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Tuesday, January 5

Covid Recedes…Lockdown Starts Friday Morning…Vaccines Are Coming -- from China, Poland, and COVAX…Ukrainians Flee Cash for Cards…Kyiv Enjoys Crimea Weather
James Brooke
by James Brooke
UBN Morning News is reported and written by James Brooke, a former New York Times foreign correspondent and Bloomberg Moscow Bureau Chief

Official numbers indicate that Ukraine’s coronavirus epidemic has receded according to official numbers. Hospitalizations are down 20% from the early December level of 28,500, Prime Minister Shmyhal said yesterday. Daily new confirmed cases are running between 4,100 and 8,000 – between one quarter and one half of the peak of 16,300 at the end of November. Yesterday morning’s reported level of 4,158 new cases was the lowest in three months, since Oct. 5.

Today, only one third of the nation’s 77,000 Covid beds are occupied, Health Minister Maksym Stepanov reported yesterday. This is a sharp contrast to November when Covid hospitals in Kyiv were full and turned away patients.

Confirmed cases may have dropped because people with mild cases do not want to go through the bother and expense of being tested. In addition, over the last three months, 6% of Ukraine’s population fell ill with traditional influenza and acute respiratory viral infection. Some of these could have been Covid cases. For example, in October, 1,998 people died of influenza and pneumonia in Ukraine, nearly four times the 579 who died one year earlier, reports OpenDataBot, citing State Statistics Service data on cause of death.

“There is a probability that we actually have fewer people now being infected with this coronavirus, and it is possible that the first wave is coming to an end,” Serhiy Komistarenko, a member of Ukraine’s National Academy of Sciences, told RBK Ukraine last week.  “And it would be good if the second wave did not start at all — or began much later.”  To date, 5.6 million PCR tests have been administered, 1.1 million Ukrainians have fallen ill, and almost 19,000 are known to have died.

In face of falling infection numbers, business groups are pressuring the government to soften the lockdown that starts this Friday, the day after Orthodox Christmas, and runs through Sunday January 24.  Last week, the American Chamber of Commerce in Ukraine appealed to lift restriction on supermarkets which will be forced to curtain off non-food items. “From January 8, even in supermarkets it will be forbidden to sell a significant part of everyday goods: household chemicals and tools, clothing, presses, light bulbs, batteries, children’s products for education,” the Chamber said in a statement.

Starting at 12:01 am on Friday, mandatory closures cover: all restaurants, bars, schools, gyms, swimming and non-food stores. Allowed will be: food stores, pharmacies, medical clinics, sales of hygiene products, telephones and animal food; car repairs; gas stations, banks, ATMS, post offices, beauty salons and barbers by appointment and hotels and hostels.

To prepare for economic pain from the coming lockdown, the government has distributed $130 million in grants to almost half a million small business owners and their employees, Prime Minister Shmygal reported yesterday by video link to President Zelenskiy.

The government is heeding Health Minister Stepanov’s call to stick with the Friday shutdown. “Many people ask whether we plan to postpone or cancel the quarantine, as the number of cases has been falling,” he told reporters last week. “With regard to the strict quarantine from January 8 to January 24, we are not going to introduce any changes.” Yesterday, during a video meeting with President Zelenskiy, Stepanov predicted that cases will increase after the holidays.

Ukraine will only start to return to normal this spring, Viktor Lyashko, chief sanitary doctor, predicts in an interview with Ukraina 24 TV. “We will start out a step-by-step return to our usual rhythm of life in April,” predicts Lyashko who is also Deputy Health Minister. “[Until then] We will not completely get rid of anti-epidemic restrictions and such harsh quarantines.”

In coming weeks, Ukraine hopes to receive almost 20 million doses of coronavirus vaccines, enough to vaccinate 10 million people, about one third of the adult population this year. The Health Ministry’s goal is to inoculate at least 50% of Ukraine’s 36.5 million people by the end of 2022. All vaccines require two shots. Here are the numbers:

China’s Sinovac Biotech: Last week Ukraine’s Health Ministry of Health signed a $34 million ProZorro contract for delivery of 1.9 million doses. Health Minister Maksym Stepanov predicts the first vaccines will arrive next month.

COVAX – President Zelenskiy wrote Thursday on Telegram: “We are working to increase supply through COVAX [from 8 million] to 16 million doses.” COVAX is a multinational collaboration organize to ensure equitable distribution around the globe of several coronavirus vaccines.

