Despite the global economic recession, Ukraine’s trade deficit dropped in half last year, from $10.22 billion to $4.9 billion in 2020, Taras Kachka, Ukraine’s Trade Representative, wrote on Facebook. Helped by strong commodity prices, Ukraine’s exports were down only 1.7%, to $49.3 billion, he writes. In the month of December, exports were up 18% yoy, to $4.9 billion. Kachka writes: “The secret of December numbers is pretty simple – metal and ore prices are rising worldwide at a crazy rate.”
Despite a poor harvest, exports of the top three grains – corn, wheat and barley – were down only 2.3% yoy in dollar terms, to $9.4 billion for 2020. “Due to the reduction in the harvest, physical exports are smaller than last year,” wrote Kachka, who is also deputy minister of Economic Development, Trade and Agriculture. “But this decrease in physical exports is compensated for price increases.”
With new US sanctions on Nord Stream 2 made final by Friday’s vote in the US Senate, the Norwegian company, Det Norske Veritas (DNV) GL announced Saturday that it will not be able to certify the $11.6 billion Russia-German Baltic gas line, RBK news site reports from Moscow. “Due to the current situation, DNV GL is unable to issue a certificate upon completion of the pipeline,” DNV GL told RBK. “DNV GL will cease all inspection activities of the Nord Stream 2 pipeline system in accordance with the sanctions and as long as these sanctions remain in effect.”
“Russia Pushes Ahead on Europe Gas Link Before U.S. Sanctions,” headlines a Bloomberg story posted Thursday, the day before the US Senate vote. With 150 km of the 1,230 km pipeline left to be laid, Nord Stream 2 has planned to start work on Jan. 15, using the ‘Fortuna,’ a Russian pipe line laying vessel capable of laying one kilometer a day. “I firmly believe the pipeline will be completed,” Uniper SE Chief Executive Officer Andreas Schierenbeck told Germany’s Rheinische Post on Wednesday. But, in Warsaw, Mateusz Kubiak, an analyst at Esperis energy consultancy, predicted the US Senate vote and said: “All of the additional pipe-laying activities will now be sanctioned, including surveying, trenching and rock placement.”
“US imposes new sanctions to kill off Putin’s pet pipeline,” headlines an Atlantic Council piece by Diane Francis, posted Saturday. “It means almost certain doom for Putin’s most important energy project and prevents Russia from tightening its control over EU natural gas supplies,” she writes of the sanctions which severely penalize companies constructing, insuring and certifying Nord Stream 2. Warning of the pipeline’s geopolitical significance, she adds that the gas line “would also damage Ukraine by rendering the country’s gas transportation system largely redundant and depriving Kyiv of significant transit revenues.” Francis quotes Senator Ted Cruz, a Texas Republican, predicting last month: “This project will never deliver gas.”
Russia cut its volume of gas pumped across Ukraine by 38% in 2020, compared to the previous year. Although Gazprom pumped 55.8 billion cubic meters through Ukraine’s east-west pipeline system, Russia’s state gas export monopoly will pay for the full 65 bcm contracted for 2020, reports the Gas Transmission System Operator of Ukraine. This year through 2024, Gazprom is contracted to ship 40 bcm a year through Ukraine.
In reverse, gas transportation from Europe to Ukraine hit almost 16 bcm last year, 12% more than in 2019 and 27% more than the annual average for 2016-18. About 10 bcm went into storage as 52 Ukrainian companies and 30 foreign ones took advantage of Ukraine’s new ‘short-haul’ and ‘customs warehouse’ storage regimes. With the start of the European winter heating system, draw down from storage started in November. Today, EU gas prices are at a 2-year high. Next April, Ukraine will have 7 bcm of available storage space, forecasts Ukrtransgaz.
Serbian President Aleksandar Vučić opened Friday Serbia’s 403 km extension of the Balkan Stream natural-gas pipeline, AP reports from Belgrade. Fuel for the line comes from Anapa, Russia, and then flow 930 km across the Black Sea in TurkStream. From northern Turkey, the line supplies Bulgaria, Romania and now, Serbia. It’s opening last year caused the sharp drop in Russian gas flowing across Ukraine. A Balkan Stream extension is planned to Hungary, currently a major importer of Russian gas through Ukraine. Last July, U.S. Secretary of State Mike Pompeo denounced TurkStream and Nord Stream 2 as “Kremlin tools.”
Pumped from the Tristar Ruby, a US cargo of LNG from Cove Point, Maryland inaugurated last weekend Croatia’s first liquefied natural gas landing terminal at Krk, an island in the northern Adriatic. POWERGLOBE, a Qatar company, has booked the terminal’s full capacity through 2023, largely with gas from the US and Qatar, reports CEEnergy News. With the terminal’s capacity equal to Croatia’s current consumption of 2.9 bcm, almost all from Gazprom, Ukraine is negotiating with Croatia and Hungary to send the US and Qatar gas to Ukraine, Serhiy Makogon, head of Ukraine’s Gas Transmission System Operator, writes on his Facebook page. Krk is about 1,000 km southwest of Chop, Zakarpattia.
