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Thursday, January 7

Reserves Hit Highest Level in Eight Years…Corona Lockdown Starts Tomorrow – Two Cities Opt Out…France’s Macron and More European Leaders Expected in Kyiv in 2021…Pivdennyi Displaces Odesa as Pearl of the Black Sea…Road Paving Projects Will Make Driving the Carpathians Fun
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 ended the year with $29.1 billion in reserves, a 15% yoy increase, the National Bank of Ukraine reported yesterday. The highest level in eight years, today’s reserves are enough to cover five months of imports, an ample cushion over the three-month level seen as adequate.

Alfa-Bank Ukraine’s Oleksiy Blinov wrote: “This strong increase was delivered via massive FX debt placements by the Ministry of Finance. Overall, MinFin borrowed a net of $2.6 billion in December.”

In the first government bond auction of the new year, the Finance Ministry raised the equivalent of $308 million — 37% of the amount raised the week before. Choosing among four hryvnia bonds – 3-months, 1-year, 2-year and 3-years – 90% of buyers opted for 3 months at 10%. Yields were virtually unchanged from last week.

Concorde Capital’s Evgeniya Akhtyrko writes: “The drop in auction receipts after the record-high results of December is not surprising. Nonetheless, UAH 9 billion in receipts is quite a strong result for a ‘typical’ auction. The market’s skew towards bonds with the lowest term of maturity continues to reflect the perception of high risk among bond buyers.”

Dragon Capital writes: “With the 2021 budget’s deficit target set at 5.5% of GDP, government borrowing needs will remain high this year, keeping it reliant on cooperation with the IMF.”

Ukraine’s 16-day lockdown of restaurants and shopping malls starts tomorrow. Confirmed new coronavirus cases totaled 6,911 yesterday morning – one half the daily average of one month ago. In light of the drop, Ternopil City Mayor Serhiy Nadal said yesterday his city of 223,000 people will ignore the lockdown. Anatoliy Bondarenko, mayor of Cherkasy, a slightly larger city, says he will recommend to his City Council to ignore the lockdown. Nationwide, shopping centers will lose $60 million in rent and their stores will lose $400 million in revenue, Maksym Havriushyn, head of the national Council of Shopping Centers, told Interfax-Ukraine.

In face of business pressure to soften or shorten the lockdown, Health Minister Maksym Stepanov told reporters yesterday: “The Health Ministry is against the postponement of the quarantine, against its cancellation.” He said of the 23,000 people hospitalized for Covid, 10% are seriously ill and “about 200 people die from the disease every day.” Stepanov denounced as “political PR” a move by Biolik, a Kharkiv pharmaceutical firm, to register in Ukraine Sputnik V, the Russian vaccine. Stepanov told Reuters: “It would be very mild to say that we are not sure about the Russian vaccine. We do not know how the research was carried out.”

In 2020, 20 Ukrainian films backed by the State Film Agency are now screening in cinemas, and 92 new film projects were launched, Oleksandr Tkachenko, Culture and Information Policy Minister, told reporters last week in an online press conference. All theaters are to close from tomorrow through Jan. 24. During the second half of last year, many cinemas stayed open, selling a maximum of half of tickets in each hall. Attendance was down sharply compared to 2019.

French President Emmanuel Macron is one of a string of Western leaders expected to visit Ukraine this year. Next Tuesday, Moldova’s new, pro-EU President Maia Sandu will visit Kyiv, the first such visit by a Moldovan president in four years. Later this month, Sweden’s Foreign Minister, Ann Linde, visit Ukraine in her new capacity as chair of the OSCE. Macron is expected in the first half of this year, reports DN.ua, citing Ihor Zhovka, Zelenskiy’s deputy chief of staff. Zhovka also said that Italian Prime Minister Giuseppe Conte is expected to visit Kyiv this year.

