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  • UKRAINE BUSINESS NEWS

    Tuesday, April 23

    By James Brooke

    Zelenskiy forces want to lock in their big electoral victory Sunday by advancing Rada elections from the current date of Oct. 27. By inaugurating Volodomyr Zelenskiy president on May 28 and holding Rada elections in the summer, the Zelenskiy reform movement aims to start this fall with a big party bloc in the parliament. Investors would like to see the election calendar shortened, but much of the Rada is opposed.

    The Prosecutor Generals Office is summoning several top allies of President Poroshenko for questioning today and Thursday in embezzlement and money laundering cases, reports the Kyiv Post and Interfax-Ukraine. Those summoned include: Valeria Gontareva, the former head of the National Bank of Ukraine; Kostyantyn Stetsenko, managing partner at ICU investment bank; Borys Lozhkin, Poroshenkos former chief of staff; Oleksiy Filatov, former deputy chief of staff; and Mykola Zlochevsky, Ukraines former ecology minister and owner of Burisma Holding, the natural gas company. Gontareva, who lives in London, told Interfax-Ukraine she would not go to Ukraine for questioning. She invited Ukrainian prosecutors to come to London.

    On Thursday, the Rada will debate and possibly vote on a Zelenskiy-backed measure to abolish the immunity from prosecution enjoyed by Rada members. Historically, members of parliament have fought to keep this protection, either because they believe they have committed crimes or because they fear prosecutions will be politically motivated.

    Transparency and open tenders will be the new hallmarks of Ukraines nearly $7 billion defense budget, promises Ivan Aparshyn, a 62-year-old defense expert seen as a future Zelenskiy Defense Minister. Were not going to continue with the practice of concealing expenses on some clandestine programs and obscure projects, he writes on the campaigns Obozrevatel blog. Referring to a sector equal to 5% of Ukraines GDP, he writes: Everyone who is in some way involved in numerous semi-criminal schemes over fuel materials, or abuses in the supplies system of the Armed Forces, will not avoid holding responsibility.

    The current modernization of Ukraines healthcare system is supported by president-elect Zelenskiys chief health care advisor, Yevhen Komarovsky. Brushing aside attacks by some Rada members on acting health minister Ulana Suprun, Komarovsky writes on his Facebook page: I am a supporter of the current strategic course to conduct the healthcare reform...there is no alternative to the strategic course for healthcare reform. Acknowledging that in Ukraine, the Prime Minister appoints the Health Minister, Komarovsky writes Zelenskiy will do everything in his power to ensure the implementation of the requirement of the law on financing of health care at 5% of GDP.

    Zelenskiy says he is open to new business opportunities in sectors associated with vice gambling, marijuana and prostitution. Ukraine could choose an abandoned city to set up a Las Vegas, with gambling and sex for money, he told RBC Ukraine news agency Thursday. "Medical marijuana I think that this is normal, he said, referring a limited legalization that is supported by health minister Suprun and a petition to the Rada with 25,000 signatures.

    Timothy Ash writes: The scale of Zelenskiys victory shows that this was not just about a snazzy media campaign funded by dark shadows in the background. This was a clamor for real change. The population want to throw the corrupt old system out. They thought they had with Euromaidan.

    Concorde Capitals Zenon Zawada writes: In order to be successful, Zelenskiy needs to focus on one or two signature issues and accomplish progress with them. He is likely to draw from his main campaign themes, which were fighting corruption, improving business conditions and ending the warfare.

    Dragon Capital writes: The strong popular mandate Zelensky has secured strengthens his hand against the government and parliament, where he currently does not have much explicit support, and potentially enables him to press ahead with early parliamentary elections while he can ride the wave of his landslide victory...it will be important to watch Zelenskys first steps...to assess how much real power his office has or can acquire and what risk there is of a post-election political impasse, particularly if the newly elected president pushes forward with a snap Rada ballot

    Markets reacted calmly Monday to the Zelenskiy landslide. The official exchange rate, traditionally guided by the central bank, increased by 16 kopecks less than 1% -- to 26.66 / 26.69 hryvnia to the dollar. In neighboring Russia, the Moscow markets rose, reportedly on the belief that a Zelenskiy government will offer the window for a Russia-Ukraine dtente and the easing of US sanctions.

    Nova Poshta, the privately owned delivery company, has successfully placed bonds for UAH 300 million, or $11.2 million, Raiffeisen Bank Aval, the underwriter, tells Interfax-Ukraine. Maturing Aug. 14, 2020, the bonds have an annual yield of 22%, says Victoria Masna, head of investment banking at Raiffeisen. The money is to go to buying new trucks, new computer servers and modernizing the companys 2,886 branches. Last year, Nova Posta delivered 174 million packages, 20% more than in 2017. As part of strategy to grow again by 20% this year, the company has opened 164 branches since Jan. 1. Reflecting the growing popularity of online shopping, one of all Nova Posha branches are in towns with less than 10,000 people.

    Barcelona-based Glovo starts deliveries this week in Lviv, its fifth Ukrainian city, after Dnipro, Kharkiv, Kyiv and Odesa. After opening last fall in Ukraine, the delivery service has 5,000 couriers and a list of 10 additional cities for expansion including Mykolaiv, Vinnytsia, and Zaporizhia. Of all European countries, Ukraine needed the least time to reach 100,000 orders per month, Dmitry Rasnovsky, Glovos Ukraine manager, said at the SUP Day Forum Thursday in Kyiv. I believe that we can reach a figure of 1 million orders per month by the end of 2019.

    With Kyiv restaurants unable to keep up with food orders, Glovo plans to open a remote kitchen in August. Four non-competing restaurant would cook under one roof at a central Kyiv location. Already, restaurants in the center of Kiev are not coping with orders....they do not have the capacity to provide such a flow, Rasnovsky said of surging online demand. He also is considering opening a remote kitchen in Troieschchyna, a Left Bank district, where costs are low and restaurant offerings are poor.

    Next month, Kyiv is to become the third city in world to have Uber Shuttle service. Currently, only Cairo and Monterrey, Mexico have the service, which allows passengers to book seats in minibuses operating along fixed city routes. Uber launched its taxi service in Ukraine in 2016, its regional headquarters in Kyiv in 2017, and, earlier this year, Uber Eats food delivery service and Uber Green electric car service.

    From the Editor: In a big bonus for Ukraine Business News readers, the site is now fully searchable. Go to www.ubn.news, type in a search term by the magnifying glass, and search through our archive of 250,000 words. For comments or story tips, reach out to me at editor@ubn.news.
    Read more news on www.ubn.news

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    • UKRAINE BUSINESS NEWS

      On Friday night, the day after Russian Prime Minister Medvedev announced June 1 restrictions on gas and diesel exports to Ukraine, contaminated Russian oil was detected at Mazyr, Belarus refinery for Ukraine. This forced Belarus to cut off gasoline and diesel exports to Ukraine and Poland, Vladimir Sizov, deputy chairman of Belneftekhim, told reporters in Minsk on Tuesday.

      Located 75 km north of Ukraine, the Mazyr refinery detected toxic organochloride compounds 10 times the limit values, the official of Belarus state-run refining and transportation company said, reports Interfax. Some organochlorides, such as DDT and those used for chemical weapons, are highly toxic. With refining work stopped, Sizov said assessment of damage is being done and documented with an eye to billing Russias Transneft for repairs.

      Due to weeklong flow times, contaminated oil will continue to flow to Mazyr through Friday, Sizov said. Oil flowing to Belaruss northern refinery, at Naftan, is not contaminated, he said. We can state that low-quality oil has entered the territory of the European Union countries, and the same oil is present on the territory of Ukraine," he said, adding that exports stopped Tuesday.

      Looking for long term alternatives to Russian oil, Belarus expects to start importing oil through Ukraine or the Baltics by the end of this year, Segey Grib, deputy general director of BNK, the Belarusian Oil Company, told reporters in Minsk on Tuesday. From Ukraine, oil from Azerbaijan, Saudi Arabia, or Nigeria could be pumped from the Black Sea on the Odesa-Brody pipeline to Mazyr. Belarus also is talking with Latvia and Lithuania about buying an oil terminal in a Baltic port, reports belta.by news agency. Flows could be 3 million tons a year. Prompting Belarus to diversify, the Russian oil is to be sold to Belarus at world prices starting in 2024.

      Facing gasoline and diesel restrictions from Russia and Belarus, Ukraine can meet its needs from other countries -- possibly with slightly higher prices at the fuel pump -- the Ukrainian Oil and Gas Association said Tuesday. The degree of diversification of the Ukrainian market exceeds the level of many European states, reports the industry association. Starting in 2017, fuel comes to Ukraine from more than 10 countries using all sorts of logistics - maritime, rail, road and pipeline, which allows to organize any deliveries in a short time. Warning in of slight fluctuations in the cost of fuel, the Association said Ukraine can get alternative supplies from Poland, Romania, and Hungary.

      Funding for a $1 billion autobahn to cut the drive time between Kyiv and Odesa to four hours is being negotiated with international financial institutions, Prime Minister Groysman said Monday during a highway inspection. Currently, it takes six hours to drive the 475 km road between the two cities, a highway that connects 15% of the nations population. During this road construction season, the government is spending $10 million to main the highway linking the capital with the Black Sea.

      In central Kyiv, Dmitry Firtash is selling and Sergey Tigipko is buying.

      Tigipkos TAS Group has bought most of Kyivs landmarks Arena City restaurant and entertainment center from Firtashs Group DF, according to Novoe Vremya. Tigipko bought10,000 square meters, or 71% of the complex, for $13-15 million, well below the $20 million asking price. Restaurants in Arena pay at least $50 per square meter rent, double the Kyiv average, Olga Naaonova, director of Restaurant Consulting tells NV.

      Last week, Firtash sold the St. Petersburg Hotel for about $15 million, reports NV. Located, 200 meters from Arena City, at Taras Shevchenko 4, the 140-room hotel has been closed for renovations for six years. The new owner Vladimir Zubiks Intergal-Bud, plans to complete renovations and reopen the 1901 building as a four star hotel in two years. In 2016, Firtah transferred to his partner, developer Vagif Aliyev, a 50% stake in the Parus business center, also near Arena. Since 2014, Firtash has been living in Austria fighting extradition to the US on corruption charges. He is under house arrest with bail set at 125 million.

      In contrast, Tigipko is buying, amassing a major holding on Velyka Vasilkivska, a 10-minute walk from Arena. Earlier this month, his TAS Group paid million $6.7 million to state-owned Ukrgasbank for the business center at Velyka Vasylkivska 39. Six months earlier, he acquired the adjacent empty lot, at Velyka Vasylkovska 35, 35b, and 37.

      Across town, at Podols Rybalsky Peninsula, Tigipko recently bought the Forge property from President Poroshenko and Rada deputy Igor Kononenko. Tigipko and partner Valery Kodetsky plan a $600 million development that is to include 50,000 square meters of office space and 36 residential buildings with a total of 6,200 apartments.

      Two days after the presidential election, strong demand from bond buyers allowed the Financy Ministry to cut yields on short term bonds and to sell 5-year bonds for the first time in eight months. For the popular 4-month hryvnia bonds, demand was more than double the 1.5 billion hryvnia offer, allowing finance officials to lower the annual rate to 19%, from 19.5%. In the first effective placement of 5-year bonds since August, the government sold 3.5 billion hryvnia at 16%, during down one 290 million hryvnia offer at 16.2%.

