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Friday, August 28

Belarus Economic Drop Could Hit Ukraine...US Cybersecurity Expert En Route Ukraine Arrested as Spy for Russia...After 100 Days, Saakashvili Quits Reform Council to Go Home to Georgia...Ze Promises Peace by Christmas...Facing Tonight’s Ban on Foreign Travelers, UIA Cuts Flights...
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 standoff between Belarus’ long-running ruler and mass opposition may soon cripple the finances of Ukraine’s northern neighbor and fourth largest trading partner. In the last week, the Belarusian ruble weakened by 8.5%, falling to 2.67 to the dollar. Belarus’ foreign currency reserves are down to $4.3 billion –“sufficient to cover just 1.4 months of imports, while three months is considered the minimum,” economist Anders Aslund writes in a new Atlantic Council piece: “Belarus Crisis: Can Lukashenka Survive a Collapsing Currency?”

Strikes are affecting three of four key state companies — fertilizer makers Belaruskali and Grodno Azot and oil refineries Naftan and Mozyr. They account for two thirds of Belarus’ exports to the West. “A prolonged strike at any of these four state-owned companies would collapse Belarusian export revenues and the Belarusian ruble, bringing Lukashenko to his knees,” writes Aslund, a Swedish-American economist with three decades experience in the ex-USSR. “If the currency collapses, the real strife will start.”

Ukraine is Belarus’ second largest trading partner, after Russia, Dmitry Chervyakov, a consultant with Berlin Economics, tells the Kyiv Post. Last year, Belarus exported $4.1 billion in goods to Ukraine and imported $1.7 billion. Ukraine bought four million tons of diesel and bitumen from Belarus for $2.4 billion and fertilizers for $300 million, largely from Belaruskali, the potash producer. Many of Belarus’ imports from Ukraine are transshipped to Russia to skirt bilateral Russia-Ukraine trade bans.

Lithuania is preparing to route Ukraine-bound trucks through eastern Poland if traffic disruptions start in Belarus, Yaroslav Narkevich, Lithuania’s Minister of Transport and Communications, tells Russian Railways Partner site. “We intend to discuss with Poland the option of returning our carriers through Poland, bypassing Belarus,” he said.  “So far there is no need to redirect the flow of trucks, but we are ready for this.” On Aug. 5, four days before the disputed Belarus presidential election, Ukraine’s Cabinet of Ministers had approved for Rada debate a liberalization law that would abolish the need for international trucking permits for Belarus-Ukraine trade.

Ukraine has “tightened control” at Ukraine-Belarus border crossings in wake of Lukashenko’s charges that Ukraine is trying to destabilize his regime. “We have tightened control at the border with Belarus, since the situation in this country is quite turbulent,” Border Guard spokesman Andriy Demchenko told RBK-Ukraine.

Starting Tuesday, Ukrainians can only enter Belarus with a foreign passport, reminds Ukraine’s Border Guard Service. A similar rule went into effect six months ago for travel to Russia. The government is trying to phase out the domestic passport paper booklets, which are easy to counterfeit.

In an open letter signed by more than 2,500 Belarusian IT CEOs, investors and developers, democratic normalcy is essential for the future of the industry in Belarus. Otherwise, they warn: “In the near future, we will begin to observe a massive outflow of specialists abroad, the opening of offices in neighboring countries, a slowdown in the growth of the IT sector, a decrease in investment in Belarusian IT companies, and a decrease in tax revenues.”

Japanese-owned tech company Rakuten Viber has closed its office last week in Minsk. San Francisco-based Rakuten CEO Djamel Agaoua cited violence against employees in Minsk. Kharkiv and other Ukrainian IT centers are recruiting Belarusian developers to move to Ukraine.

The day before he was to fly to Ukraine, a former US Army Green Beret captain was arrested and accused Friday of spying for Russia for the last 15 years. Peter Rafael Dzibinski Debbins, aged 45, had repeated meeting with Russia’s G.RU., or military intelligence, according to the Alexandria, Virginia grand jury indictment posted by The New York Times. By 2010, the Washington Post reports, Debbins had left the Army and was working for a Ukrainian steel manufacturer in Minnesota. Then his Russian intelligence agents encouraged him to get back into government work.

