Background Image

Monday, November 26

Russia Closes Azov to International Shipping…Next: EU/US Sanctions Against Novorossiysk?...Groysman Goes to Germany…2019 Budget ‘Conservative’…Non-cash Payments Almost Half of all Recorded Sales…Ukrainian Electric Car Charger Companies Market to EU
James Brooke
by James Brooke
UBN Morning News is reported and written by James Brooke, a former New York Times foreign correspondent and Bloomberg Moscow Bureau Chief

Russia closed the Kerch Strait to merchant shipping on Sunday. By anchoring a freighter across the central arch of the six-month-old bridge, Russia traps ships inside the Sea of Azov, a binational sea, and holds up ships waiting to pass through the Strait.

The closing came after Ukraine’s Navy said a Russian FSB coast guard boat, the Don, rammed a Ukrainian Navy tugboat, damaging its engine and hull. Later, the Navy says, Russian warships fired at the tug and two small Ukrainian Navy artillery warships, hitting two of the escort ships and wounding six sailors. The Russians then captured the three Ukrainian Navy boats.

Russia’s attacks on freedom of shipping in the Azov are expected speed up EU plans for “targeted measures” against Russia. Last week, the EU Foreign Affairs Council discussed in Brussels its “preoccupation over activities in the Azov Sea, which are damaging not only the Ukrainian economy, but also to many vessels that are flying European Union Member States’ flags,” according to Federica Mogherini, the EU’s high representative for foreign affairs and security. She said the EU would be “taking appropriate targeted measures in the coming weeks or days.” Ukrainian officials suggest sanctioning trade from Novorossiysk, Russia’s largest port, which is 150 km south of the Kerch Strait.

    Since President Putin inaugurated the bridge last May, Russian coast guard vessels have constantly harassed Ukraine-bound shipping in the Azov. As steel makers and grain traders seek alternatives, cargo shipments from Ukraine’s main port, Mariupol, are down, and shipments are up from Mikolaiv, the closest Black Sea Port. Before the harassment started, about 10% of Ukraine’s sea borne trade passed through its two Sea of Azov ports, Mariupol and Berdyansk.

    Last week, Russian border guards detained a Ukrainian fishing boat and impounded it in the Russian port of Yeysk, about 60 km southeast of Mariupol.  A local court ruled to confiscate the vessel, fishing gear and fish. This came after Ukraine impounded a Russian fishing boat, the Nord, last March. Kept in Berdyansk, the boat was put up for auction two weeks ago. There were no bidders at the starting price, $60,000.

    Prime Minister Groysman flies to Berlin Wednesday to open the Germany-Ukraine Business Forum on Thursday with Chancellor Angela Merkel. In advance, he spoke with the Germany weekly Die Zeit about energy investment opportunities. “We want to become a gas power that satisfies our own needs and exports — we can do it by 2025,” he said. Alluding to the Russia-Germany Nord Stream 2 gas pipeline now under construction, he added: “You can invest your money in Ukraine — and get energy resources from another source.”

    In the $40 billion state budget approved Friday, spending is to rise by 12% over last year, with revenues forecast to grow also by 12%. Spending growth was curbed by cutting utility subsidies and by hiking the minimum wage by 12% in 2019, versus 16% in 2018. The budget is based on forecasts of 3% GDP growth in 2019 and 7.4% year end inflation, versus 9.9% this year. Dragon Capital writes: “The key budget parameters look relatively conservative, with revenue and spending growth expected to slow from this year’s 16% and 18%, respectively.”

    Next year, Ukraine has to repay $15 billion in foreign and domestic debt, Finance Minister Oksana Markarova told reporters on Friday. This high level of debt repayments comes from the debt refinancing of 2014-2015.

    The chances of the government raising $600 million from sales of state companies are ‘quite high,’ Finance Minister Oksana Markarova told reporters Friday when questioned about the line item in the 2019 budget.

    From small-scale sales, Ukraine has raised $15 million through 270 successful auctions held since August. The State Property Fund expects to raise an additional $60 million through the sales 1,243 additional properties that are already listed on the ProZorro.Sales platform.

    Non-cash payments account for 44.3% of recorded transactions, up by 13% from the level at the start of the year, reports the National Bank of Ukraine. Online shopping accounted for 35% of the 2.8 billion non-cash transactions recorded through September.

    Ukraine’s network of payment terminals has grown by 14% yoy, to 263,5000, reports the central bank. Of these, 78% allow contactless payments, generally with smart phones. For cards, MasterCard reports 24.9 million active card in Ukraine and Visa reports 11.3 million. By next summer, all businesses would have to have point of sale terminals, under a draft resolution by the Economic Development and Trade Ministry.

    Electric car imports will be exempt from VAT and excise tax through 2020, under a law adopted Friday by the Rada. Through October, 4,214 electric cars were sold in Ukraine, accounting for about 5% of total car sales. With the largest known deposits of lithium in Europe, the Infrastructure Ministry wants the Rada to pass a package of laws to promote electric car and car battery manufacture in Ukraine.

    Ukraine’s three electric charger companies – Elecar, TOKA and VLS Energy – are moving into the EU market, the Kyiv Post reports. Zaporizhia-based Elecar is selling its car chargers in Poland. VLS, another charger maker, has opened a dealership in Dusseldorf. And TOKA has applied for a license to open charging stations in the EU. At home, TOKA recently signed a letter of intent to install chargers by 2020 in all of OKKO’s 396 gas stations nationwide, the Post reports.

    Hungary’s New Work Serviced Offices makes its first expansion from Central Europe to Eastern Europe, opening a co-working space on the third floor of Globus 2 shopping center on Kyiv’s Independence Square. The 960-space, called New Work Labs, includes meeting rooms, a conference room for up to 60 people, an event area, Skype rooms, a kitchen, a coffee bar and ‘recreational islands.’ Established in Budapest in 2012, the company has 12 locations in Central Europe — Budapest, Prague and Warsaw.

    The new KFC restaurant on the Maidan remained closed through the weekend, a sequel to the misfire by Varus, the Dnipro-based Yum! franchisee which chose the 5th anniversary date of the Maidan protest to open in the landmark House of Trade Unions building. In 1997, Pepsico sold its restaurant division, including KFC, to Tricon Global Restaurants, the forerunner of Yum! In the Yum! organization, the two Ukraine franchises, with a total of 13 restaurants, are franchised out of Moscow.

    For comments and story tips, Brooke is reachable at: jbrooke@ubn.news