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As Russia clamps down, Ukraine sells assets in wartime reform gamble
Ukraine’s first year of large-scale electronic auctions raised over 8.9 billion hryvnias ($216 million) from just four major asset sales, marking long-awaited progress toward market reforms even as the state has expanded control over key economic sectors during wartime.
Ukraine pulls off an economic contradiction: expanding state control while privatizing billions in assets. The country maintains profitable state-owned enterprises that generate billions for the war effort while selling large assets to prove its democratic market commitment to Western allies.
International investors watch wartime experiment
Ukraine’s privatization success during active warfare represents a crucial test case for Western allies. The transparent auctions demonstrate that democratic market mechanisms can function under extreme conditions. It is a model that could reshape post-war reconstruction planning worth hundreds of billions in international investment.
The paradox also reassures hesitant investors: Ukraine prioritizes long-term integration over short-term profits, even when state enterprises generate massive wartime revenues.
This signals institutional resilience that could survive the transition from wartime emergency measures to a peacetime market economy.
Market signals amid state expansion
The privatization achievements come as Ukraine’s public sector has expanded to its largest size since the 1990s. State-owned banks now control 53% of all banking assets and over 60% of retail deposits. State enterprises like PrivatBank generated 39% of all banking profits in 2024, contributing billions directly to war financing.
Yet Ukraine has simultaneously cleared the path to privatize profitable state banks, Sense Bank and Ukrgasbank, choosing long-term integration over immediate wartime revenue streams.
Whether these bank sales materialize during ongoing warfare remains uncertain, but the policy signals seem to satisfy Western allies demanding proof of genuine market commitment.
The tension reflects broader EU accession requirements that Ukraine become “a functioning market economy” capable of integrating into the single market.
While the European Commission imposes no direct privatization mandates, it has recommended that Ukraine “intensify its privatization efforts” and reduce the anticompetitive effects of state enterprises.
Flagship sales drive results
The reported results from the State Property Fund show that competitive bidding doubled or tripled initial prices for premium assets.
Hotel Ukraine in downtown Kyiv sold for 2.5 billion hryvnias ($61 million) after three bidders drove up the price from the 1 billion hryvnia starting point.
The United Mining and Chemical Company fetched over 3.9 billion hryvnias ($96 million), while sanctioned Russian assets, including the Aeroc gas concrete plant, brought 1.9 billion hryvnias ($46 million)—nearly double its reserve price as three participants competed for the facility.
The Vinnytsiapobuthim household chemical factory also doubled in value during bidding, reaching 608.1 million hryvnias ($14.8 million) with funds from sanctioned asset sales flowing to Ukraine’s Fund for Eliminating Consequences of Armed Aggression.
Transparent platform prevents oligarch capture
All sales used the Prozorro electronic platform, which was designed to ensure equal conditions for investors and prevent the oligarch capture that characterized corrupt 1990s privatizations.
“The launch of large privatization through electronic auctions opened opportunities for new investments necessary for the country’s reconstruction,” Deputy Economy Minister Dariia Marchak stated.
Prozorro CEO Serhiy But noted that the system works effectively even under complex wartime conditions. Online auctions provide equal opportunities for investors while ensuring state assets sell at market prices.
Reform commitment amid challenges
Acting State Property Fund head Ivanna Smachylo emphasized that large privatization represents an effective mechanism for transforming state assets into financial resources. This ensures significant budget revenues and promotes enterprise development that benefits the economy.
The success builds on earlier achievements, with small-scale privatization bringing over 5 billion hryvnias to the state budget since resuming in September 2022, confirming the effectiveness of this investment attraction mechanism.
Two new large privatization auctions, with a combined starting value of nearly 4.8 billion hryvnias ($116 million), have already been announced.
The Odesa Port Plant and sanctioned asset Motordetal-Konotop are open to any interested parties except those connected to the aggressor country.
Balancing act continues
The privatization effort continues Ukraine’s broader economic reform strategy aimed at EU integration. Its success demonstrates that transparent market mechanisms can function even during warfare.
Ukraine has managed to maintain reform momentum throughout 2024, with state bank privatizations and other strategic asset sales proceeding alongside the large-scale program.
The results contrast sharply with Russia’s command economy approach, yet also highlight Ukraine’s complex wartime balancing act—the country simultaneously expands state control in critical sectors while privatizing others to signal democratic market commitment.
The success of transparent auctions offers hope that Ukraine can balance immediate wartime needs with building an economy that benefits all participants, not just political and business insiders.