Odesa region’s Pivdennyi port consolidated its position as Ukraine’s premier sea port last year, increasing cargo by 14.5% yoy, and accounting for 39% for all of Ukraine’s waterborne trade. Ukraine’s five largest ports accounted for 92% of its 159 million tons of water borne cargo, reports the Sea Port Authority. But growth was only at Pivdennyi (formerly Yuzhny), where cargo grew to 62 million tons, and at Mariupol, on the Azov, where cargo was up 8% yoy, to 7 million tons. At Mykolaiv, cargo was down 10%, to 30 million tons. At Odesa region’s two other big ports, cargo was down by 9% at Chornomorsk, to 24 million tons; and by 8% at Odesa, to 23 million tons.

To boost cargo on the Dnipro River, the Infrastructure Ministry plans to introduce a liberalized regime where captains of foreign flag vessels have to simply email an application for a port call to the Maritime Administration within three working days of the intended visit. This will replace the current system of applying for one-time permits, a cumbersome and often costly system that effectively closes the Dnipro to most foreign flag cargo ships.

President Zelenskiy last week signed the law “On Inland Water Transport,” legislation that opens the Dnipro to foreign flag vessels and allows for the creation of a dedicated fund to rebuild the locks and docks. Artem Kovalev, the Rada member who pushed for the law, has warned: “The river infrastructure is 75% worn out.” With the changes, he predicts, river cargo will triple to 30 million tons a year in 2024, the end of the Zelenskiy presidency. He said this cargo level would generation $500 million in taxes, $625 million in economic activity and 10,000 new jobs.

Provided Covid-19 vaccines are distributed extensively, the world economy will rebound this year by 4%, nearly recovering from its 4.3% fall last year, predicts the World Bank’s Global Economic Prospects forecast. According to the World Bank, growth rates in 2021 will be: US – 3.5%; Eurozone – 3.6%; Ukraine – 3%; Japan – 2.5; and China by 7.9%.

Ukrzaliznytsia increased its freight traffic in December by 7.4% yoy, transporting 26.7 million tons of cargo, reports the state railroad’s press service. By another measure, freight turnover was up 4.4% yoy, to 14.4 billion tonnes. A key indicator of economic activity, UZ moves half of Ukraine’s cargo.

As part of the ‘Small Carpathian Circle,’ a mountain driving circuit through Lviv, Ivano-Frankivsk and Zakarpattia regions, Lviv region plans to rebuild 75 km of mountain roads this year, including upgrading 37 bridges over mountain rivers. Lviv is spending $7 million on this project, the same amount as last year. Oleh Bereza, head of Lviv Region’s Road Service, cites the tourism impact, saying: “Thanks to the Small Carpathian Circle project, we will not only connect the three regions of the Western region of Ukraine with good roads, it will also allow us to revive the central part of the Ukrainian Carpathians.” The total project will cost $100 million, estimates Ukravtodor, the national highway agency.

Editor’s Note: For Ukrainians worried that this morning’s TV images from Washington look like RT’s reporting on the Rada, here is my long view. In my wannabe commie days – spring 1971 — I rode a long distance bus from New Hampshire to join the 1 million strong May Day protest in Washington. On the bus, we were instructed to run through lines of traffic on the bridges, pop the backs of VW bugs, yank off distributor caps and throw them into the Potomac. We used the Mall as our toilet, smoked dope where we could, and generally horrified the good matrons of Georgetown. The establishment media refused to talk to us, calling us ‘treasonous’ and ‘insurrectionists.’ We didn’t care. We were fighting for a worthy cause: supporting the democratic popular liberation forces of Vietnam, Laos and Cambodia. Oh, well, 16-year-olds can’t get everything right. Looking ahead, the American republic will survive this one — and probably emerge strengthened. Newsrooms might even break down and hire one — carefully vetted — right winger to talk to today’s angry young men in red. Merry Christmas! With Best Regards, Jim Brooke

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Wednesday, December 30

Gov’t Sells $3.5 billion of Bonds in 3 Weeks…GDP Shrinkage Stabilized in H2…Bucking Recession, Lviv IT Grows 7%...Ukraine to Start Negotiating Free Trade With China, Vietnam…Kolomoisky Liquidating US Investments Before Biden Presidency?...Antonov Starts Building Jets Again…Dnipro’s Future: Ice Free?
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 Finance Ministry made another high volume government bond sale yesterday — $874 million in equivalent. With this auction, the Ministry has raised nearly $3.5 billion in the last three weeks – more than the $2.9 billion in the first 11 months of this year.