      Retail trade in Ukraine jumped 9% in March y-o-y, for 7.4% jump for the quarter, compared to last year, the State Statistics Service. Fueling this growth were: a 10.5% y-o-y growth in salaries in February; a 15% growth y-o-y in average monthly pensions in March, to $109; and a pickup in consumer confidence, to 65-67 points in January-March, All growth figures are adjusted for inflation -- 8.6% a year in February.

      Moving mining permits to auctions on the ProZorro.Sale online trading platform, the State Geology Service sold rights Monday to seven deposits. In all auctions, prices were bid up, in one case 20-fold. Mining permits were sold for beryllium, graphite, titanium, zircon, amber, clay and underground drinking water.

      Canadas Bombardier is to join Frances Alstom and Chinas CRRC in testing their electric freight locomotives in Ukraine, the Center for Transportation Strategies reports, citing Infrastructure Minister Volodomyr Omelyan. With testing to start place this summer, Ukrzaliznytsia stresses it wants foreign financing and a high degree of production in Ukraine. Henri Poupart-Lafarge, CEO of Alstom, said in Kyiv in February that his company is ready to supply 500 locomotives to Ukrzaliznytsia.

      Lampooned by the Kyiv press at its launch five months ago, the Boryspil Express train to the airport is proving such a success that Ukrzaliznytsia plans to put an additional train on the route. With a record 2,500 people taking the train Monday, most of the 27 train trips took place with some passengers standing for the 35-minute, 80 hryvnia ride.

      From the Editor: In a big bonus for Ukraine Business News readers, the site is now fully searchable. Go to www.ubn.news, type in a search term by the magnifying glass, and search through our archive of 250,000 words.

      For comments or story tips, reach out to me at editor@ubn.news.

      Comment



      • UKRAINE BUSINESS NEWS

        President-elect Zelenskiy asked the government and Naftogaz to negotiate with the IMF about lowering household gas prices. Under last Decembers deal with the IMF, gas prices were to go up another 15% in May in order for Ukraine to receive a second tranche. But, since then, European gas prices have fallen below Ukraines household gas price.

        Hours after Zelenskiys Facebook appeal, Prime Minister Groysman said household gas prices will go down by 3.5% in May. He said if they do not, he will fire Naftogaz CEO Andriy Kobolyev. On Tuesday, Groysman signaled that he will not run on President Poroshenkos ticket in the October 27 Rada election. Analysts speculate he will set up his own movement and work in a loose alliance with Zelenskiy.

        Addressing President-elect Zelenskiy, the American Chamber of Commerce in Ukraine issues its Ten Commandments for responsible stewardship of Ukraines economy. They include: advancing on integration with the EU, real judicial reform and an Anti-Corruption Court, investment and property rights, investment in infrastructure, transparent privatization of state property, cutting labor migration by improving investment conditions at home, achieving energy independence through a free and open energy market.

        On Monday, the European Business Association came out with a similar, seven-point list. Addressing key upcoming presidential appointments, the EBA called for the selection of professionals with an impeccable reputation and lack of ties with oligarchs and big business.

        Both chambers stress the importance to investors of macro economic stability. Timothy Ash sees this as a key Poroshenko legacy to Zelenskiy: Ukraines macro backstop is also much better these days, with much smaller twin deficits (2-3% of GDP), lower public sector debt (just over 60%), a stable currency, over $20 billion in foreign exchange reserves at the National Bank of Ukraine (more than four months of import cover), and with respected technocrats at both the NBU and the Ministry of Finance. It was also encouraging today that Zelenskiy appeared to rule out a move to replace incumbent central bank governor, Yakiv Smoliy, highlighting that he has a fixed seven-year term.

        In a country without a census for almost two decades, Sundays presidential election indicated that the current population may be 41 million. In 1991, 31.9 million Ukrainians voted, out of a 1991 census population of 52 million. In 2019, 18.5 million Ukrainians voted. Adjusted for different turnouts 84% in 1991 and 62% in 2019 todays total population appears to be around 41 million.

        Where did 11 million Ukrainians go? About 6 million were lost due to Russian expansionism -- 2.3 million in Crimea, 2.3 million in occupied Donetsk, and 1.5 million in occupied Luhansk. The other 5 million vanished through emigration and Ukraines falling birthrate. The loss of 21% of Ukraines population in one generation gives post-Independence politicians a poor report card. It undoubtedly boosted Zelenskiy, the 41-year-old post-Soviet challenger, who trounced President Poroshenko by a 3:1 margin.

        Last week, Zelenskiy made it clear that he does not want to be president of a country that is a bedroom community for migrant workers building Eastern Europe. Nine million Ukrainians have left the country, he said on 1+1 TVs Right to Power show. It is a shame. It is a nightmare. We didnt keep the most valuable we have people. The rest that we own -- plants, enterprises, experts -- who are they for, if in five years another half of the population moves out of the country?

        Accelerating the alienation of Ukraines Russia-controlled periphery, President Putin signed a decree offering Russian passports to the estimated 3.8 million Ukrainians living in the rebel-held areas. Ukraines foreign ministry denounced the move as attempts at creeping annexation of the area, once Ukraines industrial heartland. President Poroshenko said in a video address: The Russian Federation has crossed another red line, openly and disrespectfully torpedoing the peace process in the Donbas.

        Behind the start of China-EU container trains through Ukraine is tidal wave of transcontinental train traffic, reports World Railways, a Moscow-based news site. Last year, 6,363 freight trains traveled between China and the EU almost one an hour and nearly equal to the 8,328 trains that made the trip during the previous seven years. From a first China-EU train in March 2011 from Chonquing to Duisburg, Germany the China-EU network has grown to link 62 Chinese and 51 EU cities. Initially one sided, the rail traffic is more balanced, increasingly carrying EU exports to China. With traffic backing up at the Poland-Belarus gauge break border, Chinese shippers are experimenting with routing freight trains through Ukraine.

        Finlands Konecranes is using its Ukraine unit, Zaporizhkran, to make the chassis for 86 shipping cranes for the Virginia Port Authority. This US-bound order is part of a 98% export orientation of the Zaporizhia company, reports the Kyiv Post.

        Venture investments in Ukrainian IT startups increased by 30% last year y-o-y, to $337 million, reports a study by Deloitte and the Ukrainian Venture Capital and Private Equity Association. Similarly, the number of deals increased by 29%, to 115. The average investment increased by 12%, to $918,000. Mergers and acquisitions appeared for the first time, with seven deals registered for a total of $25 million. With the collapse of the bit coin boom, the number of ICOs fell from 19 to four. For the smallest of startups, crowdfunding platforms remained popular, with seven campaigns raising a total of $1.4 million.

        Ukrainian legal-tech startup AxDraft has attracted $1.1 million in funding on graduating from Y Combinator, the prestigious Silicon Valley-based acceleration program. Founded in Kyiv by Yuriy Zaremba, a former lawyer at Avellum, AxDraft use IT to detect codable patterns to develop contract templates. For MHP we helped save more than 1,150 hours of lawyer time by automating corporate documents and land leases, Zaremba says, referring to agro giant Mironivsky Hliboproduct. After working in Ukraine with MHP, FOZZI, Carlsberg and British American Tobacco, Zaremba says AxDraft helps in-house legal departments of corporation spend 70% less time on drafting routine legal documents and delegate more legal work to non-lawyers. As Zaremba looks for US sales managers, the startup now is valued at $10 million.

        Telephone number portability starts in Ukraine on May 1. Resisted for four years by the three mobile telephone companies, the new system allows subscribers to switch telephone companies without losing their numbers. Ukraines three mobile operators are: Kyivstar, Vodafone, and lifecell.

        From the Editor: In a big bonus for Ukraine Business News readers, our site is now fully searchable. Go to www.ubn.news, type in a search term by the magnifying glass, and search through our fact-rich archive of 250,000 words. For comments or story tips, reach out to me at editor@ubn.news.

        Comment


        • UKRAINE BUSINESS NEWS

          In the first interest cut in two years, the central bank reduced the prime rate to 17.5%, from 18%, effective today. Currently, a steady downward trend in inflation towards the 5% target allows the National Bank to begin the cycle of reducing the discount rate," Yakiv Smoliy, governor of the National Bank of Ukraine, told reporters Thursday.

          Inflation will end this year at 6.3%, Smoliy predicted. Last years inflation rate was 9.8%. In March, the year over year rate was 8.6%. Asked about the impact of Russias June 1 restrictions on exports to Ukraine, Smoliy told reporters: I do not see that this can significantly affect prices in the current year."

          The EBRD wants to double its new investment in Ukraine this year to $1 billion, Marina Petrov, a deputy head of the banks Ukraine office, tells the European Business Association. She said more lending depends on the the future Zelesnskiy continuing to work with the IMF reform program. We hope that, first of all, the work on the IMF program will continue, she said. We already see investors ready to come to the economy. The most important thing is not to frighten investors, not to make unexpected economic decisions.

          Two thirds of foreign investors are waiting for the outcome of Ukraines parliamentary elections before making new investments, according to a new survey of 75 investors conducted by Dragon Capital and European Business Association. Conducted the week before the April 21 presidential runoff vote, the survey found that 88% are interested in expanding their investments here. On Thursday, President-elect Zelenskiy accused election authorities of dragging their feet in declaring official results, a delay that would rule out advancing parliamentary elections from the Oct. 27 date. Top investor demands were: creating a real judiciary system, reducing corruption and preserving the independence of the central bank.

          With an IMF mission to visit Ukraine next month, a Zelenskiy administration will continue cooperation with the IMF and free market reforms, Finance Minister Oksana Markarova predicts in a Bloomberg TV interview. "Economic policies -- monetary and fiscal policies are in place, and we are optimistic that our policies will continue," Markarova said Thursday. "The messages that we see from President-elect Zelenskiys team are aligned with the economic policies of our government and also with the full support of the IMF program.

          With strong foreign investor interest in hryvnia bonds, there is no immediate need for a Eurobond sale, Markarova said. Separately, the central bank improved its forecast on the level of Ukraines year end international reserves by 3%, to $21.2 billion.

          Separately, Oleksandr Danyliuk, her predecessor as finance minister and now a key economic advisor to Zelenskiy, said Thursday: As for the IMF: naturally, the position is to continue cooperation. We look forward to a successful review in May. Speaking to members of the European Business Association, he said: We understand that any threat to interaction with the IMF will destabilize the situation in the country. Therefore, the position of Vladimir Zelensky to prevent this.

          China and Ukraine signed a deal for $340 million in financing to build a new highway bridge across the Dnipro at Kremenchuk, replacing a 70-year-old bridge built after World War II. An executive of China Road and Bridge Corporation and Slawomir Novak, head of Ukravtodor, signed the agreement in Beijing at the Second International One Belt, One Way Forum. Construction of a new highway bridge will route transit traffic away from the city center. The old bridge will be retained for railroad use and possible construction of a light rail connecting city neighborhoods on different banks of the Dnipro.