Poland has offered to transfer 1.5 million vaccine doses to Ukraine, Yevhen Enin, Ukraine’s deputy foreign minister, told Interfax-Ukraine.

Russia’s Sputnik V: Despite an announcement in Moscow that this vaccine will undergo ‘clinical trials’ in Ukraine, officials here say it will not be allowed. Arsen Zhumadilov, Head of Medical Procurement of Ukraine, a state enterprise, wrote on Facebook Sunday: “To rely on a state Russian company during a Russian armed aggression against Ukraine on the question of providing epidemic safety for the country is being ignorant to say the least.”

The Covid economy accelerated Ukrainians’ flight from cash in 2020, indicate figures from PrivatBank, Ukraine’s largest bank. Last year, Ukrainians’ transactions with PrivatBank terminals increased by 31% yoy, to the hryvnia equivalent of $11.5 billion. Spending in pharmacies was up 40%, to almost $1 billion. Spending food stores was up 48%, to almost $6 billion. Spending on clothes and shoes was down 1.6%, to almost $900 million.

Surfing the net during lockdowns, Ukrainians boosted visits to Ukrainian Wikipedia last year by 21% yoy. In 2020, 855.1 million pages were visited, raising Ukrainian Wikipedia to the rank of 17th most popular worldwide, according to the Ukrainian Wikipedia editor’s blog.

The New Year’s holiday temperatures were some of the warmest on record, with the weather comparable to that of a normal mid-October, reported Central Geophysical Observatory. On Thursday and Friday, record highs were set at 8.4C, or 47F, on each day. This follows Kyiv’s warmest autumn since record keeping started in 1881. Because of the warm weather, the Dnipro River season has been extended through January, an unprecedented time expected to be free of major ice.

Editor’s Note: It may be comforting for some Ukrainians to learn that the US has its own fair share of stupid people. Yesterday, I received a UPS package marked ‘Extremely Urgent’ and addressed to “Ukraine S.S.R.” No, it was not 30 years late. It was a replacement for a UPS package that the US-company proved incapable of delivering last month to an office address in Kyiv with a 24-hour reception. Resolutely ignoring all emails from me with mobile numbers and delivery instructions, the US-designed ‘tracking’ system sent me an ominous crescendo of emails: first declaring that the package was ‘abandoned,’ and then, that it was being ‘destroyed.’ There should be an NGO: Morons Without Borders. With Best Regards, Jim Brooke

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Monday, December 14

Eurobond Buyers Buy Ukraine…Appetite Returns for Hryvnia Bonds…More Christmas Presents for Ukraine: US, World Bank and EBRD Aid Total $1.5 billion…All Seaports Are For Rent or Sale…Big Privatization Candidates are Named ...Corona Vaccinations to Start
James Brooke
by James Brooke
UBN Morning News is reported and written by James Brooke, a former New York Times foreign correspondent and Bloomberg Moscow Bureau Chief

Ukraine’s offering of dollar Eurobonds was three times oversubscribed Friday, causing the Finance Ministry to raise the final volume by 20%, to $600 million, and to push the rate down to 6.2%, one full percentage point below the yield for a similar 12-year issue last July. “The estimated yield of 6.20% is the lowest yield on public Eurobonds in US dollars in the history of Ukraine,” Finance Minister Serhiy Marchenko said in a statement posted on the ministry website. Five months ago, the government placed 13-year Eurobonds for $2 billion with a coupon of 7.253%. JP Morgan, Paribas and Goldman Sachs were the organizers of Friday’s placement. The offering started the day with a yield guidance of 6.4% for $500 million.

Tomorrow’s auction of government hryvnia bonds should draw more foreign buyers, analysts predict. Last week saw an uptick of foreign buying — $79 million – breaking a fall in foreign holdings since January. Fueling interest are: high yields – 12.25% for 4-year bonds, and a sense that the hryvnia/dollar exchange rate has stabilized after a 20% drop earlier this year. Since the start of the year, foreign holdings of the bonds dropped 34%, reports the National Bank of Ukraine. On Thursday, Dmytro Sologub, a deputy governor of the central bank, said the government’s need to finance the budget deficit is behind the recent increase in bond rates.

The World Bank approved Friday night a $300 million loan to help “prevent around 1 million Ukrainians from falling into poverty due to the COVID-19 pandemic,” the Bank’s Board of Executive Directors reported from Washington. The loan is designed to get “fast cash transfers to individuals and households who have lost their jobs or income sources because of the pandemic,” the Bank said. “According to World Bank estimates, 60 percent of the Ukrainians who may fall into poverty because of the COVID-19 outbreak do not currently benefit from any existing social protection program.” The money follows a similar $150 million loan approved last April under the Bank’s Covid-19 ‘Social Safety Nets’ project.