Last spring, Debbins taught a webinar for Ukrainian-American Concordia University. He was billed as an instructor for Cyber Intelligence Initiative of Washington’s Institute for World Politics. The course was titled: “How to Approach Enterprise Cybersecurity!” In a congratulatory YouTube video, he urges graduates to have “a hacker’s mindset.”

Russia’s Gamaredon hacking group has prepared “a large coordinated attack on government agencies and critical infrastructure” by sending out email attachments infected with malware, Ukraine’s National Security and Defense Council warned last week. The goal may be to disrupt the Oct. 25 local elections. Phony emails were made to look like messages from Ukraine’s State Security Service. Council Secretary Oleksiy Danylov warns: “Cyberthreats from the Russian Federation are extremely dangerous for both Ukraine and European countries.”

So far this year, one million cases of cyber threats — website attacks, DDoS attacks, phishing and malicious software – have been recorded by the National Coordination Center for Cybersecurity, a unit of the Defense Council. To respond to threats and prevent attacks, the Center is stepping up cooperation with private sector companies. Last month, it signed cooperation agreements with three dozen private foreign and Ukrainian companies.

The Zelenskiy government is tripling the number of state companies protected from privatization – to 659. The Cabinet of Ministers approved the new list Wednesday. It will now go to the Rada. Last year, the Rada abolished a similar list of over 1,000 companied exempt from privatization.

Former Georgian President Mikheil Saakashvili, a major free market force in the Zelenskiy government, announced yesterday that he is returning home to Georgia, reports Georgia Online.  “I know that we can live much cooler, much better, and every Georgian can be rich, and we can do it together!” he says in a video. “I’m coming back!”

Appointed three months ago to serve as chairman of Ukraine’s National Reform Council, Saakashvili felt the push of anti-reformers in the Zelenskiy government and the lure of Oct. 31 parliamentary elections in Georgia. Responding to negative reactions, Saakashvili posted on Facebook: “Some of my Ukrainian friends mourn my ‘farewell’ to Ukraine. I want to tell them: heads up! We will fight both in Georgia and in Ukraine! We will win there and there!”

In Tbilisi, Thea Tsulukiani, Georgia’s Justice Minister since 2012, promised to prepare a jail cell for the former president. In 2018, Saakashvili was convicted in absentia in two trials on charges stemming from his decade in office, from 2004 to 2013. The sentences handed down by Tbilisi City Court total nine years. Saakashvili and his supporters say the trials were politically motivated.

President Zelenskiy believes the current one-month-old ceasefire in the Donbas can be extended into a lasting peace by the end of this year. “I want to believe that it will be this year,” he tells Eurovnews’ Sasha Vakulina in a lengthy video interview. “I really want to believe it, and I DO believe, I do.”

Zelenskiy also asks European leaders to spell out the steps for Ukraine to join the EU. “I asked many European leaders this question – what do you want Ukrainians to do, step by step, to become an EU member?” he said in the interview posted Tuesday. Calling on Ukraine to speed up adoption of EU norms, he said: “We just have to become the country that Europe really would want.”

Travel companies plan to protest today the ban on incoming foreign travelers. The 1-month ban goes into effect tonight at midnight. Chornobyl tour operators, organizers of medical tourism, the Business Travel Association and owners foreigner friendly night clubs, such as Skybar, Closer and River Port, plan to gather outside the Cabinet of Ministers. Using the hashtag #OpenUkraineNow to coordinate the protest, the Association of Incoming Tour Operators says that after temperature controls started two months ago at airports, there are no known cases of infected tourists entering Ukraine. The ban is on nationals from all countries, not just the 65 countries deemed ‘red’ by Ukraine’s Health Ministry.

Kyiv Boryspil, Ukraine’s busiest airport, is installing this week a $37,000 temperature screening system that allows border guards to identify passengers with fever systems as they walk past a stationary camera. “It enables instant, non-contact temperature measurement of passengers from a distance,” the State Border Service said of the EU-donated equipment.

Noting that foreigners currently account for 60% of UIA’s passengers, UIA said yesterday it is cancelling flights in September between Kyiv and Athens, Barcelona, Berlina, Chisinau, Delhi, Geneva and Madrid. It will reduce frequencies between Kyiv and Brussels, Dusseldorf, Dubai, Istanbul, Paris and Tel Aviv. UIA CEO Yevhen Dykhne says the government ban “will have a negative impact on the aviation industry of Ukraine, which in the absence of any other state support in the crisis caused by the global pandemic, is economically weakened and is in critical condition.”

