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Tuesday, December 1

China’s Trade With Ukraine Soars to Double Russia’s Trade...US Press Detail Ukraine’s DC Lobby Against Nord Stream 2, Hunt for Mushrooms at Home...Ze’s Deputy Chief of Staff Sings Way Off Key as President Courts IMF...$200 Million Rebuild Moves Ahead for Dnipro Airport
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

China has roared ahead of Russia to account for twice as much of Ukraine’s trade this year, reports the State Statistics Service. For this year through August, China-Ukraine two-way trade totaled $9.4 billion. Russia trade totaled $4.8 billion. Germany was just behind, with $4.6 billion. The next four were: Poland — $4.5 billion; Turkey — $2.9 billion; Belarus — $2.5 billion; and United States — $2.5 billion.

DHL will create “a powerful logistics center” in Kyiv’s left bank Liski rail hub for container trains going to and from China, Ukrzaliznytsia CEO Volodomyr Zhmak writes of a memorandum of cooperation signed Friday between the state railroad and DHL Global Forwarding. To open up new east-west routes, UZ is finalizing similar agreements with BTLC Germany and Poland’s PKP Cargo Connect. To promote the rail hub near the Darnytsia rail station, Zhmak appointed last month Edvins Berzins, former chairman of Latvian Railways, to be executive director of what is formally called the Liski Transport Service Center. After starting last June, container trains now run almost weekly from China to Liski. Around Ukraine, there are now 36 routes regularly plied by container trains.

In “U.S., Russia Race to Outflank Each Other on Russian Pipeline,” Wall Street Journal reporter Brett Forrest recounts the down to the wire race to stop the Nord Stream 2 trans-Baltic gas pipeline, a line seen as rendering Ukraine defenseless against full-fledged Russian intervention. In the 1,800-word story, one villain emerges: US Treasury Secretary Stephen Mnuchin. Forrest writes: “Mr. Mnuchin, whose department enforces sanctions, was opposed, these former officials said. ‘He was a big hang-up at every turning point,’ said one.” Two Washington lobbyist heroes emerge: Vadym Glamazdin, a government-relations official with Naftogaz, and Oleksandr Kharchenko, an official at Ukraine’s National Security and Defense Council.

A bounty of mushrooms flowed out of Ukraine’s forests this fall, reports The New York Times, citing unusual weather: “a dry summer followed by an unusually warm fall and late first frost.” In “I Have Never Seen So Many Toadstools.’ A Bumper Crop of Mushrooms in Ukraine,” Times reporters interviewed Emilia Koleda, a grandmother selling mushrooms on the Kyiv-Chernihiv highway. Noting that her mushroom sales earned her money for firewood and school supplies for her grandchildren, said says: “Mushrooms saved so many people this year…Nature helped us through the quarantine.” Befitting the secrecy of mushroom hunters, the reporters chose as their dateline a Chernihiv settlement so tiny it does not appear on google maps.

With the Democrats returning to power in the White House, David Arakhamia, head of the Servant of the People Rada faction, hopes that Joe Biden will resume an Obama era practice of extending US guarantees to $1 billion in Ukrainian 5-year Eurobonds. The Obama Administration did this three times at the height of Ukraine’s post-Maidan financial crisis – in May, 2014, in May, 2015 and on Sept. 23, 2016, just before the election that brought in Donald Trump. With the US guarantee, the last bond carried the lowest rate in Ukraine’s history — 1.471%. With Ukraine’s reserves recovering the Trump Administration refused to refinance the first two issues. They were repaid in full.

Ukraine’s faces a bulge in repayments next fall, and Arakhamia tells Interfax-Ukraine that he hopes a Biden Administration will roll over the $1 billion bond coming due in September. “We hope that with the arrival of the new White House administration, we will be able to agree with our strategic partners on refinancing this loan,” Arakhamia tells the news agency. Ukraine’s international reserves are $24.5 billion.

