The State Property Fund hopes to raise as much as $430 million this year by selling six large state companies, including Kyiv’s President Hotel, Kyiv Bolshevik Plant, the Odesa Portside Plant and United Mining and Chemical Company. Dmytro Sennychenko, head of the Fund, wrote on Facebook: “The Fund will bring the budget, through transparent privatization auctions in 2021, 4 times more than last year!” Included in the auction earnings goal is $110 million from small-scale privatizations. So far this year, $35 million has been raised.
Economy Minister Ihor Petrashko wrote on the Ministry website. He said: “Removing restrictions on the sale of large state-owned enterprises will not only fill the state budget, but also attract large amounts of private investment in the development of these companies and the economy of Ukraine.”
Secretary of State Antony Blinken couched the Kolomoiskiy bans in the framework of getting Ukraine back on a Western-style free market, low corruption track. “The United States continues to stand with all Ukrainians whose work drives reforms forward,” Blinken said. “The Department will continue to use authorities like this to promote accountability for corrupt actors in this region and globally.” Last month, Blinken singled out Zelenskiy’s ousted Prosecutor-General, Ruslan Ryaboshapka, as an “anti-corruption champion.”
In response to the Kolomoiskiy bans, Zelenskiy’s office said: “The battle with the oligarchs lies not only in the realm of criminal responsibility. It is also about creating the conditions in Ukraine, in which business can grow in a transparent and competitive environment, and large financial groups will not be able to dominate the market or influence the media and political decisions.”
On Thursday, the day before the Kolomoiskiy family bans were announced, the Washington-based Atlantic Council posted an essay headlined “Zelenskiy Aims to End Ukraine’s Oligarch Era,” written by Yuliia Mendel, Zelenskiy’s spokeswoman. “President Zelenskyy is now making good on his election promises and combating oligarch influence in ways that eluded his predecessors,” wrote Mendel. Listing a string of recent measures, including the closing of three TV stations owned by pro-Russian oligarchs, she concluded: “As events in recent weeks have shown, President Zelenskyy is prepared to challenge the power of Ukraine’s oligarchs everywhere from the energy and banking sectors to politics and the media.”
Denmark’s Maritime Authority expects Nord Stream 2 to be completed by the end of September 2021, several months later than forecast completion date. Reuters reports that a Russian pipe-laying vessel, Akademik Cherskiy, left Wismar, a German Baltic port, yesterday to join another Russian vessel, the Fortuna, in laying 120 km of pipe through Danish waters. The new gas pipeline is designed to double the capacity of the existing undersea Nord Stream gas pipeline from Russia to Germany, to 110 billion cubic meters per year. If commissioned, it would render Ukraine’s east-west pipeline system redundant.
Baker Hughes Co and AXA Group and 16 other international companies have withdrawn from the Nord Stream 2 gas pipeline to avoid US sanctions, Reuters reported. Washington has sanctioned the Fortuna’s owner and other Russian companies. Yet Russian companies are expected to try to complete the $11 billion Russia-Germany project despite US opposition. Texas Senator Ted Cruz is leading a Republican effort to pressure President Biden to widen sanctions against the project, Bloomberg reported from Washington.
Bidding in an online auction of a Ukrspirt distillery drove the price up almost five times, to $3.6 million, reported the State Property Fund. Thursday’s sale of the Vyshiakivka, Poltava is part of a plan to sell all 41 unites of Ukrspirt. In the second half of this year, major privatization will commence, notably the sales of: Kyiv’s President Hotel, the Bolshevik enterprise, the Odesa Port Plant, and the United Mining and Chemical Company.
By the end of this decade, Ukraine’s goal is to sell all state companies not protected from privatization and to transfer to concession 90% of companies enterprise protected from privatization. These goals are stated in the National Economic Strategy of Ukraine until 2030, approved last week by the Cabinet of Ministers. The plans include corporatizing all state-owned companies, introducing supervisory boards, ensuring the financial self-sufficiency, increasing the average return on equity of state-owned enterprises to 10%, and carrying out IPOs in international financial markets of at least two state companies.