The EBRD’s new loans to Ukraine projects will hit €750-850 million this year, a ‘big increase’ over the average of the last four years, Matteo Patrone, EBRD managing director for Eastern Europe and the Caucasus, told the UkraineInvest conference Friday. Separately, the European Investment Bank is extending €1 billion in loans to Ukraine, making it the main loan recipient from the Bank in the ‘Eastern Neighborhood’, EU’s designation for 26 nations surrounding the EU.

Ukraine is to receive $250 million in US military aid under a defense spending bill approved Friday by the U.S. Senate in a 84-13 vote. Earlier in the week, the House of Representatives approved the bill by a similar overwhelming majority. Ten days ago, President Trump threatened to veto the bill over non-Ukraine issues. A Senate summary says the bill “authorizes US$250 million for the Ukraine Security Assistance Initiative, including US$75 million for lethal assistance, and extends the authority to support Ukraine in deterring Russia.” The bill also includes provisions to tighten sanctions on Nord Stream 2, the Russia-Germany gas line.

Ukraine plans to transfer all of the nation’s seaports to concessions or private ownership by 2025, Infrastructure Minister Vladyslav Krikliy told an online international investment conference Friday. Noting that concession contracts with foreign investors were signed this summer for two ports – Olbia and Kherson – he said that next in line for concessions are the rail, ferry and container terminals of Chornomorsk and the passenger terminal at Odesa port. Next will be concessions of Berdyansk, on the Azov, and Izmail, on the Danube. The Ministry is preparing to sell outright three small ports: Belgorod-Dniester, Ust-Dunaisk and Skadovsk.

By 2022, the government plans to reach concession agreements for highways, airports, rail stations and other infrastructure facilities, Prime Minister Shmygal said at the conference, which was organized by UkraineInvest. Speaking to an estimated 1,000 participants from 63 countries, he said: “During 2021-2022, it is planned to conclude concession agreements for seaports, highways, airports, railways and other infrastructure facilities.” He also said that over the next four years, President Zelenskiy wants Ukraine to climb into the top 30 of the World Bank’s Ease of Doing Business Index. After climbing 48 positions during the Poroshenko government, Ukraine now is in 64th place.

In the first half of next year, the State Property Fund plans to start the privatization of the United Mining and Chemical Company, the First Kyiv Machine-Building Plant (formerly Bolshevik), and stakes in six regional power companies, the head of the Fund, Dmytro Sennychenko, said Thursday at the Ukrainian Investment Roadshow. Last spring, the Rada suspended all major privatization auctions after coronavirus restrictions shut down almost all air travel. Sennychenko said he expects the Rada to lift the ban this spring.

Ukraine will receive – free of charge — enough Covid-19 vaccines to vaccination 4 million people this spring, Ukraine’s Chief Sanitary Doctor Viktor Liashko wrote Saturday on Facebook. In addition, Ukraine is budgeting $90 million to buy vaccines to inoculate another 13 million people. This would cover a little less than one half of Ukraine’s current population, estimated at 37 million. In a recent poll by the Rating Group, 40% of respondents said they would not take a vaccine, even if free.

Coronavirus hospitalizations jumped 25% in November, over October, to 63,958 cases, reports Ukraine’s National Health Service. On Friday, deaths hit a record level — 285. New cases reported are averaging about 13,000 a day, but many cases are never reported. On Friday, Odesa Mayor Hennadiy Trukhanov became the latest politician to be hospitalized for coronavirus. Since September, President Zelenskiy and the mayors of Kyiv, Kharkiv and Lviv have been hit by Covid.

Due to Thursday afternoon’s ice storm, flights in and out of Kyiv’s two airports were disrupted through noon on Friday. With Kyiv Sikorsky closed for several hours, Wizz Air cancelled two flights to Germany. A Wizz Air flight to Vilnius did not return to Kyiv and a Belavia flight from Minsk did a U-turn and returned to it base. The glaze over the city caused numerous traffic accidents and falls by pedestrians. A CCTV video of a woman trying to walk near Andriyivskyy descent went viral drawing millions of viewers worldwide.

