Summer Gift: $2.7 billion from the IMF … Bonds for Roads and Rail … UZ Flips from Profit to Big Loss … Black Sea Gatekeepers? Chinese to Buy a Bridge over the Bosporus

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Ukraine may receive $2.7 billion from the IMF this summer

under a plan by the International Monetary Fund Managing Director, Kristalina Georgieva, to allocate $650 billion from international reserves to restore the world economy after the coronavirus crisis. Unlike the conventional IMF programs this money would not have to be paid back. The National Bank of Ukraine Governor, Kyrylo Shevchenko, announced the possible windfall yesterday following a meeting with Alfred Kammer, the Director of the IMF’s European Department.

Alfa-Bank Ukraine wrote:

 “An easy $2.7 billion from the IMF might arrive in 2021…This allocation might be very helpful as Ukraine faces its next FX debt payment peak in September ($3.1 billion). However, such ‘windfall cash’ might finally erode the country’s motivation to proceed with the Stand-by Arrangement.”

Separately, Shevchenko told Interfax-Ukraine last week that Ukraine should receive two tranches from last June’s $5 billion IMF Stand-by Agreement

“given the longer course of negotiations.” Ukraine has been in on-again, off-again talks with the IMF since last fall. He said that he hoped that the Rada will pass legislation in coming weeks so that Ukraine will meet the IMF’s compliance requirements. Failing that, he said: “These funds can be replaced by the placement of Eurobonds. We know that the IMF is not primarily about money, but about trust in the country. a strong signal to investors.”

With the ‘Big Construction’ program running up government debt this summer,

the government has approved extending state guarantees Ukravtodor for the hryvnia equivalent of $357 million in loans or bonds. Separately, the state highway agency has set up a unit to prepare for the offering this summer of state-guaranteed Ukravtodor hryvnia bonds to foreign and domestic investors.

Ukrzaliznytsia plans to issue a Eurobond this year,

to partially cover for a disastrous 2020.  Largely due to the coronavirus, a $110 million profit in 2019 turned into a $430 million loss in 2020, according to the State Railroad’s recently released Annual Report. Revenues from freight transportation were down 10% yoy to $220 million in 2020. Passenger revenues dropped 58% yoy to $148 million.

UZ has 250,000 employees, “while a modern railroad of this size could probably manage with around 120,000”

  Adomas Audickas, a member of the railroad’s Supervisory Board, wrote in an Atlantic Council essay: “How to Reform Ukrainian Railways.” While the railroad has lost 75% of its trans cargo due to Russian measures, internal rates undermine the UZ’s finances. He wrote: “Grain shippers pay 40% higher tariffs than shippers of iron ore. Reforming tariff-setting practices must be a priority.”

Each ton of iron ore “is transported with a 19% loss for Ukrzaliznytsia,

Sergii Leshchenko, another UZ board member, (Kyiv Post). Once an UZ freight train carrying iron crosses into Poland or Slovakia, “the tariff for ore transportation increases,” he wrote. “In Poland, it increases 2.5 times. In Slovakia — more than four times.” Blaming Rinat Akhmetov’s metal companies for lobbying for low tarrifs, he concluded that UZ loses $288 million “annually due to unfairly low tariffs for iron ore transportation.”

UZ has set a goal to raise cargo this year by 3%,

to 314 million tons, and revenue by 10%, to $2.6 billion, the company reported last month.

Concorde Capital’s Alexander Paraschiy has commented on this issue:

“Any change in Ukrainian Railways’ tariff policy that leads to an effective increase of cargo rates usually meets fierce resistance from large business customers (especially top customers, the companies related to Rinat Akhmetov like Metinvest and DTEK) this means that the likelihood of the company’s changing its tariff policy is not high.”

Volodymyr Zhmak is suing UZ and the Cabinet of Ministers for firing him last month.

The reasons for his firing were not made public. Ivan Yuryk, the new Acting Head of the Company, is the 11th head in seven years. “The release of the chairman of the board six months after the appointment and further chaos with the acting head of the company will definitely worsen the state of UZ,” Viktor Dovhan, a former Deputy Infrastructure Minister, told the Center for Transportation Strategies.

Ukraine’s second multimodal terminal – moving containers from trucks to trains – has opened in Klevan, Rivne region.

This ‘dry port’ on a 10-hectare lot is designed to handle 2,000 containers a month. Due to the lack of such cargo hubs, 80% of containers in Ukraine move by trucks on highways. Although growing fast, containers account for only 1% of all rail traffic as measured by weight. In Europe, containers account for 45% of rail cargo.

Ten years after the first China-EU freight train trip, 3,345 freight trains were sent from China to the EU in the first three months of 2021

, reported Xinhua. Freight traffic was up 12% yoy to 920 million tons.

UZ aims to handle one Chinese train a day

– either in transit to Eastern Europe or to Kyiv’s Darnytsa rail yard. In January-February, 27 Chinese transit trains rolled across Ukraine and four more went to Darnytsa.

Six Chinese companies plan to pay $700 million to buy 51% of a road and rail bridge over Turkey’s Bosporus,

reporte Russian Railways Partner. Opened five years ago, Yavuz Sultan Selim is a toll bridge with eight lanes for cars and trucks and two rail tracks. Located at the Black Sea entrance to the Bosporus, the 2.1 km long suspension bridge is the third highest in the world, built to allow freighter traffic below. Included in the deal is the bridge’s access highway, the Northern Ring Road. The Chinese consortium is composed of: China Merchants Expressway, CMU, Zheijiang Expressway, Jiangsu Expressway, Sichuan Expressway, and Anhui Expressway.

Editor’s Note: While Putin refuses to talk to Zelenskiy on the phone, the rhetoric from the Kremlin is shrill, bordering on hysteria. Foreign Minister Lavrov has warned: “Those who will try to start a new war in Donbas will destroy Ukraine.” Dmitry Kozak, Deputy Presidential Chief of Staff, warned that an escalation could mark the “beginning of the end” for Ukraine – “not a shot in the leg, but in the face.” Kremlin officials repeatedly warn against Ukraine committing a Srebrenica, a reference to the 1995 massacre of 8,000 Bosnian Muslim men and boys by Bosnian Serbs. Behind the radical speech may be the panicky realization by aging leaders that Ukraine is slipping between their fingers. A generation of Ukrainians has grown up spurning Moscow and St. Petersburg in favor of Berlin and Krakvow. On church and language, the two countries are divorcing. Zbigniew Brzezinski, the Polish-American political scientist, once observed: “Without Ukraine, Russia ceases to be an empire, but with Ukraine suborned and then subordinated, Russia automatically becomes an empire.” With the time for a sneak attack long gone and the Western allies focused, let’s see how far the Kremlin’s last Soviet-trained rulers are willing to go. With Best Regards Jim Brooke

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Earlier News
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Friday, April 9
Real Estate Rocks: ATB to Invest $410 million…Poles to Fund 60% of Lviv’s IT Park…Defying E-Commerce, 6 Shopping Malls to Open in Kyiv…Offices May Shrink…Cut Off From EU, Ukrainians May Vacation Locally This Summer
Thursday, April 8
Ships and Airplanes: Dnipro Shipping Season Has Strong Start…From Kyiv to Qatar by Ship…Danube Shipping Co. Makes $200 Million Bid for Dnipro Cargo…Nibulon and SMG Revive Black Sea Shipbuilding…Coming Soon: River Cruise to Chornobyl…Boryspil Air Traffic Drops in Half
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