Separately, Azeri gas has started moving through the new Trans Adriatic Pipeline, Interfax-Azerbaijan reports from Baku, citing Azerbaijan’s Energy Ministry. This 878 km pipeline picks up Azeri gas from Turkey’s terminus of the Trans-Anatolia Pipeline and then pushes it across northern Greece, Albania, under the Adriatic and, finally to Italy, near Brindisi. Competing with Russian pipelines, the Azeri pipeline is designed to transport 10 bcm a year from the Shah Deniz field in the Caspian. The pipeline design allows for compressors to double capacity to 20 bcm. For comparison, Ukraine imported about 14 bcm for internal consumption in 2020.
Tomasz Fiala, CEO of Dragon Capital, and Ivan Svitek, former Chairman of Alfa Bank Ukraine, have signed an agreement to buy Unex Bank from Vadim Novinsky’s Smart Holding. “The Antimonopoly Committee of Ukraine has already approved the agreement,” Smart Holding said Thursday. Last year, Fiala and Svitek, both Czechs, tried to buy Idea Bank, but could not come to terms with the Polish owner over price, reports Interfax-Ukraine. The price for Unex has not been disclosed. According to the National Bank of Ukraine, Unex has $28 million in assets, making it rank 64th among the 74 banks operating in Ukraine.
To prevent a strengthening of the hryvnia, the central bank bought a net $335.5 million on the interbank market in December. By contrast, during the whole year, the bank bought a net $1.1 billion, reports the National Bank of Ukraine. The Bank intervenes to prevent exchange rate volatility. The 2021 budget is predicated on an average exchange rate this year of UAH 29.1 per dollar, a 3% devaluation from today’s rate of 28.27.
Ukraine’s minimum wage increased Friday by $35, $212 per month. On Dec. 1, it increases to $230. With the minimum wage largely used to calculate pensions, Ukraine’s average monthly wage is $480.
Real wages were up 8% yoy in November, reports the State Statistics Service. Nationally, the average nominal wage was $404. In Kyiv, the wage was 54% higher — $622. Nationwide, the biggest regional increases were: Luhansk and Chernivsti + 21%; Ternopil and Mykolaiv + 20%; Khmelnytsky and Rivne +18.5%; Ivano-Frankivsk and Kherson +18%), and Sumy and Kirovohrad +15%.
Concorde Capital’s Evgeniya Akhtyrko writes: “Retail sales in Ukraine are booming, backed by fast growth of real wages. Strong household consumption is helping the economy to offset falling investments.”
Investments were down 24% in the third quarter, compared to the same July-September period in 2019. The Central Bank attributes this to uncertainty over the Covid-19 pandemic and freezing of solar and wind projects due to unpaid electricity bills by the state.
To mitigate the impact of the upcoming Covid quarantine, the government last week distributed $80 million in aid to 278,000 employees and small business owners, the Digitalization Ministry reports. With all applications coming in through the new Diya, or Action, portal, the government plans to make all payments by this Thursday. Each payment is UAH 8,000, or $283.
Restaurants and bars can stay open until 7 am on New Year’s Day, the Cabinet of Ministers has decreed. The following weekend, on Friday January 8, a 2-week strict lockdown is to be imposed nationwide, closing restaurants, non-grocery stores, fitness centers, shopping malls, hostels, and all schools, but not kindergartens.
China, already Ukraine’s largest trading partner, could increase its two-way trade with Ukraine by 50%, to $20 billion by 2025, Irina Nikorak, executive director of Silk Link, Ukraine’s Silk Road Association, told Xinhua news agency. She said a cooperation plan for joint construction of the Belt and Road Initiative was signed Wednesday at the fourth meeting of the China-Ukraine Inter-government Cooperation Committee, co-chaired via video link by Chinese Vice Premier Liu He and Ukrainian Deputy Prime Minister Olha Stefanishina. Nikorak said Ukraine wants to become a logistics hub connecting Europe and Asia and Ukraine offers joint projects for food processing, industrial parks and IT development zones.
Ukraine is negotiating with a Chinese manufacturer for a supply of vaccines against Covid-19, Ukraine’s Foreign Minister Dmitry Kuleba said Thursday on Ukraine 24 TV channel.
Of the 30 million ‘economically active’ Ukrainians, only 37%, or 10.9 million, pay taxes, Oleksiy Lyubchenko, Head of the State Tax Service, said recently on the Freedom of Speech show of Ukraina TV. Far from getting better, today’s number of taxpayers is about half of the number of 15 years ago, he said. According to 2019 statistics, 11.8 million Ukrainians who are able to work “did not make any money,” Lyubchenko said. To him, this means that most work unofficially.
The top tax dodging regions are largely in the West: Uzhgorod – 63%; Chernivtsi – 53%; Odesa — 48%; and Lviv — 46%. In central Ukraine, rates are better: Kyiv – 30%; Chernihiv and Poltava – 31%.
Off the books transactions account for “somewhere over 50%” of GDP, Danil Getmantsev, ruling party MP and chair of the Rada committee on finance, tax and customs policy, told Radio Liberty. He called it “too optimistic” and Ernst & Young estimated earlier this year 24% of GDP. Even this rate is “terrible” as the government seeks to move Ukraine toward a tax-paying, EU standard economy.