Editor’s Note: Ukraine’s offer of $600 million in Eurobonds was three times oversubscribed Friday. Tomorrow afternoon, at 16:00 Kyiv time, I moderate a CFO-level panel of corporate issuers – DTEK, Kernel, Metinvest, Naftogaz, Ukrzaliznytsia, and Vodafone – for Strategy Council’s annual Ukrainian Investment Roadshow. We will explore the 2021 outlook for Ukraine in international capital markets. Immediately after, Ben Hough, my BCP Securities colleague, will moderate a panel of international investors in Ukraine –a panel of international investors in Ukraine – Amundi, Emso, Rothschild, Plenisfer and BlueBay. Capping this unique afternoon, I interview Kurt Volker, former US Envoy to Ukraine, on what we should expect from the incoming Biden administration on Ukraine. To catch these high level views – at no charge — sign up here with London’s Strategy Council. With Best Regards, Jim Brooke

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Friday, December 11

Ukraine Wants to Supply Hydrogen to Germany…Germany: Get Straight With Solar and Wind…Russia and Ukraine Fight over Helicopters and Planes…€22 Million Planned for International Schools in Kyiv’s UNIT.City…UIA, Windrose Plan Flights to New York
James Brooke
by James Brooke
UBN Morning News is reported and written by James Brooke, a former New York Times foreign correspondent and Bloomberg Moscow Bureau Chief

With its East-West gas pipelines, Ukraine would like to become a major supplier of hydrogen to Germany, Prime Minister Denys Shmyhal said Tuesday at the first German-Ukrainian Energy Day. “The development of hydrogen energy is a priority for Ukraine,” he said, alluding to the fast growing energy source. “It is an opportunity to use the existing potential of green energy and attract investments in the development of a green economy.”

Anka Feldhusen, Germany’s ambassador and host of the event, cautioned that Ukraine should first pay its $1 billion debt to wind and solar producers. One of 11 ambassadors to send a letter last month to Shmyhal about the mounting debt, Feldhusen said diplomatically:  “I would not want Ukraine to lose its attractiveness to foreign investors because of this story.”

In Ukraine, DTEK is the pioneer in the hydrogen energy field, becoming Ukraine’s first company to join Hydrogen Europe, an association where European leaders exchange strategies and forge partnerships in hydrogen technologies. Emanuele Volpe, DTEK’s Chief Innovation Officer, said at the conference: “DTEK plans to launch a local hydrogen pilot project that will act as a catalyst for gradual development of the sector and accelerate the introduction of regulatory, technical, commercial, and logistics measures required to give a boost to the industry.”

Ukraine’s central bank decided yesterday to keep the prime interest rate at 6%, the level unchanged since JuneAlthough inflation in November rose to 3.8%, the National Bank of Ukraine does not see it as an immediate threat. “Cooperation with the [IMF] remains fundamental for the recovery of Ukraine’s economy,” wrote a message posted on the bank website. “Financing provided by the IMF and other international partners is crucial for the planned budgetary spending.”

In a housecleaning exercise, the Cabinet of Ministers decided Wednesday to transfer 18 enterprises of the UkrOboronProm defense conglomerate to the State Property Fund for privatisation.  With a total value listed at $10 million, the companies are expected to be sold largely for their scrap metal and real estate. Of the 18 companies, 11 no longer function. Five lost a total of $530 million during the first half of this year. A legacy of the Soviet military industrial complex of the 1980s, the list includes such entities as the Vinnytsia Aviation Plant,  the Zakarpattia Helicopter Production Association, and the Lviv Radio Engineering Research Institute.

The Russia-Ukraine military divorce deepened last week after Russian Helicopters accused Ukraine’s Motor Sich of performing “illegal” overhauls of Mil Mi-17 helicopters for the Afghan Air Force, reports Moscow’s Ria Novosti. The Russians charge that the helicopters were designed and built in Russia and that any overhaul outside of the Russian manufacturer “endangers the lives of the American and Afghan soldiers that are operating these helicopters.”

FlightGlobal, a US-based news site, recalls that last year, Ukraine’s Antonov sought to seize five An-124 cargo jets operated by Volga-Dnepr because the Russian air cargo company performed life extension modifications on the planes without Antonov’s permission or participation.

The Black Sea Trade and Development Bank is extending at 9-year, €10 million loan to the Novopechersk School to build a new campus at Kyiv’s UNIT.City, nearly tripling enrolment to 1,200 students. Zoya Litvin, head of Osvitoria, the controlling non-profit association, says the K-12 school “will focus on STEM and IT, sectors that will develop the fastest in the future.” Litvin’s husband, Vasily Khmelnitsky, is developing UNIT.City as Ukraine’s largest hub for IT companies. Built on the 25-hectare grounds of a former motorcycle factory, UNIT.City expects to have 15,000 residents by 2025.