No IMF funding for Ukraine until Zelenskiy earns trust,” headlines a stinging critique of the Zelenskiy government by Anders Aslund, the Swedish-American economist who has been watching Ukraine for 30 years. “If the Ukrainian government does not fundamentally revise its current economic policy and political trajectory, it is unlikely to receive any IMF, World Bank, or European Union funds for as long as Volodymyr Zelenskiy remains president,” Aslund writes in an Atlantic Council Ukraine blog. “Zelenskiy does not appear to grasp that the IMF takes its conditions seriously and does not want to be treated as just a source of cheap credits. Unlike the Ukrainian government, it is focused on structural reforms so that the Ukrainian economy can start growing at five to eight percent a year, rather than at minimal rates.”

The Zelenskiy administration’s effort to get back on track with the IMF hit an unexpected bump when Oleg Tatarov, deputy head of the administration, said Saturday that the National Anti-Corruption Bureau does not serve Ukraine’s interests and that its head Artem Sytnyk doesn’t have “the moral right” to run the agency and should be replaced. The next day, the Zelenskiy administration hurried out a statement saying Tatarov’s statement was: “His personal opinion that does not reflect the administration’s official position.”

The Anti-Corruption Bureau was created with Western advice and financing. Ukrainian officials have repeatedly assured the IMF that it will be retained. Two weeks ago, Zelenskiy met with G7 ambassadors and assured them that Sytnyk would stay on the job. Next week, the Rada is to vote on a bill that would guarantee the Bureau’s survival and Sytnyk’s role as head. In Washington, analysts predict that the Biden administration will use ‘tough love’ on Ukraine — conditioning support on free market, EU-standard reforms.

Ten Turkish and Ukrainian construction companies have applied to take part in the $200 million rebuild of Dnipro airport, reports Kyrill Khomyakov, head of Ukrinfraproekt, the State Agency for Infrastructure Projects. Qualified companies are to take part in a competitive tender. Expected to take several years, the project involves building a new concrete runway, jet taxiing aprons, lighting, navigational aids and a perimeter fence. Next year’s budget has allocated $50 million, or one quarter of the money.

Controlled by the Ihor Kolmoisky group, Dnipro airport has languished, recording Ukraine’s 7th largest volume of passengers last year. In 2019, Dnipro handled 338,888 passengers, sandwiched between Zaporizhia, at 434,000, and Kherson at 154,046. Separately, Infrastructure Minister Vladyslav Krykliy reported Sunday from Istanbul that a Turkish construction company wants to modernize Kherson airport, which is served by Turkish Airlines.

In Switzerland, airplane pilots who are unable to fly during the coronavirus pandemic may soon retrain to become train drivers.  With the support of Aeropers, the nation’s main union for cockpit employees, Swiss Federal Railways and Edelweiss Air are studying a pilot retraining. While dozens of jets are grounded in Switzerland this winter, the state-owned railroad is cancelling trains due to lack of staff. Converting a jet pilot into a locomotive engineer is expected to take less than one year.

In Berlin, DHL has painted its trademark yellow and red colors on 10 idle tour buses and converted them into ‘paketbussen.’ The parcel buses, including six double deckers, will receive and deliver packages to customers standing outside, minimizing contagion. Logistik Watchblog quotes Berlin’s Governing Mayor, Michael Müller, saying: “The parcel business, which will reach a new dimension due to the corona Christmas, is specifically facilitated with the paketbussen. It helps us to further reduce contacts.”

Editor’s Note: Drawing on 10 years covering news in South America, I believe Latins are often better skilled than Ukrainians at conflict avoidance. A South American president would know how to handle a troublemaker like Tatarov. An annoying writer or opposition politician would be called into the Italianate foreign ministry. With grave ceremony, he would be handed freshly penned credentials, appointing him ambassador to…India. Adios! Over the winter holidays, Zelenskiy could create a Ukrainian consulate in Vladivostok, an area once majority Ukrainian. To jazz up the job, it could be called a ‘Consulate General’ — responsible for an area larger than Western Europe, from Sakha to Sakhalin. To get in the mood on the loooong train ride across snowbound Siberia, Tatarov could read Chekhov’s 1893 “Sakhalin Island” — Остров Сахалин — a classic report on exile. With best regards, Jim Brooke.