          With Chinese-EU container trains starting to roll across Ukraine, Economic Development Minister Stepan Kubiv offered at the forum to build a trade and industrial corridor China-Ukraine-EU. "Ukraine is ready to offer profitable transport routes on the territory of Ukraine to connect China with the countries of Europe, he said in Beijing. We offer our Chinese colleagues a joint project portfolio: development of port infrastructure, alternative energy facilities, construction of highways and bridges, development of railway and airport facilities, high technology, cooperation in the aerospace sector, agricultural processing.

          Ukraine, Poland, Germany and Slovakia suspended imports of Russian oil on the Druzhba pipeline network Thursday, citing contamination by organic chloride at 100 times normal levels. Used to boost oil output, organic chloride must be separated before shipment as it can corrode and destroy refining equipment, Reuters reports. With Druzhba handling 1% of the worlds global oil supply, prices hit $75 a barrel for the first time this year. Russias Transneft says contaminated oil will stop flowing through the pipeline by Monday. Rare in Russia, chloride contamination last hit oil supplies 10 years ago, but at a lower level.

          In Polands latest Ukraine-friendly move, Warsaw plans to end roaming charges for Ukrainians using their mobile phones in Poland. Abolition of roaming charges will be very noticeable for ordinary people, including Ukrainians living in Poland, Marcin Przydacz, Polands top foreign ministry official for Eastern affairs, tells PAP news agency. Faced with a growing labor shortage, Poland encourages Ukrainian labor migration, offering Ukrainian-language on city transport systems and such Facebook pages as Pick Strawberries in Poland.

          President Poroshenko is expected to sign a sweeping language law that will impact business in Ukraine --As approved by the Rada Thursday, the bill requires:-- All foreign businesses operating in Ukrainian must have Ukrainian versions of their websites
          -- All computer software distributed in Ukraine will have to be either in Ukrainian, English or one of the 24 official languages of the European Union. Russian is not an official language of the EU.
          -- All print and online media are to be in Ukrainian, or have Ukrainian versions. Exceptions are media in English, Crimean Tatar of one of the 24 official languages of the EU.
          -- Ukrainian-language content on national TV and radio increases from 75% to 90%; for regional broadcasters, the quota increases to 80%
          -- All movies produced in Ukraine must be in Ukrainian. All foreign language movies must be dubbed into Ukrainian. Foreign language movies with subtitles can only be shown at film festivals.
          -- Theater performances must be in Ukrainian, with a few exceptions
          -- Publishing houses must print at least 50% of their books in Ukrainian. Book stores will have to sell at least 50% of their books in Ukrainian.
          -- All education is to be in Ukrainian and all service sector employees must first address customers in Ukrainian.

          From the Editor: In a big bonus for Ukraine Business News readers, our site is now fully searchable. Go to www.ubn.news, type in a search term by the magnifying glass, and search through our fact-rich archive of 250,000 words. For comments or story tips, reach out to me at editor@ubn.news.

          Comment


          • UKRAINE BUSINESS NEWS


            Getting a jump on the May holidays, President-elect Zelenskiy flew Saturday for a family weekend break in Bodrum, Turkeys resort city on the Aegean. Two weeks ago, Turkish Airlines started a weekly flight from Kyiv Boryspil to Bodrum. On June 13, Pegasus starts flights to Bodrum from Kyiv Sikorsky. Turkish Airlines, with flights from Kyiv, Kharkiv, Kherson, Lviv, Odesa and Zaporozhia, carried 800,000 passengers on its Ukraine flights last year, a 28% increase over 2017. Benefitting from a visa-free, passport-free Turkey-Ukraine travel regime, Ukraine ranks 7th as a source of foreign tourists for Turkey.

            A radical regional airports development program is a key to Ukraines official plan to quadruple air passenger traffic to 80 million in 2030, reports Aviation Voice news site. To increase regional traffic from 25% today to 50% in 2030, the plan calls for investing 450 million to upgrade the airports of Kharkiv, Kherson, Lviv, Odesa and Zaporizhia to accommodate wide body jets. The airports of Bila Tserkva, Cherkasy, Chernivtsi, Dnipro, Ivano-Frankivsk, Kryvi Rih, Mariupol, Mykolaiv, Poltava, Rivne, Sumy, Ternopil, Uzhgorod and Vinnytsia would be upgraded to handle Boeing 737s and Airbus A320s.

            Bolstered by the arrival last week of its seventh Boeing 737, SkyUp launches an ambitious summer schedule this week. From Kyiv Boryspil, Ukraines new low cost airline will start flights to: Alicante, Batumi, Bodrum, Burgas, Catania, Faro, Heraklion (Crete), Naples, Palma de Mallorca, Pula (Croatia), Odesa, Rimini, Split, Tenerife-South, Varna, and Yerevan. From Lviv, SkyUp starts flying to: Alicante, Antalya, Monastir (Tunisia) and Tivat (Montenegro). From Kharkiv, SkyUps new flights will be to: Barcelona, Kutaisi, Larnaca, Monastir, Odesa, Paris-CDG, Rimini, Tirana and Tivat.

            SkyUp starts flying from a new regional airport this week -- Kryvyi Rih. SkyUp starts flights tomorrow to Sharm El Sheikh and on Thursday to Antaliya. Later this year, SkyUp would like to fly from Cherkasy.

            Poltavas newly reopened airport, plans to start flights to Poland this year, and to Spain and Israel next year, Volodymyr Okary, the aiport director, tells Zmist newsite. This spring, the airport reopened with SkyUp charters to Sharm el Sheikh and Antalya, Turkey.

            After re-opening last December, Mykolaiv airport carried 4,300 passengers during the first quarter. Growth is to continue, with SkyUp starting a flight on Wednesday to Antalia and MotorSich starting flights to Kyiv Sikorsky next month.

            By the time Odesas new runway is completed this fall, Ryanair will become the citys largest airline, with scheduled year round flights to five EU cities. One flight will go to Berlin, and four to Poland Gdansk, Katowice, Krakow, and Wroclaw. The Krakow flight starts June 16. The other flights start Oct. 29.

            With as many as 2 million Ukrainians working and studying in Poland, Ukraine has opened in Katowice its 11th honorary consulate in Poland. In addition, there are four consulates: Gdansk, Krakow, Lublin and Warsaw.

            The news that Lufthansa recently inspected Zaporizhia airport, drew attention to southeast Ukraines fastest growing airport and its 12,000 square meter new terminal that opens this fall. Built to handle 400 passengers an hour, the terminal will soon handle flights by nine airlines to 12 destinations, including Barcelona, Istanbul and Warsaw. By contrast, Dnipro a city of 1 million people -- one third more than Zaporizhia has four airlines flying to four cities. To steal passengers from its rival, Zaporizhia recently started a direct bus route from downtown Dnipro to Zaporizhia airport, a 100 km, 90-minute ride.

            Scheduled domestic flights should return to Mariupol by next year, Infrastructure Minister Volodymyr Omelyan tells Delo.ua. His ministry and the military are assessing safe landing approaches to this Donetsk region airport, which is only 35 km, west of the front line. Currently used for supply flights by the military, the Mariupol landing strip is considered in better shape than its rivals for civilian flights: Kramatorsk, also in Donetsk region, and Berdyansk, 80 km to the west of Mariupol.

            With the loss of Crimea, the tourist flow to Berdyansk is to hit 1.5 million this summer five times the level of 2015 -- Berdyansk city mayor Vladimir Chepurny told reporters in Kyiv last week. Chepurny and Zaporizhia officials lobby for reopening the Berdyansk airport. In the 1980s, it received Aeroflot flights direct from Moscow.

            Investing in Ukraines two Sea of Azov ports, the government has awarded tenders this month for the first major dredging in a decade of Mariupol and Berdyansk to Azimut Specialized Technical Bureau LLC, a Ukrainian company. With the winner determined by ProZorro online auctions, the two contracts total $27 million.

            Russian harassment of Ukraine-bound ships in the Azov continues, Petro Tsyhykal, head of Ukraines State Border Guard Service, said Wednesday. There is constant inspection of vessels in the Kerch Strait which visit Ukrainian ports for economic purposes, he said, according to the agency. An artificial queue is being created, and our vessels take much longer to inspect and are the last to be let go. Through April 25, Mariupol port has handled 1.5 million tons, with 127 ship calls, lower levels than last year, the port director reports.

            Five months after Russias seizure of three Ukrainian Navy boats near the entrance to the Sea of Azov, Ukrainian naval, air and land forces have started visit, board, search, and seizure training at Ochakiv, home to the Navys operational control center. Training is conducted at 73rd Maritime Special Purpose Center, 70 km east of Odesa, according to Janes Defence Weekly.

            France is supplying a 64 million soft loan to supply drinking water to Mariupol, an Azov city of 500,000 people, a population swollen with refugees from occupied areas of Donetsk region. Under an agreement approved Thursday by the Rada, the 30-year loan with a 10-year grace period and an annual interest below 1% will help build modern water filter stations and to upgrade city water pipes to cut leaks of drinking water and sewage. A leader in the field, France exports water system technologies around the world.

            This week, Nibulon starts its passenger service with two catamarans connecting Black Sea coast resorts of Mykolaiv and Kherson regions. With the business increasingly popular, Nibulon is building in its Mykolaiv shipyard a third catamaran, a 24-meter river-sea boat designed to take passengers on the Dnipro, Southern Bug and Black Sea.

            The government has approved a visa-free deal with Ecuador, a country that will makes all of South America visa-free for Ukrainians, with the exception of the northern tier countries of Colombia, Venezuela and the Guianas. A similar agreement was approved with North Macedonia, the former Yugoslav republic.

            From the Editor: In a big bonus for Ukraine Business News readers, our site is now fully searchable. Go to www.ubn.news, type in a search term by the magnifying glass, and search through our fact-rich archive of 250,000 words. For comments or story tips, reach out to me at editor@ubn.news.