In one step, 100,000 small businesses have downloaded the ‘cash register in a smart phone’ app since its debut August 1, 2020 Getmantsev said. As a result, there have been 100 million sales receipts using this technology. The protests in the last two weeks by small businesses of the Save FOP movement, he charges, are led by people who want to abolish cash registers altogether.
Legalized gambling will bring in $270 million in new tax revenues in 2021, Hetmantsev predicted in the Radio Svoboda interview. Gambling in high-end hotel casinos is to start in Ukraine next year.
Ukrainian Insurance Group, a unit of Vienna Insurance Group, has paid $1.3 million for a cargo of wheat destroyed on August 4 in the massive port explosion in Beirut. The cargo was insured against all risks, the company said.
In 2021, Ukraine’s air travel will only rebound to half the level of 2019, Infrastructure Minister Vladyslav Krikliy estimated in a year end interview with Channel 24. The 2019 level 25 million passengers will only be attained in 2023, he predicts.
President Zelenskiy signed on Friday the national budget for 2021. Expenditures are to be $46.5 billion and revenues are $38.2 billion. The deficit of $8.3 billion is to be 5.5% of GDP, forecast at $150 billion. For the Big Construction roads program, $5.3 billion is to be spent.
Wizz Air plans to fly from Vinnytsia, its sixth Ukrainian city, Vinnytsia Mayor, Serhiy Morgunov, told Avianews. He said: “We are talking about the potential opening of flights from Vinnitsa to Berlin, Budapest, Vienna and Warsaw.” The Budapest-based discount carrier currently flies from Kyiv Sikorsky, Kharkiv, Lviv, Odesa and Zaporizhia.
The budget is built around these numbers for 2021: GDP growth — 4.6%; inflation — 7.3%, public debt to GDP at 65%; average exchange rate — UAH 29.1 per dollar (versus UAH 28.39 today). Starting Friday, the minimum monthly wage increases to UAH 6,000, or $211. The budget predicts an average monthly salary of $480.
In 2021, the Infrastructure Ministry plans to spend $21 million to upgrade the runway of Vinnytsia, the nation’s 11th busiest airport. At the same time, the city is going to upgrade the terminal to simultaneously handle two medium haul jets of the Boeing 737 size. In 2018, the airport handled 60,000 passengers, a recent peak. After losing UIA service to Boryspil that year, the airport reverted to only serving charter flights.
Retail sales for this year through November are up 8% in real terms, compared to the same 11-month period in 2019, reports the State Statistics Service. In November alone, retail sales were up 12.1% yoy in real terms. Analysts say this indicates that merchants were able to work about the three weekends of retail lockdown in November.
Starting today, Turkey, the top foreign travel destination for Ukrainians, requires a negative result of PCR coronavirus test performed 72 hours before arrival. Egypt, the other leading destination for Ukrainians, adopted a similar requirement earlier this month.
In a rebuff to China, Ukraine’s Foreign Affairs Ministry has decided to remove all Huawei equipment from its buildings. “Several other government agencies have followed this example,” the Foreign Ministry said. Prime Minister Shmygal tweeted that Ukraine is joining the US ‘Clean Network’ initiative, which aims to protect confidential information and intellectual property. He tweeted: “Ukraine supports the principles of The Clean Network and will remain a reliable partner for investments by technology companies from all over the world.” US officials say this move will help Ukraine integrate into NATO and the EU, as most members of these alliances are in The Clean Network.
The US government may help Ukraine pay the price difference between Huawei equipment and comparable equipment provided by Western companies, Keith Krach, US Under Secretary of State for Economic Growth, Energy, and the Environment, told Radio Svoboda on Tuesday. “You may ask yourself: why is China’s offer lower? Why do they provide such cheap services? Because they want your data,” he said. Referring to the U.S. International Development Finance Corporation, he added: “The US government, in particular the DFC, can cover the price difference.” The Kyiv Metro’s new 4G mobile system, completed this week, is built with Huawei equipment.
Ukraine netted $90 million in 419 privatization auctions this year, Economy Minister Ihor Petrashko said on Channel 24 TV, reported the Ministry. By using a transparent internet-based auction system, the State Property Fund managed to push average sales prices up three times over asking prices. Next month, the Rada is to vote on a government bill to sell large state companies. This process could net around $500 million this year, the government estimates.
The latest property of state alcohol producer Ukrspyrt was sold at auction yesterday for $2 million, almost double the asking price, reports the State Property Fund. With almost half of Ukrspyrt’s 41 properties now sold, the Fund calculates that the state will net $70 million from the privatization. Starting next July, the only way a private investor can start new alcohol production in Ukraine is to produce from a property privatized from Ukrspyrt.
In a nation building exercise, President Zelenskiy plans to inaugurate next year a Lviv-to-Luhansk highway, the longest in the nation. Labelled the M-10, this east-west road would run 1,392 km, almost twice the distance of Paris to Marseilles. Without waiting for full completion, Zelenskiy plans to inaugurate the M-10 on August 24, the 30th anniversary of Ukraine’s Independence. Polls indicate road building is the most popular achievement of the Zelenskiy government.
“We want to unite the West and the East with a big highway,” Zelenskiy said yesterday, speaking at the inauguration of the first section of Zaporizhia’s bridge over the Dnipro. Providing a new, international standard route to Stryi and the EU, the M-10 is expected to quickly double its traffic, to 40,000 vehicles a day.
