era railway infrastructure in favor of European standards.

Ukraine’s completion of its inaugural European-gauge railway line represents more than improved travel times—it demonstrates how a country under invasion is advancing rail integration faster than some existing EU members who have debated similar projects for decades.

Breaking from Moscow’s rail grip

The new line from the capital of Zakarpattia oblast, Uzhhorod, to Chop near the Ukraine-Slovakia-Hungary tripoint uses the standard European gauge of 1,435 mm instead of Ukraine’s current 1,520 mm Soviet broad gauge, eliminating time-consuming train changes at borders that have slowed passenger and freight movement for decades.

“For the first time in Ukraine’s modern history, a European-gauge railway has been built from scratch—a 22-kilometre stretch between Chop and Uzhhorod. Thanks to this, Uzhhorod has become the first regional centre to gain a direct European-gauge connection with EU countries—including the capitals Bratislava, Budapest and Vienna,” said Chairman of the Management Board of JSC Ukrainian Railways (Ukrzaliznytsia) Oleksandr Pertsovskyi.

Ukrainian railway workers laid 60,000 concrete sleepers, 4,000 tons of rails, and 69,600 cubic meters of ballast while installing modern Ukrainian-made signaling systems with microprocessor control.

The 22-kilometre project was finished for less than 30 million euros, whereas in the EU, the costs of building a railway vary between 12 and 45 million euros per kilometre.

Faster than the Baltics

Ukraine’s rapid progress contrasts sharply with established EU members struggling with similar conversions. The Rail Baltica project, intended to connect Estonia, Latvia, and Lithuania to European-gauge networks, has faced delays and cost overruns since its 2014 launch, with completion now pushed to 2030.

While Baltic states joined NATO and the EU in 2004, they retained Russian-gauge railways; Ukraine treats infrastructure conversion as essential to its survival and European integration.

Strategic infrastructure as a geopolitical statement

“Ukrzaliznytsia has become a true lifeline during Russia’s war of aggression—for citizens seeking safety, for businesses sustaining the economy, and as a channel of “iron diplomacy,” bringing world leaders to Ukraine in solidarity and support. It is a first, but very significant step towards fully integrating Ukraine’s railways with the European network, and towards Ukraine’s future inside the European family.” said Ambassador of the European Union to Ukraine Katarína Mathernová.

This project is part of the extended Trans-European Transport Network (TEN-T) corridors inside Ukraine.

Under the Connecting Europe Facility, the European Commission has provided €110 million ($129 million) in non-reimbursable support (mobilising €220 million ($258.6 million)) to integrate the Ukrainian and EU rail systems along these corridors, including a July grant of €76 million ($89 million) for the Poland–Lviv standard-gauge line.

Lviv connection next

Officials have already announced the next phase: extending standard-gauge track from the Polish border to Lviv, Ukraine’s largest western city. Pertsovskyi has also set out near-term execution goals:

The July CEF grant supports the Poland–Lviv link, creating a direct standard-gauge route from Ukraine’s industrial heartland to EU markets.

Future plans include additional European-gauge sections in Zakarpattia and Volyn oblasts, routes to the Czech Republic, Hungary, and Poland, and comprehensive freight corridors from Ukrainian industrial centres to European ports and markets.

Wartime integration and EU timelines

“This is a historic step towards EU integration. Especially in wartime, when railways serve as a vital lifeline for Ukraine’s economy and people, strengthening these transport links is more important than ever.” said Teresa Czerwińska, Vice-President of the European Investment Bank.

That compresses the traditional accession sequence—stabilise politics, build institutions, then knit infrastructure.

If Ukraine can convert track, align signalling, and meet EU technical standards faster than some members did in peacetime, other milestones, then market access, regulatory alignment, and TEN-T build-out need not wait for a “perfectly stable” post-war moment.

The policy question for Brussels is whether wartime institutional capacity should accelerate, rather than delay, integration.

This represents a fundamental shift in Ukraine’s energy narrative, from vulnerability to strength, and maybe even regional dominance on the energy market one day.

Ukraine is rapidly becoming a net energy exporter to Europe, with August 2025 exports reaching a record 450,000 MWh—the highest monthly figure since integration into the European Network of Transmission System Operators for Electricity (ENTSO-E) on 16 March 2022.

The scale of this reversal is staggering. Just over a year ago, Russia’s systematic attacks destroyed 61% of its generation capacity.

International volunteer experts are exploring large-scale distributed generation projects that could position Ukraine as Europe’s new low-cost electricity supplier.

Western regions lead the reconstruction model

Zakarpattia Oblast exemplifies this transformation. In spring 2025, regional officials met with Canadian volunteer engineers from “Technology United for Ukraine” to explore what could become billion-dollar distributed generation projects using gas turbine and hydrogen technologies.

