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Friday, August 14 – Nationwide Safety Checks Start on Ammonium Nitrate Fertilizer

Nationwide Safety Checks Start on Ammonium Nitrate Fertilizer...Behind the Blast: Russian Businessman Abandoned Ship, Cargo, and Ukrainian Crew in Beirut...Avangard May Close Egg Farms in Coming Weeks...Ukraine to Create Domestic Airline Based on Antonov Regional Jets...US Threatens to Stop Sending Oil to Belarus Through Odesa..
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

By Sept. 15, all of Ukraine’s ports are to complete “extraordinary measures for government supervision” of the import, handling and storage of ammonium nitrate, Prime Minister Shmygal has ordered. The explosion of 2,750 tons of ammonium nitrate in Beirut’s port killed 171 people, wounded 6,500, left 250,000 homeless and cause $15 billion to the port alone.

Ukraine, Europe’s largest food exporter, is a major importer of ammonium nitrate, a key component of fertilizers. Last year, Ukraine imported 716,000 tons, at least seven times the volume of 2016, according to the State Statistics Service. Coming from Georgia, Bulgaria, Turkey and Romania, the chemical compound enters through a dozen ports – from Izmail to Mariupol. Inside the country, there are more than 600 warehouses for ammonium nitrate, Andriy Miselyuk, director of Dialogue Institute for Socio-Political Design, writes on his Facebook page.

At Pivdennyi, Ukraine’s busiest port, 9,600 tons of ammonium nitrate are stored “in accordance with all norms and standards,” the seaport administration says in a statement. The compound is “packed in big bags” at berths No. 1 and 2. “In this case, it is not explosive,” the port asserts, that bulk handling of the compound is dangerous. During the first six months of production, the chances of explosion are low. Ukraine consumes 1.5-2 million tons a year, an amount that makes for a steady rotation of stock. The Beirut stockpile, entirely in bags, was seven years old when it blew up.

Behind the devastating Beirut port explosion was a Russian business man who abandoned his ship, his 8-man Ukrainian crew and his cargo of ammonium nitrate in Beirut in 2013, according to a Reuters story, reported by 12 journalists in 11 cities, from Moscow to Panama City. Police questioned the de facto owner, Igor Grechushkin, aged 43, at his home in Cyprus about the cargo. The ship’s captain Boris Prokoshev, told Reuters from his home in Sochi that he sees Grechushkin and the ship’s charterer, Teto Shipping Ltd, as the same entity. Based in the Marshall Islands, Teto was dissolved in 2014.

Flying the flag of Moldova, a landlocked nation, the ship, the Rhosus, was loaded in Sept. 2013 with 2,750 tons of ammonium nitrate produced by Rustavi Azot, a nitrogen producer in Georgia. The cargo was destined for a commercial explosives factory in Mozambique. En route, it developed a leak and docked in Beirut. Four months earlier, safety inspectors in Seville, Spain detained the Rhosus for a series of safety violations, including a corroded deck. In Beirut, Grechushkin ordered the captain to load heavy road building equipment on the deck, reports according to 112.ua.

With the Rhosus disabled by the leak, Grechushkin abandoned the ship and the crew, both news agencies report. Four crew members were forced by Lebanese officials to stay on the ship for 11 months to prevent it from sinking. After a sailors aid group flew them home to Ukraine, the ship sank. According to Prokoshev, the captain, Grechushkin owes at least $150,000 in unpaid salaries. According to 112.ia, Grechushkin lives in Cyprus with his wife Irina, and their son, a student  at a private university in Scotland. Although Cyprus is a 45-minute flight or a 2-hour ferry ride from Beirut, the captain said Grechushkin never came to Beirut to check on the boat. The blast was so massive it was heard — and felt — in Cyprus, 200 km across the Mediterranean.

IFC is supplying a $35 million loan to help Galnaftogaz to improve its supply of fertilizer and fuels to small farmers. The Lviv-based company has pioneered allowing farmers to buy fertilizer and seeds in the spring, paying forward with ‘crop receipts,’ or liens on fall harvests. Galnaftogaz, with 357 OKKO-branded filling stations, is Ukraine’s largest fuel retailer. The loan from IFC, a World Bank unit, will also finance installation of fast-charging stations for electric vehicles.

After good weather in eastern and central Ukraine, the USDA has raised its Ukraine harvest forecasts to: 27 million tons of wheat, and 39.5 million tons of corn. “Yields are expected to be the second highest on record, with a previous record of 7.84 tons per hectare in 2018,” writes the US Department of Agriculture.

Ukraine’s Avangard, Europe’s largest egg producer, may close six of its 20 farms, cutting production by 20% by mid-October, reports Poultry World. UkrLandFarming, Avangard’s parent company, may have to lay off 2,500 employees. Avangard owner Oleg Bakhmatyuk says that due to ongoing court cases against him, he is unable to get bank loans. In 2010, Avangard raised $187.5 million in an IPO on the London Stock Exchange. But Russia’s 2014 annexation of Crimea and occupation of half of Ukraine’s Donbas resulted in Avangard losing valuable properties. Although Avangard produced 2.6 billion eggs in 2018, its debt is estimated at $2 billion.

