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Friday, December 4

Dnipro to Once Again Become the Mississippi of Ukraine…China Leads List of Partners for Free Trade Talks…Dragon Buys Site for Industrial Park Near Lviv…November Weekend Shopping Ban Cost Malls $250 million 
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

After 12 years of discussion, the Rada yesterday passed a river development bill designed to triple cargo carried on the Dnipro to 30 million tons by 2025. Ships will pass free through river’s six locks. To modernize the aging river gates, an ‘Inland Waterways Fund’ will be created, funded largely by excise taxes on fuel. During the late Soviet era, 60 million tons of cargo moved annually on the Dnipro.

A revitalised working river will generate an extra $500 million in economic activity, Infrastructure Minister Vladyslav Krikliy said on his Telegram account. He added that for each 1 million tons of cargo carried on the river, Ukraine can save $35 million in road repairs.

“All over the world, river transportation is the cheapest and most environmentally friendly way of delivering goods,” Artem Kovalev, Rada member and chief author of the law, wrote on Facebook. “Ukraine has a huge potential for the development of water transport, but now less than 1% of all goods are transported by the river (in the EU it is 7%). At the same time, the Danube and Dnipro are included in five largest rivers in Europe.”

Renewal of the Dnipro is expected to revive two Soviet era economic activities: shipbuilding and river cruise tourism. Due to global warming, the Dnipro’s ice-free shipping season seems to be expanding — to nine months. President Zelenskiy, a promoter of the bill, said he would sign the legislation soon. 

Ukraine wants to start free trade talks next year with a host of countries, led by its largest trading partner, China, Taras Kachka, Ukraine’s Trade Representative, told Evropeiska Pravda. “Currently, the access of our products to the Chinese market is subject to higher duties than Chinese products to us,” he said, referring to a trade relationship that totalled $9.4 through August. 

Ukraine would like to reopen and liberalise the UK-Ukraine agreement that was signed two months ago in London, a rushed deal designed to beat the December 31 Brexit deadline. Also on the list are countries with major trade deficits with Ukraine due to food exports: Egypt, Indonesia, Jordan, Morocco and Vietnam. The Ukraine-Israel free trade agreement enters into effect on Jan. 1.

Even without a UK-Ukraine trade pact renegotiation, Ukrainian food exporters are showing “great interest” in the expanded duty-free access to the British market, Foreign Minister Dmitry Kuleba told Interfax-Ukraine after a bilateral briefing on trade opportunities. Furniture manufacturers have gone on two trade missions to Britain recently, he said. He added: “ Even Ukrainian manufacturers of Christmas tree decorations are now interested in the British market.”

Helped by cheaper energy import prices, Ukraine’s trade deficit in goods is running at half the level of last year, reported the State Customs Service. Through November, the trade deficit was $3.93 billion, down from $8.15 billion recorded during the first 10 months of last year. Year over year, exports were down 3.5%, while imports were down 10.8%.

Dragon Capital has acquired Lviv Industrial Park located on a 23.5-hectare land plot on the M10 highway, 60 km east of the Polish border. Five years ago, CTP, the largest developer and operator of warehouses and industrial parks in Central and Eastern Europe, bought the site — the Czech company’s first foray into the former Soviet Union. For Dragon, the Lviv site complements their 49-hectare site on the Kyiv-Zhytomyr highway where an industrial park is in the planning stages. “We are ready to start construction of new Class A facilities in our industrial parks in the coming years,” says Dragon CEO Tomas Fiala.

The ban on shopping during three weekends in November cost Ukrainian shopping malls about $250 million, the Ukrainian Council of Shopping Centers told Interfax-Ukraine. The 30-40% drop in weekend sales was partially offset by 10-20% increases on Fridays, Mondays and Tuesdays. Epicenter, one of the nation’s largest retailers, lost 750,000 weekend visits and $35 million in weekend sales, says Vladimir Goncharov, Epicenter’s director of retail trade. The drop in sales will ripple through the economy effecting 5,000 suppliers, largely Ukrainian, and sales tax payments.