For the eight different hryvnia bonds offered, yields have changed little since last week, ranging from 10% for 3-month bonds, to 12.25% for 5-year bonds. With 3-month bonds in dollars offering a 2.9% yield, investors snapped up $323 million worth – 37% of yesterday’s total sale.

Interpipe, Ukraine’s top producer of steel pipes and railroad wheels, is buying back $75 million worth of its 2024 Eurobonds, the company reported. CEO Fadi Hraibe told investors “Various instruments are also being considered for attracting financing for Capex: issuing Eurobonds, attracting project financing and attracting bank financing.” He later clarified that Interpipe does not have immediate plans to issue a new Eurobond. Located in Dnepropetrovsk, the mines-to-metals company employs about 11,000 workers.

Ukraine’s international reserves are “over $28.5 billion,” the highest level in eight years, Bohdan Danylyshyn, head of the Council of the National Bank of Ukraine, wrote on his Facebook page. This would be $3.2 billion higher than at the start of 2020, or a 13% increase. He wrote that during this year of the Covid shock, Ukraine’s Central Bank spent up a net $1.1 billion to defend the hryvnia.

In a televised briefing, the Economy Minister Petrashko said that Ukraine’s GDP probably shrank in the fourth quarter by 3% yoy. This represents a stabilization from the cataclysmic 11.4% yoy drop in the second quarter. The third quarter drop was 3.5% yoy, says the State Statistics Service. For all of 2020, Petrashko predicts a GDP shrinkage of 4.8%. Looking ahead, he predicts this will be largely cancelled out by 4.6% growth in 2021. He said this is the consensus of five forecasts for 2021 – from the IMF predicting 3.4% growth to the EBRD predicting 5.6%.

Bucking the Covid recession, the number of IT companies and IT workers in Lviv increased by 7% in 2020, compared to the previous year, according IT Research 5.0, a study conducted by Fama research agency for Lviv’s IT Cluster. There are now 492 IT companies in Lviv, employing 26,500 people. The average monthly salary of an IT specialist in Lviv is $2,080, about four times Ukraine’s average salary for all sectors. During last spring’s lockdown, all IT companies surveyed switched to remote work — 22% partially and 78% fully.

Ukraine is preparing to negotiate Free Trade Agreements in 2021 with China, Vietnam, Indonesia, Egypt and Jordan, said Ihor Petrashko, Minister of Economic Development and Trade.  “These are important markets for Ukrainian products as part of expanding our export opportunities.”

Tripling Vietnam-Ukraine trade to $1 billion by 2023 and forging a bilateral free trade pact were two goals set at a meeting Monday in Kviv between Nguyen Hong Thach, Vietnam’s ambassador to Ukraine, and Taras Kachka, Ukraine’s Deputy Minister for Economic Development and Trade. Both officials agreed to expand air links and to speed up establishment of a Vietnam House in Kyiv and of a Ukraine House in Hanoi, reports Vietnam News Agency. By contrast, China-Ukraine trade is believed to have hit $14 billion this year.

A recently agreed $1 billion “linked loan” from China “is not a victory,” Oksana Markarova, Ukraine’s former Finance Minister and future Ambassador to the US, wrote in her blog for Ekonomichna Pravda. Noting that the money will be used to fund the Kyiv Ring Road and for Kremenchuk’s new bridge over the Dnipro.  She says this kind of loan may require Chinese workers, materials, technology and construction companies. Markarova warned, “The process and results of Ukraine’s use of the tied loan from China are expected to be in line with the creditor’s vision and the approaches of China and the Chinese Communist Party.”

In advance of the January 20, 2021 inauguration of President-elect Joe Biden, Washington-based Radio Svoboda continues to investigate Ihor Kolomoisky’s investments in the US with a story headlined: “Ukrainian Tycoons Selling U.S. Property Amid Foreclosure Proceedings, Court Documents Show.” According to court documents filed Christmas eve, Optima Ventures, the U.S. real-estate holding company owned by Kolomoisky and Hennadiy Boholyubov wants to sell an office building and a stake in a hotel in Cleveland. Reporter Todd Prince writes: “Separately, the Justice Department is seeking the forfeiture of two commercial buildings owned by Optima Ventures in Louisville, Kentucky, and Dallas, Texas.”