Next year, Ukraine will create a domestic airline based on a fleet of regional jets produced by Kyiv’s Antonov, Infrastructure Minister Vladyslav Krykliy said yesterday on a visit to Kharkiv State Aircraft Manufacturing Company. “Aircraft manufactured by Antonov will be used for regional transportation,” he said. To boost domestic air travel, Ukraine is abolishing the 20% VAT tax on domestic tickets. Last year, 16 of Ukraine’s 54 civilian airports carried passengers — on scheduled or charter flights. About 5 million people flew out of regional airports.

Betting that corona travel restrictions will ease, SkyUp announces seven new international routes for its winter schedule. Starting Oct. 25, Ukraine’s discount carrier will fly from Kyiv Boryspil to Amman, Belgrade, Bratislava, Belgrade, and Stockholm. It will also start Kharkiv-Dubai and Lviv-Dubai. On Sept. 26, it will start Kyiv-Dubai, a route that is to become five times a week.

Starting today, Ukraine’s new electronic visa platform launches at this address: https://evisa.mfa.gov.ua/. Citizens of India, the Philippines and South Africa will be able to get electronic visas for travel to Ukraine for business, tourism, medical treatment, culture, science, education, sports, and journalism. The e-visa should be printed out to show at border control.

After Belarus President Aleksandr Lukashenko cracked down violently in the wake Sunday’s presidential election, U.S. Secretary of State Mike Pompeo said Washington is considering ending oil shipments to Belarus. Most come through Klaipėda, Lithuania, to the Naftan refinery, in northeast Belarus. Several shipments of US oil have come this year through Odesa to Belarus’ southern refinery, in Mazyr, 50 km north of Ukraine. So far this year, Odesa has handled six tanker loads of oil for Belarus, largely from Azerbaijan.

From the Editor: One month ago, I ruffled feathers with news items gathered under the headline: “Will Russia Launch a Military Attack on Ukraine in August?” Now it seems my premonition of a Russian August surprise was off — by a couple of degrees. In Belarus, yesterday’s walkouts from big state-owned companies strengthen calls for a national strike. That could be Lukashenko’s endgame. With the White House distracted in the 81-day runup to the US presidential vote, Moscow could easily pull a Prague 1968 – roll in tanks to restore ‘order.’ Timothy Ash writes: “The Ukrainians are very concerned. They think the Russians’ game plan is take over Belarus, roll tanks up to the border with Ukraine, and then max pressure on Ukraine from the North and East.” Also from London, Keir Giles, writes a Chatham House essay: Watching Belarus Means Watching Russia Too. In Russian intervenes militarily in Belarus, “Ukraine would be forced to rapidly re-orient its defense posture to face a new threat from the north.” With Best Regards Jim Brooke

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Thursday, August 13 – Cabinet of Ministers of Ukraine: 200 More State Companies to be Privatized

200 More State Companies to be Privatized...Plans for a $3 billion, 150 km Kyiv Ring Road...Ze Signs Derivatives Law...Flights Leave Kyiv Sikorsky Half Full...
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

About 200 more state companies will be transferred to the State Property Fund for privatization, the Cabinet of Ministers decided yesterday. The companies are either unprofitable or are used “for various shady schemes,” Economy Minister Ihor Petrashko told reporters after the meeting. At the same time, the government is cutting by one third – to 200 – the proposed list of state companies exempted from privatization, Prime Minister Shmygal said during the Cabinet Meeting.

Until the coronavirus pandemic started, several foreign investor groups had planned to come to Ukraine this summer to study state companies scheduled for sale. Dmytro Sennychenko, head of the Property Fund, estimates that about half of Ukraine’s 3,000 state companies are bankrupt and will be liquidated. The others will be sold at public, electronic auctions, largely as is. To help foreign investors, the Fund has set up a bilingual Ukrainian-English website with ‘data rooms’ on each property up for sale. To speed the sale of distilleries from Ukrspirt, the state alcohol producer, the Cabinet of Ministers yesterday passed a key package of regulations setting sale conditions.

Ukravtodor presented yesterday a project to build $3 billion, 150km, three quarter circle Kyiv ring road. Designed to intercept traffic about 40 km outside capital, the bypass would link all major international highways that converge on Kyiv – from Kovel, Lviv, Odesa, Boryspil, Kharkiv and Chernihiv. Designed to carry 300,000 cars a day, the bypass road would include a new, 6 km bridge over the Dnipro, to be built south of Pivdenniy (South) Bridge. At the presentation, the national highway agency announced a tender for the first of six sections: a 35 km stretch between the Kyiv-Lviv and Kyiv-Odesa highways. If full financing can be arranged, the new ring road could be completed by 2030.

