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Cafes opening in Kharkiv, but most large Ukrainian businesses remain shuttered

KHARKIV, Ukraine – In the northeastern Ukrainian city of Kharkiv, Yaroslav Radchenko is slowly reopening a chain of coffee shops he owns called Bricks Coffee and Desserts. Like just about everybody else here, Radchenko shut down when the Russians invaded in February. He fled to the relative safety of Dnipro, southwest of Kharkiv.

Now he's back, and five of his 18 Kharkiv cafes are serving espresso again. But Radchenko says he faces numerous challenges, including staff shortages.

"Part of our staff live in the areas under constant shelling or missile attacks," he says. "Or they have small children — so they can't come back."

Some of the Bricks baristas have left the country entirely. Others are now in the military.

Big industries and small businesses alike are hurting

It's not just the little guys who are hurting; if anything, they may be doing better than the country's largest businesses. The country's maritime ports on the Azov and Black Seas have been shut down. The major industrial port of Mariupol is not only in ruins but is now in the hands of the Russians. All the airports are closed. Almost all freight now moves in and out of the country by rail or trucks through Poland, leading to massive backups on both sides of the border. In the east and around the capital Kyiv, roads and bridges have been destroyed.

For major industrial companies in the east of the country, "The whole logistics system has been basically destroyed and it takes time to rebuild," says Dmytro Symovonyk, Managing Director of Citadel Capital Ukraine in Lviv.

The World Bank says the Ukrainian economy could contract by as much as 45% this year due to the war. Symovonyk says the economic hit will be hardest on large industrial firms, particularly ones close to the front lines in eastern Ukraine.

And with Russian cruise missiles slamming into cities all across the country, companies are hesitant to rebuild, banks are hesitant to invest and insurance companies are reluctant to underwrite new construction.

"Even if Elon Musk decided to build a new Gigafactory near Lviv," Symovonyk says, referring to one of the safest parts of the country. "And then a missile would come in. Who can take this risk?"

Running a business will remain difficult for the foreseeable future

Nestlé is one company that's taking a risk, though not in Kharkiv. The Swiss-based multinational runs a large factory in Kharkiv making Mivina noodles, a popular brand of instant noodle. While Nestlé has restarted two factories in the west of the country, Ukrainian spokesman Volodymyr Spivak says for safety reasons, they still haven't been able to reopen their Kharkiv plant.

"This is an unbelievable situation," Spivak says. "You can try to be ready for the war but it's not possible to be ready for the war."

The company gave away its last stocks of food from its warehouses, Spivak says, and continues to pay employees from the Kharkiv plant even though it's shut.

Numerous other factories and lots of offices in Kharkiv remain shut.

By any estimation, this is an extremely hard time to run a business in Ukraine.

"Also the Ukrainian market itself shrank because a lot of people left Ukraine," says Symovonyk with Citadel Capital. "We are talking about millions of people who are no longer here for the moment."

Yaroslav Radchenko, at one of his Bricks cafes in a residential Kharkiv neighborhood, says the city has been changed by the war. Much of downtown, which was heavily bombed, still remains shut and it doesn't make sense yet to reopen his cafes there.

"Before, in the city center, there were a lot of offices and universities," Radchenko says. "The activity was higher than in residential areas. Now it has changed. In residential areas, there are more people and it now makes more sense to work in the residential area."

Radchenko says he plans to push forward with reopening his coffee shops as aggressively as he can. He views restarting his cafes as a patriotic act. Radchenko began the coffee chain after having to flee Luhansk in 2014, when Russian-backed separatists took over the region. He says it would take a lot for him to close them down again.

"If for example Kharkiv would be taken [by the Russians] and would not be under Ukrainian control," he says. "That would make me leave, only this."

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