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.
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.”
” 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.”
Ukrzaliznytsia passenger service – which has been hemorrhaging money loser – lost 26% more of its income in the last year, a total of $314 million, said Volodomyr Zhmak, the state railroad’s CEO, yesterday. Due to quarantine restrictions on travel, passenger traffic decreased by 56%, to 68 million passengers. Estimating that the railroad’s locomotives and cars are “90% worn out,” Zhmak praised the government for allocating $145 million this year for the renovation of rolling stock. In Ukraine, freight subsidizes passenger service.
The share of UZ cars in freight trains has dropped in half – from 47% in 2018 to 21% in 2021, Zhmak said. This year, Zhmak wants to increase the UZ portion to 40%. Private cars are more popular because they are cheaper and in better shape. Critics charge UZ drags its feet on pilot projects to allow private freight trains on UZ tracks.
Former Ukrzaliznytsia CEO Wojciech Balczun is co-owner of Aurum Polonez, an amber mining company in Klesiv, northern Rivne oblast, according to Nadra.info. A Polish rock musician, Balczun ran UZ in 2016-2017. His partners are Poland’s Amos Investments and Mykola Nemtsov, who was UZ’s acting director of security during Balczun’s time at the railroad.
Egis Ukraina, a French-financed engineering company working in Ukraine for the last three decades, has entered into a joint venture with Ertle, Ltd, an international engineering and construction holding, known locally as Derffer. The new company is called Egis Ertle Engineering. Ignace Haertlé, founder of the Ertle Group and major Derffer shareholder, notes that the company worked on the NOVARKA new safe confinement for Chornobyl, saying: “Through the years, we have delivered projects for both international and local clients including turnkey contracts, reconstructions, adaptations.”
Half of Ukrainians seeking work abroad want to go to Poland, with two thirds looking for seasonal work, according to an OLX Work survey last month of 7,700 Ukrainian job seekers. The other top two destinations are: the Czech Republic – 11%; and Germany – 9%. The primary reasons are: high salaries in the EU – 60%; and difficult financial situation at home – 39%. Construction and factory work account for half of the jobs sought.
Resistance to vaccinations against the coronavirus is high and growing in Ukraine, the AP reports in an article headlined: “Wide resistance to vaccines plagues Ukraine’s COVID-19 fight.” The portion of poll respondents who do not want to get vaccinated rose from 40% in February to 60% in March 2021, according to polls of 1,200 Ukrainians conducted by the Kyiv International Institute of Sociology. In the first half of 2019, resistance to measles vaccinations lead to 5,000 cases in Kyiv and 50,000 nationwide.
The Health Ministry reported that 40% of medical workers say they do not want to be vaccinated. In the Donetsk village of Selydove, a visiting AP reporter found that only 5% of medical workers agreed to be vaccinated. Thirty kilometers away, in the frontline town of Krasnohorivka, AP reported: “Soldiers widely refused to be vaccinated.”
Ukraine and Israel are negotiating mutual recognition of “vaccination passports” for tourist travel, Yevhen Korniychuk, Ukraine’s Ambassador to Israel, told Ukraine 24 TV. In September, more than 4,000 Hasidic Jewish pilgrims plan to travel to Uman, Cherkasy region, for the High Holidays. Although Israel has the world’s highest vaccination rate for a major country – 44% — some Orthodox Jews refuse to be vaccinated.
UIA said that it has refunded $2.5 million to travelers last month for flights cancelled due to COVID-19. These refunds, up to 15,000 passengers, brings to $29 million the airline has refunded to customers over the last year.
Passenger traffic at Kyiv Boryspil was down by two thirds during the first two months of this year, compared to January-February 2020, reported the Center for Transportation Studies. With UIA’s suspension of its hub system, transfer passengers were down 94%, to 20,018. Passengers on regular, scheduled flights were down 75%, to 373,726. Faring best were vacationers on charter flights, which were down by 30%, to 298,332.
A total of 1,000 people a day crossed the two checkpoints with Russia-controlled Crimea last month, reported Ukraine’s State Border Guard Service. This volume – 27,300 people – was down 88% compared to February, 2019.