From the Editor: Assuming the US grand jury indictment is true, the Kremlin once again is playing a diabolical game. With one hand, Russia launches cyberattacks against Ukraine. With the other, it sends a compromised American to infiltrate Ukraine’s cyber security world.  It all reminds me of the gee whiz stories in the US financial press a decade ago about Eugene Kaspersky. This graduate of a KGB-sponsored technical college, amazingly, had reinvented himself as the CEO of rare Russian multinational. But in 2015, Bloomberg reported “high-level [Kaspersky] managers have left or been fired, their jobs often filled by people with closer ties to Russia’s military or intelligence services.” US government agencies quietly banned the use of Kaspersky cyber security and anti-virus software. 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, 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

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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

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Wednesday, August 12 – President Zelenskiy signed the gambling law

Gambling Legalized in Ukraine...Foreign Film Production to be Tax-Free...Three Chinese Container Trains in Three Days...EasyJet May Start Flying to Ukraine This Fall...Odesa Opens a (Back) Door to the 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

Wednesday, August 12

President Zelenskiy signed the gambling law yesterday, ending Ukraine’s decade-long ban on casinos and slot machines. The law restricts casinos to five-star hotels in Kyiv, and to four- and five-star hotels outside of Kyiv. Slot machines will be allowed in three-, four-, and five-star hotels. Billboard advertising is banned. Only people aged 21 or over are allowed to gamble. A portion of house winnings from gambling operations go to a new health, sports and culture fund.

Two days after the Rada passed the gambling law, on July 14, a nationwide poll found that 61% of the 2,000 respondents opposed legalizing gambling. Across the political spectrum, there was more support for legalized gambling among younger voters and among supporters of Golos, European Solidarity and Zelenskiy’s Servant of the People parties.

President Zelenskiy has signed a law dropping Ukraine’s 20% VAT from the production of videos, films, TV programs, cartoons and commercials for export. Zelenskiy, who owns his own production company, predicts foreign productions will boost hotels, restaurants, transport companies and law firms. He says: “It will also have a positive effect on the popularization and improvement of Ukraine’s image in the world, in particular, to improve its investment attractiveness in other sectors of the economy.”

Twelve distilleries of Ukrspirt, the state alcohol producer, may be next in line for privatization, Dmytro Sennychenko, chairman of the State Property Fund, said yesterday at the opening in Kyiv of AgroExpo 2020. Until the state monopoly on alcohol production was abolished earlier this year, Ukraine’s production of ‘cooking’ alcohol had quadrupled during the 2010s. For the Ukrspirt privatization to be successful the government must first approve the Alcohol Reform and Development Program, regulations which will provide for the procedure and conditions of sale.

Uniper, the Dusseldorf-based energy giant, says it may have to impair a loan to Nord Stream 2 if US sanctions kill the Russia to Germany Baltic gas pipeline. “The worst case would be, of course, if (Nord Stream 2) would never be finished and then, of course, the question is: can we get our money back or not?” Chief Executive Andreas Schierenbeck said on an analyst call yesterday, according to Reuters. Uniper has committed to fund up to €950 million, or 10% of the €9.5 billion project. Schierenbeck did not say how large the threatened loan is. A loan is considered ‘impaired’ if it is probable that an institution will be unable to collect all amounts due, according to the original terms of the loan agreement.

Today, the third Chinese container train in three days is to arrive at Kyiv’s left bank Liski train depot. The trains take 15 days to travel 9,000 km from China, through Kazakhstan or Mongolia and Russia, to Ukraine. Noting growing interest from Ukrainian companies exporting to China, Ivan Yuryk, acting CEO of Ukrzaliznytsia said: “A significant number of importers and exporters have become interested in the availability of this service.”

A record 1,232 China-Europe trains rolled in July, a 68% yoy jump, reports Xinhua from Beijing, citing China State Railway Group. With 40 trains plying the route daily, cargo was up 73% yoy, to 113,000 containers. Of the trains 724 went from China to Europe, up 74%. And 508 went from Europe to China, up 60%. Despite the coronavirus pandemic, this traffic has grown by double digits for every month since March.

