Background Image

Wednesday, August 21

Ze Aide: Cut Up State Company ‘Monsters’...Privatization Candidates: Big State Banks and Companies...Turkey, Ukraine Build Bomber Drone...Coal Comes from Colombia...In Donbas, Surge in Cross-Border Foot and Car Traffic
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

Naftogaz and Ukrzaliznytsia are “monsters that must be killed and dismembered,” Oleg Ustenko, President Zelensky’s official ‘Macroeconomic Policy Adviser,’ said Tuesday on Radio NV. In addition to cutting up the state railroad and state oil and gas company, Ustenko said Ukrspyrt, the state alcohol company, and the State Food and Grain Corporation should be privatized.

Separately, Oleksiy Honcharuk, deputy presidential chief of staff, has said that all of Ukraine’s state banks should be privatized and that minority shares in Ukrzaliznytsia and Ukrposhta, the state post office, should be put up for sale. Honcharuk is one of the ruling party’s four official candidates for prime minister, a decision expected within 10 days.  With a privatization revolution brewing, Andriy Kobolyev, CEO of Naftogaz, says the new Rada should allow a Naftogaz IPO. The newly elected Rada is sworn in next week, on Aug. 29.

Chinese companies are interested in the privatization of Ukrposhta, Igor Smelyansky, the postal company CEO, said after meeting Chinese logistics executives from the Alibaba group, the world’s largest e-commerce company. “I had negotiations with large Chinese companies,” he wrote on Facebook after a conference in Hangzhou. “Alibaba loves working through partners and sharing risks with them. But they want certainty, a clear strategy and clear rules at customs.”

    Maxim Nefedov, the new head of the State Customs Service, promises businesses to enforce equal rules at customs. “I promise you equal rules of the game,” he told a business gathering Tuesday. “But then do not ask for any preferences or benefits, and do not explain to me that without this your business will not be able to work.” He said the new Customs Service will be up and running by the end of September. His three priorities are: mail, road crossing on the western borders, and containers at the Black Sea ports.

    Container traffic at Ukraine’s seaports jumped 20% during the first seven months of this year, compared to the same period last year. With Ukrzaliznytsia inaugurating new container routes almost every month, the number of containers handled at the ports hit 545,803, according to the Sea Ports Administration.

    Selling unused state property has caught on across the nation since the small-scale privatization started one year ago on the ProZorro.Sales election auction platform. In the first year, 1,142 state properties were sold, garnering $60 million for cities and for the State Property Fund. Competition bid prices up an average of 60% from starting levels. So far, 239 cities, towns and territorial communities signed up for the program which auctions state properties valued at less than $10 million. Top municipal privatizers are: Lviv — $17 million; Zhytomyr –$4 million; Kyiv — $3.6 million; and Vinnytsia — $1.4 million.

    Ukraine, home to Europe’s largest lithium reserves, is bound to benefit from the projected surge in electric vehicles over the next 30 years, according to a study by Wood Mackenzie, the Scotland-based renewables, metals and mining research group. World supplies of lithium, cobalt and nickel will be exhausted if electric vehicle technologies do not evolve, warns Gavin Montgomery, head of research at Wood Mackenzie. Ukraine also has deposits of cobalt and nickel in the Krivorozhsky Basin. Next month, the Rada is to take up legislation to promote investment in electric battery and vehicle production in Ukraine.

    Turkey and Ukraine will develop a ‘heavy’ class of military drone capable of flying 24 hours, as high as 12 km, and loaded with 1,000 kg in munitions. Named Akinji after the Ottoman Empire’s horse-mounted guerrillas, the drone has sensors, thermal imagers, and powerful cameras. With a 20-meter wingspan, the 4.5-ton drone will be powered by two Ukrainian engines. UkrOboronProm director general Pavlo Bukin said the drone will “carry out high-precision strikes with weaponry that is identical to what is used by fighter airplanes.” Expected to be ready for the militaries of Turkey and Ukraine in 2021, the drone is a joint project of UkrOboronProm’s UkrSpetsExport and Turkey’s Baykar Defense.

    Cut off from their coal mines in Donetsk, DTEK is importing coal from Colombia, a one month, 6,500-mile voyage from the Caribbean to the Black Sea. On June 1, Russia imposed new trade restrictions on Ukraine, cutting coal exports by 85%, to 129,300 tons for June. DTEK has contracted to buy 400,000 tons of coal from Colombia, the second-largest coal exporter in the Americas, after the US. Last week, the first shipment – 75,000 tons — arrived at Pivdennii (Yuzhne). In total, DTEK plans to import 1 million tons of coal this year, Maxim Timchenko, DTEK Group Director-General, told reporters Tuesday.

    Volodymyr Lavrenchuk is stepping down as board chairman of Raiffeisen Bank Aval, a bank he has led for 14 years. Oleksandr Pysaruk, a former first deputy governor of the National Bank of Ukraine, will take over the post. Last year, Raiffeisen’s Ukraine unit recorded $200 million in profits. Martin Grüll, CFO of the Austrian bank, said of Lavrenchuk: “He carefully and with great dedication led the bank, sometimes leading it through very stormy waters. He passes his successor a strong bank.”

    The central bank does not expect volatility this fall in foreign exchange rates for the hryvnia. “We do not see the prerequisites for a radical change in the situation in the economy and the foreign exchange market,” Dmitry Sologub, a deputy governor of the National Bank of Ukraine, told reporters Tuesday. Predicting that Ukraine’s currency will float within a 10% band, he said: “We do not see the prerequisites for fundamental changes, looking at the macroeconomic situation in Ukraine.” The current exchange, 25.15 hryvnia to the dollar, is almost 15% stronger than the 29.4 hryvnias/dollar end-year exchange rate forecast in Ukraine’s 2019 state budget.

    The central bank expects annual inflation to slow to 6.3% by the end of the year, Sologub said Tuesday. “The disinflation trend is there. We don’t see new inflationary trends,” he told reporters. Inflation in July was 9.1%.

    While a deadly military standoff grips Ukraine’s 400 km control line with Russia-controlled Donetsk and Luhansk, cross-border traffic is thriving. In one 24-hour period, on Monday, 38,200 people crossed at the five regulated crossings: Hnutove, Maryinsk, Mayorsk, Novotroyitske, and Stanytsya Luhanska. At the first four, 4,600 vehicle crossings were made, reports Ukraine’s State Border Guard Service. At Stanytsia Luhanska, bridge damage prevents car crossings. On Friday, the UNHCR started an electric golf cart service to shuttle elderly people and families with children down the 800-meter path between the two checkpoints.

    From the Editor: Ukraine Business News is now fully searchable. Just click the little magnifying glass on our website: Search back through 300,000 words! Best regards Jim Brooke –