Parents of Kyiv’s French school are voting through Wednesday on an 18-month, €12 million project to build a 6,000 square meter unified campus at Unit.City. The project for Lycée Français Anne de Kiev would bring under one roof  750 K-12 students who now are divided among three buildings in central Kyiv and Podil. French government guarantees could cover bonds or loans raised to finance construction.

Ukrainians’ spending on foreign travel dropped in half this year, to $4.5 billion from $8.7 billion, Dmitry Sologub, a deputy governor of the National Bank of Ukraine, told reporters yesterday. “It was a significant factor in improving our current account,” he said. “Travel companies from March to June did not buy foreign currency at all, then they began to buy, but purchases remained low.” He expects foreign travel spending to rebound slowly next year, probably to $5 billion.

Starting March 28, UIA promises to gradually, but “completely restore” its international route network, the airline says in a note posted on its siteyesterday. Ukraine’s flag carrier plans to restore 43 international routes, including  flights from Kyiv Boryspil to: New York, Toronto, Cairo, Delhi, Dubai, Jeddah, London Heathrow and London Gatwick, and 22 EU cities. Domestic flights will be operated from Kyiv Boryspil to: Dnipro, Ivano-Frankivsk, Kharkiv, Kherson, Lviv, Odesa and Zaporizhia. MXP) – Kyiv, and Kyiv – Nice (NCE) – Kyiv.

Windrose Airlines has applied to the US Department of Transportation to fly passengers and cargo between Ukraine and New York, reports the US-based aviation news site, One Mile at a Time. The airline, controlled by Ihor Kolomoisky, recently leased an Airbus A330-200, a wide body, two-aisle plane which can seat 400 passengers in three classes.  “The airline will apparently use this A330 for charter services to New York and Hong Kong,” writes the news site, citing the US filing. “Windrose further anticipates directly operating ad hoc charters to and from the United States using its own metal.”

Passenger traffic at Kyiv Sikorsky through November totalled 670,900 passengers – 18% of the level of the first 11 months of last year. In November, Kyiv’s right bank airport handled only 13% the volume of November last year. The airport is on track to finish this year with a passenger volume slightly below 2013.

Editor’s Note: Where are you going for Christmas? That was the frequent, almost reflexive question last night at the farewell dinner for Italy’s highly competent ambassador, Davide La Cecilia. With the exception of Davide, most of us are not going anywhere. With Kyiv recording a record 1,899 coronavirus cases yesterday and countries throwing up barriers right and left, this will be a winter of hibernation. In a sign of the times, Davide’s move to Roma is to take up a post coordinating vaccines. Buona fortuna a te, caro amico! Jim Brooke

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Monday, November 30

Corona Lockdown is ‘90%’ Sure for December...Nord Stream 2 Gas Line Work Resumes This Weekend...Canada’s Vermilion Pulls out of JV With Naftogaz...Thanks to Global Warming, Dnipro Shipping Season Gets a One-Month Extension
James Brooke
by James Brooke
UBN Morning News is reported and written by James Brooke, a former New York Times foreign correspondent and Bloomberg Moscow Bureau Chief

In December, “the probability of a complete coronavirus lockdown is 90%,” David Arakhamia, head of the ruling Servant of the People Party in the Rada, said on Ukraina TV’s Segodnya show Saturday. In contrast to last spring’s general shutdown, this would be a ‘smart’ lockdown he said, intimating that the Kyiv metro and many public services would work until Dec. 25, the western Christmas, now an official holiday in Ukraine.

In preparation for a lockdown, a law to give financial aid to 2 million salaried workers hit by coronavirus controls goes into effect next week, Arakhamia told reporters on Saturday. These one time payments are to go up to $280 per person. The overall budget will be about $500 million, Yulia Kovaliv, the President’s deputy chief of staff said Thursday night on 1+1 TV’s Right to Power show.

About 10% of Ukraine’s small and medium businesses are on the verge of bankruptcy due to corona controls, Dafina Gercheva, resident representative of the United Nations Development Program, estimates in an interview with Interfax-Ukraine. By the end of December, the corona controls and recession will have put more than 9 million people – one quarter of Ukraine’s population — in financial distress, the UNDP predicts.

