“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.”
, Finance Minister Serhiy Marchenko said in a lengthy interview with LIGA. “We have no opportunity to receive income from another source,” he says. “The IMF program is our baseline scenario.” He said talks would go better with IMF if they were face to face, not through video calls.
Construction starts this year on the first leg of a planned network of high speed, European gauge tracks across Ukraine, Infrastructure Minister Vladyslav Krikliy told a national infrastructure conference yesterday. At buildout of the 2,000 km network, it will be possible to travel from Lviv to Kharkiv at speeds up to 250 km an hour, completing the trip in “3-4 hours” promised President Zelenskiy. Currently, this 1,000 km trip takes 14 hours by car or by InterCity fast trains.
The first step will be to start building this year of 80 km of EU gauge tracks from the Polish border to western Lviv’s Sknilov station, near Lviv airport. This would allow travel from Poland to Lviv without delays associated with the gauge change at the border. As outlined yesterday, Ukraine’s high speed rail network would radiate out of the capital: Kyiv-Lviv-Polish border; Kyiv-Odesa; Kyiv-Kharkiv; and Kyiv-Dnipro-Zaporozhia. By the end of this decade, the network is to have 39 trains carrying 5 million passengers a year.
South Korea’s Hyundai Corp. is ready to start negotiating with South Korea’s government and multilateral lenders to win financing for a major part of track construction and for 10 high speed trains, Eun Soo Choi, Hyundai’s vice president for commercial transport, told the Infrastructure forum. “We are ready to provide financing for several projects,” he said in a video address. He said that Hyundai will spend $2 million for a pre-feasability study for the high speed rail network. Next month, Ukrzaliznytsia and Infrastructure Ministry officials are to travel to South Korea to advance discussions.
Ukraine plans to launch a state-owned national airline by the end of this year, Kyrylo Tymoshenko, deputy presidential chief of staff, told reporters yesterday at the infrastructure forum. “We have an ambitious goal of creating a state air carrier,” he said. “Ukraine will receive an understandable state national air carrier that can solve not only tourism issues, but also state issues.”
For domestic flights, the airline would use Antonov jets, which are not accepted in the EU. To promote, regional air travel Tymoshenko vowed to follow through on the government’s promise to abolish the VAT tax on tickets for domestic flights.
The location of a new airport for Ukraine-controlled Donbas is to be decided this year, President Zelenskiy said yesterday. After seven years of war, the government wants to return air travel to the region. “We could open the Mariupol airport, restore and renovate it, but today the military say that it is dangerous,” Zelensky told reporters. Berdyansk and Zaporizhia airports are too far from the Donbas. Other options would be to upgrade Kramatorsk airport in Donetsk or Severodonetsk airports in Luhansk. Both airports are only used by the military and may be considered too close to the front lines for civil aviation.
Zakarpattia’s new airport will probably be in Seredenje, a farming town of 4,000 people, midway between the region’s two most populous cities, Uzhgorod, the capital, and Mukachevo. Uzhgorod’s airport borders on Slovakia, creating air traffic control problems. Mukachevo has an abandoned Soviet-era air strip. The Seredenje compromise means that about 250,000 people would be within a 45-minute drive of the regional airport.
An international brand hotel will soon replace the long-shuttered hotel Odesa at the city’s cruise passenger terminal, Tymoshenko, the deputy presidential chief of staff, said yesterday. Opened in 2001, the 158-room hotel on a wharf jetting into the Black Sea was first run by the Kempinski Hotel Group. It closed in 2014 with the suspension of cruise ship port calls to Odesa. Tymoshenko said: “There is already an investor. The final stage is underway.”
UAE companies “are talking about a big project – the construction of a large marina in Odesa and a large separate port,” President Zelenskiy said yesterday, fresh from a 2-day working visit to the United Arab Emirates. One company comes to Ukraine this week to talk about investing in river ports, he said. Last summer, Dubai’s DP World bought a 51% stake in the TIS Container Terminal in Ukraine’s biggest port, Yuzhne, 40 km east of Odesa city.