“Business without Barriers” is a movement promoted by First Lady Olena Zelenska to reduce the physical and psychological barriers that prevent people with disabilities from participating in the work force and society at large. A declaration of support was signed this week by representatives of: Ukrposhta, Oschadbank, Ukrzaliznytsia, Auchan, 1+1 Media, DTEK, Socar, work.ua, ATB, and Danone. Ukrzaliznytsia said it is making stations, platforms and trains easier for travellers in wheelchairs, the elderly and parents with small children.

DTEK says that almost 3,000 of its 70,000 employees have disabilities, “We are actively introducing the best services for our clients so that our services are as accessible as possible,” says DTEK CEO Maxim Timchenko. Yesterday, DTEK, the largest private investor in Ukraine’s energy sector, became Ukraine’s first company to join ‘The Valuable 500,’ an international movement dedicated to improving the integration of employees and clients with disabilities.

Editor’s Note:  Often shrouded in poetry and romance, the Dnipro also is a working river — Ukraine’s Mississippi. To the envy of Russia, the Mississippi and the Dnipro flow south carrying produce from vast agricultural lands to world markets, through the Gulf of Mexico and the Black Sea. By contrast, Russia’s rivers flow north, generally emptying into the Arctic. The Volga flows into the Caspian — also not very useful. In Ukraine, river infrastructure experts — from the Dutch to the US Army Corps of Engineers — have been standing by for the last decade, waiting for Kyiv to pass the bill that the Rada passed yesterday. A new decade may dawn as Ukrainians rediscover what the Vikings knew 1,000 years ago — the economic utility of the mighty Dnipro. With best regards, Jim Brooke

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Friday, October 30

Ze Wakes Up and Fights Back...Foreign Construction Cos. Study Toll Road Plan...Ukravtodor to Fix 30% More Roads Next Summer....New UZ Chief Drops US Locomotive Deal...Kyivstar’s 4G Data Usage Jumps 50%
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

Rada members must prepare new bills marked ‘urgent’ to restore anti-corruption legislation invalidated Tuesday by the Constitutional Court, President Zelenskiy said yesterday in an emergency National Security and Defense Council meeting. “The electronic [asset] declaration system in Ukraine will work,” he said, ordering its restoration. “Draft laws for its renewal should be prepared and sent to the Verkhovna Rada as urgent.” The Rada reconvenes next week. After the ruling party’s poor showing in last Sunday’s local elections, it is not clear if the President still has a working majority.

If the National Security Council identifies the Constitutional Court’s actions as a threat to Ukraine’s security, “Zelenskiy might propose a draft law that would reboot the court and fire all of its 15 judges,” writes the Kyiv Post. Hinting at this, Zelenskiy said yesterday: “The devastating blows inflicted on the country’s achievements in the fight against corruption and in corruption prevention in Ukraine cannot be ignored. The decisions of individuals whose actions are becoming increasingly socially dangerous have to be assessed immediately and rigorously.”

Court actions dismantling anti-corruption bodies drew fire yesterday from the EU and G-7 ambassadors in Kyiv. Analysts say at risk are: visa-free access to the EU and the IMF Stand-by Agreement.

Foreign and national construction companies will be able to participate in up to $2 billion worth of contracts to rebuild 1,500 km of highways in Ukraine through 2023, government officials announced yesterday at a webinar on Public-Private Partnerships in the Road Sector. Tenders are to be drawn up next year for six sections of ‘M’ or international highways, said Infrastructure Minister Vladyslav Krykliy. The six sections are the first phase of a $9 billion, 4,500 km project that is to stretch through the decade.

The first phase focuses on ‘brownfields’ – upgrading existing roads. These highway sections will be become Ukraine’s first toll roads, but will be “installment roads,” Krykliy said. Under this system investors first pay for construction, then recoup their investments through highway infrastructure, largely gas stations, restaurants and billboards. Ukraine is one of a few major countries in the world without toll roads. The online information session drew 310 participants from 43 countries and 38 companies, Krykliy later wrote on his Telegram channel.