New coronavirus infections doubled in November, hitting an average of 16,250 a day on Friday and Saturday. In Kyiv, the number of new cases hit a record 1,739, Mayor Klitschko said Saturday. In Lviv, two patients, one aged 61 and the other 66, died Friday after a power outage knocked out their ventilators for one hour. Over the last eight months, 12,093 deaths are attributed to Covid-19. Immunologist Andrii Volyanskyi predicts on Facebook that another 25,000 Ukrainians will die of Covid over the next four months, the traditional peak flu season.

Betting that online sales will keep surging, Allo Group, the consumer electronics retailer, is launching its own nationwide delivery service, Allo Express in Ukraine. Citing “today’s realities,” Allo CEO Maksym Raskin said the company decided to “to invest in the creation of our own postal operator.” The package delivery service will have desks in each of Allo’s 140 stores in Ukraine.

Work on laying Nord Stream 2 gas pipeline could resume this weekend in the Baltic Sea waters of Germany, near the Adlergrund shoal, reports Deutsche Welle. The local Stralsund Waterway Authority is advising ships to be careful when navigating the area starting Saturday. Meanwhile, Nord Stream 2 AG, gas pipeline company, says: “We plan to resume pipe-laying work using a vessel with anchor positioning in the exclusive economic zone (EEZ) of Germany this year.” With the US Congress preparing more sanctions against companies working on the $11 billion project, Norway’s DNV GL announced it will stop verifying services for ships and equipment used to build Nord Stream 2.

Canada’s Vermilion Energy has backed out of two production sharing agreements it won last year with Naftogaz, reports OilPoint, citing Ukraine’s state oil and gas company. The Calgary-based company “has decided not to participate in the projects due to significant reductions in gas and oil prices compared to 2019, the coronavirus pandemic and the global economic downturn,” Naftogaz said referring to the two sites, Balaklia and Ivanovo. Instead, Naftogaz will go it alone, investing $125 over the next five years to conduct 3D seismic tests and to drill 12 exploration wells.

Undeterred by this setback, Naftogaz is open to working with a foreign company, particularly Romanian, to develop the Dolphin block, in the Black Sea near the Danube delta and Romania’s maritime border. Working jointly with Romania to develop the shelf may be “more economically attractive” for Ukraine, and would create better security since Romania is a NATO member, Lana Zerkal, adviser to the Naftogaz CEO, said Friday at an online briefing. However, Exxon Mobil has been mulling selling its 50% stake in Romania’s Neptun Deep offshore project. Since 2008, it has shared this Black Sea block with Romania’s OMV Petrom, which is majority-controlled by Austria’s OMV.

But this year’s slump in oil and gas prices makes Ukraine unattractive to oil and gas producers, say experts interviewed by UNIAN. “I honestly think that the chances of attracting serious Western investors are minimal,” Gennadiy Kobal, founder of EXPRO Consulting, told the news agency Friday. “The record decline in gas prices has led to the fact that oil and gas companies have lost a significant part of their capitalization.”

Regarding the Dolphin block, Vitaly Radchenko, partner at CMS Cameron McKenna, said: “We have talked with many normal real, producing, foreign oil and gas investors. We worked with them to get them interested in the Black Sea shelf. The territory is viewed as controversial and dangerous. None of the real investors will come there to drill, because it could end up in a conflict with Russia. Therefore, giving the shelf for research to the state gas company is a logical decision.”

With winter temperatures increasingly mild, the Dnipro River shipping season is being extended for one extra month – to the end of December. Originally, the river’s six locks were to start closing in a north-south sequence in mid-November. But shippers, notably Nibulon, lobbied for an extended season, noting that last year serious ice did not start forming on the river until January. Under the direction of the State Maritime and River Transport Service, closing the river involves pulling out hundreds of buoys.

The $15 billion Istanbul Canal, an artificial alternative to the Bosporus, has reached the tender stage, Turkish President Recep Tayyip Erdogan said Friday. Expected to take a decade to dig, the 500-meter wide canal would allow liquefied natural gas cargo ships to enter the Black Sea for the first time. Further weakening Russia’s position in the Black Sea, the canal would not be subject to the Montreux Convention. This 1936 agreement places limits on the size and number of non-Black Sea navy ships allow to pass through the Bosporus.