The volunteer organization, led by president Brian Robinson, brings experienced engineers willing to conduct technical and economic feasibility studies and attract donors for distributed generation development—expertise that traditional consulting firms hesitate to provide in active war zones.

But Zakarpattia’s energy ambitions extend beyond meetings.

The region already hosts Ukraine’s only multi-megawatt wind turbine production facility, launched by Friendly Wind Technology in May 2024, capable of producing up to 20 wind turbines annually ranging from 4.8 to 5.5 megawatts.

More ambitious still is the planned 1.5-gigawatt hydrogen valley project, featuring an initial 100 MW electrolyser capacity powered by 120 MW solar and 80-160 MW wind installations. Operations are expected to start in 2035.

Geography drives strategy

Zakarpattia’s location makes it ideal for Ukraine’s energy export ambitions.

At the same time, its borders with Hungary and Slovakia provide direct pipelines into European energy markets.

Ukrainian workforce and production costs could make electricity produced here competitive across Central Europe, positioning the country to replace Russia as the continent’s energy supplier.

This would help the EU simultaneously overcome Russian and fossil fuel dependency.

From defense to export strategy

Ukraine’s energy transformation, already well underway, follows a clear strategic evolution. State power operator Ukrenergo declared more than a year ago that decentralizing electricity production through hundreds of small power plants was the only way to protect against Russian attacks.

The export numbers show that what began as a defensive necessity is turning into an offensive economic strategy.

Volunteer expertise fills the gap

Here is also where the Canadian engineers come into play. Their involvement in Zakarpattia reflects a broader pattern in Ukraine’s reconstruction: specialized technical assistance increasingly comes from unexpected sources as traditional institutions remain cautious about active war zone operations.

“Such potentially rapid solutions will increase the region’s energy potential and strengthen the national energy system,” regional officials commented after the spring discussions.

The volunteer-driven approach offers advantages beyond mere expertise. Unlike commercial consultants, volunteer organizations can focus purely on technical feasibility and donor attraction without commercial constraints that complicate larger institutional projects.

What needs to happen next

For Ukraine’s west to fulfill its potential as an energy export hub, several elements must align.

Feasibility studies like those proposed for Zakarpattia need completion and implementation; international financing must move from discussion to commitment; projects require seamless connection to European grid systems, and individual regional projects should complement rather than compete.

The success of initiatives like the Zakarpattia hydrogen valley and distributed generation projects will determine whether Ukraine’s western regions become mere reconstruction examples or strategic economic centers driving the country’s post-war prosperity.

If volunteer feasibility studies successfully attract the donors they target, Ukraine’s west could emerge as the launching pad for energy independence, transforming Ukraine from a Russian energy victim into Europe’s new electricity supplier.

Only to discover they still can’t find available tickets due to the same structural problems that have plagued the system for years.

This shows Ukraine’s broader challenge with state enterprise reform: companies like railway operator UZ excel at customer-facing modernization while struggling with deeper institutional governance. The mismatch between good PR and bad governance shows the limits of surface-level reforms in transforming Soviet-era institutions.

This pattern carries stakes beyond Ukraine’s borders.

Western partners have earmarked billions for Ukrainian infrastructure reconstruction, with the EU alone pledging €50 billion ($58 billion) through 2027. If Ukraine’s largest state enterprises can’t solve fundamental capacity problems while excelling at public relations, it raises questions about whether reconstruction funds will address real inefficiencies or create more impressive-looking dysfunction.

For EU integration, Ukraine must prove its institutions can deliver results, not just better customer experiences.

Modernization meets Soviet-era constraints

Meanwhile, UZ—world’s sixth largest rail passenger transporter and world’s seventh largest freight transporter—has accelerated customer improvements during wartime rather than postponing them. CNN reported last year that the railway operates 55 accessibility-adapted passenger cars, while over 10,000 employees received disability awareness training. In 2023, following social media campaigns, UZ introduced women-only compartments on four main routes.

These changes represent genuine modernization. UZ opened its first merchandise shop in November 2022 at Kyiv’s Central Station, followed by a second at Lviv’s main station in late 2023.

The company also has an online shop selling model trains, traditional tea cup holders, mugs, railway-branded clothing, and travel utensils—moves that signal UZ’s confidence in its public image and commitment to European-style customer service.

These financial pressures compound UZ’s governance problems beyond ticket shortages. In 2022, anti-corruption prosecutors charged three officials with embezzling 103 million hryvnias ($2.5 million) through diesel fuel procurement schemes, manipulating prices to overpay by 10% on 55,000 tons of fuel.