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Tuesday, August 18 – the biggest impact of strikes spreading across Belarus

Belarus Strikes May Starve Ukraine’s Roadbuilders of Asphalt...Belarus Eurobonds: Worst Performers of Emerging Markets...Ukraine’s Garage Sale: Government to Auction Leases for 4,262 Empty Buildings...A Rebound Coming? Ukraine Buys Back GDP Warrants...
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

For Ukraine, the biggest impact of strikes spreading across Belarus may be a shortage of asphalt for President Zelenskiy’s $3 billion drive to pave 4,000 km of highways this year. Ukraine imports half of its asphalt in heated, liquid form from Belarus. “Objectively, there is nothing to replace Belarusian volumes — and this is half of the market,” Serhiy Kuyun, director of the A-95 Consulting Group, writes on his Facebook page. “Russian supplies are closed, and Ukrainian traders are just mastering imports by sea.”

Ukraine also gets about one third of its diesel and gasoline from Belarus. But the strikes and slowdowns will only result in a ‘hiccup’ for Ukrainian prices, Kuyun predicts. “First, we have been living with a huge surplus of diesel fuel and gasoline for half a year. Traders sell it to zero at best, the market is so overwhelmed. Second, the Ukrainian market is open for supplies from all sides.”

Most of Ukraine’s imports of Belarus petroleum products come from the Belarus’ largest refinery, in Mazyr, on the Pripyat River, 250 km north of Kyiv. According to Argus Media, it appears that Mazyr workers will be on a 3-hour lunchtime strike this week. At Naftan refinery, near Belarus’ northern border with Lithuania, workers are on strike. The refinery which is owned by Belneftekhim, was already shut down for scheduled maintenance.

On the IT front, Ukrainian IT companies are “already accepting individual divisions of IT companies in Belarus as guests,” Olha Kunichak, manager of the European Business Association’s IT Committee tells Interfax-Ukraine. “Ukrainian IT companies are ready to cooperate and help our northern neighbors.” To restrict protesters, the Belarus government has been shutting off the Internet. Ukraine started this summer a fast track program to grant work permits to foreign IT specialists. According to Ukraine’s Ministry of Digital Transformation, Ukrainian universities only graduate 15-17,000 IT specialists annually, while the fast-growing sector needs 40,000 a year.

Belarus Eurobonds handed investors a loss of 5.1% this month, the worst performance in emerging markets, according to a Bloomberg Barclays index. Since the 2031 bonds were issued on June 25, the yield is up by one percentage point.

Ukraine is recalling its ambassador from Belarus to protest Lukashenko’s “repeated and groundless” statements against Ukraine, Ukraine Foreign Minister Dmytro Kuleba said yesterday. President Lukashenko’s return to of Russia mercenaries who had fought on the separatist side in the Donbas war, “derailed the trust between our nations and inflicted a heavy blow upon our bilateral relations,” Kuleba said.

Leases for 4,262 empty buildings totaling 2.5 million square meters – or 10 times New York’s Empire State Building – will go up for electronic auction this fall under streamlined rules approved last week by the Cabinet of Ministers, announces Leonid Antonenko of the privatization department of the State Property Fund. The full of list of leases to auctioned by ProZorro.Sales includes: 1,070 offices, 837 warehouses, 566 factories, 61 spaces at airports, and six sites for renewable energy plants at Chornobyl. While much of the vacant space is in the big five cities, there are thousands of square meters up for lease in Cherkasy, Kropyvnytskyi, Mykolaiv, Rivne and Zaporizhia.

Ukraine ranks first in a ranking of 39 Eastern European and developing countries for public procurement transparency. Following 64 indicators for the Transparency Rating, the authors placed Ukraine at the top with a score of 97% and Tajikistan at the bottom with a score of 38%. Poland got  74%, Hungary 67% and the Czech Republic 65%. Russia and Belarus were not studied by the group, the Soros-funded Institute for the Development of Freedom of Information. For the last four years, all government purchases of goods worth more than $7,300 have to go through the ProZorro on line tendering system.