With a two-year budget of $500 million, the M-30 saw 580 km restored this year. Another 750 km are to be repaired by the end of next year. For now, the high-speed road will terminate in Pokrovsk, Donetsk. Most of the final 200 km, through Luhansk to the Russian border, are in the Russia-controlled section of the Donbas.
Ukraine’s Cabinet has approved a $20 billion development plan to rebuild the Ukraine-controlled half of the Donbas. Although multilateral institutions, such as the World Bank and the EBRD, are funding infrastructure projects in Ukraine-controlled Donetsk and Luhansk, little private investment has followed.
Concorde Capital’s Zenon Zawada writes: “Such economic development concepts will remain a fantasy for as long as the situation with the war in Donbas remains as it currently is, which is low-level fighting accounting for a handful of injuries and casualties per week.”
The US is preparing new sanctions to block Russia’s Nord Stream 2 gas pipeline, Reuters reports citing three Trump Administration officials. Relying on existing mandates from Congress, the Administration would sanction the dozens of EU companies helping Russia to lay the pipeline under the Baltic Existing sanction have caused the $11.6 billion project to run one year and $1 billion over budget. Although a Gazprom vessel is to resume work in Danish waters on January 15, one US official said of the executive order sanctions: “Now we’re in the process of driving a stake through the project heart.”
Ukraine does not plan to restrict air travel during the holidays. “The government understands that people are in the mood for the holidays and does not plan to impose any restrictions on air traffic,” Foreign Minister Dmytro Kuleba said yesterday in an online briefing.
UIA is ending this year with a passenger count of 1,787,000 – only 22% of the level of 2019. Transit passengers declined with UIA’s hub system, falling to 14% of last year. The number of flights was 17,000, 28% of last year’s levels. To survive, the airline laid off 1,000 employees last summer.
Seeking to put its airplanes to use, UIA is offering ‘flights to nowhere’ – one-hour sightseeing flights over Kyiv. Passengers are guaranteed to fly above the clouds and to see the sun, a winter rarity. If all 116 seats fill up on the Embraer 195 jet, the price per person will be $75. “A real New Year’s gift – a one-hour flight over Kyiv,” beckons the announcement on the UIA website. The airline also says: “A lottery with valuable aviation prizes will be held for passengers on board.”
Internet purchases by Ukrainians grew 41% in 2020, to top $7 billion, estimates a new study by EVO, an umbrella group of online companies. Last year’s growth was only 17%. “One year ago, we forecast e-commerce growth in Ukraine in 2020 at 15%, the pandemic has significantly adjusted it,” EVO reports. For next year, EVO is forecasting growth of 33%. Today, about 9% of all Ukrainian purchases are online.
Sixty-six Ukraine-connected IT firms have made the annual ranking of top 1,000 leading information technology companies worldwide, published by Clutch, a Washington-based matchmaker for IT companies and contractors. The Kyiv Post reviewed the list and determined that almost 7% have strong Ukraine ties. The list includes foreign companies with R&D centers in Ukraine – Ciklum, Sigma Software, Daxx, and AltexSoft – and largely Ukrainain firms — Intellias, Digis, OTAKOYI, and Frontmen.
Ukraine’s IT sector grew by 20% last year, fueled by 4,000 IT companies in the market, according to a new report: “Ukraine: The Country that Codes.” The 56-page industry overview prepared by software developer N-iX says the number of IT workers in Ukraine doubled in five years, hitting 200,000 today.
Outgoing US President Donald Trump vetoed yesterday the US defense budget, a document that includes $275 million in military support for Ukraine and tighter sanctions on Western companies involved in Nord Stream 2, the Russia-Germany gas pipeline. Trump returned the budget to the House of Representatives, calling it “a gift for China and Russia.” The House is expected to return Monday to vote on an override. Joe Biden is to be inaugurated President on Jan. 20.
US Aid to Ukraine is coming under threat from a different direction – dissatisfaction over the coronavirus stimulus bill, which would give payments of $600 per person. On Tuesday, President Trump called the checks “ridiculously low,” calling for payments of $2,000. A growing debate focuses US foreign aid, including the $453 million military and civilian aid planned for Ukraine this year. “This is a sensitive area for voters and lawmakers,” writes Newsweek. “Though foreign aid typically makes up around one percent of the entire federal budget, public perception is that the U.S. gives out far more. Polling suggests Americans believe the country spends up to a third of its entire budget on foreign aid.”
Over the next week, Ukraine will attract a 6-month loan from Deutsche Bank of up to $350 million, the Cabinet of Ministers resolved yesterday. The move to take a bridge loan indicates that the government only expects to get a second tranche from last summer’s IMF agreement by the end of May. The IMF tranche is to be for $700 million. The Cabinet’s resolution authorizes a loan at LIBOR + 5.75%, or almost 6%. By contrast, at the Finance Ministry’s weekly auction on Tuesday, investors bought $138.5 million worth of 1-year government dollar bonds at 3.8%.