This was followed in 2024 with charges against the former chairman and eight employees for equipment contract fraud.

This pattern reflects a broader challenge across Ukrainian state enterprises.

In March 2024, then-First Deputy Prime Minister Yulia Svyrydenko argued that companies like UZ, the postal service Ukrposhta, and energy transmitter Ukrenergo demonstrate successful reform through supervisory boards and professional management.

That may be the case, but governance reforms remain fragile while customer-facing improvements prove more sustainable. UZ successfully modernizes the passenger experience because those changes require operational adjustments on a lower organizational level rather than systemic institutional transformation.

Wartime performance vs. institutional problems

The railway’s wartime operational record illustrates this tension well. According to company data, UZ transported 25 million long-distance passengers in 2023, including 2 million to EU countries, while handling 14 million tons of freight by November—a 34% increase in freight volume from the same period in 2022. These operational successes occurred alongside governance failures.

UZ’s approach—prioritizing visible customer improvements over trickier changes in structural governance—may reflect wartime pragmatism rather than reform strategy.

Or the avoidance thereof.

Yet this creates sustainable gaps between public perception and institutional reality. Successful branding can mask persistent governance problems, potentially complicating future reform efforts when customer satisfaction remains high despite ongoing structural issues.

In other words, the public and those who have to make these decisions may shrug off the need for any reform by asking: Why change something that works? Even if it doesn’t.

The pendulum problem

Ukraine faces an urgent choice because reconstruction funding is available. The country can continue this hybrid approach—excellent customer service masking structural dysfunction—or tackle the harder institutional reforms that would solve capacity problems.

Western partners evaluating billions in infrastructure investments must know which path Ukraine will choose.

Surface modernization creates good headlines and satisfied international observers.

Still, it won’t solve the underlying problems that make passengers hunt for tickets on existing trains, but it can’t expand capacity to meet demand.

It’s whether Ukraine’s institutions can evolve beyond Soviet-era constraints while maintaining their wartime operational success. So far, they’ve proven adept at one but not the other.

On paper, Russia’s economy looks like a fortress: GDP rising, defense spending at record highs, oil billions still rolling in. No wonder many ask if sanctions have failed — or if Putin’s war economy is strong enough to sustain his war in Ukraine indefinitely. But a June 2025 report from CSIS — one of Washington’s most respected think tanks — warns that this fortress is hollow, and the cracks are already spreading.

1

Russia’s economy only shrank in 2022 but grew in 2023 and 2024. Why do experts say it’s collapsing?

Russia’s “growth” is fake — a wartime sugar high before the crash.
Yes, GDP fell 2.1% in 2022, then rebounded with 3.6% growth in 2023 and 4.1% in 2024. But that wasn’t real recovery — it was deficit spending on weapons that get blown up in Ukraine.

Moscow poured a record 13.5 trillion rubles ($145B) — 6.3% of GDP — into its war machine in 2025. That kind of “military Keynesianism” doesn’t build prosperity; it just keeps factories busy cranking out tanks.

Now the bill is coming due:

• GDP growth slowed to just 1.4% in Q1 2025, with a 1.2% contraction after adjustment.

• Inflation hit 10.2% in April.

• The central bank is stuck at 21% interest rates to avoid collapse.

• The budget deficit is swelling to 1.7% of GDP.

This is classic stagflation: fake war-driven growth hiding a shrinking economy and soaring prices. Putin can brag today — but Russia is already sliding into crisis.

2

How can Russia have a labor shortage with 140 million people?

Russia is in a self-inflicted “labor famine.” Since February 2022, 1–2 million workers have vanished from its economy:

• 600k–1M fled abroad to escape the war
• 300k–500k conscripted in mobilization
• 800k volunteered to fight in Ukraine
• ~1M killed, wounded, or missing

The result: 73% of businesses are understaffed, while defense plants poach workers with salaries 40,000 rubles ($500) above civilian jobs.

The cracks are already visible:

• March 2025: manufacturing suffered its worst slump in 3 years
• April 2025: Russia’s top business lobby warned of “zero growth”
• Even Putin admitted in March 2025 that the fight against inflation was “strangling growth.”

And it’s not just Russia. Western companies that rely on Russian suppliers are watching production shrink in real time — proof that the war is choking not only Russia’s economy, but global supply chains too.

3

Why should I care about Russian inflation when I don’t live in Russia?

Because Russian inflation is already in your wallet — you just don’t see it yet.

Russia’s inflation hit 10.2% in April 2025, forcing interest rates up to 21%. That pain doesn’t stay inside Russia. To dodge sanctions, Russian firms burn $10–30 billion a year on shady commissions, and those costs get passed into the global price of oil, metals, fertilizer, and grain — the building blocks of everything from your phone to your food.