Ukraine’s PPP system is being developed with the advice of the World Bank’s IFC Group. Since 2014, IFC has advised governments on 147 public-private partnerships, an effort expected to draw $33 billion in private financing. In Ukraine, IFC advised on the recently completed concession contracts for Kherson and Olvia ports, contracts that are to bring in investments totaling $137 million.  Now, IFC is advising preparation of a tender for the concession of a container terminal in Ukraine’s Chornomorsk port and is analyzing concessions at rail stations. This project that could bring in over $150 million, says Jason Brett Pellmar, the IFC’s regional manager.

Ukravtodor plans to repair 6,800 km of roads next year, almost 30% more than the target for 2020, Alexander Kubrakov, head of the state highway agency, said yesterday at the presentation of the public private partnership plan for roads. Funding sources are: the Road Fund, funds raised under state guarantees, loans from international financials institutions, such as the World Bank, and possibly the first public private partnership.

Two months into the job as head of Ukraine’s state railroad, Volodymyr Zhmak announced yesterday he will drop a $1 billion framework agreement signed in 2018 to buy as many as 200 diesel locomotives from Wabtec Corporation, formerly GE Transportation. “As for cooperation with General Electric, today I do not see the need for further purchase of General Electric locomotives,” he said at a press conference in Kyiv. “Our goal is to switch to electric locomotives, because it is much more economical.” Of Ukrzaliznytsia’s 23,300 km of track, only 44% is electrified.

Through late July, Ukrainian officials repeatedly said they are negotiating to sign a contract by the end of this year to buy another 40 locomotives from Wabtec – a purchase that would carry a $185 million price tag. This would build on an initial purchase of 30 Wabtec diesel locomotives in 2018-2019. Last January, President Zelenskiy told visiting US Secretary of State Mike Pompeo: “The Ministry of Infrastructure and Ukrzaliznytsia are already negotiating the purchase of a new batch of American-made locomotives.”

Most of UZ’s rolling stock have passed their intended life expectancies, Zhmak gave these ‘depreciation rates: UZ’s 958 electric locomotives and 227 diesel locomotives — 96%; 41,138 freight cars – 89%; and 2,040 passenger cars – 88%. To accelerate renewal of the fleet, he said UZ will spend $250 million next year to produce 4,200 new freight cars and to overhaul up to 20,000. The railroad plans to spend $145 to overhaul locomotives. Ukraine has six locomotive repair plants. The nation’s sole locomotive production plant is in the part of Luhansk Region now under Russian control.

Austria’s Rail Cargo Group is launching a new weekly container freight train from central China to Vienna, through Ukraine. Separately, Rail Cargo, a unit of Austrian Federal Railways (ÖBB), recently announced that it is doubling – to twice a week — the frequency of its freight trains from Xian, China to Budapest, also through Ukraine. Previously, some China-Central Europe trains passed through Belarus. The China-Kazakhstan-Russia-Ukraine route provides “the best geopolitically, the fastest and most stable solution for the transportation of small goods between Xi’an and Vienna on a stable rail route,” the Austrian company told Ukraine’s Center for Transportation Strategies.

In the latest move to remove big trucks from Odesa’s residential areas, Euroterminal has started to build a rail spur to the Odesa-Peresyp rail cargo sorting yard, about five kilometers north of the historic port. As present, 80% of containers enter and leave Odesa Port by truck.

4G mobile telephone usage by Kyivstar subscribers was up 50% yoy in the third quarter, reports Ukrinform. The 4G network of Kyivstar, the nation’s largest mobile company, now reaches 84% of Ukraine’s population, the company reports. Of Kyivstar’s 25.8 million sim card holders, 65% use their phones for data. Due to the quarantine, “subscribers are using more digital products,” said Kyivstar President Oleksandr Komarov.