The Cabinet of Ministers approved yesterday a bill to resume privatization of large state-owned companies, a process suspended last March due to the coronavirus outbreak. With investors now familiar with road shows on Zoom, the government wants the Rada to unfreeze ‘large’ privatizations. Slated to bring almost $500 million to the budget in 2021, the privatization plan calls for selling next year: five thermal power plants, three regional power plants, the former Bolshevik plant, the Odesa port plant, the United Mining and Chemical Company, and Kyiv’s President Hotel.
By Jan. 4, acting Energy Minister Yuriy Vitrenko is to prepare a solution for paying the $921 million solar and wind power debt owed by the government’s Guarantee Buyer. Prime Minister Shmygal set the deadline at yesterday’s Cabinet of Ministers meeting.
Today, the first cars are to roll across the first completed section of Zaporizhzhia’s new road bridge over the Dnipro. Long lampooned as the city’s white elephant, the unfinished bridge saw construction resume last year by a Turkish construction company. The first leg of the completed bridge crosses the ‘Old Dnipro’– the narrower channel that separates Khortytsia Island and the right bank community of Baburka.
The Infrastructure Ministry plans to restore 50% more roads in 2021 than this year, Minister Vladyslav Krikliy told Interfax-Ukraine in a wide-ranging interview. The 2021 goal is now 6,800 km. “Another three years at this rate, and we have all roads of national importance will be built – international and national roads for sure,” Krikliy said.
Planning to open select highway sections to privately built and operated toll roads, the Cabinet of Ministers yesterday set tolls, measured in Euros. For cars, motorcycles and minibuses up to 10 seats, the toll will be €2.3 for 100 km. For trucks up to 12 tons and buses up to 29 seats, the toll will be €4.5 for 100 km. For big trucks and buses, the toll will be €13.3 for 100 km. For example, to drive a car down one likely stretch – from the Lviv ring road to the Krakovets border crossing – the toll would be €1.38.
Road repair was the most popular phenomenon of 2020, winning the approval of 93% of 2,004 participants in a nationwide poll. The poll was conducted in the first half of December for the Kyiv International Institute of Sociology. The most unpopular phenomena were the war in the Donbas and the coronavirus epidemic, winning negativity ratings of 99.2% and 99.4% respectively.
The Infrastructure Ministry plans to start laying European gauge track in Ukraine next year, Krikliy told Interfax-Ukraine. The priorities are two sections of Ukrzaliznytsia’s track to the Polish border. Construction of 80 km from Lviv west to the border crossing at Mostyska, would create a direct Lviv-EU link capable of generating traffic of 600,000 passengers a year, the railway calculates. Further north, construction of a similar 65 km Euro-gauge line west from Kovel to the Polish border would allow the city to become a major hub for Chinese container traffic bound for the EU. Five rail lines converge on Kovel, a Volyn Oblast city.
By opening Ukraine’s 13 state-owned seaports to private companies through concessions, the government hopes to draw $1.8 billion in private investment through 2038. These concessions – largely renting wharves, land, cranes and warehouses – would generate almost 5,000 new jobs, according to a new Seaports Development Strategy approved yesterday by the Cabinet of Ministers.
The European Investment Bank Board has approved a €270 million loan to upgrade Boryspil Airport, the Bank’s website reports. The money would cover about three quarters of a €351 million Boryspil renewal project. The upgrade will focus largely on the Western runway, a 3,500-meter concrete strip “which has been operating for more than 50 years and is in poor condition,” the Bank says. The loan is covered by EU guarantees, which means the contractor must follow EU procurement rules. Last year, Boryspil handled 62% of Ukraine’s 24 million air passengers.
Construction is to start next summer on a 4-year, $500 million project to build Ukraine’s largest and most modern ski area in Lviv’s Carpathian Mountains. Based in Volosianka, a 3-hour train ride south of Lviv city, the area is to have more than 60 trails. Its technology and design are to be one decade ahead of Bukovel, says the developer, OKKO Group Holding. The prime mover is Vitaliy Antonov, OKKO’s founder and main shareholder. A native of nearby Stryi, Antonov worked for four years after university in mountaineering and mountain rescue. Other investors in OKKO are the EBRD, Goldman Sachs, Horizon Capital and Genesis Asset Managers, LLP.
Datagroup, Ukraine’s leading fiber infrastructure and digital services provider, has agreed to buy 100% of Volia, Ukraine’s leading cable broadband service provider. Fully backed by Horizon Capital’s EEGF II fund, sole financial investor in Datagroup, the deal “is expected to generate revenues exceeding $130 million and over $50 million in EBITDA,” Mykhailo Shelemba, Datagroup Chief Executive Officer and shareholder, says in a Horizon press release.
Creating synergies, Volia generates 95% of its revenues from consumers, and Datagroup generates 85% of its revenues from businesses. Datagroup’s Shelemba says the company is “a reliable partner for over 50% of the top 200 largest companies in Ukraine and 93% of the country’s banks.” In Ukraine, there are over 5,000 internet service providers. “Scale truly does matter when it comes to infrastructure to meet the demands of increasing digitalization,” says Lenna Koszarny, Horizon Capital’s CEO and Founding Partner. “Ukraine needs significant backbone infrastructure investments to meet the demands of the digital age.”