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            • UKRAINE BUSINESS NEWS
              In coming days, President Poroshenko is to sign into law the energy bill approved last week by the Rada, moving Ukraine next year from green tariffs to green auctions. Effective next year, the bill requires that all solar plants over 1 MW and all wind farms over 5MW participate in energy auctions. An existing 10% tariff increase for use of Ukrainian-made equipment is retained. The bill aims to establish a fair market price for green electricity, to promote competition among producers, and to cut the cost of green power to consumers, according to Sergey Savchuk, head of the State Energy Efficiency Agency.
              The new legislation corrects an error -- the highest rates in Europe, Igor Naslik, Energy and Coal Industry Minister, told the Rada on Friday. The goal is to cut news feed-in tariffs for solar plants by 25% next year, and by 2.5% a year from 2021 to 2023. For wind plants over 2 MW, the feed-in tariff is to go down next year by 10%. Biomass and biogas energy rates stay unchanged. Feed-in tariffs are prices paid to producers for selling into acommon electricity pool.
              Renewable energy largely solar and wind will be the fastest growing energy source in Ukraine this year, predicts the Energy and Coal Industry Ministry. Renewables will more than double increasing by 127% -- to six gigawatts. Nuclear will decline by 1.2%, to 83.4 gigawatts. Thermal coal and gas will drop by 2% to 46.5 gigawatts. Combined heat and power plants will increase by 6.6% to 11.7 gigwatts. Large hydro will fall by 23% to eight gigawatts.
              During the first quarter of this year, solar accounted for 80% of the 860 MW of newly installed renewable energy capacity, reports Savchuk, the Energy Efficiency director. Of Ukraines three gigawatts of installed renewable capacity, solar accounts for 71%.
              Sky high green tariffs boost the cost of power but generate little renewable electricity, Katya Gorchinskaya writes in a Politico article titled: Ukraines Green Oligarchs. Current rates paid producers, in euro cents per 100 kilowatt hours, are: solar -- 15 to 16 cents; wind -- 10.2 cents; small hydro 10 to 17 cents; thermal 5.8 cents; nuclear 1.7 cents. As a result, renewables provided 1.9% of the nations electricity last year, but accounted for 8.6% of the nations 5.5 billion power bill.
              Asserting that five years of subsidies were needed to jump start Ukraines renewable energy industry, DTEK, now Ukraines largest solar producer, tells Politico: Investments in renewables have become the third most attractive sector for direct investments in Ukraine besides the agricultural and IT sector. DTEK, owned by Rina Akhmetov, adds: As in other countries, the introduction of a specific regulatory framework was instrumental for DTEKs and other investors' decision to kickstart investments in this sector, and a precondition to attracting foreign long-term debts for the financing of the imported equipment required.
              Michael Yurkovich, CEO of TIU Canada, has two solar plants, totalling 24 MW, in southern Ukraine. Working on two more plants, in Odesa, for an additional 32 MW, he recently told Renewables Now: "Investors need confidence that there is an ongoing commitment to renewables; a consistent level of support during the investment cycle; a supportive regulatory and permitting environment; transparency in the distribution of support; and a level playing field for investors."
              Over $1 billion in solar projects are under construction this spring, racing the Dec. 31 sunset of the sky high green tariffs. Adjusting to a new auction regime, investors plan billions of dollars in additional investments through 2020. The investment action largely focuses on Ukraines three sunniest southern regions Mykolaiv, Kherson and Odesa.
              Here is a partial roundup:
              In Mykolaiv, 400 MW of solar capacity is under construction or in the planning phase. Foreign investors nvestors include: Estonia Energy Invest, Turkeys Eko Yenilenebiler Enerjiler AS, and Norways Scatec Solar. With EBRD financing, Scatec is building two Mykolaiv solar plants, investing a total of 232 million to build 197 MW capacity.
              In Kherson, Scatec, through its Atlas Capital Energy LLC, is building this spring a 50 MW solar station in Hola Prystan. With about a dozen companies in Ukraine, Scatec is working on 414 MW of projects 251 MW under construction and 163 in the design and permitting stage, reports Interfax-Ukraine.
              The Arab Investment and Development Authority, AIDA, signed a deal in Dubai last month with STC Energy Ukraine to invest $2 billion in solar power plants in Ukraine. The first phase is to build solar plants totaling 170 MW, under the agreement signed by AIDA chair Adil Al Otaiba, STC Energy CEO Natalia Tykhonova, reports Emirates News Agency.
              In Kirovohrad region, there are plans to commission 46 solar stations with a generating capacity of 500 MW by 2023, reports EcoTown news site. Almost half of this will come from three solar plants, totaling 190 MW, that DTEK plans to commission by the end of this year.
              In Nikipol district of Dnipropetrovsk region, DTEK inaugurated earlier this month a 200 MW solar farm, the second largest in Europe. Now DTEK Renewables is building nearby a 200, 240MW solar polar plant, due for commissioning this year.
              Companies from Belgium, Denmark, Ireland, Lithuania and Turkey are among the investors building about a dozen solar projects for over 100 MW in central Ukraines Zhytomyr region.Establishing the regions reputation as solar friendly, the Zhytomyr Regional Administration signed 14 memorandums with solar investors last year.
              Turkeys Emsolt is building this spring 20 MW of solar capacity at two sites, in Zhytomyr and Khmelnitsky. The company has 85 MW ready for construction and another 50 MW under development, reports UNIAN.
              Kness Group, the Vinnytsia-based engineering, procurement and construction firm, is building 500 MW of solar capacity across Ukraine this year. This adds to 500 MW in projects completed by the company in earlier years, Yevhen Didichenko, co-founder of Kness, told a recent renewable energy conference organized by GOLAW firm in Kyiv.
              Two Japanese companies, Green Power Development Japan and Deloitte Touche Japan, are talking with the Energy and Coal Industry about building solar plants with a total capacity up to 1.2 GW in the Chorobyl exclusion zone, reports Interfax Ukraine. In addition to the symbolic value of building solar at the site of the 1986 nuclear disaster, solar developers want to plug into existing power transmission lines.
              Odesa region now has 500 MW of installed solar capacity, including a 260 MW project commissioned in January. From Danube to the Mykolaiv border, Odesa now has 23 solar plants in the below 50 MW size. Spains Acciona Energia Global is seeking to win permission to buy majority control of two solar projects in Izmail owned by UDP Renewables of Vasyl Khmelnytsky.
              With the spread of solar, southern Odesa increasingly faces the problem of excessive daytime power for local electricity grids. To address this, Frances RTE International and Ukrenergo are designing Ukraines first energy storage system. RTE International is a unit of RTE, the French electricity grid operator. The first phase of work is financed by a 560,000 grant from Frances Economy and Finance Ministry.
              From the Editor: The Ukraine Business News will come out through the holiday week. As with this mornings solar edition, there will be largely a sectoral focus. A reminder to readers: the UBN site is now fully searchable. Go to www.ubn.news, type in a search term by the magnifying glass, and search through our fact-rich archive of 250,000 words. For comments or story tips, reach out to me at jbrooke@ubn.news

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              • UKRAINE BUSINESS NEWS

                Antonovs deal to build up to 300 An-132 cargo turboprops for the Royal Saudi Air Force has ended, apparently falling victim to the new Russia-Saudi rapprochement. Under a joint venture contract signed three years ago, Antonov and Taqnia Aeronautics were to build the advanced military cargo planes, some in Kyiv and some in Saudi Arabia. Two years ago, the first prototype flew from Antonovs airport outside Kyiv. Each plane was valued at $30 million.
                Last week, Alexander Donets, president of Antonov, told UNIAN: For reasons not related to Antonov state enterprise, in Saudi Arabia, there was a change of the program partner, and the process was halted...Antonov did not freeze the An-132 project. London-based Middle East Monitor speculates that dropping the Ukrainian cargo plane project is a price Moscow exacted for Russia-Saudi collaboration on oil prices.
                India may succeed Saudi Arabia in the project, Donets tells UNIAN. Two months ago, an An-132D was flown in a demonstration flight in Bangalore at Aero India 2019. Donets said: The plane made a good impression, largely because it was created on the basis of the AN-32, which is well-proven in the operation of the Indian Air Force. Traditionally supplied by Soviet aircraft, Indias air force uses 104 An-32 cargo planes, the 1980s/1990s predecessor of the An-132D. Antonov has signed a commitment to participate in the Make in India program and is now waiting the outcome later this month of Indias general election.
                Since 2016, Antonov sales and production deals have fallen through with Azerbaijan and Turkey,two countries that work to maintain good relations with Russia. A 2016, deal for an Azeri company to buy 10 An-178 military transport jets has not materialized as the Azeris have not found financing for Antonov to buy replacements for Russian components. A cross-Black Sea venture to build an An-188 military transport jet with Turkey is stalled. From the Turkish side there was a great interest, Donets told UNIAN. But at this stage, interest is diminished, perhaps due to lobbying the interests of large aviation concerns.
                Ukraines SkyUp and FANair have shown interest in Antonovs regional commuter jets -- An-148 and An-158. But, in this highly competitive market, Boeing, Airbus, Bombardier and Embraer can easily outcompete Antonov on financing. As far as I know, An-148s are being built in Voronezh at the VASO enterprise, Donets said, referring to Voronezh Aircraft Production Association, a Russian manufacturer that has produced these 100-seat passenger jets under license from Antonov.
                For the future, Antonovs strategy should be to produce about 20 mid-size military cargo jets a year, Donets said. It is not economical to build the massive, Soviet-era cargo jets -- Mriya An-225 or Ruslan An-124. A major priority is to win Rada approval of about $50 million in funding to complete the program of substituting Russian parts with components from Western suppliers.
                To prepare for Antonovs post-Russia future, Boeings Aviall is building a warehouse in Kyiv that will be stocked with Western parts used in Antonov planes. Under the Antonov-Boeing contract, Aviall will perform maintenance for all new purchasers of Antonov planes. Separately, Antonov plans to open in United Arab Emirates this year a service center to maintain Antonov planes flying in the region and in Africa.
                Belarus predicts that clean oil will start flowing from Russia to Belarus two refineries by Saturday. This would be two weeks after contaminated Russian oil was detected in Belarus, prompting Ukraine, Poland, Slovakia and Hungary to stop oil imports on the Soviet-era Druzhba pipeline network. Full restoration will take a couple ofmonths of heavy work, Belneftekhim, the state energy company, said in a statement Tuesday. Without including refinery repairs, Belarus estimates it will lose $100 million in oil exports, Reuters reports. According to Belneftekhim, levels of corrosive organochlorine compounds in the Urals oil coming through the Druzhba pipeline were 10-25 times greater than the standard limit.
                A 950 MW nuclear reactor remained turned off Tuesday after a fire burned out an electrical transformer at the Rivne Nuclear Power Plant Monday night. Radiation levels have not risen, Ilona Zayets, spokeswoman for Energoatom, the state nuclear agency, tells AFP. Ukraines 15 nuclear reactors supply about the half of the nations electricity. Commissioned in Nov. 1986, six months after the Chornobyl nuclear disaster, the Rivne reactor is of the VVER design, considered safer than Chornobyls RBMK reactors. The Rivne Plant has four reactors and is located in Varash, about 40 km south of Belarus and 180 km east of Poland.
                As Ukraine, Russia and the EU stake out positions for talks next month on renewing Russias gas transit contract with Ukraine, President Putin warns Ukraine that no gas in the pipeline means no gas for Ukraine. Imagine that there is no transit, then there will be no gas supply to Ukraine, he tells reporters, according to UNIAN. Currently, to avoid dealing with Gazprom, Ukraine buys Russian gas from EU companies. Gazproms 10-year gas transit contract expires at 10 a.m. Monday Jan. 1. Gazprom said in January it would only negotiate seriously after Ukraines presidential elections.
                Due to repairs on Russias Yamal-Europe gas line, the volume of Russian gas shipped across Ukraine to the EU increased by 5.3% during the first quarter, to 20 billion cubic meters. In one week in April, shipment volumes jumped by 25%, to 300 million cubic meters a day. This flexibility makes Ukraines gas line system essential to Europes energy security in the 2020s, Naftogaz CEO Andriy Kobolyev writes on his Facebook page.
                Ukraine and the EU plan to offer Gazprom a 10-year contract, with a guarantee of 60 billion cubic meters a year in transmission. Ukraine will provide capacity at 90 billion cubic meters per year, Yuriy Vitrenko, executive director of Naftogaz, briefed reporters last week. Thirty billion cubic meters will be free capacity, which will be available for booking by other companies. He calculates that at this level, Ukraine would keep its annual gas transit fees at the current level, $3 billion.
                If Russia cuts off gas to Ukraine next year, Naftogaz plans to reverse flows in the main pipeline, allowing Slovakia to pump gas east to Ukraine, Vitrenko tells NV Business. To this end, workers are rebuilding a key compressor pipeline station in Bar, 70 km southwest of Vinnytsia city. To strengthen its negotiating position with Russia, Naftogaz plans to fill all reservoirs this summer, allowing Ukraine to get through the heating season of a normal winter. Ukraine has the largest gas storage capacity in Eastern Europe 31 billion cubic meters.
                If Russia cuts off gas to Ukraine next year, Naftogaz plans to reverse flows in the main pipeline, allowing Slovakia to pump gas east to Ukraine, Vitrenko tells NV Business. To this end, workers are rebuilding a key compressor pipeline station in Bar, 70 km southwest of Vinnytsia city. To strengthen its negotiating position with Russia, Naftogaz plans to fill all reservoirs this summer, allowing Ukraine to get through the heating season of a normal winter. Ukraine has the largest gas storage capacity in Eastern Europe 31 billion cubic meters.