Belarus closed its borders yesterday afternoon with Lithuania, Poland and Ukraine, reported Belarus’ State Border Committee, citing “the existing epidemiological situation in neighboring countries.” Although Russia’s coronavirus infection rate is 50% higher than Belarus, the Russian border was not closed. This leads some analysts to conclude that Alexander Lukashenko, the self-proclaimed president of Belarus, is preparing a crackdown before next Tuesday’s US presidential election. Belarus is not blocking trucks from Ukraine, a major trading partner.

Editor’s Note: I watched the Public-Private Partnership webinar, just after a major foreign investor in wind energy bent my ear at length about the government’s $1 billion overdue electricity debt to renewable investors. Then, I caught up with the news and saw that UZ is backing out of the $1 billion Wabtec (GE) locomotive deal. Oh, yes, these were all Poroshenko deals. But, what if, in 2027, a foreign construction company finds Ukraine’s new government is slashing highway tolls to win votes. Will that next government say: ‘But those were Zelenskiy deals”? With Best Regards, Jim Brooke

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Monday, August 25 – IMF Review Date Is Not Set

IMF Review Date Is Not Set…Reserves Hit New High.Miracle for Mykolaiv?....Ukraine’s G.I. Business Program…IKEA Boosts Goods…New Car Imports Down….No Combat Losses for 29 Days...
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

The IMF has yet to set a date for the review of the Standby Agreement, a review that was to be in September. IMF Ukraine representative Goesta Ljungman tells Hromadske that while “discussions on the implementation of the parameters and indicators of the liquidity program are ongoing, the The IMF has yet to set a date for the review of the Standby Agreement, a review that was to be in September. IMF Ukraine representative Goesta Ljungman tells Hromadske that while “discussions on the implementation of the parameters and indicators of the liquidity program are ongoing, the date of the IMF mission on the first revision of the program has not yet been determined.”

Ukraine received in June a first $2.1 billion tranche of what is to be a $5 billion loan program.

Prime Minister Shmygal says he expects Ukraine will receive the second tranche by the end of this year. Some economic analysts say the IMF switched to observation mode after President Zelenskiy unexpectedly switched the central bank leadership within a month of getting the first IMF tranche.

International reserves reached a new high this month at $28.8 billion, according to the National Bank of Ukraine. Boosted by the IMF tranche, this is the highest level in eight years.

Mykolaiv’s shipbuilding industry is to be revived with a government program designed to create 25,000 new jobs, President Zelenskiy and David Arakhamia, leader of the Servant of the People Rada, promised on a visit Friday to a city that was the Soviet center for shipbuilding in the Black Sea. “We want to restore the former glory of the city of shipbuilders,” Arakhamia said, referring to Mykolaiv whose modern history dates back to the creation of a Russian Navy shipyard in 1789.

The government promises “a national program to support shipbuilding, cheaper credit resources,” Arakhamia said. Later on Friday, Oleh Uruskyi, Minister for Strategic Industries visited the Okean shipyard in Mykolaiv, reported the company website.

Business education for combat veterans and soft loans for veteran-owned startups are government priorities, President Zelenskiy said during an International Volunteer and Veterans Forum in Kyiv. “It’s both military skills and the rules by which all successful companies exist,” he said. “One cannot ignore the experience of other countries, where many veterans are the founders of large, serious, powerful, well-known companies.”

With the minimum monthly wage set to rise to $182 (UAH 5,000) next Tuesday, Zelenskiy says the budget can “definitely support” the hike. On July 1, the minimum wage is to increase by 30%, to UAH 6,500, currently $237. Ukraine’s median monthly wage is $768.

Grain sales were down 18% yoy in July, reports UNIAN citing the Ministry of Economic Development, Trade and Agriculture. Due to bad weather, much of the harvest is late.

Steelmaker ArcelorMittal has transferred 50 million tons of slag to the government for the national road construction program, reports Interfax-Ukraine, citing the company. Earlier this year, Arcelor pushed the government to change regulations to allow construction of concrete roads with slag. Increasingly common across Europe, the use of crushed slag for road construction helps companies cut disposal costs. In turn it cuts costs for building concrete roads. So far this year, 100,000 cubic meters have been used to build roads in Donetsk, Dnipropetrovsk, Kharkiv and Zaporizhia regions. The goal is to use almost 500,000 tons this year for roadbuilding.