A US company is negotiating with Mykolaiv regional authorities to build a $250 million waste recycling plant for the entire region, Alexander Stadnik, regional head, tells NikVesti, a local news site.  For convenience, the plant would be located in Nova Odesa district, in the center of Mykolaiv oblast, reports Delo.ua. Stadnik did not identify the company, but said it is ready to start investing.

Fighting to preserve a joint venture with a Chinese company to control Ukraine’s aircraft engine maker, Ukraine’s DCH conglomerate told Reuters and NV business news site yesterday that it has signed an agreement to buy “more that 25% of shares” in the company, Motor Sich.  Addressing fears that design and production would move to China, DCH, a Kharkiv-based group, told NV: “DCH will have the right to veto key business decisions.” NV speculated that joint venture idea was developed last November during a meeting in Kharkiv between Oleksandr Yaroslavsky, owner of DCH, and Jack Ma, founder of China’s Alibaba Group. DCH says Ukraine Antimonopoly Committee should decide on the case by the end of this year.

President Zelenskiy signed a law creating the legal and regulatory framework for derivatives – the financial instrument that helps to provide hedging opportunities against prices, interest rates or currency rate movements. Scheduled to go into effect next July 1, the law would allow such derivatives as swaps, which will allow Ukrainian banks, farmers and manufacturers, to hedge their foreign exchange exposures. Required under the IMF’s current standby agreement with Ukraine, the law was drawn up by the National Securities and Stock Market Commission working with experts from the EBRD.

Timur Khromaev, head of the Commission, said of the derivatives law: “It represents a big step forward in creating the conditions in which our economy can move to a more sophisticated stage of development.” Matteo Patrone, EBRD’s regional Managing Director said: “The new law will contribute to the establishment of a derivatives market in Ukraine. This is a major step forward to putting Ukraine on investors’ radar screens.”

The day after President Zelenkiy signed the law legalizing gambling, Parimatch, the largest betting company in Ukraine, announced that it will bid for hotel casino licenses in Ukraine. Founded in Kyiv in 1994, Parimatch has moves largely online, accepting bets on sporting events, e-sports, elections, show business, Eurovision and the Nobel Prize. With 1,600 employees, the company largely operates in Ukraine, Belarus, Kazakhstan, Russia and Cyprus, where it has its headquarters.

The Finance Ministry raised the equivalent of $366 million in its weekly government bond auction Tuesday – virtually the same amount as one week earlier. To keep, hryvnia rates from rising, the Ministry rejected the equivalent of $75 million worth of bids. Interest rates were little changed with 4-month bonds going for 7% and 2-year bonds going for 10%. By contrast, the Ministry satisfied 26 of 27 bidders for 1.5 month USD-denominated bonds at 3.6%.

Concorde Capital’s Evgeniya Akhtyrko concludes: “There is no improvement in the sentiments of the broader circle of market players regarding the risk level of UAH debt at the moment.”

Planes left Kyiv Sikorsky Airport half full last month. In July, Kyiv’s right bank airport handled 1,314 flights — 48% the number of flights of one year earlier. But the number of passengers was only 52,400 – 20% the level of one year earlier. The most popular international destinations were: Warsaw; Tivat, Montenegro; London Luton; Minsk; Dalaman, Turkey; Wroclaw, Poland; Bodrum. Turkey; and Tirana, Albania.

SkyUp Airlines returned in July to 50% of its pre-coronavirus traffic levels. Operating 704 domestic and international flights from Kyiv Boryspil, the low cost airline carried 96,407 passengers in July.  Of its regularly scheduled foreign destinations, Albania was more popular than Bulgaria. For charters, Turkey was more popular than Egypt.

Air Astana resumes flights between Almaty and Kyiv Boryspil next Wednesday. From Almaty, the Kazakh national carrier flies to 26 destinations, including Beijing and Delhi. Air Astana suspended flights to Ukraine five months ago.

The day after President Zelenskiy signed a law giving tax breaks to foreign film productions, Kyiv City officials announced a list of streets to be closed Aug. 12-25 for the filming of a Jean-Claude Van Damme film — ‘The Last Mercenary.’ Since most of this Netflix ‘comedy action movie’ takes place in France, it appears that Kyiv will be dressed up to look like a French city. Van Damme, a Belgian, is known to American fans as ‘The Muscles from Brussels.’

From the Editor: The attitude at the Kyiv headquarters of the State Property Fund is to move state companies out the door. Fund Head Sennychenko is frank that he has neither the time nor the resources to clean up 3,000 companies before sale. For Eastern Europe, this will be the region’s last big privatization sale (assuming Tyrannosaurus Rex prevails in Belarus). For investors in Ukraine, all Sennychenko can promise is transparent presentations and honest auctions. Properties will be presented as is, poison pills and all. Compared to the Wild East, shoot ‘em up days of Russia’s privatizations in the early 1990s, Kyiv-in-the-time-of-corona is mildly inconvenient, but not a physical risk. With Best Regards Jim Brooke