Here’s the hidden link: disrupted supply chains and higher transport/insurance costs drive up commodity prices everywhere. Russia makes critical inputs for semiconductors, aircraft parts, and agriculture. As Russia’s costs spiral, global alternatives rise too. Their inflation becomes your higher grocery bill and gas price.

4

Isn’t Russia still making billions from oil sales? Doesn’t that make its economy invincible?

Russia’s oil revenues are collapsing in slow motion — and Putin’s war budget hangs on them more than he admits.

Oil made up 42% of the budget in 2022, but by 2024 it was down to 30% — even with high global prices. Sanctions forced Moscow to sell crude at a 15% discount, with shipping to India adding $10–15 per barrel.

Here’s the danger: Russia’s 2025 budget assumed $69.7 oil, but forecasts are already down to $56. In April 2025, Trump’s tariff threats sent Urals crude below $50. Every $10 drop = $10–15B lost revenue. If oil hit $30 again — as during COVID — Russia would lose as much money as it spends on the entire war.

Bottom line: Putin can brag about oil billions, but his lifeline is a knife-edge. One global shock, and the war chest collapses.

5

If Russia has China, why would Western pressure matter?

China is keeping Russia afloat — but that makes Moscow weaker, not stronger.

In 2024, Russia imported $115B in goods from China — 72% above pre-war levels. By 2023, 76% of battlefield-related deliveries came from China and Hong Kong. And now, 53% of all Russian imports are Chinese — meaning Beijing could cripple Russia’s war effort overnight by simply enforcing existing sanctions.

Despite talk of “yuanization,” Russia still can’t escape its need for dollars and euros. Meanwhile, China enjoys steep discounts on Russian oil, gas, and raw materials.

This isn’t partnership — it’s economic colonization. Beijing gains leverage, Moscow loses sovereignty. And for the West, the pressure point is clear: make China choose between Putin and global markets, and Russia’s lifeline snaps.

6

I keep hearing Russia’s banking system is stable. What’s the real risk?

Russia’s banking system looks stable — but it’s built on quicksand.

Businesses owe $446B in loans, half to defense firms on subsidized rates of 5–6%, while everyone else pays 18–19%. At the same time, with interest rates at 21% and inflation near 9%, Russian savers get 11% real returns just by parking money in banks — deposits jumped 70% in 2024.

The entire system now depends on depositors’ trust. But here’s the trap: nearly half of government debt is floating-rate. If the central bank raises rates, debt costs explode; if it cuts, inflation spirals.

That’s the classic setup for a banking crisis — politically connected loans propped up by nervous savers. A shock — sanctions, a battlefield loss, or a ruble collapse — could spark a bank run and bring the system down in weeks.

7

How long before Russia’s war economy cracks?

Based on 2025 data, Russia can probably grind along for another 2–3 years under current sanctions — but only if nothing goes wrong.

What could speed up collapse:

• Oil < $50/barrel: Already happened in April 2025, hitting budget revenues immediately

• Stricter sanctions enforcement: Especially on China’s dual-use exports to Russia

• Global recession: Trump’s tariff threats already rattled commodity markets this spring

• Banking crisis: 21% interest rates keep savers in banks — until confidence cracks

Russia’s National Welfare Fund — the rainy-day reserve — dropped 24% in early 2025 to just ₽3.39T ($39B). At current burn rates, that cushion won’t last long; even the central bank has warned it could be emptied if oil collapses.

And remember: Russia is running its economy on war spending — defense outlays at 6%+ of GDP — the highest since the Cold War. That means Moscow’s “growth” depends on pouring money into weapons that get destroyed in Ukraine, not building lasting prosperity.

Bottom line: The system works — until it doesn’t. History says Russia might stagger on for 2–5 years, but unlike the USSR, today’s Russia can’t wall itself off. Global markets, sanctions, and war costs make it vulnerable to shocks that could accelerate the crash overnight.

For Ukraine and the West: the pressure is working. But it’s a test of stamina — keep it up, and Putin’s war economy will eventually break.

8

What this means for you

Russia’s collapse isn’t guaranteed — but the odds are rising. Labor shortages, runaway inflation, oil dependency, and record war spending are the same pressures that have broken other wartime economies.

• Investors: steer clear of Russian commodities and watch for ripple effects in global supply chains.

• Policymakers: sanctions are working, but only if pressure is steady and sustained — collapse takes years, not months.

• Everyone else: Russia is more dangerous now, but less sustainable long term. The next 2–3 years will decide whether Putin’s war economy holds — or breaks.

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