Canada’s Black Iron mining company has signed a preliminary agreement with an American institutional investor to raise US $100 million to create new iron ore production in Kryvyi Rih, Dnipropetrovsk region. Saying the planned investment “changes the rules of the game for Black Iron,” Black Iron CEO Matt Simpson said it would allow the company to start construction in the second half of the year.
Stalled in the planning stages for a decade, Black Iron gained a new life this year due to three factors: jumping iron prices, China’s drive to diversify raw material imports away from Australia, and the fact that Kryvyi Rih is President Zelenskiy’s home town. At current iron prices, the pay payback period of the US $452 million first phase project is estimated at 2.9 years. Raw material reserves are 411 million tons. The life of the project is 17 years.
Dragon Capital has won approval to buy Kyiv’s Unex Bank from Vadym Novynskyi, reports Ukraine’s Antimonopoly Committee. Neither Dragon nor Novynskyi’s Smart Holding confirmed a sale to Interfax-Ukraine. According to the National Bank of Ukraine, Unex Bank ranked 64th out 74 banks in Ukraine with assets of $28 million. Founded in 1993, the bank originally focused on large industrial corporations in central Ukraine. It now has 22 branches in nine regions.
AxDraft, a fast-growing Kyiv startup that automates the preparation of legal documents, has been acquired by Onit, a Houston-based legal technology company. Founded only three years ago, AxDraft has worked in Ukraine with Carlsberg, Dragon, DTEK, Glovo and OLX. In 2018, AxDraft participated in Y Combinator, the famous U.S. startup accelerator, then, in 2019, it raised $1.2 million from Silicon Valley venture capital investors. “This makes us the first Ukrainian legal technology startup to make a successful exit,” AxDraft founder Yuri Zaremba said in a press release. The purchase price was not revealed, but after last year’s capital raise, the company was valued at $10 million.
New Jersey’s Holtec International has completed the first $70 million stage of a 20-year, $1.3 billion project to build a nuclear spent fuel storage repository near Chornobyl. The site will take waste from three of Ukraine’s four nuclear power plants – Khmelnytskyi, Rivne, South Ukraine. Ukraine’s fourth plant, Zaporizhzhia, has its own onsite, US-designed storage facility. Ukraine’s new central repository, located three km west of the abandoned Chornobyl power station and 150 km north of Kyiv, is to start accepting nuclear waste next June. This step will save Ukraine $200 million a year — a fee currently paid to Russia to reprocess and store Ukraine’s spent nuclear fuel.
Stainless steel nuclear waste canisters, each weighing almost 200 tons, will arrive by rail at the repository site in Yaniv, Kyiv Oblast. Over the next six months, Ukrzaliznytsia crews are to reopen 43 km of track west to Vilkhova, Zhytomyr. This line was abandoned after the 1986 disaster. Energoatom, Ukraine’s state nuclear power operator, will run this line through the Exclusion Zone. After last year’s boom in Chornobyl tourism, Kyiv tour operators are interested in using the restored rail line.
Holtec will supply the first 94 containers — a $300 million contract. Simultaneously, Ukraine is to use Holtec technology to start making its own canisters, for domestic use and export. Yesterday, UNIAN reviewed the storage project in a 2,000-word analysis. Noting that Holtec is using the same dry storage equipment in Belgium, Sweden, the UK and the US, the news agency concludes that Ukraine’s repository “will be the most modern and safest nuclear fuel storage facility in its class.”
During this decade, Ukraine’s electricity production from nuclear will rise from 53% today, to 57% in 2030. At the same time, the electricity share from coal will drop almost in half, to 12%. These were the predictions made yesterday by Maksym Timchenko, CEO of DTEK, Ukraine’s largest privately owned energy company. Coal-fired power plants increasingly be used as standby sources of electricity, predicted Timchenko, whose company employs thousands of coal miners and operates most of Ukraine’s coal-fired power plants.
In a radical corporate turnaround, DTEK wants to be Ukraine’s leader in decarbonization, Timchenko said during his presentation of DTEK’s strategy to 2030. “We want to change, we want to move from a high-carbon business to a green, efficient one,” he said. “We declare DTEK’s carbon neutrality by 2040…Both the entire business structure and the investments that we will make in the coming years will allow us to fulfill this commitment.” By 2030, he promised, renewables will account of at least one third of electricity produced by DTEK.
After investing about $1 billion in Ukraine wind and solar projects in the last three years, DTEK now redirects its renewables investments to the EU. “Today our investments in European countries are in a very active development phase,” Timchenko said. “In 2021, we will have the first pilot projects for the construction of wind and solar power generation in the European Union.” Behind the pause in Ukraine investments is the $1 billion overdue power bill that the state-controlled Guaranteed Buyer owes wind and power companies in Ukraine, including DTEK.
Offering government bonds of 10 different tenors and two different currencies, the Finance Ministry raised the equivalent of $782 million yesterday at its weekly bond auction, the Ministry reports on Facebook. Hryvnia bonds started with 10% yields for 3-month bonds and ranged up to 12.25% yields for 5-year bonds. The Ministry sold 1-year dollar bonds with yields of 3.8%, netting $138.5 million. Yesterday’s big bond sale follows the December 15 sale, which netted $1.8 billion – the largest on record, the Ministry reports.