Poland issued 44% fewer visas to Ukrainians during the first half of the this year, compared to the same January-June period last year, reports the Warsaw Business Journal. The drop to 270,000 visas is not as dramatic as it seems because Poland suspended residency rules during the epidemic, meaning that “a large part of Ukrainians simply did not leave Poland.” Krzysztof Inglot, head of Personnel Service, a Polish employment agency, says: “Those who were already in our country had the opportunity to extend their stay…There is [now] an influx of new employees from the East, who are ready to undergo a two-week quarantine in order to work in our country.”

This fall, Ryanair plans to launch two more Poland-Ukraine flights: from Lviv to Poznan and from Kharkiv to Warsaw. Ryanair, Europe’s largest carrier, also plans to increase frequencies out of Kyiv Boryspil to the seven Polish cities it served before the quarantine restrictions of last spring.

Germany’s FlixBus, the Europe’s bus transport operator, is opening its fourth Ukraine-Poland route: Kyiv-Warsaw, with stops in Zhytomyr, Rivne and Radom (Poland). Aimed at low budget tourists and migrant workers, FlixBus also offers three buses from Ukraine to Germany.

Britain’s EasyJet, one of Europe’s largest low-cost airlines, may start flights between Italy and Ukraine by October. In late July, shortly, after Italy and Ukraine fully liberalized air traffic, ENAC, Italy’s Civil Aviation Authority, authorized the Austrian unit of easyJet to operate 12 weekly flights to Ukraine. EasyJet’s Italy bases are in Naples, Milan Malpensa and Venice Marco Polo.

Ernest Airlines is to be reborn this fall as a regional Italian carrier. Until the Milan-based airline went bankrupt last January, it operated 13 routes between Italian and Ukrainian cities. Ukraine’s travel press is welcoming the news that the discount carrier is to emerge from bankruptcy. Italy’s Naviganti site notes that the fleet of the new Ernest will be 16 Franco-Italian-made turboprops. These regional planes seat 70 and have a range of 1,500 km. The flight distance from Milan to Kyiv is 1,700 km.

Austria, Georgia, Lithuania, Slovakia, and Canada have returned to Ukraine Health Ministry’s “Green” list. Travelers arriving from these countries do not take Covid-19 tests or self-isolate. Most countries in the world – 105 – are on Ukraine’s “Red” list. This includes: US, Cyprus, Israel, Spain, Poland Romania, Bulgaria, Greece, Estonia and the Netherlands. A 1,300-word article in the Kyiv Post outlines protocols for entering Ukraine.

Through Aug. 30, Ukraine has closed its two road checkpoints for entry into Russia-controlled Crimea, purportedly to control coronavirus. Only Crimean residents with Ukrainian passports are allowed to enter Crimea. Ukrainians who live on the mainland can return home. Although Russia’s annexation of the peninsula in 2014 radically cut Ukrainian tourism to Crimea, several hundred thousand Ukrainians travel to Crimea every summer, largely to visit friends and family and to check on their properties. There are no flights, ferries or trains between Ukraine and Crimea.

The cross-Danube ferry linking Orlivka, Odesa oblast, and Isaccea, Romania started service this week. Operating hourly, from 8 am to 8 pm, the ferry now carries only trucks. Passenger cars should start at the end of August, Yuri Dimchoglo, a co-investor in the project tells the Center for Transportation Strategies. Fares are: passenger – €1; motorcycle – €2; car – €15; minibus €25; big truck – €50. The ferry cuts out a 2-hour, 100 km drive with two border crossings – Moldova and Romania. With passport control stations on both banks of the Danube, the ferry is Odesa’s first border crossing with the EU.

From the Editor: On one hand, it’s nice to see transportation companies looking beyond Covid to forge new ties between Ukraine and the EU. But, only the naïve think that Ukrainians go to Poznan or Radom for fun and leisure. The corona crisis was a wakeup call for the vibrant economies of Eastern Europe as to how much they depend on Ukrainian workers. As long as Ukraine’s political elite follow business as usual and mid-level bureaucrat slow walk reforms, workers will vote with their feet – westward. As they said in Rio during one of Brazil’s perennial crises of the 1990s– o último a sair, apague as luzes do aeroporto! – the last one out, turn out the lights at the airport!   –With Best Regards Jim Brooke