In the last six months, Ukraine’s Central Bank has moved from collegiality to Soviet-style centralism, Kateryna Rozhkova, First Deputy Governor of the National Bank of Ukraine, said in a lengthy interview with NV. “There’s actually a rollback,” she says. Relations with the new Governor of the Central Bank have become so frosty that they only communicate in group meetings, on Zoom. She said: “If there are any questions and I comment on something, he comments on something. It does not mean that we communicate with him.”
Hours after the interview with NV was posted on Facebook yesterday, the bank’s communications department tried — unsuccessfully — to censor the interview. Rozhkova also complained that she is no longer invited to key meetings and that her opinions are not heard on PrivatBank, the bank she helped to nationalize in 2016. In response, Galyna Kalachova, the bank spokeswoman, wrote on Facebook that Rozhkova had been asked to edit the text to reflect bank policy. She wrote: “One-voice policy is important.”
Independence of the Central Bank became the critical issue with the IMF last summer after President Zelenskiy pushed out the internationally known and respected governor, Yakiv Smoliy. In the ensuing shakeup, several top officials left the bank and Rozhkova’s responsibilities were reduced. The public dispute comes one week after the bank raised prime for the first time in two year, to 6.5%. President Zelenskiy favors easy money policies.
With the $5 billion IMF lending program to Ukraine suspended, Bloomberg and Reuters moved stories yesterday on the spat. Bloomberg headlined: “Another Ukrainian Central Banker Speaks Out on Governance Fears.” Reuters headlined: “Ukraine central bank denies it tried to censor top official.”
Mining World.com argues that Ukrainian miners focus on the easy pickings: vast deposits of high quality iron ore. “Ukraine is developing its raw material potential one-sidedly,” reports the website. “A limited range of minerals used in the coal–iron ore –steel chain. The industry still has untapped reserves of rare-earth materials left intact.”
“Ukraine harbors significant reserves of non-ferrous and rare-earth metals including unique deposits of beryllium, zirconium, tantalum, and a complex of phosphoric rare-earth and rare-metal ores,” reports MiningWorld.com. “Ukraine’s confirmed reserves of lithium are the largest in Europe. The country also has a real opportunity to enter the global market with pure and ultra-pure metals such as gallium, indium, thallium, lead, and tin…Ukraine just needs to harness its mineral resources to thrive. For this to happen, new technologies and large investments are needed.”
“Deposits of less-common metals and rare-earth group are of special value,” reads the World Data Center’s National Atlas of Ukraine. “Geologists have [mapped the] Perha deposit of beryllium in Zhytomyr Oblast, large Azov deposit of rare-earth group in Donetsk Oblast, Polokhivka and Stankuvate deposits of lithium in Kirovohrad Oblast.”
A Japan-Ukraine free trade pact and cooperation between the Japan Space Agency and Dnipro’s Pivdenne Design Bureau are on the horizon for the 2020s, Serhiy Korsunsky, Ukraine’s Ambassador to Japan said Tuesday at a Kyiv forum on bilateral relations. “There have already been several dozen such meetings – this is the beginning of negotiations on a free trade agreement,” said Korsunsky, who arrived in Tokyo last fall. He said work is advanced on updating a Soviet-era convention on avoiding double taxation, Ukrinform reports.
Canada and Ukraine plan to start talks this year to expand the 2017 Canada-Ukraine Free Trade Agreement to cover services and investments, Ukraine’s Foreign Ministry reports. On Tuesday, Marc Garneau, Canada’s new Foreign Minister, had an extensive telephone call with Dmytro Kuleba, Ukraine’s Foreign Minister, to review the bilateral relationship.
The Biden Administration “is reviewing US policy” toward Nord Stream 2, while letting a deadline for more sanctions to pass on Tuesday, The Wall Street Journal reported yesterday from Washington. With US policy on the $11 billion Russia-Germany natural gas line apparently in flux, several US representatives wrote a letter yesterday to Secretary of State Antony Blinken demanding a briefing. The bipartisan letter warns: “If completed, Nord Stream 2 would enable the Putin regime to further weaponize Russia’s energy resources to exert political pressure throughout Europe.”