Prime Minister Shmygal started a two-day visit to Turkey yesterday with a meeting with Turkish business executives in Istanbul. Appealing for Turkish investment, he said: “We have ambitious plans to build and renovate our infrastructure, including roads, bridges, energy and medical infrastructure, in other areas – water supply, sewerage, garbage recycling. Turkish companies have successful experience in these areas.” Today, he meets with government leaders in Ankara to discuss military and diplomatic cooperation. Leading a delegation of two ministers and two deputy ministers, Shmygal is flying in a Ukrainian An-148 regional jet. Turkey is interested in producing medium range military transports with Antonov.

Ukraine plans to purchase five more Turkish-made Bayraktar Tactical Block 2 unmanned aerial vehicles next year, Turkish media report. Last month, Azerbaijan used these armed drones in its successful war with Russia-backed Armenia. Signaling a closer partnership with Turkey, Ukraine’s Foreign Minister Dmytro Kuleba told Turkey’s Anadolu Agency Friday: “Ukraine, looks at the Nagorno-Karabakh issue from the perspective of international law. Our position is very clear. We are on the same page with Turkey.” In the second half of December, the foreign ministers and the defense ministers of Turkey and Ukraine are to meet in Kyiv in a ‘2+2 format’ – a sign of close bilateral ties.

Editor’s Note: As readership of the Ukraine Business News grows day by day, we will invest in December to upgrade the UBN website. Searching the archive will be faster and easier. And after English, Ukrainian, Russian, German and French, we will add a mystery sixth language. Stay tuned – and tell your friends to sign up! With Best Regards, Jim Brooke

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Thursday, November 26

Naftogaz Wins No Tender Deal to Develop Black Sea Gas Field...Ukraine Now is Key Player in Eastern Europe Gas Market...EU Has Big Hydrogen Plans for Ukraine...Biden Is Expected to Block Nord Stream 2...Millions of Ukrainians Shop Online for ‘Black Friday’
James Brooke
by James Brooke
UBN Morning News is reported and written by James Brooke, a former New York Times foreign correspondent and Bloomberg Moscow Bureau Chief

The government yesterday granted Naftogaz the right to develop a massive Black Sea gas block without a tender. The Dolphin block, near Ukraine’s portion of the Danube river delta, is believed to hold at least 1 trillion cubic meters of gas – more than double the big Black Sea find announced recently by Turkey. “This means the possibility of producing up to 10 billion cubic meters per year,” Ukraine’s state oil and gas company announced on Facebook. In recent years, Ukraine has imported 11 to 14 billion cubic meters a year.

Seismic work could involve $40 million of investments in the first year, Naftogaz said on Facebook. “This means the possibility of attracting international investors, and at the same time – on the best terms for Ukraine,” the company wrote yesterday. Last month, Naftogaz unexpectedly pulled out of a $500 million Eurobond sale despite it being oversubscribed. Yesterday’s no tender decision by the Cabinet of Ministers cuts permitting delays. “The company will be able to start developing the shelf immediately after the adoption of the normative act,” Roman Abramovsky, Minister of Environmental Protection and Natural Resources, said at the Cabinet meeting.

Last year, an American company, Trident Acquisitions, won a competitive tender to develop the offshore block. The incoming Zelenskiy government refused to accept the results of this ‘Poroshenko tender.’ The issue languished for one year. Last night, Ilya Ponomarev, CEO of Trident, emailed the UBN: “This story has ended as we have predicted – no major [foreign energy companies], just no one showed up. So, the government threw our $1 billion offer out of the window. [Now it] will spend taxpayers money in Naftogaz to develop this difficult project in very uncertain times, assuming all risks themselves.”

Ukraine has become a key player in the EU natural gas market, storing 10 billion cubic meters of gas this fall for gas traders. With the European heating starting last month, Ukraine, for the first time in history, started re-exported stored gas to EU countries. “A significant milestone for the gas market is the start of the re-export of gas that was previously imported to Ukraine from the EU,” Sergei Makogon, CEO of the Operator of the Gas Transportation System of Ukraine, writes on Facebook. “Previously, there was only transit and import.” Integrating Ukraine into the regional gas system are: duty free gas storage, duty free short haul gas transportation through Ukraine, and new reverse flow gas pipelines.

The “U” factor: Ukraine’s growing role in Europe’s natural gas market,” headlines a 1,600-word article in S&P Global Platts. This year “access to both Ukrainian storage and inbound transport capacity resulted in large gas flows transiting Slovakia, the Czech Republic and Hungary destined for Ukraine,” reports S&P.  “This in turn created the conditions for the growth of gas hubs in Central and Eastern Europe.”