                From the Editor: The Ukraine Business News will come to your email inbox every morning this week, largely a holiday week in Ukraine. As with todays Antonov and Russia oil and gas edition, there will be largely a sectoral focus. A reminder to readers: the UBN site is now fully searchable. Go towww.ubn.news, type in a search term by the magnifying glass, and search through our fact-rich archive of 250,000 words. For comments or story tips, reach out to me at jbrooke@ubn.news

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                • UKRAINE BUSINESS NEWS

                  Russias oil contamination scandal is cutting oil exports to the EU by 10%, impacting $2.7 billion worth of oil, and leaving EU importers fuming about Transnefts silence just as Russia seeks to present itself to the EU as a reliable provider of gas through its Nord Stream pipelines. The disruption sent oil to a six-month high above $75 a barrel, tarnished Russias reputation as an exporter at a time of rising competition, Reuters says in a lengthy report detailing the contamination of oil shipped to Belarus, Poland, Germany and Ukraine.
                  The only way to deal with the contaminated oil is to dilute it gradually with clean oil. Lacking sufficient storage tanks, Germany and Poland may reverse their pipelines and pump the oil back to Russia. Russian Railways is using tanker cars to take some of the oil out of Belarus by train, reports Bloomberg. At least 10 tanker ships with a combined 1 million tons of contaminated oil - worth more than $500 million at current prices - have sailed from Russias Ust Luga Baltic port, Reuters reports. Now, they must find storage tanks for unloading and dilution.
                  Vitol, the worlds largest oil trader, refused one cargo at Ust Luga, prompting the port to shut down for a day. On Friday, Russian officials said newly arrived oil is clean and reopened the port. But Western traders found the oil was contaminated. Even though Russia says it has resumed shipments of clean oil, we are still very much in paralysis as the quality is bad, a major Western buyer of Russian oil told Reuters. Two week into the crisis, Transneft, Russias state pipeline monopoly, has not communicated with its customers. On Tuesday, Transneft President Nikolai Tokarev met with President Putin and denounced the contamination as a deliberate act by a private oil company in the Samara region.
                  In Eastern Europe, clean oil is expected to arrive from Russia on May 19, one month after the contamination was discovered in Belarus, reports Ukrtransnafta, Ukraines pipeline company. Until then, 70 million barrels of contaminated oil are to be drained from pipelines for storage in tank farms. Companies participating are Ukrtransnafta, Hungarys MOL, Slovakias Transpetrol and Belarus Gomeltransneft Druzhba. Belarus calculates the contamination will cost its companies $100 million.
                  About the time clean oil is to flow again, Russias Gazprom is to meet with the EU and Naftogaz to renegote its 10-year-old Ukraine gas transit contract, due to expire on Jan. 1. Gazprom argues that its new Nord Stream II and TurkStream pipelines allow it to dispense with sending gas through Ukraine. The EU, increasingly concerned about security of supply, is asking for a minimum flow of 60 billion cubic meters a year, a position backed by Naftogaz. On Tuesday, perhaps with an eye to the upcoming gas talks, President Putin complained that the oil contamination crisis is very serious for us, in material, economic and image terms.
                  The biggest trucks in Ukraine now haul iron ore Metinvests Northern Iron Ore Dressing Works in Kryvyi Rih. The $2 million BelAz dump trucks can carry loads of almost 300 tons of rock at the quarries, part of one of Europes largest iron ore mining enterprises. This year, Metinvest is buying 16 of these monster trucks. Until these purchases, the biggest dump trucks in Ukraine could carry 220 tons. BelAz says that Ukrainian mining companies use 2,000 BelAZ trucks, accounting for 90% of the oversized dumptrucks in the nation.
                  ArcelorMittal Kryvyi Rih, Ukraine's largest integrated steel company, plans to increase iron ore concentrate output by 10.5% this year, to 10.3 million tons. This would be a 23% increase over the 2017 level. To reach this level, the company is increasing its investments in mining trucks and bulldozers this year by 46%, to $7 million.
                  Alexander Yaroslavsky plans to invest $150-200 million over the next five years in two properties he bought since 2017 Sucha Balka, an iron mine in Kryvyi Rih, and Dnipro Metallurgical Plant, a steel plant in Dnipro. At the iron mine, the Kharkiv-based businessman plans to buy new equipment, mine reserves at deeper levels, and build a processing plant. At the steel plant, he plans to build a continuous casting plant.
                  In March, Ukraines ports handled 30.4% more iron ore than in the same period last year -- more than double the 12.6% growth recorded for all freight, reports the Sea Ports Administration.
                  Toronto-based Black Iron (TSX: BKI) has raised almost US$1.2 million in a private placementon the heels of a March land agreement with Ukraines Defense Ministry. Under the deal, the Canadian mining company will compensate the Defense Ministry for taking over a troop training area to build an ore processing and tailings site for its Shymanivske iron ore project in Kryvyi Rih. According to Black Iron, the deposit has 646 millon tons measured and indicated resource, at 31.6% iron.
                  Concorde Capitals Dmytro Khoroshun notes that in February, Glencore signed an MOU with Black Iron. Speculating that the Swiss-British mining and commodities giant might be the investor in the private placement, he writes: This news is positive for both Black Iron and Ukraines image as an investment destination because it demonstrates the seriousness of foreign investors in projects such as Shymanivske.
                  Some skilled miners working at Donetskstal now earn more than their counterparts in Poland and the Czech Republic, Ildar Saleev, company general director tells Channel 24. Competing with Central European mines for labor, he said Donetskstal is raising salaries by an average of 15% for the 10,000 workers at the companys eight units. He said miner salaries in the Pokrovskoe mine are 76% higher than Ukraines average and 43% higher than the Donetsk region average. At present, the company has hundreds of vacancies for drivers, pipe fitters, welders and miners, with monthly salaries ranging from $370 to $1,300.
                  From the Editor: For comments or story tips, reach out to me at jbrooke@ubn.news

                  Comment


                  • UKRAINE BUSINESS NEWS
                    With rain forecast across Ukraine for the next week, farmers are happy. Early spring grain was completed on 2.1 million hectares 10% more than last year. This is 94% of the planned area, reports the Agrarian Policy and Food Ministry.
                    Moisture in the soil may put Ukraine on track to match last years record grain harvest of 70 million tons. In neighboring Russia, similar weather could boost the grain crop by as much as 14%, to 129 million tons, reports Reuters in a story headlined: Good Weather Puts Russia, Ukraine on Track for Large Grain Crop. Kazakhstan, the regions other big producer, expects to match last years harvest of 20 million tons.
                    With two months left in the grain marketing year, farmers have exported 41 million tons topping the 40 million tons exported during all of the previous marketing year. Ukraine has exported: 23 million tons of corn, 14 million tons of wheat, and 3.3 million tons of wheat. Underlining Ukraines role as a world food power, total grain exports could hit 50 million tons this year.
                    Despite farmers complaining about rail tariffs, the amount of grain moved by freight trains increased by 7% during the first quarter, to 28.6 million tons of grain. Over the last decade, Ukrzaliznytsia has doubled its grain volumes, from 15.5 million tons in 2008 to 33 million tons last year, Andrey Ryazantsev, the state railroads financial director, tells the Center for Transportation Strategies.
                    Sunflower oil production was up by 14%, to 1.5 million tons, during the first quarter, compared to last years in January-March period. In March alone, sunflower oil production jumped to 23% y-o-y, to 527,000 tons, reports that State Statistics Service. Ukraine is the worlds largest exporter, with India the top buyer of the cooking oil. In 2018, production dropped by 8% y-o-y, to 4.8 million tons.
                    Kernel, Ukraines largest sunflower oil producer, saw its oil sales jump by 40%, to 389,600 tons in the first quarter, compared to January-March last year. Behind the jump, Kernels numbers underline Ukraines slow progress in creating a sunflower oil brand and selling oil in bottles a higher value export. Kernels bulk sales were 11 times greater than its bottle sales 32,000 tons. During the first quarter, bulk sales grew by 41%. Bottle sales lagged, growing by 30%.
                    Low sugar prices and rising production costs are prompting sugar producers to cut plantings of sugar beets this spring by about one quarter, to 210,000 hectares, the lowest level in five years, reports Ukrtsukor, the sugar producer association. During the first half of the sugar marketing year, sugar exports were down by 10% to 304,000 tons, the association reports. During the last sugar refining season, sugar production was down by 15% to 1.7 million tons.
                    At Astarta, Ukraines largest sugar producer, sugar sales dropped by 42% y-o-y during the first quarter. Sugar prices were down by 15%. By shifting land last year to corn, wheat, barley and sunflower, Astartas revenue increased by about 21% to to 110 million, calculates Concorde Capital analyst Alexander Paraschiy.
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                    • Ukraines fruits and nuts export revenues rose by 22%, to $25 million, during the first two months of this year, compared to January-Febuary period of last year. Februarys exports of $25 million were double the level of two years ago, according to EastFruit information and analytical platform.
                      Pig Progress news site reports that Danish and German companies are planning to launch pig farms in Ukraine, despite outbreaks of African swine flu. The sites World of Pigs feature reports that Danish company Agro East is building a farm in Zhytomyr with a capacity for 25,000 pigs. In Lviv region, two farms, for a total of 10,000 pigs, are planned by German pig producers Poels Mastschweine and Tierproduktion Alkersleben. In Ivano-Frankivsk region, Goodvalley Ukraine, another Danish company, plans to invest 4 million to build a meat processing plant.
                      Two new cases of African swine fever one in Ternopil and one in Chernivtsi were reported Thursday by the State Service for Food Safety and Consumer Protection. Since 2015, about 400 outbreaks involving dozens of farm have been reported. Last year, 145 cases reported in Ukraine of the virus which is fatal to pigs. If infections continue to spread, Ukraine will lose 1.2 million pigs, or $150 million, by 2020, predicts the Food Safety agency.
                      Poultry meat exports are up by 38% q-o-q, to 103,000 tons for $147 million, reports the Ukrainian Food Export Board. The top buyers during the first quarter were: Saudi Arabia - 27% or $40 million; the Netherlands 16.5% or $24.3 million and Slovakia - 10% or $14 million. Last year, Ukraine exported 330,00 tons making it the seventh largest poultry meat exporter in the world.
                      After spending almost $250 million to buy a poultry producer in Slovenia, MHP, Ukraines largest poultry producer, plans to continue to buy producers in the EU and to expand to the Middle East and Africa, according to a statement posted on the Warsaw Stock Exchange website. At home, MHP is investing to increase its production capacity in Vinnytsia by one third, to 840,000 tons in 2022. Between now and 2022, MHP plans to spend $420 on foreign purchases and increasing domestic production.
                      With little room for sales growth at home, MHP plans to expand exports this year by 15%, to 330,000 tons, Victoria Kapelyushnaya, MHP chief financial officer, tells GlobalMeatNews. During the first quarter, poultry volume sales totaled 164,000, up 21% y-o-y. Exports were 93,000 up 47% y-o-y to 57% of total sales. Concorde Capitals Andriy Perederey writes: The companys key EBITDA driver in 2019 will be a rise in poultry export volumes.
                      Ovostar Union, a top manufacturer of eggs and egg products in Ukraine, opened a subsidiary in Dubai and spent $3.3 million to buy two Kyiv region companies last year, the group reported in its annual financial report. Last year, sales destinations were: Ukraine 55%; Middle East - 26%, EU - 16%, and other countries - 3%. Last year, export revenue increased by 17% to $56 million.
                      This year, Ovostar, plans to increase laying hens by 13%, to 7.9 million head, and to increase egg production by 14%, or 1.8 billion eggs. List as OVO on the Warsaw Stock Exchange, Ovostars reports are scrutinised closely by analysts in Kyiv. Calculating that the company first quarter revenue was $30 million, or a 9% y-o-y decrease, Concorde Capitals Androy Perederey writes: We are keeping our neutral view on Ovostar stock.
                      A Norwegian company partly owned by the Norwegian government sold its 3,000-hectare farm in Sumy region last week for an undisclosed price. The results of the investment were impressive; now we are looking forward to additional opportunities to invest in Ukraine, said Hans Christian Dall Nygard, regional advisor to Norways State Investment Fund, an investor in the farm. Andrew Kinsel, an American lawyer who advised on the deal, said: Farm property sale is common, land rental agreements are signed with a corporate entity, and the corporate entity is sold. Land itself is (usually) not sold, only rental agreements. Even without a private farm land market, he said: "There is strong demand in the farming sector. I see that buyers are quite active through the planting and elections season.
                      The Ukrainian Agro-Industrial & Food Forum, the largest such conference outside of Ukraine, will take place May 28 in Rotterdam. Expected to draw executives from 150 agribusiness companies, the forum unites two of the world's leading exporters and innovators of agri-food products the Netherlands and Ukraine. Now in its second year, the forum will focus on trade, logistics and infrastructure, financing, ag tech, export markets, trade and investment, and promotion of the value chain.
                      From the Editor: UBN is a media sponsor for the Ukraine ID conference next month in Kaniv, Cherkasy region. Known as the Ukrainian Davos, the conference runs June 7-8 with the theme The Revolution of Values. Last summer, I participated in this intellectual retreat and found it highly worthwhile. For more information or to register, visit ukr-id.com. I will be there again this year! best Jim Brooke jbrooke@ubn.news.