As foreign investors re-enter the government bond market, the hryvnia strengthens, write analysts from Alpari, Dragon and ICU. The dollar now buys 28 hryvnia, a rate little changed in nine months. ICU wrote yesterday: “Foreigners’ activity in the bond market continued to support hryvnia exchange rate. Due to a large supply of hard currency, the hryvnia appreciated during most of last week…Recovery in foreigners’ demand for local-currency debt increased the supply of hard currency, and the [central bank] responded by purchasing hard currency into reserves. In total, the NBU purchased almost US$300m.”
Aiming to cut road deaths by 30% by 2024, the government has approved spending $85 million in 2021 on the first year of an international highway safety program. The money will be spent on 400 illuminated pedestrian crossings, 300 dampers to minimize head on collisions, Weight-in-Motion systems to detect overweight trucks, speed cameras in fixed positions and in police cars, and the construction of 20 roundabouts to replace dangerous intersections.
Ridership of the Kyiv Metro is down 40% yoy, to 250 million this year, Kyiv Mayor Vitaliy Klitschko told reporters yesterday. Referring to the 2-month lockdown last spring, he said: “For the first time in 60 years of the existence of the Kiev metro, it did not work.” By the end of this month, all 52 stations of the system are to have 4G mobile internet. By the end of next year, two new stations should open on the Green Line, extending the line 8 km to the northwest, from Syrets to Prospekt Pravdy and Mostytska. The new unified e-transport ticket now is used for 1 million rides a day, he said.
The government last night appointed Yuriy Vitrenko, the former Naftogaz executive, as acting Energy Minister and First Deputy Minister of Energy. Vitrenko replaces Olha Buslavets, who ran the Energy Minister since April. A graduate of the INSEAD, the French business university, Vitrenko spearheaded a successful Stockholm arbitration case against Gazprom. Although Gazprom paid Naftogaz $2.9 billion, a contingency fee payout for Vitrenko’s team rankled some. Last week, when his candidacy came up for vote, he won only 82% of the needed Rada votes. In Ukraine, acting ministers often serve for years at a time.
More litigation with Russia and more openness to Western investment may emerge under Vitrenko. Interspersed with stints at Naftogaz, Vitrenko worked for Pricewaterhouse Coopers in Kyiv, Merrill Lynch in London, and Amstar Europe, a private equity fund, affiliated with a Denver group. He is CEO of AYA Capital, a Kyiv-based investment company he founded a decade ago. At Naftogaz, he worked on several large Eurobond placements.
Yulia Kovaliv, a familiar face to foreign investors, resigned yesterday as deputy chief of staff to President Zelenskiy. Kovaliv also headed the Office of the National Investment Council, an organization that promoted dialogue between the government and CEOs of the leading foreign investors in Ukraine.
The government also appointed Vadym Melnyk as head of the State Fiscal Service. The previous fulltime head of the service, Serhiy Verlanov, was dismissed last April.
The Kyiv Economic Court accepted last week a lawsuit alleging that Roman Leshchenko, Ukraine’s newly appointed Agriculture Minister, embezzled $430,000 from a Ukrainian farming company owned by Kurt Jacob Groszhans, a North Dakota farmer. The lawsuit indicates more claims will be filed for misappropriated grain. Before Leshchenko’s Rada confirmation vote Thursday, he reportedly told questioners that he repaid all debts to the American investor. Groszhans is represented by US attorney Bate Toms.
While the US government labors to determine damage done by cyber infiltrators, Ukraine’s government faces almost daily hacker attacks on its government resources and is strengthening its cyber security, Ivan Bakanov, the SBU state security service, wrote Friday on Telegram. “The scale of the infiltration into government information resources is impressive – attacks occur almost daily,” he said. In 2019, a virus downloaded in a tax accounting program caused millions of dollars of damages to companies in Ukraine. Russia is believed to be behind the infiltration in the US and the disruption in Ukraine.
With Ukraine recording its first infection with new highly contagious coronavirus strain, the government decided last night not to suspend flights between Ukraine and Britain. First identified in Britain on December 14, the new strain already has been identified in Australia, Denmark, Italy and the Netherlands. Ukrainian infectious disease specialist Viktor Petrov told Ukraina 24 TV yesterday that a patient, ‘Mykola’, a labor migrant shuttling between Zakarpattia and the Czech Republic, “had this new variant identified by Britain.”
While France, Germany, Turkey and Poland stop flights from Britain, Ukraine’s Cabinet of Ministers decided not to suspend air traffic with the UK, Infrastructure Minister Vladyslav Krykliy wrote on his Telegram page. He said: “Now flights are operated mainly to return Ukrainians from studies from abroad home for Christmas holidays.” Earlier yesterday, Ukraine’s Embassy in London posted a warning suggesting: “Ukrainian citizens temporarily refrain from traveling to London and the south-east of England.” The UK government posts its latest coronavirus restrictions here.
Today, there is only one flight from Kyiv to Britain: a Wizz Air flight from Sikorsky Airport to London Luton. Last week, UIA inaugurated flights between Boryspil and London Heathrow. At that time, UIA’s holiday schedule called for three flights a week – on Thursdays, Saturdays and Sundays – from Boryspil to Heathrow and to Gatwick, its traditional destination.