With new coronavirus cases hitting 10,000 a day last week – double the rate of one month ago – over half of Ukrainians told pollsters they would support a new lockdown. If cases keep surging, 56% would back a lockdown, and 41% would oppose, respondents told the Rating Sociological Group last Tuesday and Wednesday. Two-thirds of respondents were in favor of closing restaurants, cafes, and cinemas during a lockdown. Support for other measures were: shutting down gyms – 58%; closing schools – 52%; closing urban mass transit – 20%.
In a separate poll, only one quarter of respondents told the Kyiv International Institute of Sociology that they would take a coronavirus vaccine. Of the 1,207 respondents, 60% said they would not take the vaccine. The poll concluded on Monday, before President Zelenskiy and Health Minister Maksym Stepanov were filmed taking the vaccine.
Under pressure for a slow start to vaccinations, Minister Stepanov told the Rada on Friday that all Ukrainian adults will be vaccinated by the end of this year. As of Thursday, only 10,000 people had been vaccinated – 10 days after the arrival of 500,000 AstraZeneca vaccines from India. A second load of 1.9 million Sinovac vaccines from China are expected to arrive one week from now.
Ukraine will open full-fledged embassies in Chile, Ghana and the Philippines this year, Foreign Minister Dmytro Kuleba told reporters on Friday. In addition to these new diplomatic posts, Ukraine will open consulates general in Mumbai, Wroclaw, Poland and Sighetu-Marmatiei, the Romanian city across the border from Zakarpattia.
Ukraine will allow dual citizenship with EU and “friendly countries,” Foreign Minister Kuleba said on Friday when he announced plans to allow dual citizenship in Ukraine with the EU countries. One goal is to reconnect Ukraine with Ukrainians who have emigrated since the collapse of the Soviet Union. As for Russia, he said: “This is an aggressor state, there can be no talk of any dual citizenship with it.”
Ukraine’s grain harvest is expected to rise by 15% to 75 million tons this year, returning to the bumper crop levels of 2019, Deputy Economy Minister Taras Vysotskyi wrote on Facebook. While the amount of grain planted is virtually unchanged, moisture levels in the ground lead government experts to forecast the following increases in output: corn +10% to 33 million tons; wheat +17.5 % to 29.5 million tons; and barley +18% to 9 million tons.
Oil crops are increase by 3.2% to 19 million tons. The harvest forecasts are: sunflower seeds +3% to 13.5 million tons; soy +11% to 3 million tons; and canola unchanged, at 2.6 million tons.
The State Department has barred Ihor Kolomoiskiy and his immediate family from entering the US. The bans come as the US Justice Department pursues a civil case alleging Kolomoiskiy and his business partner Hennadiy Boholyubov stole billions of dollars from PrivatBank and laundered the money by buying office buildings and steel companies in the US.
After Ukraine’s government nationalized PrivatBank in 2016, Kolomoiskiy left Ukraine for Switzerland and then for Israel, where he also holds citizenship. In 2019, Kolomoiskiy backed Zelenskiy in the Presidential campaign. After Zelenskiy won the first round, Kolomoiskiy returned to his native Dnipro. The US entry ban applies to Kolomoisky’s wife, Iryna Kolomoiska, his daughter, Angelika Kolomoiska, and his son, Israel Zvi Kolomoiskiy.
Kolomoyskiy and Boholyubov, who are both under investigation by the FBI for money laundering, are suing the US Government for attempting to seize their Texas commercial building worth $23 million, RFE/RL reported in a 1,000 word article from Washington. They say the US government’s actions violate the sovereignty of Ukraine. Last week, Optima Ventures, a U.S. real-estate holding company controlled by the pair, informed a Florida court that it will file for arbitration against the United States in the World Bank’s International Center for Settlement of Investment Disputes.
Millions of Ukrainians signed up in the first year of the government’s Diya mobile app for digital services. As a result, the number of partner agencies and companies is expected to increase 10-fold this year, to 1,000, reported the Digital Transformation Ministry. Under the ‘State in the Smartphone’ program, users can store: a child’s birth certificate, a certificate of an internally displaced person, a digital tax number, digital internal and foreign passports, driver’s license, registration certificate and car insurance. Users can pay traffic fines. Last month, almost half a million Ukrainians applied for one-time, 8,000-hryvnia quarantine relief payments.