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                      • UKRAINE BUSINESS NEWS
                        With the record harvest pushed through the economy, Ukraines real GDP growth slowed to 2.4% in Q1 2019, compared to 3.5% in Q4 2018. Metals, the largest export after agriculture and labor, was close to zero due to planned repairs at major mines and steelmakers, reported the National Bank of Ukraine. Retail, travel and construction were up, fueled partly by labor remittances. The central bank predicts the economy will grow by 2.5% this year, down from 3.3% last year.
                        Foreign investment in hryvnia treasury bonds increased by 18% last week, to the equivalent of $1.3 billion. Foreign holdings of the bonds has grown from less than 1% on Jan. 1, to 5% today, reports the National Bank of Ukraine.
                        Ukraine will auction 5G mobile frequencies next year, Infrastructure Minister Volodomyr Omelyan told reporters after meeting Friday with the National Communications and Information Regulatory Commission. They see a great prospect of this technology, said Omelyan. It is their position, that Ukraine will be able to sell the first licenses for 5G next year. Last month, Omelyan launched a 5G pilot project Internet of Things on Highways. Last year, 4G service was launched in Ukraine. Last month, Verizon, the leading American mobile company, and South Koreas three mobile carriers launched 5G service.
                        With an IMF mission expected in Kyiv this month, Christine Lagarde, the Funds managing director, talked Friday with outgoing President Poroshenko and stressed that much remains to be done to complete the transformation of Ukraine into a modern market economy that is firmly governed by the rule of law and that is able to attract the higher levels of investment needed to achieve stronger and sustainable growth.
                        Separately in Brussels, President-elect Zelensky's anti-corruption advisor, Ruslan Riaboshapka, told reporters Friday: This one of our top-priority initiatives: criminal liability for illegal enrichment will be restored. In court decisions that threaten IMF cooperation, Kyiv courts recently threw out an illegal enrichment law and the nationalization of Ukraines largest bank, PrivatBank.
                        If Western partners including the IMF maintain cooperation, Ukraine can get through this year, a peak year for foreign debt repayments, Yakiv Smolii, governor of the National Bank of Ukraine, told G7 ambassadors and IMF representatives in Kyiv on Friday. When the Rada returns to work in two weeks, parliamentarians are to consider a key IMF demand: reorganizing the State Fiscal Service into a tax service and a customs service. If Ukraine passes its IMF review in late May, it should win an IMF tranche of $1.3 billion.
                        Taking advantage of Russias ban on overflights of its territory by Ukrainian arilines, Azerbaijans low-cost carrier Buta Airways, is expanding flights from Baku to three Ukrainian cities: Kharkiv, Kyiv and Odesa. After flying to Kyiv Sikorskiy for two years, Buta added Kharkiv on Friday and will add Odesa on May 16. on Friday, May 3, made its first flight to / from Kharkiv airport. UIA has a lone flight to Baku, from Kyiv Boryspil, which must fly south over the Black Sea, around Crimea and across Georgia to reach Azerbaijan. All airlines fly around the conflict zone, a legacy of the July 2014 shoot down of Malaysia Airlines Flight 17 by a missile fired from Russia-controlled Ukraine.
                        Kazakhstans new discount carrier, FlyArystan, plans to fly to Ukraine in the near future, Peter Foster, president of the parent company, Air Astana, tells the Center for Transportation Strategies. According to the British CEO, FlyArystan plans to carry 700,000 passengers this year and to expand its fleet in two years to 15 passenger jets. UIA, faced with longer and costier flight routes to Kazakhstan, has cut its frequencies to Almaty and dropped its flights to Astana, now called Nur-Sultan.
                        Over the next 25 years, Kyivs Borsypil airport is to undergo a major 3.4 billion expansion to handle 54 million passengers four times todays level. Under a long range development plan approved last week by the government, the airports land area would increase by two thirds, to 1,538 hectares, Viktor Dovhan, deputy Infrastructure Minister, posts on Facebook. Terminal D, the main international terminal, would be greatly expanded and the second runway would be rebuilt. After registering a 19% increase last year, to 12.6 million passengers, Boryspil expects to see a 14% increase this year, to 14.4 million passengers.
                        Starting Friday, Ukrzaliznytsya will double the size of its Boryspil Express train, allowing the airport railroad shuttle to carry 200 passengers at peak hours. Ridiculed by the Kyiv press at its launch last November, the 80 hryvnia shuttle from downtown Kyiv has proved so popular, passengers often stand for the 35-minute ride.
                        Online purchases now account for 56% of long distance rail tickets sold, up from 50% last year, reports Evhen Kravtsov, CEO of Ukrzaliznytsia. More than 100 million rail tickets have been bought online since the service started in 2015.
                        Preparing for the harvest season, Ukrzaliznytsia is expanding its online auctions for freight cars using the electronic ProZorro system, Kravtsov says. During a test phase, almost 10,000 cars -- largely grain hoppers were auctioned in 803 auctions, garnering the state railroad an extra $1.3 million.
                        Ukrzaliznytsia plans to issue a new series of Eurobonds by October to refinance current Eurobond debts, according to the state railroads 2018 financial report. In March, Ukrzaliznytsya paid $150 million of debt on Eurobonds, largely with money raised domestically, from Oschadbank and Ukrinfraproekt, the State Agency for Infrastructure Projects of Ukraine, according to the Center for Transportation Strategies.
                        Kyivs Chernobyl tourism industry gets big boost this week with world wide release of Chernobyl five-part miniseries. The drama revolves around the brave men and women who sacrificed everything to save Europe from unimaginable disaster, all the while battling a culture of disinformation, reads a review in the Straits Times of Singapore, where the series starts tomorrow. The Los Times writes of the series, which launches tonight in the US: Note to viewer: Wear your mouth guard if youre prone to teeth grinding under stress...It exposes a government paralyzed by its own secrecy while shining a light on the selfless citizens who gave their lives to protect their countrymen and perhaps the world.
                        Chernobyl tours increasingly popular 33 years after the disaster, with half a dozen Kyiv-based compnies offering $100 day tours. HBO drama or not, the truth remains Chernobyl happened, and its affects are still being felt to this day...Tours to the site, which require your passport, pants, long-sleeved shirts and closed toe shoes, are something that helps make this part of the countrys history tangible, Breanna Wilson wrote in a Forbes travel article last month: Stop Overlooking Kyiv, Eastern Europe's Diamond In The Rough.
                        Separately, Isotopium: Chernobyl a new video game based in Prypryat, has drawn 62,615 registrants, according to a Reuters interview with game co-founder Sergey Beskrestnov. For $9, players can remotely drive tanks about a 180 square meter set in Brovary, blasting out competitors in the search for an an nergy source called isotopium. Beskrestnovs company, Remote Games, plans next to build a game revolving around the colonization of Mars.
                        From the editor: UBN will be the media partner for Ukrainian ID, the international economic and humanitarian forum, known as the Ukrainian Davos. The conference runs June 7 - 8 in Kaniv, Cherkasy, under the theme: Revolution of Values. Last year 300 experts took part in discussions. This year, organizers plan to gather 500 opinion leaders. For more information, visit ukr-id.com.

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                        • UKRAINE BUSINESS NEWS
                          With or without Nord Stream 2, Russia may stop shipping gas through Ukraine in January, top Naftogaz officials warn in interviews. By storing gas in Europe and sending more gas through its northern Yamal-Europe pipeline, Russias Gazprom may meet its minimal contractual obligations to the EU, Andriy Kobolyev, Naftogaz CEO, tells Voice of America. I do not think the absence of North Stream [2] will stop the Russian side from completely interrupting the transit of gas through Ukraine, he warns. There are many signals from Europe and there are many signs on the market that Russians are preparing for such a scenario."

                          Although the Nord Stream 2 Russia-Germany gas line is half built, Danish approvals for laying pipe on the Baltic seabed and new EU legislation are expected to delay commissioning beyond the December 31 target date. But with access to 13 billion cubic meters of storage in Europe and using gas swaps in different markets, Gazprom could afford turn off the flows to Ukraine next winter. Gazprom can work without any transit through Ukraine as soon as January 2020 even if the pipeline is delayed, Yuriy Vitrenko, Naftogaz executive director, tells bne IntelliNews.