Interpipe, Ukraine’s largest pipe and wheel producer, will redeem at par 97 million of its 2024 notes this week, according to the company.

IKEA Ukraine plans to offer 5,000 items in its first physical store in Kyiv, says Florian Melle, Ukraine director of Ikea. He said: “A city-format store will open in Kyiv without a food department and restaurant, but we strive to launch them as soon as possible.” Earlier this year, IKEA started operating an online store that proved so successful that the company struggled to keep up with orders. Ikea’s first physical store in Ukraine is to open in Kyiv’s Blockbuster Mall by the end of this year.

Energy traders imported 345,000 megawatts of electricity in the first quarter of 2020, reports NERC. The imported electricity was from Slovakia, Hungary, Romania and Belarus.

New car imports are down 36% y-o-y, reports Ukrinform citing Ukravtoprom. The average value of an imported new car is $19,300. Japanese vehicles are the most popular.

Passenger transport is down 56.2% y-o-y, reports the State Statistics Service. Rail was down 58.2%. Motor transport was down by 44.3%.

There have been no combat losses in the eastern regions for the past 29 days,  Zelenskiy said  during his Independence Day speech. “A year ago, I talked about how every morning starts with an SMS message from the General Staff of Ukraine. SMS about the number of wounded and dead for the past day on the front line. The numbers are different, but only one message makes the morning good: wounded – zero, dead – zero. Today, for the 29th day in a row, is a really good morning for me and our whole Ukraine. Yes, we face many new challenges. But today is 29 days since we have no combat losses in the east of Ukraine.”

From the Editor – After Monday’s Independence Day holiday, the Rada – and the Ukraine Business News — are back today. One example of constructive work the Rada can do is the simple legislation passed earlier this year authorizing the use of metallurgical slag for road building. An increasingly common practice in countries with steel industries, this recycling will cut into Ukraine’s slag mountains and help provide the nation with decent roads. Writing tonight from western Turkey, I see clearly how Turkey’s good roads generate economic development. With Best Regards, Jim Brooke

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Tuesday, March 10

Ukraine Will Save on Its Oil Import Bill, but a World Recession Would Wipe out Gains...Ukraine Securities Return to Prices of Last Summer...Russia Faces ‘Black Tuesday’...Ukraine Poultry Exports Resume to EU...IT Propels Kyiv Office Expansion...1 Million More Cars for Ukraine...4G for Kyiv Metro.
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

Short term, Monday’s oil price crash will help Ukraine, a net energy importer. Oil and gas, Ukraine’s top import category, account for one quarter of Ukraine’s imports. In 2018, this import bill was $13 billion. On Monday, Brent fell 24% to $34.50 a barrel, nearly a 20-year low. European gas prices already are at 10-year lows.

Long term, a world recession could drag down prices for Ukraine’s main commodity exports – food and metals. A recession could come about from an economy battered by spreading coronavirus restrictions and the collapse in energy prices. Starting today, all of Italy is under lockdown as the government seeks to contain coronavirus. The Saudi-Russia feud that triggered the oil collapse shows no sign of easing.

Global investors’ flight to safety is returning Ukrainian securities to the levels of last summer. On Monday, the yield on Ukraine’s dollar bond due 2028 hit 8.31%, the highest since June and an increase of 183 basis points since Friday. Similarly, nominal prices of Ukraine’s GDP warrants fell 7.4% Monday to 82 cents, the lowest since August. The hryvnia devalued by 1% against the dollar, hitting 25.

This financial hurricane catches Ukraine without an Economy Minister or an Energy Minister. After last week’s Cabinet purge President Zelenskiy has yet to find replacements. Timothy Ash writes from London: “Who advised Zelenskiy to make this move at such a terrible time in global markets with coronavirus?”