By the end of next month, Diya users will be able to change their registered places of residence, use electronic signatures, and interact with government for taxes, medical records and construction permitting. “In 2021, Ukraine will enter into what we term as ‘paperless mode,’” Mykhailo Fedorov, Digital Transformation Minister wrote in an Atlantic Council blog. “In other words, if a service is not available online, this means it is not available offline.”
This year, five years after the Ukraine-EU free trade agreement went into force, both sides “are ready to start the review of trade liberalization for goods,” Valdis Dombrovskis, the European Commission’s Vice President for Economy, said on Wednesday at a press conference in Brussels with Ukrainian Prime Minister Shmyhal. “This will be an important step towards further improving access to our respective markets,” Dombrovskis said. “We hope that this positive trend between Ukraine and the EU will also strengthen the role of the EU as a key trade partner for Ukraine.”
In a blunt resolution approved Wednesday by 526 European Parliament members – three quarters of the total – the Euro Parliament criticizes Ukraine for weak progress on cleaning up the courts, for putting political pressure on the Central bank, for slow progress on bringing power plants up to EU standards, for profiteering attempts during the coronavirus attempts and for making “no visible” progress “in the de-oligarchisation of the country.” On reports of “attempts to purchase medical equipment at a disproportionately high price in the midst of a pandemic,” the parliamentarians “urge Ukraine to combat the pervasive nepotism and corruption that persist in its health sector, and especially in the Ministry of Health.”
Concorde Capital’s Yuri Svirko writes: “While the EP resolution will have no immediate effect on the EU-Ukraine relations, including the visa-free travel regime or further trade liberalization, it is still an early warning signal for Kyiv.”
Ukraine’s Anti-Corruption Prosecutor’s Office, or NABU, is investigating corruption reports surrounding the vaccine, Maksym Hryschusk, acting head of the unit told reporters Wednesday. Separately, a civil society watchdog group, NABU Public Control Council, charged that talks were underway to buy China’s Sinovac Biotech vaccine at $3 a dose, “however, subsequently, the Minister of Health Maksym Stepanov manually stopped this process and instructed to start negotiations on the purchase” at $17.85 a dose. Stepanov has said that different companies charge different prices.
Before the Euro Parliament vote, Josep Borrell the Commission’s de facto foreign minister, warned: “Despite notable progress, widespread corruption continues to hamper Ukraine’s reform process. Its key institutions must have strong and independent leadership and the chance to do their work free of political, economic or other interference.” The speech, delivered by Dombrovskis, concluded: “We urge all reform-oriented political factions to come together and give a clear signal of Ukraine’s determination to make its reform path irreversible.”
Many of the Euro Parliament recommendations coincide with “10 Steps for Ukraine’s Economic Recovery and Growth in 2021,” a charter released yesterday by the American Chamber of Commerce in Ukraine.
To speed up privatization of Ukraine’s 3,500 state companies, Mikheil Saakashvili’s Office of Simple Solutions and Results has sent to the Rada a package of bills that would deprive courts of the power to freeze sales, to give local communities 30% of sales proceeds, and to channel all other sales proceeds to improving state services. By creating these incentives, Saakashvili argues in a Kyiv Post opinion piece, Ukraine will find the will to cut the state companies which cost the Treasury $6.1 billion a year. He wrote that Ukraine has 63 times more state companies than Poland and 76 times more than Sweden.
The EU and the WHO said yesterday that they will spend €40 million over the next three years to help Ukraine and five other former Soviet republics to roll out vaccinations against Covid-19. WHO Europe Director Hans Kluge said progress is slow in the EU. Vaccinations are taking place in only 29 out of the 37 countries in the European region. He said: “Today, 7.8 million people have completed their immunization series. That is equivalent to only 1.5% of the population of those 29 countries.” Ukraine hopes to start vaccinating next week.
With snow forecast for all day today and into tomorrow, trucks are restricted from entering Kyiv City and from moving on many highways in Western Ukraine. Ukravtodor is using almost 1,000 snow plows to keep roads open. Ukrzaliznytsia is clearing tracks with 27 locomotives equipped with snow plows. Without counting snow drifts, snow depths have ranged from 50 cm in Hrebinka, Poltava, to 35 cm in Kyiv, to 25 cm in Lviv.