Ukraine’s Finance Ministry has repurchased about 10% of outstanding GDP-linked securities, the Finance Ministry announced Friday on the Irish Stock Exchange. Known as GDP warrants, the securities have payouts triggered by two consecutive years of GDP growth. By spending up to $300 million to quietly buy back these securities, the government may be expecting a post-Coronavirus growth bounce next year. After Ukraine’s economy GDP fell 11.4% in Q2, the central bank predicts that economy will shrink by 6% this year, and rebound by 4% next year.

Concorde Capital’s Alexander Paraschiy calculates that the purchase was at 90% of par and writes: “This is also a good signal for the holders of GDP warrants, as it indicates MinFin is anticipating large payments under the warrants in the mid-term.”

Timothy Ash writes: “Now most official forecasts have a 4% plus growth for 2021.With the changes at the [central bank], the Zelenskiy administration is going for a pro-growth agenda, which might mean lower rates, cheaper currency, perhaps looser fiscal – note minimum wage hikes.

In a sign the Corona-recession has eased, Ukraine’s electricity consumption in July was only 0.7% below last year’s level, according to Ukrenergo, the nation’s state power transmission company.  Industrial consumption was down 3.2% yoy, but household consumption was up 4.7% and consumption by chemical industries was up 15%.

The central bank expects to receive the second tranche from the IMF by the end of this year, Kyrylo Shevchenko, the new governor of the National Bank of Ukraine, says in an interview with RBK-Ukraina. The IMF approved the 18-month, $5 billion program on June 9, and the first tranche — $2.1 billion — was disbursed three days later. Release of the remaining $2.9 billion depends on four reviews. However, Shevchenko’s predecessor, Yakiv Smoliy quit on July 1, citing pressure from President Zelenskiy. Since then, talk of a September review has faded.

Last week, the central bank bought $223 million, strengthening the hryvnia mildly to UAH 27.3/$1. So far this year, the National Bank of Ukraine has bought $1 billion more than it sold, latest data show. Demand for dollars this summer has been weak as vacationers are largely bottled up inside the country, unable to take advantage of visa-free access to the EU.

Last year, Ukrainians made 26 million trips out of the country, while foreigners made 15 million trips here, according to the State Statistics Service. Tourism accounts for only 1.5% of Ukraine’s GDP, well below Belarus – 6.4% — and Georgia – 26.3%. To generate more inbound tourism, Ukraine has dropped visa requirements for Chinese tourists and allowed Indians, South Africans and Filipinos to apply for visas on line. “Simple arithmetic shows the advantages of visa liberalization: the average check of one Chinese tourist in Ukraine is about $950,” says SkyUp, Ukraine’s discount airline. After coronavirus and visa barriers drop, SkyUp mulls launching flights to: China, India, Bahrain Saudi Arabia, Kuwait, Oman, UAE, Qatar, Egypt, Lebanon, and Tunisia.

Reminder: UIA is offering two direct Kyiv-New York-Kyiv flights – next Monday Aug. 24, and the following Monday, Aug. 31. No additional New York flights are scheduled. Tickets only are available through the UIA site:  https://www.flyuia.com/ua/en/home.

From the Editor : In October 1991, I interviewed Stanislav Shushkevich, Belarus’ first president, who was then one month into the job. A smart man, Shushkevich has a doctorate in physics and was, oddly, chosen by authorities in Minsk to teach Russian to the American defector, Lee Harvey Oswald. Reporting for The New York Times, I asked Shushkevich a question of interest to my readers: “How many nuclear bombs do you have?” He responded: “I have no idea. Ask the Red Army.” Then, as in now, the biggest questions in Minsk are often answered 700 km to the east, in Moscow. This week, we may see whether Moscow props up Lukashenko for a few more years, or eases him into a sunny retirement at his hillside chalet above Sochi. With Best Regards Jim Brooke