President Zelenskiy yesterday suspended the Chief Justice of the Constitutional Court through February after he failed to appear Monday at police inquiry into a bribery charge. The Justice, Oleksandr Tupytsky, is seen as the organizer of court decisions two months ago to dismantle anti-corruption agencies in Ukraine.

Concorde Capital’s Zenon Zawada writes: “On the surface, it’s impressive that the Prosecutor General’s Office is pursuing this criminal case against Tupitskiy…We are confident that Tupitskiy won’t be prosecuted for any alleged crimes because of the “krysha” [political cover] that he enjoys, which likely extends into the Prosecutor General’s Office. Any measures it takes against him are merely for show.”

Signaling a revival of Ukraine’s aircraft building industry, the Defense Ministry has ordered three An-178-100R military transport jets from Antonov, the first such order since Independence in 1991. Powered by two domestic turbojet engines, this version of the An-178 can carry 18 tons of cargo, cruise at 825 km/h, and fly a maximum of 5,000 km. For comparison, the flight distance between Uzhgorod and Kharkiv is about 1,000 km.

Next year, Ukraine will establish a state airline based on a fleet of Antonov regional jets, President Zelenskiy promised yesterday at the military cargo jet signing ceremony. Yuri Guzev, the new general director of UkrOboronProm said: “We expect to sign new government contracts for the manufacture of An-178 aircraft from 2021.” Last month, the Cabinet of Ministers signed off on a 10-year, $1.4 billion program to develop and modernize Ukraine’s aviation industry.

The Dnipro shipping season is being extended to Jan. 15, an unprecedented extension into mid-winter. Studying long term weather forecasts, the Maritime and River Transport Service on Monday made its third shipping season extension since November 11. With the latest extension, shippers will get two extra months of use of the river’s six locks. Closing the river involves pulling out hundreds of buoys.

Editor’s Note: Thanks to global warming, will the Dnipro soon be navigable year round? Maybe not this year, but ice free may be in the cards for Ukraine’s mighty river. Twenty years ago, when I covered Canada and the Arctic for The New York Times, I saw the trend at the Port of Churchill, on the west coast of the Hudson Bay. At the wind battered office of the harbor master, a bronze plaque records every year ‘The First Ship.’ Dates trend earlier and earlier for arrivals of ice class bulk wheat carriers from such distant, exotic ports as Gdansk, Poland. Fast forward to last week. The same New York Times ran a thought-provoking piece: “How Russia Wins the Climate Crisis.” With Best Regards, Jim Brooke

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Friday, December 4

Dnipro to Once Again Become the Mississippi of Ukraine…China Leads List of Partners for Free Trade Talks…Dragon Buys Site for Industrial Park Near Lviv…November Weekend Shopping Ban Cost Malls $250 million 
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

After 12 years of discussion, the Rada yesterday passed a river development bill designed to triple cargo carried on the Dnipro to 30 million tons by 2025. Ships will pass free through river’s six locks. To modernize the aging river gates, an ‘Inland Waterways Fund’ will be created, funded largely by excise taxes on fuel. During the late Soviet era, 60 million tons of cargo moved annually on the Dnipro.

A revitalised working river will generate an extra $500 million in economic activity, Infrastructure Minister Vladyslav Krikliy said on his Telegram account. He added that for each 1 million tons of cargo carried on the river, Ukraine can save $35 million in road repairs.

“All over the world, river transportation is the cheapest and most environmentally friendly way of delivering goods,” Artem Kovalev, Rada member and chief author of the law, wrote on Facebook. “Ukraine has a huge potential for the development of water transport, but now less than 1% of all goods are transported by the river (in the EU it is 7%). At the same time, the Danube and Dnipro are included in five largest rivers in Europe.”

Renewal of the Dnipro is expected to revive two Soviet era economic activities: shipbuilding and river cruise tourism. Due to global warming, the Dnipro’s ice-free shipping season seems to be expanding — to nine months. President Zelenskiy, a promoter of the bill, said he would sign the legislation soon. 