                          To cope with a cutoff, Naftofaz is preparing compressor stations to reverse gas flows from west to east, a strategy used during Russias mid-winter 2009 cutoff. We modernised some of these compressor stations, but if it happens again it would be a new crisis scenario, says Vitrenko.

                          In Beijing, President Putin told reporters on April 27: If there is no transit, then there will be no reverse deliveries. Naftogaz warns that if Russia cuts EU deliveries to a minimum, the EU will not have surplus gas to sell to Ukraine. Later this month, all three sides EU, Gazprom and Naftogaz are to meet to try to negotiate a new 10-year gas transit contract. During the first four months of this year, the volume of Russian gas crossing Ukraine to the EU was up by 5.6% y-o-y, to 29 billion bcm.

                          To prepare for this scenario, Naftogaz has started filling its gas reservoir system, the largest in Eastern Europe. After the April 5 end of Ukraines heating season, pumping started in earnest and has reached almost 10 billion cubic meters, 18% more than this time last year, according to UkrTransGaz, the Naftogaz pipeline unit. With the reservoirs already one third full, the goal is top off the tanks: to start next with winter with the nations 12 underground gas storage reservoirs filled with 20 billion cubic meters, 18% more than last year.

                          The U.S. has nearly tripled its natural-gas exports to the European Union since July and has signed new export licenses allowing two US companies to sell a total of 60 billion cubic meters a year to Europe, The Wall Street Journal reports from Brussels. Today, the U.S. is a small player in Europe, the worlds largest energy importing region. Last year, U.S. LNG accounted for 2% of all EU imports, compared to the 40% market share enjoyed by Russian pipeline gas.

                          U.S. sales about 1 bcm a month are the tip of the iceberg, U.S. Energy Secretary Rick Perry told a EU-US business energy forum in Brussels. The bottom line is the United States has what Europe wantsan incredible abundance of clean and affordable natural gas. To diversify supply sources, the EU has provided 656 million in financing for new LNG links and terminals across the bloc. Some could bring American gas to Ukraine, via Poland.

                          Zelenskiy advisor Oleksandr Danylyuk met with Perry in Brussels on Thursday, saying later: The United States role in diversifying energy supplies is important to Ukraine and Europe in general. This reduces political risks and lowers the cost of energy for consumers.

                          Ending a nearly two week freeze, clean Russian oil started flowing Monday afternoon from Belarus on the Druzhba pipeline to Ukraine, reports Ukrtransnafta. On April 19, Belneftekhim first detected oil flowing from Russia that was highly contaminated with organo chlorides that could corrode refinery equipment. Ukraines state pipeline company estimates it lost 1 million in oil transit fees to Slovakia, Hungary and the Czech Republic. The Druzhba pipeline is expected to fully return to normal on May 20.

                          With Russia limiting exports of oil and oil products to Ukraine starting June 1, Lithuanias ORLEN Lietuva, the only refinery in the Baltics, expects to increase its market share in Ukraine, reports Baltic Course news site. Last year, Ukraines imports of oil products from Lithuania increased by one third, to $570 million. With this jump, Lithuania came in third last year as oil products supplier to Ukraine, behind Belarus and Russia.

                          Ukrainian companies again won all auctions for oil and gas blocks conducted under the rules of ProZorro. On Thursday, in the second round of auctions, UkrGazVydobuvannya, the state gas producer, won six of the seven licenses, which are valid for 20 years of exploration and production. A small, private company, Unified Oil and Gas Company, won the seventh license. In March, in the first round of electronic auctions, UGV and two private gas producers, Burisma Group, DTEK Oil & Gas, won three licenses. The third licensing round, for nine blocks, will be June 18, reports WorldOil website.

                          Richard Deitzs VR Capital Group is expanding its investments in Ukraine, establishing a joint venture with Investment Capital Ukraine and buying a 50% stake in 11 solar plants with a total capacity of 127 MW in Mykolaiv region. This is the third joint venture in renewable energy between Kyiv-based ICU and VR, according to Avellum, which provided legal advice to ICU. An investor in Russia since 1994, Deitz was based in Moscow for many years. According to Barrons, his flagship hedge fund, VR Global Partners, L.P., had assets under management of $4.4 billion at the end of 2017.

                          Ukrainians driving home en masse Sunday from their no visa May holidays caused lines as long as 500 cars at Polish-Ukraine border crossings, reports Ukraines Border Service. With automobile crossings on the Polish border increasing by 500,000 a year, Ukraine needs to double its land crossings with the EU from the current number of 18, Petro Tsyhykal, head of the border service, recently told Channel 5. He said that last year 100 million people crossed Ukraines borders.

                          From the editor: The UBN website is now fully searchable in English 250,000 words. At the same time, the UBN site now offers the Morning News in English, Ukrainian Russian and German. Best Jim Brooke jbrooke@ubn.news

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                          • UKRAINE BUSINESS NEWS
                            US Ambassador to Ukraine Marie Yovanovitch is to complete her three-year tour two weeks from now. With no successor in sight, the embassy is to be run by Pamela Tremont, the current deputy in charge of mission.
                            Recently, when US media attention was focused on the Mueller report on Russian interference in the 2016 US election, some Trump supporters campaigned against Yovanovitch as an Obama appointee who colluded in a Poroshenko effort to help Hillary Clinton in the presidential. In reality, Yovanovitch, a career foreign service professional, arrived in Ukraine in late August 2016, about 10 days after The New York Times published an article detailing secret payments by the Yanukovich government to Paul Manafort. The story immediately led to Manaforts resignation as Trumps campaign manager and, eventually, to his conviction last summer on eight charges of tax and bank fraud.
                            Timothy Ash writes from London: Yovanovitch did a decent job - her only "crime" was speaking out for more efforts from the Poroshenko administration to fight corruption...Yovanovitch seems to have got caught in the cross-wires of the domestic political debate in the US... This leaves Ukraine with an inexperienced incoming president - less able now to draw on the experience/connections of a sage US diplomat.... This is a big loss for Ukraine, and it is a clear signal where Trump's priorities lie - more in normalizing the relationship with Russia, than supporting allies such as Ukraine.
                            Melinda Simmons, a British diplomat with a decade of experience in international development,is to arrive in Kyiv this summer as Britains new ambassador, succeeding Judith Gough. Until 2013, Simmons served as an alternate member of the Board of the European Investment Bank, a major source of infrastructure funding for Ukraine. Noting that her mothers grandfather worked in Kharkiv and Kyiv, she told Londons Jewish Chronicle news site: The idea that you would come back to a country that your family felt the need to leave, and in such a positive way is something that is both personally meaningful to me and my wider family.
                            South Koreas outgoing ambassador heard a pitch from Infrastructure Minister Volodymyr Omelyan that Hyundai build an electric car factory in Ukraine. In response, Amb. Lee Yang-goo said Hyundai plans to build on the success of its Rotem trains on Ukraines InterCity service and participate in a tender for 85 new subway cars in the Kharkiv Metro expansion plan. The EBRD and the European Investment Bank are financing half of the 320 million project.
                            With EUs electric car market booming, Omelyan says that if lawmakers pass bills to stimulate the electric car and battery industry, the next day we send a delegation to Tesla on construction of their first European plant in Ukraine. Ukraine has Europes largest known supplies of lithium, a key imponent for car batteries. A Tesla battery weighs 540kg, giving Ukraine a supply advantage for Europe, argues Omelyan.
                            First time registrations of used imported cars totaled 207,000 for the first four months of this year, eight times the number of the same January-April period last year. By contrast, 25,300 new passenger cars all imports -- were registered during the same period, 3% fewer than during the first four months of last year. The flood of imports is due to lower taxes in Ukraine and growing restrictions in Germany against diesel cars. Of new registrations of used imports, 53% were for diesels, according to Ukravtoprom, the industry association.
                            During the first four months of this year, 822 people were killed and 7,804 injured in 47,445 traffic accidents, reports Alexei Belo****sky, first deputy head of the Police Patrol Dpartment. About one third of accidents are caused by speeding. Since the April 26 holiday season started, there have been 3,200 arrests for drunk driving. With EBRD support, the Infrastructure Ministry is investing in road safety, aiming to cut traffic fatalities by one third by the end of next year. There are now 75 speed cameras working on national highways.
                            Analysts from JP Morgan and UBS predict that political maneuvering in advance of parliamentary elections will delay Ukraines receipt of a second tranche this year. PM Groysman clearly signaled that he is moving away from IMF requirements as he announced he will be running in parliamentary elections, JP Morgan economists Nicolaie Alexandru and Trang Nguyen write in a note. Both Zelenskiy and most politicians are likely to call for populist measures rather than IMF-required reforms. Separately, analysts at Swiss investment bank UBS predict that if the Rada does not approve new anti-corruption legislation, this summers $1.4 billion IMF tranche will be delayed.
                            After 15 years in Moscow, Morgan Stanley Bank plans to end banking activities in Russia early next year, the New York-based bank says in its annual report. Morgan Stanley cites the impact of Western sanctions and the ambiguous interpretation of laws in Russia. "The group plans to abandon banking, brokerage and depositary licenses and voluntarily liquidate the relevant business units," the bank said, according to RBC.ru. In 2015, Royal Bank of Scotland ceased operations in Russia, followed in 2016 by Barclays. Deutsche Bank and Credit Suisse have significantly reduced their business.
                            Three weeks before a pedestrian-bicycle bridge is to be inaugurated connecting Volodomyrska Hill and the Friendship of Nations Arch, the executive of a Swiss architectural firm says she was never paid for the design. The basic concept, the basic principles of design, the form, the constructive solution, and the materials were taken from our [2013] project, Stephanie M. Schafroth, founder and principal of Zurichs Leuppi & Schafroth Architekten, tells the Nashi Groshi TV program. Schafroth said her firms cost estimate was $6 million, 64% below the bridges cost of $10 million. The 210 meter long, glass floored bridge is to be inaugurated on May 26, Kyiv Day.
                            Does the State Aviation Administration follow the election returns? On Tuesday, the commissioners turned down applications by SkyUp and AtlasJet Ukraine to fly Odesa-Tel Aviv, deciding to award the route to Windrose Airlines. The principal beneficiary of Windrose is believed to be Igor Kolomoisky. Currently residing in Tel Aviv, Kolomoisky was the primary backer of Zelenskiy in his successful presidential campaign.
                            Read more news on www.ubn.news