Timothy Ash writes of compromise solutions aired in the last two days: “These are not solutions but rather “sell outs” when viewed from Ukrainian perspective, which would bring the pipeline on stream. Surely the Biden team, which was supposedly going to be tough on Russia, are not going to sell Ukraine down the river or the tube at the first opportunity?”
With train passenger rider volumes at half the levels of one year ago, Ukrzaliznytsia plans to lay off 30,000 workers, about 11% of the 260,000 total, Vadim Bubnyak, chairman of the Trade Union of Railway Workers and Transport Builders of Ukraine, told reporters Tuesday. Yesterday, employees of the state railroad staged a protest in front of the Cabinet of Ministers.
Aiming to introduce Wi-Fi Internet on all intercity trains, Ukrzaliznytsia plans to launch a pilot project shortly on one of the most popular routes – Kyiv-Kharkiv-Kyiv, announces Volodymyr Reznik, the railroad’s IT Director. “Intercity + trains are often used as offices on wheels, so in these trains it is first of all important to ensure high-quality Internet access,” he says. “If this project is successful, we will introduce Wi-Fi in all trains, ensuring uninterrupted communication throughout the journey of trains through Ukraine.”
Offering Ukraine as a transport corridor for shipment of goods between Turkey and Sweden, Ukrzaliznytsia has proposed specific routes, Edwin Berzins, head of the railroad’s Liski terminal in Kyiv, told web conference co-sponsored with the Polish port of Gdansk: “Creating a new corridor between the Baltic and Black Seas.” He said last week: “We have proposed an exact calculated route — Turkey-Ukraine-Poland — together with partners in this project.”
Poland’s PKP Cargo wants to develop a border terminal at Medyk as a transit point for Europe’s East-West trade with China. Located three kilometers west of Lviv oblast, the Polish terminal has two parallel sets of tracks: EU gauge and the wider gauger of the former Soviet Union. “The company can reload containers that should appear in the near future, thanks to new intermodal lines from China through Ukraine,” Witold Strobel, a PKP board member, tells the Center for Transportation Strategies.
China surpassed the U.S. last year as the EU’s top trading partner, Eurostat, the EU’s statistical office, reported Monday. “In 2020, China was the EU’s main partner,” the agency reported. “This result was due to an increase in imports (+ 5.6%) and exports (+ 2.2%).” The EU’s trade deficit with China rose to $219 billion last year, from $199 billion in 2019. With more and more cargo moving by rail, Belarus and Ukraine are competing to win this transit traffic.
Metinvest, Ukraine’s largest private company, plans to increase its capital expenditures this year by about 25% yoy, to $800-850 million, Oleksandr Lyubarev, corporate finance and treasury director, said Tuesday in an analyst call on the company’s 2020 results. Thanks to strong steel prices, the integrated mining and steel conglomerate starts this year with a cash pile of $826 million. Metinvest’s EBITDA in 2020 increased by 74% YoY to $1.8bln. While mining was little changed, at $1.1 billion, metals contributed an extra $900 million, compared to 2019.
Dragon Capital writes: “Metinvest’s 2020 results were expectedly strong thanks to a surge in iron ore and steel prices in 2H20…During the call, management sounded optimistic about the prospects for 2021, with both iron ore and steel prices remaining strong.”
With China accounting for 80% of rare-earth imports into the U.S., Ukraine could benefit from Washington’s growing nervousness about supplies, mining experts say. Rare earths are essential for production of goods ranging from smart phones to fighter jets. “China is exploring whether it can hurt U.S. defense contractors by limiting supplies of rare-earth minerals that are critical to the industry,” the Financial Times reported Tuesday. Chinese rare earth producers told the FT that Chinese government officials had asked them how badly US and EU companies would be affected if China restricts rare-earth exports during bilateral disputes. Earlier, Bloomberg outlined the threat in a lengthy report: “How China Overpowered the U.S. to Win the Battle for Rare Earths.”