Ukraine wants to start free trade talks next year with a host of countries, led by its largest trading partner, China, Taras Kachka, Ukraine’s Trade Representative, told Evropeiska Pravda. “Currently, the access of our products to the Chinese market is subject to higher duties than Chinese products to us,” he said, referring to a trade relationship that totalled $9.4 through August. 

Ukraine would like to reopen and liberalise the UK-Ukraine agreement that was signed two months ago in London, a rushed deal designed to beat the December 31 Brexit deadline. Also on the list are countries with major trade deficits with Ukraine due to food exports: Egypt, Indonesia, Jordan, Morocco and Vietnam. The Ukraine-Israel free trade agreement enters into effect on Jan. 1.

Even without a UK-Ukraine trade pact renegotiation, Ukrainian food exporters are showing “great interest” in the expanded duty-free access to the British market, Foreign Minister Dmitry Kuleba told Interfax-Ukraine after a bilateral briefing on trade opportunities. Furniture manufacturers have gone on two trade missions to Britain recently, he said. He added: “ Even Ukrainian manufacturers of Christmas tree decorations are now interested in the British market.”

Helped by cheaper energy import prices, Ukraine’s trade deficit in goods is running at half the level of last year, reported the State Customs Service. Through November, the trade deficit was $3.93 billion, down from $8.15 billion recorded during the first 10 months of last year. Year over year, exports were down 3.5%, while imports were down 10.8%.

Dragon Capital has acquired Lviv Industrial Park located on a 23.5-hectare land plot on the M10 highway, 60 km east of the Polish border. Five years ago, CTP, the largest developer and operator of warehouses and industrial parks in Central and Eastern Europe, bought the site — the Czech company’s first foray into the former Soviet Union. For Dragon, the Lviv site complements their 49-hectare site on the Kyiv-Zhytomyr highway where an industrial park is in the planning stages. “We are ready to start construction of new Class A facilities in our industrial parks in the coming years,” says Dragon CEO Tomas Fiala.

The ban on shopping during three weekends in November cost Ukrainian shopping malls about $250 million, the Ukrainian Council of Shopping Centers told Interfax-Ukraine. The 30-40% drop in weekend sales was partially offset by 10-20% increases on Fridays, Mondays and Tuesdays. Epicenter, one of the nation’s largest retailers, lost 750,000 weekend visits and $35 million in weekend sales, says Vladimir Goncharov, Epicenter’s director of retail trade. The drop in sales will ripple through the economy effecting 5,000 suppliers, largely Ukrainian, and sales tax payments.

“Business without Barriers” is a movement promoted by First Lady Olena Zelenska to reduce the physical and psychological barriers that prevent people with disabilities from participating in the work force and society at large. A declaration of support was signed this week by representatives of: Ukrposhta, Oschadbank, Ukrzaliznytsia, Auchan, 1+1 Media, DTEK, Socar, work.ua, ATB, and Danone. Ukrzaliznytsia said it is making stations, platforms and trains easier for travellers in wheelchairs, the elderly and parents with small children.

DTEK says that almost 3,000 of its 70,000 employees have disabilities, “We are actively introducing the best services for our clients so that our services are as accessible as possible,” says DTEK CEO Maxim Timchenko. Yesterday, DTEK, the largest private investor in Ukraine’s energy sector, became Ukraine’s first company to join ‘The Valuable 500,’ an international movement dedicated to improving the integration of employees and clients with disabilities.

Editor’s Note:  Often shrouded in poetry and romance, the Dnipro also is a working river — Ukraine’s Mississippi. To the envy of Russia, the Mississippi and the Dnipro flow south carrying produce from vast agricultural lands to world markets, through the Gulf of Mexico and the Black Sea. By contrast, Russia’s rivers flow north, generally emptying into the Arctic. The Volga flows into the Caspian — also not very useful. In Ukraine, river infrastructure experts — from the Dutch to the US Army Corps of Engineers — have been standing by for the last decade, waiting for Kyiv to pass the bill that the Rada passed yesterday. A new decade may dawn as Ukrainians rediscover what the Vikings knew 1,000 years ago — the economic utility of the mighty Dnipro. With best regards, Jim Brooke