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                            • UKRAINE BUSINESS NEWS
                              Ukraines food exports increased by 22.5% during the first quarter, adding almost $1 billion in sales, compared to the same period last year, reports Olga Trofimtseva, acting Minister of Agrarian Policy and Food. The top three export groups were: grain - 45%; oil - 22%; and oilseeds - 7%. Top products were: corn - 33%; sunflower oil - 21%; and wheat - 11%. Top destinations were: Asia 41%; EU - 35%; Africa - 15%; and CIS - 6%.
                              After last years record 70-million ton crop, Ukraines grain harvest this year is to recede by 2.3% this year, to 68.4 million tons, predicts the Institute of Agrarian Economics. While livestock production is to be flat, egg production is to grow by 3.4%, and poultry meat by 7.4%. Last year, company farms were the locomotives of Ukrainian agriculture, with their output growing by 12.1%, compared to family farm output growing by 2.2%.
                              The Grain Ukraine conference will gather producers, international traders and government officials in Odesa on May 24-25. In addition to an address by Trofimtseva and panels on Ukraines prospects in world grain markets and strategies for easing domestic transportation bottlenecks, there will be a field trip to M.V. Cargos new grain terminal in Yuzhne, a one-hour bus ride south of Odesa.
                              Effective Wednesday, the central bank raised the monthly limit on dividend repatriation to 12 million, from 7 million per company. 12 million, satisfies the needs of all companies with foreign investments operating in Ukraine, says Oleh Churiy, deputy head of the National Bank of Ukraine. However, we realize that this limit is a certain barrier for new investors, and our goal is to lift the limit.
                              Concorde Capitals Evgeniya Akhtyrko writes: This is the latest step by the central bank in its ForEx liberalization campaign. It reflects the NBUs increasing confidence in the situation on Ukraines ForEx and the market's ability to regulate itself.
                              Ukraine will receive the next IMF loan tranche, for $1.3 billion, by mid-July, Alexander Paraschiy, Concorde Capitals head of research, predicts in an interview with UNIAN. He says that Ukraine has fulfilled three of four basic provisions for the tranche. This month, the Rada may pass a fourth: a new, constitutionally sound illegal enrichment law. Based on our history, this is a very good result, he says. Lowering gas prices should not be an issue because parity with imports is maintained. The biggest cloud, he sees, is Igor Kolomoiskys attempts to reverse the 2016 nationalization of PrivatBank.
                              Ukraine's central bank will make at least one more cut in its prime interest rate this year,indicates a Reuters poll of 12 analysts. Five analysts expect the rate to end this year at 16%, down from 17.5% today. Three see the year-end rate at 17%. Two weeks ago, the National Bank of Ukraine cut prime from 18%, its first cut in two years. ICU writes: In case of successful negotiation on the new [IMF] tranche and continuing decline of the CPI, the NBU is likely to cut the rate again during June meeting (-50 bps), eventually lowering it to 16% by the end of the year.
                              Inflation in April was 8.8% compared to one year ago, the State Statistics Service reports. The central bank predicts inflation will taper to 6.3% at the end of this year. The median forecast of Reuters analysts is 7.8%.
                              Concorde Capitals Evgeniya Akhtyrko writes: We expect the demand for UAH-denominated bonds will remain high as yields will still significantly exceed the current inflation rate. In addition, investing in UAH-denominated bonds looks like a very lucrative opportunity for non-residents, given the hryvnia's ongoing stability.
                              With inflation expected to hold below 9% and the hryvnia/dollar exchange rate at 26.5, little changed in three years, foreign investor interest remains strong. Foreign investors now hold UAH 36.3 billion ($1.37 billion) in bonds. ICU writes: In our view, a large portion of bills was purchased by foreign investors, most likely with longer maturities from offered yesterday.
                              As the presidential transition nears, the US-Ukraine Business Council stresses the importance of Ukraines new oil and and gas production sharing agreements. Tender bids are due in May and the awards are expected in June, the Council said Wednesday. This process is being watched around the world as a strong and serious signal that Ukraine is expanding the energy investment climate and providing real opportunities for the private sector to invest in Ukraine.
                              Will Trump try to trade Ukraine for Venezuela in a grand bargain with Putin over spheres of influence? London-based Ukraine analyst Timothy Ash asks that question in advance of next Tuesdays meeting in Sochi between the two foreign ministers, Russias Lavrov and Americas Pompeo. Ukraine is not Trumps to give, Ash answers himself. The Ukrainians have proven a willingness to fight - and now have 300,000 well trained/reasonably armed troops and will never bow to Putin...So maybe Bolton is thinking: the US takes out Maduro, which would be a huge win for Trump, but would actually not give that much to Russia in exchange.
                              Filling a void in US diplomatic leadership in Ukraine, George P. Kent, Deputy Assistant Secretary of State for Europe and Eurasia, met Wednesday in Kyiv with President-elect Volodomyr Zelenskiy, with Foreign Minister Pavlo Klimkin, and with Interior Minister Arsen Avakov. A speaker of Ukrainian and Russian, Kent served as Deputy Chief of Mission in Kyiv until last fall. Ambassador Marie Yovanovich is in Washington, prior to completing her posting here on May 20. On May 28, Kristina Kvien, acting DCM in Paris, is to arrive in Kyiv to serve as DCM here until a new ambassador arrives. From 2006 to 2010, Kvien handled Russia and Ukraine issues, first at the US Embassy in Moscow, then at the National Security Council.
                              U.S. Ambassador to Ukraine Recalled in Political Hit Job, Lawmakers Say Foreign Policy headlines an article that says Ukrainian anti-reformers allied with Trump operatives to engineer Amb. Yovanovitchs recall two months ahead of schedule. Its extremely unfortunate what happened to [Yovanovitch], but its also a danger for our policy in Ukraine going forward, warns John Herbst, a former U.S. ambassador to Ukraine. Important things are going on right now with the new president taking office. You need a strong ambassador on scene. Itll be very important that whoever that is have the ability to speak out strongly on reform.
                              editor@ubn.news

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                              • UKRAINE BUSINESS NEWS
                                In a major deal with France, Ukraine is negotiating to buy 22 ships and 24 helicopters to patrol Ukraines Black Sea and Azov Sea borders. These [22] ships will be of patrol class, which will reliably carry out the tasks assigned to protect the sea border, President Poroshenko said last week, reports Interfax-Ukraine. Last month, Petro Tsyhykal, head of the Border Guard Service, told Channel 5: Negotiations are underway with French partners for the purchase of 22 modern patrol vessels with the help of the Internal Affairs Ministry.
                                France also would be the main supplier of the helicopters. Last July, the Internal Affairs Ministry signed a contract with Airbus Helicopters to buy 55 helicopters -- models H225, H145, and H125.
                                Ukraine's largest integrated steel maker, ArcelorMittal Kryviy Rih, will reinvest its entire 2018 profits -- $350 million into upgrading production, the company reports. The decision was taken at the companys annual general meeting of shareholders on April 25.
                                Poland displaced Russia as the top buyer of Ukrainian goods, as Ukraines trade with Russia dropped 11% q-o-q, to $2.4 billion. In the January-March period, Ukraine sold $818 million worth of goods to Poland, compared to $759 million to Russia. Ukraines trade with Russia is expected to further drop this summer after the June 1 start of Moscows second trade embargo list with Ukraine in six months. While trade with Russia fell, Ukraines trade with the EU grew by 10% to $9.5 billion. The EU accounts for 38% of Ukraines foreign trade.
                                President-elect Zelenskiy will inherit an economy with its macro indicators in best shape in years, writes Timothy Ash. Ukraine now runs modest twin deficits, at 2-3% of GDP, public debt is on a declining path, sub-60% now, while the [central bank] has $20bn in reserves, above the three month import cover minimum, Ash writes from London. Foreigners seem happy to invest into domestic debt, given high yields, moderating inflation, hawkish NBU, and reasonably stable hryvnia. Efforts by Zelenskiy backer Igor Kolomoisky to win back PrivatBank, is still the number one issue for the incoming president Zelenskiy in the sphere of the economy and relations with the international financial institutions.
                                In Sarajevo, Finance Minister Oksana Markarova says Ukraine is either on track or well positioned to meet all requirements of the IMF standby program. Talking to Bloomberg Thursday after a panel at the EBRD Annual Meeting, she declined to discuss timing of the next IMF tranche, saying most important thing is to stay on track. On the panel, she said Ukraines macroeconomic situation is very good.
                                To cut corruption, our goal is the state in a smartphone, Zelenskiy told visiting Canadian Foreign Minister Chrystia Freeland on Wednesday. "We don't want to be talking about fighting corruption, we want to defeat it," he said. To do this, his team wants to minimize Ukrainians contacts with bureaucrats.
                                Nibbling away at Ukraines massive inventory of idle state-owned properties, ProZorro has auctioned off 552 state properties since July, earning $37 million for the treasury. Real estate accounted for the overwhelming majority of sales of these small privatisations. Last December, Kyiv court rulings froze privatisations of large state companies.
                                In an aggressive bid for Ukraines migrant worker market, Ryanair unveils a fall Ukraine schedule with flights to five new German cities and eight new Polish cities. From Odesa, Ryanair launches flights to five Polish cities: Krakow in July, then Gdansk, Katowice, Poznan and Wroclaw on Oct. 29-30. From Kharkiv, Ryanair starts flights to Krakow and Poznan, and Vilinius Lithuania. From Kyiv Boryspil, Ryanair starts a flight in the fall to Katowice and doubles its frequencies to Warsaw to twice daily. Ryanair already flies to five from Borsypil to five other Polish cities.
                                Targeting Germany, Ryanair starts flights in October from Boryspil to Hahn, Karlruhe/Baden-Baden, Nuremberg and Weeze; and from Odesa to Berlin-Tegel. Its Austrian unit, Lauda, starts flights in November to Stuttgart.
                                With three year head start, rival Wizz Airs Ukraine flight network already includes 12 Ukraine-Poland routes and 13 Ukraine-Germany routes. This summer Wizz Air launches three new flights:from Kyiv Sikorsky to Lublin in June and to Leipzig/Halle in July; and, in August from Kharkiv to Krakow, a new Wizz Air base.
                                After todays flight, Motor Sich suspends its weekly Kyiv-Lviv-Uzhgorod flight, inaugurated only two months ago. The Infrastructure Ministry is working with the airline and regional officials to promote the route, aiming to establish daily direct Kyiv-Uzhgorod flights for Zakarpattias summer tourism season.
                                Budapest-based Wizz Air has studied flying out of Uzhgorod. Wizz Air has 10 international flights out of its eastern Hungary base as Debrecen, 145 km south of Uzhgorod. Uzhgorod airport was inaugurated in 1929 with flights to Prague. Today, with proper marketing, the airport could resume its regional role, serving passengers from eastern Slovakia, eastern Hungary, northwestern Romania and Zakarpattia.
                                Restoring a link broken with the end of the Hapsburg Empire in 1918, Austrias Peoples airline made a first charter flight from Vienna to Chernivtsi on Wednesday. Reserved for Austrians, the charter flight follows Peoples charter flights last year from Vienna to Lviv, another former Hapsburg city. For Lviv airport, Vienna is the fourth most popular destination, after Warsaw, Kyiv and Istanbul. Austrian Airlines flies the 1h15 min route 11 times a week.
                                In time for the summer travel crush, Kyiv Boryspil opens on May 23, the airports first multilevel parking garage. Connected by a covered walkway to Terminal D, the garage will offer long term and short term parking, video surveillance, and digital signs indicating where spaces are free in the 1,000-space facility. Short term parking will be about $1 an hour. Frustrated by years of construction delays, airport officials will celebrate May 23 with a musical festival on the roof, billed as "KBPAEROPARTY."
                                With the sailing today today of the Viking Sineus from Kyiv River Station, Viking Cruises unofficially opens the start of the Dnipro River summer cruise seaso. Through late September, Viking offers 11 cruises from Kyiv to Odesa and the same number coming up river from Odesa. The ship sleeps 196 passengers and per person prices start at $4,000. Last summer, the 11-day cruises proved so popular with affluent American and European tourists that the Swiss-based company decided to offer this season an extended option Kyiv to Bucharest.
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