Ukraine: Economic Consequences of the Dam Destruction at the Kakhovka HPS

Most of the facts are based on official government announcements or statements from officials. The government, as well as the World Bank, are currently assessing the direct losses resulting from the disaster.  

Olesky South of Ukraine
Oleshky - a town in Kherson region, South of Ukraine by Mazar Technologies

Agricultural sector

Economic Consequences and Assessments of the Dams’ Destruction at the Kakhovka Hydroelectric Power Station (as of 10:00 on June 8).

Updated data will be posted on the Centre for Economic Strategy webpage.

– According to preliminary estimates by the Ministry of Agrarian Policy and Food of Ukraine, 10 thousand hectares of agricultural land on the right bank of the Dnipro river in Kherson region have been affected. Additionally, a considerably larger area on the left bank of the region, which is currently under occupation, has also suffered from the impact.

Man-made catastrophe will cease the water supply of 31 field irrigation systems of Dnipropetrovsk, Kherson and Zaporizhzhia regions. In 2021, these systems provided irrigation on 584 thousand hectares of land, which contributed to Ukraine’s harvest of approximately 4 million tons of grain and oil crops, valued at around 1.5 billion dollars.

These regions play a pivotal role in the production of vegetables and fruits destined for the domestic market. Lost harvests is poised to exert upward pressure on food prices within Ukraine.

In 2023 on the right bank of Dnipro river, only 13 irrigation systems are working. The terrorist act at the Kakhovka HPP effectively left 94% of irrigation systems in Kherson, 74% in Zaporizhia, and 30% in Dnipropetrovsk regions without a reliable water source.

– In addition, the Ingulets irrigation system in the Kherson and Mykolaiv regions, which takes water from the Dnipro River downstream of the Kakhovsky Reservoir, may also face the risk of flooding.

-The destruction of the Kakhovka HPP has also resulted in significant losses to the fishing industry, with estimates suggesting that the death of adult fish alone may amount to 95 thousand tons, equivalent to approximately 4 billion UAH. The overall losses from the death of all biological resources are projected to reach up to UAH 10.5 billion.

– Global markets have already reacted to the dam’s collapse. On June 6, wheat quotes on the Chicago Board of Trade (CBOT) reached a three-week high at $230.6 per ton (+$1.3).

However, it is too early to judge the consequences for global food security, given that only 20% of grain and leguminous crops in Ukraine were grown in the affected regions.

– The grain terminal of the company “Nibulon” (one of the largest grain market operators of Ukraine), which is located in Kozatsky, Kherson region, was flooded. The grain storage capacity at the “Kozatske” terminal was 76,000 tons.

Please see the full report including Energy sector, logistics and infrastructure