The collapse in oil prices will weaken Russia, Ukraine’s geopolitical adversary. When Moscow trading starts today after the March 9 holiday, the ruble is expected to weaken beyond Monday’s 4% fall. In London trading Monday, several major Russian companies, including Gazprom, saw their share prices fall by one quarter. In contrast to previous Russian recessions, the economies of Russia and Ukraine are increasingly de-linked, a legacy of six years of war.

Viktor Avdiyenko writes in Apostrophe: “Monday can be called ‘black’ with full confidence. But Russia is most likely waiting for ‘Black Tuesday, when stock markets open there. Russian and foreign analysts predict that oil quotes may continue to fall – up to $20 a barrel, and the dollar will rise to 80 and, possibly, up to 100 rubles.”

Meanwhile back in Ukraine’s bricks and mortar economy:

Ukraine resumes poultry exports to the EU this week, ending a 6-week suspension due to the discovery of an avian flu case in Vinnytsia Region in mid-January. After imposing a blanket ban on poultry imports from Ukraine, the European Commission decided to zone the ban to a 10 km radius from the affected farm, Khutor. Ten other countries that imposed a ban — including Japan, South Korea, Azerbaijan, Armenia, and Moldova – are expected to follow the EU lead. “MHP resumed exports to the EU since March 7,” said Myronivsky Khliboproduct, the company responsible for most of Ukraine’s exports.

Last year, Ukraine increased its poultry meat exports by 26%, to a record, 414,000 tons, for $579 million, reports Ukraine’s Institute of Agricultural Economics. About one third of exports – 134,262 tons – went to the EU, making Ukraine the third largest supplier, after Brazil and Thailand, reports the European Commission. Last year, Ukraine was the world’s sixth largest producer — after Brazil, the US, the EU (with the UK), China and Turkey.

Chickens represent Ukraine’s animal husbandry bright spot, increasing by 2% y-o-y, to 211.5 million head on Feb. 1, reports the State Statistical Service. By contrast, the national cattle herd – milk cows and beef cows – were down 7% y-o-y to 3.1 million. Similarly, pigs were down 5.2%, to 5.6 million heads. Sheep and goats were down by 5.7%, to 1.2 million heads.

With demand for new office space strong in Kyiv, a record 255,000 square meters are to go on the market this year, more than double last year’s amount, according to a new Kyiv office research report by the CBRE Ukraine, the real estate consultancy. Reviewing office buildings under construction, CBRE estimates the same volume of new office space will come on the market in 2021 and 2022.

IT accounted for 44% of the new office space take up in Kyiv last year. This was followed by industry and energy with 25% and by co-working and temporary offices at 12%. With IT growing at 20% a year in Kyiv, CBRE predicts that the current office vacancy rate of 8.5% will stay roughly same through 2022. “If in the next two to three years, demand will correspond to the supply, then significant fluctuations in rental rates are not expected,” CBRE says. Due to IT companies demanding large floor plates – often 4,000 square meters or more — many office construction projects are fully pre-leased, reports CBRE.

Residential housing increased by 27% last year y-o-y, to 11 million square meters. Newly commissioned housing was almost evenly split between single family houses – 53% — and apartments – 47%. Of the total, 62% were in urban areas. Kyiv City led the nation, with 1.1 million new square meters.

The schedule for ‘big privatization’ tenders – over $10 million – is: Dnipro Hotel and United Mining and Chemical – May; Odesa Port-Side Chemical Plant – August; President Hotel – October; Electrotyazhmash – November; Centrenergo – December. To prepare for sale, the State Property Fund is installing new managers. It is unclear how much success the Fund is having in annulling ‘poison pill’ management contracts.

One million additional cars may hit Ukraine’s roads this year, if current registration figures hold up. In January and February, 61,000 used imports and 14,000 new imports were registered, reports UkrAvtoProm, the auto industry association. Car sales usually pick up during the course of the year.