Foreign purchases of Ukrainian government bonds are returning to their peak levels of late 2019, reported Dragon Capital. Over the last month, foreign purchases totalled $526 million, “close to peak monthly inflows of $560-610m in September and December 2019,” Dragon wrote. “Recent appreciation pressure on the hryvnia (+1.4% w-o-w) is likely to support interest in local bonds. We expect yields on medium-term hryvnia debt to remain close to current levels in the coming months unless an upsurge in foreign demand drives them lower.”
State-owned PrivatBank was the most profitable bank in Ukraine last year, recording $910 million in net profit. The next four most profitable banks were: Raiffeisen Bank Aval – $145 million; state-owned Oschadbank – $101 million; FUIB – $94 million; and OTP Bank – $62 million. The biggest loss was recorded by state-owned Ukreximbank — $200 million.
The net profit of all Ukrainian banks amounted to $1.475 bln last year, or 29% less than 2019, reports the National Bank of Ukraine. Out of 73 banks operating in Ukraine last year, 65 were profitable, reported the Central Bank. The former owners of PrivatBank, billionaires Ihor Kolomoyskiy and Hennadiy Boholyubov, are undertaking court actions to return ownership of the bank. It was nationalized in December 2016 after auditors found a $5.5 billion hole in its accounts.
The US Embassy applauded the move yesterday, saying: “The United States supports Ukraine’s efforts yesterday to counter Russia’s malign influence, in line with Ukrainian law, in defense of its sovereignty and territorial integrity. We must all work together to prevent disinformation from being deployed as a weapon in an information war against sovereign states.”
The EU was more cautious, with the office of foreign policy chief Josep Borrell, saying: “This should not come at the expense of freedom of media and must be done in full respect of fundamental rights and freedoms and following international standards.”
Timothy Ash writes from London: “It was notable over the past 24 hours that President Zelenskiy went after Russian interests in Ukraine…Don’t think that Zelenskiy did this off the hoof. This was clearly in coordination, perhaps at the behest of the US. Zelenskiy is simply not strong enough to take on these interests without US backing.”
The European Investment Bank increased its new investments in Ukraine last year by 50% yoy, to more than €1 billion, bringing total EIB investment in Ukraine to €7.5 billion, Jean-Erik de Zagon, the bank’s resident representative for Ukraine, told reporters yesterday. Bank Vice-President Teresa Czerwińska said Ukraine now receives 60% of EIB money destined for the Eastern Neighborhood, a group of 16 countries to the east and the south of the EU. She said: “We delivered record investment of over €1 billion in Ukraine in 2020, focusing our operations on support for conflict-affected regions of eastern Ukraine, sustainable and green infrastructure, digitalization, innovation and business recovery after COVID-19.”
For this year, the EIB has agreed to repurpose €50 million from an existing facility to finance buying corona vaccines for Ukraine. Yesterday, the Cabinet of Ministers approved taking a €270 million loan for Boryspil International Airport. The money is to go to replacing the 40-year-old main runway, and adding new lights, de-icing facilities and an emergency rescue station. The EIB also is discussing with the government a major loan to improve rural drinking water across the country, reported the government portal.
Last month, a record 14 Chinese container trains rolled across Ukraine, reports Ukrzaliznytsia. The top destinations were: Poland – 7; Hungary – 6; Slovakia – 1. Two container trains from China finished their 2-week trip at UZ’s logistics center in Liski, on the left bank of Kyiv.
Kyiv’s tourism tax collections nearly dropped in half last year, falling to $1.2 million, according to the State Tax Service. Never a major source of revenue, the tax is a good barometer of tourism activity.
In a potential boon for Ukrainian IT startups, unused university real estate may be privatized three years of abandonment, according to a bill that has won preliminary approval of the Rada. In the US, several IT hubs, including California’s Silicon Valley and Boston’s Route 128 ‘Technology Corridor’, grew up around universities strong in science and engineering.
Leases to rent more than 2 million square meters of vacant government real estate across Ukraine will come up for online auction, the State Property Fund reports. In the first year of online auctions, 991 leases were sold and rents averaged 54% higher, says Leonid Antonenko, first deputy chair of the Fund. In coming weeks, 621 more leases will come up for auction. As leases expire, terms on about 10,000 more will be decided through public auctions.