President Zelenskiy said he is ‘confident’ that Ukraine will get IMF funds by the end of this year. If a deal cannot be reached on the remaining $2.9 billion, “there is plan B, plan C,” he told reporters yesterday at the Ukraine 30. Infrastructure Forum. He blamed the pause in talks declared by the IMF 10 days ago on “a lot of lobbyists who are individually working with the IMF and telling them what’s going on in Ukraine. They say: ‘Oh, things are so horrible here! If only we were (in power), we would have done better’.”
From London, Timothy Ash speculates that delays in receiving tranches from the $5 billion program could be because Ukraine’s government knows it can borrow at low rates in international markets while it gambles that the Biden administration will eventually lean on the IMF to soften its conditions. Key conditions for a resumption of IMF disbursements are purges of the Higher Court of Judges and the Constitutional Court, steps seen as essential for building a judicial system that investors would trust.
“Zelenskiy needs to understand that the Fund is in the end a creditor,” writes Ash, senior emerging market strategist at BlueBay Asset Management. “It sets the terms, as it is lending the money at a discount interest rate…With yields on Ukrainian Eurobonds already 60-70 bps higher over the past few weeks, maybe it would be opportune for the Ministry of Finance to return to market sooner, rather than later.”
With the first 500,000 coronavirus vaccines expected to arrive in Ukraine from India this weekend, Health Minister Maksym Stepanov sketched out yesterday the latest information on future deliveries:
Ukraine’s goal is to vaccinate half of the adult population – about 15 million people – by the end of this year. Ukraine’s EU land neighbors – Poland, Slovakia, Hungary and Romania — have already vaccinated 7% of their populations.
Yuriy Gusev, Ukroboronprom’s director general, yesterday signed $1 billion worth of agreements and contracts in the United Arab Emirates with the country’s two leading military equipment manufacturers, the EDGE Group and Tawazun Economic Council. “We are delighted with the opportunities for the UAE and Ukraine to cooperate, exchange and benefit from the military and the technical capacity of the two countries,” said EDGE CEO Faisal Al Bannai, according to Zelenskiy’s presidential website.
Nicknamed “Little Sparta” by former US Defense Secretary James Mattis, Sunni-dominated UAE is a close ally of Saudi Arabia and faces Shia Muslim Iran across the Strait of Hormuz. Government-owned EDGE specializes in drones, long range missiles, cyber defense, and electronic warfare. It has 12,500 employees and $5 billion in annual revenues. The Stockholm International Peace Research Institute ranks EDGE 22nd in its list of world’s largest arms companies. SIPRI researcher Pieter Wezeman writes: “EDGE is a good illustration of how the combination of high national demand for military products and services with a desire to become less dependent on foreign suppliers is driving the growth of arms companies in the Middle East.”
With the UAE’s Hope probe now in Mars orbit, Ukrainian space and high tech companies could contribute to boosting bilateral trade, Zelenskiy said yesterday in a meeting with Sheikh Muhammad bin Zayed Al Nagayan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces. The two countries vowed to increase trade “several times” from the 2019 level of $1.65 billion. Zelenskiy said high level Ukrainian delegations are coming to the Emirates for two big trade fairs that open Sunday – Gulfood in Dubai, and IDEX, or the International Defence Exhibition and Conference, in Abu Dhabi.
“Ukraine can and will become a guarantor of food security in the Emirates,” Zelenskiy told WAM, the Emirates News Agency, shortly after arrival on Saturday. “We are among the world leaders in the export of wheat, corn and barley.” With a population of 10 million, the Emirates has an economy three times bigger than Ukraine’s, but imports 85% of its food — $2 billion worth last year. Last year, Ukraine exported $252 million worth of food to the UAE. Zelenskiy noted that Ukraine’s pavilion at the World Expo that opens in Dubai in October will be shaped like a 15-meter high sheaf of wheat. He said: “The yellow color on our flag symbolizes the wheat field and readiness to contribute to world food security.”