Ukraine’s first concrete highway – a 160 km road used by Poltava grain trucks going to Dnipro – must be completed by the end of this year, President Zelenskiy vowed Thursday on a site visit. The north-south N-31 highway runs from Reshetilovka, Poltava Oblast to Dnipro, where there are road, rail and river connections to the Black Sea.

4G mobile service could be in all 52 stations of the Kyiv Metro by this time next year — if the Kyiv City Council sets tariffs as a meeting on Thursday, Alexander Komarov, Kyivstar CEO, said at a 4G test launch last week at Akademistechko station, the western terminus of the Red Line. With 4G, the total investment in the Metro by Ukraine’s big three mobile operators – Kyivstar, Vodaphone Ukraine, and lifecell – will total $20 million, estimated Oleksander Kogut, Kyivstar’s director for regulatory support. Last summer, Chinese technology giant Huawei won the tender to supply the mobile equipment for the 69 km largely underground system, which is used by 1.3 million riders every weekday.

From the Editor: With coronavirus and the oil price collapse threatening to push the global economy into a recession, it does not help that Ukraine has no Economy or Energy Minister. If the world turns to the IMF for help this spring, it does not help that Ukraine played footsy with the IMF for six months. If food riots and political fires break out around the world, Ukraine may discover it is priority number 38. With Best Regards, Jim Brooke jbrooke@ubn.news

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Monday, February 24

Global Warming Lengthens Road Construction Season...Turks Win Tender to Finish Zaporizhia Bridge...Russia’s ‘Inspections’ On Azov Cost Shippers $45 million...Kyiv Outshops Moscow...Price of Gas Imports to Drop in Half by Summer...Coal Mines to Close in 2020s
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

Thanks to Ukraine’s mild winter, highway workers fired up their bulldozers last week and started work on 34 projects in 14 regions, reports the press service of Ukravtodor. “A record early start was caused by favorable weather conditions,” reports the national highways agency. Working through November, Ukravtodor plans to spend a record $3.5 billion this year to upgrade 4,000 km of national roads and 2,500 km of local roads.

Turkish construction company Onur submitted a winning $488 million bid to complete the long unfinished bridge across the Dnipro at Zaporizhia, Ukravtodor reports on Facebook. The ProZorro tender called for building a 9 km highway with six interchanges and two major bridges — the highway connects Khortytsia island with the right and left banks of the river. The unfinished bridge has been a city landmark since construction first started 16 years ago. The Zelenskiy Administration wants the project completed by the end of 2022.

Turkish construction company Cengiz has signed a memorandum of cooperation to upgrade the M14 road between Mariupol and Nova Kakhkova to the level of an international highway. Planner see upgrading this 350 km east-west route as key to easing the isolation of Berdyansk and Mariupol, Ukraine’s main ports on the Azov.

Russia has detained 2,249 ships since Kerch Strait naval clash of November 2018, Andriy Klimenko, editor in chief of the BlackSeaNews portal. With each detention for ‘inspections’ lasting an average of four days, shippers have lost $45 million, Klymenko told a European Parliamentary delegation last week in Brussels. He said: “More than half of the ships subjected to unreasonable detentions in the Kerch Strait are related to the EU — having a European flag, shipowner, or port of destination.”

Confounding stereotypes, the Kyiv metro area has 50% more ‘high quality retail space’ per capita than the Moscow metro area, according to new statistics by UTG, the Ukraine real estate consultancy. Kyiv’s metro population of 3.7 million people has 1.8 million square meters of shopping space, or two people per square meter. Moscow’s metro population of 12.5 million people has 4 million square meters of shopping space, or three people per square meter.

With Russia’s economy stagnant, the gap may grow.  Without counting 21 Kyiv region malls in ‘concept’ stage, Kyiv is to add 550,000 new square meters – a 30% increase from today’s levels — by the end of next year. This would raise Kyiv’s retail saturation to 1.6 people per square meter, about double Moscow’s.