The sale of prisons will start this month, Justice Minister Denis Malyuska tells Ukrainian Radio. This year, four abandoned prisons are to be sold through ProZorro.Sale, the online auction house. Over the last decade, Ukraine’s prison population had gradually reduced to 50,000 today. Reasons include: a declining population of young men, government policies to promote releases on parole, and a reluctance to incarcerate white collar criminals.
In a decisive move to ally firmly with the new Biden Administration, President Zelenskiy closed three pro-Russian TV stations yesterday, imposing 5-year sanctions on the stations and their legal owner, Rada MP Taras Kozak. Ukraine’s National Security and Defense Council alleged that Kozak funded the stations through sales of coal from Russia-controlled Donbas, an act the Council classified as ‘funding terrorism.’
During the first 10 months of Covid controls, UIA has paid passengers back $26.5 million for flights affected by the pandemic. During this April-January period, “the airline has considered more than 101,000 passenger appeals,” UIA said yesterday in a press statement. The airline said Covid controls cut its 2020 passenger volume to 15% the level of 2019. Short staffed, the airline has augmented its online ‘Manage my Booking’ service. Details for refunds or credits for future travel can be found here.
Media reports allege the three stations lose $1.5 million a month and the real source of funds is the Kremlin. Most TV stations lose money in Ukraine and are subsidized to promote the political groups, of major businessmen, or oligarchs. The stations — 112 Ukraine, NewsOne and ZIK – had a total audience share of only 5%. But their news stations had higher ratings. Yesterday afternoon, after the stations continued streaming through YouTube, Oleksandr Tkachenko, Minister of Culture and Information Policy, asked YouTube to cut them off.
Regional TV stations will be vetted for pro-Russian content and possible closures, Oleksiy Danilov, secretary of the Defense Council, warned yesterday at a briefing aired by Ukraine 24 TV. “The state will be tough because we’re in an extremely difficult situation today,” he said. “We’re at war. Everyone needs to realize and understand this.”
Also sanctioned are the two private jet companies used by Kozak and Victor Medvedchuk, leader of the pro-Russia Opposition Platform For Life, in their flights from Ukraine to Moscow and Russia-controlled Crimea. Medvedchuk, a friend of Russian President Vladimir Putin, is widely seen as the real owner of the three TV stations. Yesterday, the 44-member, Opposition Platform accused Zelenskiy of censorship, called him a ‘fascist devil,’ and voted to impeach him. In the 424-seat chamber, that move is expected to go nowhere.
Aware of the IMF’s core attachment to market prices for gas, acting Energy Minister Yuriy Vitrenko and Finance Minister Serhiy Marchenko also explained the government’s position to IMF representatives. “They are concerned that we are revising some of our earlier commitments,” Marchenko told NV Radio yesterday, referring to the IMF. There are no grounds, he added, “to say that we have already done something very bad.”
From London, Timothy Ash stressed the importance of market prices for a major source of Ukraine’s heat and electricity: “The move to market-based gas pricing in Ukraine has produced huge wins in recent years – it’s helped slash gas consumption from plus 70 bcm to less than 30 bcm, cutting the energy import bill from $12bn per annum, to perhaps $2-3bn, and also cut the quasi-fiscal deficit by 4-5% of GDP, given the huge subsidies previously given to Naftogaz. That has also cut a huge amount of graft from the system. Estimates had suggested that Ukrainian elites were perhaps creaming off $3bn annually from the gas business.”
Spawning street protests in at least eight regional capitals, the spike in Ukraine’s gas prices stems from: cold weather, high prices in Europe, and a poorly implemented market opening that allows price gouging by suppliers. Ash again: “The Zelenskiy team will argue that this is not aimed as a major reversal in market-based energy pricing, but is a reaction to oligopoly pricing by a few bad actors in the industry. Essentially Naftogaz seems to be selling gas to consumers at UAH7 per kWh, whereas other operators are selling at prices nearer to UAH11-12 per kWh. Naftogaz can do this as it bought gas into storage cheaply and is trying to take market share.”
At stake is $2.9 billion of low interest loans remaining to be disbursed from the IMF’s $5 billion Stand-By Arrangement of last summer. The agreement is widely seen as a seal of approval for Ukraine’s economic policies, an approval that lowers Eurobond rates for Ukrainian borrowers and, ideally, gives a green light to foreign brick and mortar investors. While discussions behind closed doors in Kyiv have been heated, in Washington, IMF Spokesman Jerry Rice merely told reporters yesterday: “The first review of the Stand-By agreement continues.”