The six-month Expo ideally will promote Emirates investment and tourism in Ukraine, Zelenskiy said. In 2019, 250,000 Ukrainians flew to Dubai, the Emirates’ largest city, using four airlines – flydubai, UIA, SkyUp and Air Azur Ukraine. Zelenskiy said 15,000 Ukrainians live in the Emirates and 200 Ukrainian companies have offices there.
The European Investment Bank will lend €270 million to rebuild Boryspil airport’s 50-year-old western runway, the EU bank announced Friday at its Luxembourg headquarters. In addition to replacing the obsolete 3,500 meter long concrete runway, the 20-year loan will go to improving de-icing, airfield lighting, and instrument landing. Looking beyond today’s coronavirus travel restrictions, Prime Minister Shmyhal said in Luxembourg: “The loan signed today for Boryspil International Airport will ensure the development of infrastructure and strengthen the position of the international hub.”
The EIB also is loaning Ukraine €50 million to buy Covid-19 vaccines and modern refrigeration equipment to store them, the bank reported Friday. Earlier, the World Bank announced it would loanvUkraine $89 million to buy vaccines.
Vaccinations are to start in Ukraine this week, Viktor Lyashko, chief sanitary doctor and deputy health minister, said Saturday. Over the next 10 weeks, 367,000 people are to be vaccinated – largely soldiers and Covid-19 doctors. By the end of this year, the Ministry hopes to vaccination almost half of the nation’s adults.
After six weeks of remote talks, an IMF team in Washington suspended its work Friday with Ukraine, awaiting “more progress.” Needed steps include adopting legislation to restore anti-corruption bodies, cleaning up the courts and phasing out price controls on natural gas. Goesta Ljungman, the IMF representative in Kyiv, said: “The discussions were productive, but more progress is needed to support completion of the first review under the program. Discussions will continue.”
At stake are soft loans of: $2.9 billion from the IMF, $750 million from the World Bank and €600 million from the EU. With $29 billion in foreign currency reserves and manageable debt repayments through the summer, many analysts say the government does not feel pressure.
Hours before talks were suspended, Dragon Capital wrote: “Moderate fiscal funding needs in the coming months suggest no urgency about IMF financing…We expect a $0.7bn second tranche in July-August and identical third disbursement closer to year-end.”
With Eurobond rates low, Ukraine may not feel urgency, analysts say. With the Biden Administration forming its policy and team for Ukraine, the IMF may be waiting to get clear signals from the US, its largest shareholder.
Tim Ash writes from London: “It’s always a frustration in Ukraine that in times of flush global market liquidity reform momentum stalls…Markets can of course turn… Ukrainian policy makers would thus be well advised not to bet everything on markets remaining open to them this year, and to try and get back to proper talks with the IMF ASAP.”
In response, President Zelenskiy promised to submit to the Rada this week needed draft bills to improve the judicial system and “insist” lawmakers debate them “quickly.” Finance Minister Serhiy Marchenko emailed Bloomberg to say: “Ukraine remains committed to its reforms agenda and fruitful partnership with the IMF.” Underlining the lack of urgency, presidential advisor Timofiy Milovanov, a supporter of reforms, told Interfax-Ukraine: “Financial and macroeconomic stability is maintained. There are no systemic risks. The situation with the budget is normal.”
Russian sanctioned eight more Ukrainian companies Friday, raising the total to 84. The new decrees includes: vessel maker Craneship, towage firm Donmar, cargo operator Transship and metal producer Maxima Metal. Last year, Russia added former President Petro Poroshenko and rock singer politician Svyatoslav Vakarchuk to its list of sanctioned Ukrainians, raising the total to 35.