With passenger flights unreliable, logistics company Meest China has started weekly cargo flights between Hong Kong and Boryspil. “Regular flights are canceled, delivery times are difficult to predict,” commented Mikhail Lymar, general director of Meest China, a unit of Meest Holding, a Canadian-Ukrainian group. He said the new cargo flights on Airbus 330 jet “will allow us to make delivery from China to Ukraine in 12 hours and not depend on airlines.”
EU job offerings for Ukrainians have grown by 40% since coronavirus travel controls started to lift in June, reports Jooble, the Kyiv-based job search engine that aggregates international job postings. As of Monday, there were 9,631 vacancies targeted for Ukrainians. Top offerings at the top three countries were: Poland – packers, handymen, tailors, drivers, and builders; Germany – caregivers, tilers, plumbers, electricians, and packers; the Czech Republic – maids, welders, electricians, and drivers.
Starting last Thursday, Wizz Air resumed flights from Kharkiv to all its German and Polish destinations. Ukrainian tourists are not allowed to travel to Poland and Germany. With the exception of Ukrainians with valid work permits who are allowed to fly. Wizz Air, the airline with the most destinations from Kharkiv, now flies to six EU cities, down from 10 last spring, before the coronavirus lockdown.
A 150 km ring road around Kyiv and a 1.7 km suspension bridge over the Dnipro at Kremenchuk are to stem from Cabinet of Ministers’ recent approval of an infrastructure agreement with China. “With this agreement, we open the door for Chinese loans to infrastructure,” Viktor Dovhan, international advisor to Infrastructure Vladyslav Krikliy wrote on his Facebook page. The Kyiv Bypass highway will be U-shaped, providing connections to all main highways, from the M-1 to Chernihiv in the north, to the M-7 to Kovel in the west. Capable of handling 300,000 vehicles a day, this 8-lane, restricted access highway is to be completed by 2030.
President Zelenskiy promises The New York Times to “reformat” the Constitutional Court as part of “global judicial reform in Ukraine, which we will start implementing next year.” In a video link interview with Andrew Kramer, a Times correspondent in Moscow, Zelenskiy says: “Many laws have already been prepared, the stages of implementation of these reforms have been prepared.” The Times did not use this part of the 5,000 word interview in its story, but the entire interview is on the President’s website in English, Ukrainian and Russian
Sales of electronics and home appliances during last month’s ‘Black Friday’ and ‘Cyber Monday’ were up 28% yoy to $235 million, reports the Ukraine unit of GfK, Germany largest market research institute. Online sales jumped by 73% yoy, partly because online stores offered more discounts. Overall, almost 1 million items were sold during the discount days. The hottest sector was IT, where sales were up 70% yoy in monetary terms.
Ending a 9-month suspension, Qatar Airways resumed flights Friday between Doha and Kyiv Boryspil. Flights will be four times a week on Airbus A320 jets. From Doha, Qatar flies to 100 destinations, said Halyna Durmush, Qatar Airway commercial manager in Ukraine.
European development banks are providing €900 million to rebuild the southern half of the Kyiv-Odesa highway and a 24 km northern bypass around Lviv, reported the Infrastructure Ministry. “This project is the largest in the 10 years of cooperation between Ukravtodor and the EBRD,” Oleksandr Kubrakov, head of the state highway agency, said, referring to the €450 million loan from the European Bank for Reconstruction and Development. This loan is being matched by a second €450 million loan from the European Investment Bank.
Work is to start next year on the projects which are both sections of the Trans-European Transport Network, or TEN-T. Of the money, two thirds goes to rebuilding 275 km of the Kyiv-Odesa highway, and one third to completing the circular bypass around Lviv. “Under the project, the government of Ukraine is committing to enhance Ukravtodor’s procurement system and to strengthen its internal controls, policies and procedures to prevent bribery and corruption, the EBRD says. Both banks issued a joint statement Friday calling reform of Ukravtodor a “litmus test” for anti-corruption work in Ukraine.
Ukraine plans to build by 2022 a EU-standard highway on the 72 km section of the M-10 between Lviv and the closest crossing with Poland, at Krakovets, Ukravtodor’s Kubrakov tells Interfax-Ukraine. This congested highway section tops the list of candidates for public private partnership concessions. From Krakovets, the highway would connect with Poland’s A4, which runs 680 km west to connect with Germany’s autobahn network.
Weekly container trains are to start rolling next year between the Baltic and the Black Seas, Lukasz Greinke, President of Gdansk Port, tells The Maritime Executive, a Florida-based news site. Gdansk is the location of Poland’s largest container terminal and is considered the only Baltic port capable of receiving direct calls from Asia by the largest ships. Greinke said of the Gdansk-Odesa rail corridor: “We are already speaking with Turkish ship owners and freight forwarders about the benefits of the new corridor in terms of speed and efficiency.”
Germany will spend €255 million to help Ukraine improve energy efficiency in schools, rebuild roads, and modernize its vocational education system, the Finance Ministry announces. The money will be a mix: €40 million in outright grants, and €215 million in loans at concessional terms – 30 years at 2% interest. The money will also to go upgrading municipal utilities: water, sewers and heating. German Ambassador Anka Feldhusen, said: “Germany supports Ukrainian decentralization reforms and improvements in the energy industry and education.”