In Kyiv, 241,000 square meters of new retail space went on the market last year. This is 50% more than the 159,000 square meters of gross leasable area that went on the market in 2018. With the new supply, Kyiv’s overall retail vacancy rate is creeping up, hitting 7.8% in December. For regional malls, the vacancy rate is twice as high – 15.4%, reports UTG.

Ukraine’s retail sales are expected to grow by 10% this year, matching last’s growth. Growing three times as fast as GDP growth, retail is fueled by $1 billion a month in remittances from workers outside the country and the large portion of Ukraine’s economy – as much as 50% — that is off the books.

Supermarket chain Novus plans to open 10 new stores in Kyiv by the end of 2021, Ihor Landa, CEO of BT Invest Ukraine, the company that runs Novus, tells Interfax-Ukraine. He says the chain plans to expand because purchasing power is growing in greater Kyiv, now home to 10% of Ukraine’s population. Novus has 750 unfilled job vacancies.

For the first time, Ukrainian regional real estate projects will have their own stand at MIPIM, the leading European investment exhibition for the international real estate market. On show will be Ivano-Frankivsk’s Promrylad, a $25 million project to convert a Soviet era factory into modern multiuse space, says Anna Nestuly, Ukraine organizer of Ukraine’s delegation to the March 10-13 fair in Cannes. Counting the Kyiv city stand and the Ukraine regions stand, Ukraine’s delegation is to number 100, double the size of 2018. Participants include: Altis Holding, City One Development, DELTA Ukraine, Dragon Capital, Intergal Bud, Invest in Projects, Mandarin Plaza Group, Midland Development, Toronto-Kyiv, TK Property Management and UDP.

Ukraine should aim to triple IT workers, to 650,000, and nearly triple IT export revenue, to $13 billion a year, Kira Rudik, a leader of the Rada’s Digital Transformation Committee, said in Zaporizhia. “The IT industry is growing fast,” said Rudik, former CEO of Ring Ukraine, now owned by Amazon.  “We are an agrarian country. We have every chance to become a technological country. What we need to do to achieve this is increase export revenue to $13 billion a year.”

With talks over the green tariffs adrift for the last six months, Prime Minister Alexei Goncharuk said Friday: “We anticipate serious problems for our energy sector to serve such high obligations…We also do not stand and do not support a retrospective change in the rules.” With investments frozen for many new projects, investors say the government is not showing adequate political will to forge a consensus with industry on tariffs.

Ukraine’s import price of gas may drop in half this summer – to $80 per 1,000 cubic meters – predicts Oleksiy Orzhel, Energy and Environmental Protection Minister. In January, Ukraine’s average price of imported natural gas was $175.26, already a 10-year low. With production sharing agreements coming up for auction in coming months, Orzhel warns ultra-low prices will turn off investment. He said Friday: “It will be very difficult to make decisions to invest in production…many companies have frozen their further extraction investment projects.”

The government plans to close most of Ukraine’s coal mines during this decade, Minister Orzhel said Friday at a presentation of a revised draft Concept for a Green Energy Transition To 2050. The cutoff level for production will be $40 a ton. “Very few facilities will be competitive,” Orzhel said, outlining a policy that he predicts will outlast the five-year Zelenskiy Administration. Referring to the social impact, he said: “It will not be shock therapy, but gradual closures.”

Russian health officials took a Chinese woman with symptoms of a respiratory illness off a Kyiv-Moscow train in Bryansk, Russia. The woman was hospitalized in quarantine. She and five Ukrainian passengers in the rail car later tested negative for coronavirus. The rail car was decoupled from the Ukrzaliznytsia train, sanitized., and isolated.

From the Editor:  With Ukraine’s new public/private concessions to expand from ports to airports, to railroad stations and to toll highways, foreign investor interest will be high next month at the Ukrainian Transport Infrastructure Forum. The Ukraine Business News is proud to be a media sponsor for Forum which the Strategy Council will hold March 31 at Kyiv’s Premier Palace Hotel. The schedule can be found here. With Best Regards, Jim Brooke jbrooke@ubn.news