Europe’s Green Deal commitment to renewables, hydrogen and decarbonizing energy sources “means that between 2030 and 2040, Europe may see a radical drop in demand for natural gas,” Andrian Prokip, wrote in a Kennan Institute essay: “New Era of Gas Wars between Ukraine and Russia? “That would likely mark the end of Russia’s energy expansionism.”

The EU ‘Hydrogen Strategy’ calls for dividing EU hydrogen production between the EU and its eastern neighbors. “This strategy stipulates that ‘the Eastern Neighborhood, in particular Ukraine, and the Southern Neighborhood countries should be priority partners,’” writes Prokip, an energy expert for the Wilson Center. “Ukraine could become a key partner of the EU in the production and export of hydrogen. In light of Ukraine’s current diminished role in natural gas transit…hydrogen export may become the basis for a revitalized, long-term cooperation and part of the real economic integration of Ukraine and the EU.

In reaction, Gazprom and Rosatom, the nuclear corporation, recently signed a deal to hydrogen production in 2024. Uniper, the German energy giant, says Nord Stream 2 could be repurposed to carry a blend of 80% hydrogen and 20% natural gas.

“Joe Biden Is Unlikely to Save Angela Merkel’s Pet Project,” headlines a Bloomberg article yesterday about the $11 billion, 1,239 km Russia-German Baltic Sea gas line. “U.S. opposition is likely to remain under Biden,” Bloomberg writes about Nord Stream 2.  “There’s American cross-aisle agreement” against Nord Stream, Ursula von der Leyen, European Commission President and Angela Merkel’s former defense minister, told Germany’s Die Zeit newspaper earlier this month.

Democrats should not go wobbly on Nord Stream 2, The Wall Street Journal warns in an editorial: “Congress shouldn’t back off Russia sanctions in the annual defense bill.” “The incoming Democratic Administration wants closer cooperation with Western Europe,” wrote the conservative US newspaper. “That shouldn’t come at the cost of increasing NATO vulnerability to Russia. Congress would assist U.S. and European strategic interests if it gets the Nord Stream sanctions over the finish line in the lame duck session.”

The US Congress is targeting insurance companies in the latest strategy to stop the pipeline, Bloomberg reports from Washington. “House and Senate negotiators agreed to target insurers and technical certification companies working on the project in a defense bill that must pass by the end of the year.”

In advance of passage, US officials already are contacting companies to warn they may face sanctions, DPA reports from Washington. “We’re in the process of calling a number of these companies to make them aware that they’re likely engaged in sanctionable activity,” an official reportedly tells the German news agency.

Rozetka.ua, Ukraine’s largest online store is seeing record number of visitors to their site – 5.6 million on Tuesday. With the retailer’s ‘Black Friday’ sales going on all week, Vladyslav Chechotkin, Rozetka owner wrote on Facebook that some items already are running out. “Sales hit records,” he wrote. “We have run out of many products already, despite our large purchases.” The most popular items are: laptops, TV sets, vacuum cleaner robots, electric grills, men’s boots, women’s sneakers, and Lego blocks.

The American Chamber of Commerce in Ukraine has presented its annual Thanksgiving Awards to Mykhailo Fedorov, Digital Transformation Minister, and to Paul Niland, founder of Lifeline Ukraine, a national suicide prevention hotline focused on helping military veterans. Fedorov said of his work to simplify government services: “We have already created a mobile application and portal of electronic services ‘Diia’, introduced the first digital passports in the world, launched registration of a business in 15 minutes.”

Editor’s Note: In honor of Thanksgiving, my own Turkey Award goes to Péter Szijjártó, Foreign Minister of the neighboring republic of Hungary. In mid-October, as Americans were voting for president, Hungary’s top diplomat posted on Facebook a long, slashing video attack on Joe Biden. He charged that Vice President Biden spent more time in Ukraine than in the US outside Washington’s Beltway. After that wrongway bet, Szijjártó now learns that Biden’s Secretary of State will be Antony Blinken. From 1994 to 1996, Antony’s father, Donald Blinken, was US Ambassador to Hungary. The future US Secretary of State may well be hip to Hungary’s tricks. After the US election, Hungary’s hapless Foreign Minister flew to Phnom Penh to bond with a fellow authoritarian, Hun Sen, Cambodia’s Prime Minister for 36 years. But after their embrace, Szijjártó discovered he had Covid-19. The 67-year-old Cambodian dictator retreated into self-isolation for two weeks. Thai authorities cancelled all meetings with Szijjártó and sent him home on the first flight in the direction of Budapest. With Best Regards, Jim Brooke