One year after the last-minute renegotiation of Ukraine’s gas transit deal with Gazprom, Naftogaz reports that the Russian state company paid its 2020 bill in full — $2.1 billion. Gazprom paid for shipping the total booked amount – 65 billion cubic meters. By year’s end, Gazprom had shipped only 86% of that amount — 55.8 bcm. This year through 2024, Gazprom is contracted to ship 40 bcm a year through Ukraine’s pipelines.
Today, the US State Department is expected to issue a report listing which European companies working on Nord Stream 2 will be subject to US sanctions, Reuters reports from Washington. In advance, Rambøll, Danish, a consulting engineering company, dropped out of the $11 billion Russia-Germany gas line project this week. The company had done environmental impact studies, reports Politiken, the Copenhagen newspaper. A few days earlier, Norway’s Det Norske Veritas GL, which was to certify the1,230 km pipeline upon completion, also dropped out of Nord Stream 2.
TIU Canada of Calgary is suing Nikopol Ferroalloy Plant for disconnecting the Canadians’ 10.5 MW solar plant last March, ostensibly because the Ferroalloy Plant did not want to pay green power rates. The trial started Wednesday in Kyiv Commercial Court with TIU charging that the shutdown has cost them €1.5 million over the last 10 months. The solar plant connects to a substation on the grounds of the Ferroalloy Plant, which is owned by Igor Kolomoisky, Gennadiy Bogolyubov, and Viktor Pinchuk. TIU maintains that under Ukrainian law, only electricity producers can disconnect a plant from the national power grid.
Ukraine’s coal production fell by 7% last year, hitting 29 million tons, near the level of 1916, reports the Energy Ministry. Employment in coal mines is about 30,000 today – 6% the level of the end of the Soviet period. In the last 15 years, government subsidies to coal mines have been cut from $8 billion a year to less than $500 million a year today.
Western Ukraine Coal Construction, Ukraine’s last state company devoted to building coal mines, goes up for auction in 10 days, reports the State Property Fund. The company has 15,700 square meters at its headquarters in Chervonograd, Lviv region and nine hectares at a miners’ resort in Volyn’s lake region. Bids start at $400,000.
The State Property Fund plans to sell 500 state properties this year to private owners, Dmytro Sennychenko, the head of the Fund, wrote on Facebook. “Privatization grows jobs, improves the socio-economic state of the regions, and the state ceases to spend taxpayers’ funds on damages,” he wrote. Obstacles include: the need to follow 70 procedures for each property sale, “sabotage by enterprise management or its ′shadow ′ executives,” and the lack of final Rada approval to lift last year’s suspension of big sales.
Regional airports are primed for a post pandemic takeoff. UkSATSE traffic numbers for 2020 confirmed the dominance of Kyiv’s two big airports – Boryspil (47,524 flights) and Sikorsky (12,805). The air traffic control agency’s graphic on Facebook shows a second layer that is catching up with Sikorsky: Lviv (9,850), Odesa (9,282), and Kharkiv (7,576). A third layer shows potential: Dnipro (4,174), Poltava (4,119) and Zaporizhia (4,087). This winter, Dnipro starts a 3-year, $100 million rebuild of its runway and terminal. Last spring, Zaporizhia inaugurated its new terminal. And Poltava’s air traffic is entirely charter aircraft. Scheduled flights are expected to follow — once EU travel restrictions lift.
The EBRD is working with the Infrastructure Ministry to create dedicated funds to develop Ukraine’s airports and railway infrastructure, Minister Vladyslav Krykliy said yesterday on the ministry website. In an attempt to emulate the Road Fund, “the EBRD has already allocated funding and selected consultants to analyze international experience, develop a concept and write relevant legislation,” Krikliy said. The EBRD also gave the Minister a report yesterday assessing the ministry’s capacity to execute public partnerships with private companies.
The government’s plan to cut gas prices by one third is sparking a flurry of meetings between the IMF representative and government ministers. “We had a constructive meeting with the IMF on gas prices,” Prime Minister Shmygal wrote yesterday evening on Telegram. “Our Government’s position: the gas market in Ukraine must work. Unfortunately, some market players continue to abuse the position that Ukrainians suffer from.”