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  • UKRAINE BUSINESS NEWS
    Riding the wave of foreign investor demand for Ukraine bonds, Naftogaz placed two tranches of Eurobonds for the equivalent of $1 billion, at rates just above the sovereign. On Friday, Naftogaz placed 600 million of Eurobonds for five years at 7.125% and $335 million for 7.375% for three years. Bids exceeded supply by a factor of 2.5. Bookrunners were Citibank and Deutsche Bank. Much of the money is to be spent on buying natural gas this summer to fill storage tanks in advance of negotiations this September with Gazprom to renew the Russian gas transit contract that expires Jan. 1.
    By comparison, one month ago Ukraine placed 1 billion worth of seven-year Eurobonds at 6.75%. Earlier this month, Ukrzaliznytsia placed $500 million worth of five year Eurobonds at 8.25%. Reflecting the dramatically improved borrowing environment, Naftogaz tried last November to borrow up to $1 billion at rates up to 10.9%. On Friday, Naftogaz placed the bonds below its initial benchmark yield of dollar Eurobonds at about 7.75% of euro Eurobonds at about 7.5%.
    Germany was the EU country hardest hit by contamination of oil flowing from Russia on the Druzhba pipeline, the Paris-based International Energy Association reports. Oil supplies to Germany fell by 110,000 barrels a day, or 6.5%. Supplies to Slovakia fell by 70,000 barrels a day and supplies to Poland fell by 30,000 barrels a day. The oil contamination problem started in mid-April, and initially was covered up by Russias Transneft. It comes as Russia seeks to portray itself as a reliable energy supplier to Germany and the EU, capable of meeting European gas import needs with two Russia-Germany pipelines, dropping Ukraine as a back up route.
    Citing corruption and poor performance at Odesa port, President Zelenskiy promised Saturday a major shake-up of port administration. He said smuggling costs the treasury $1 million a day and private control of the main port entrance blocks growth. As a result of corruption, Danish shipping giant Maersk stopped docking in Odesa last year. Two months ago, P & O Maritime Ukraines entry into the port was blocked for weeks, held up by what the unit of DP World Group called sabotage by port authorities. Over the last three years, Odesas cargo has dropped by 15%, falling behind that of nearby Chornomorsk and Pivdennii (Yuzhne). Compared to 2015, the ports net profit dropped 21-fold to $700,000 but salaries paid to port directors increased 14-fold, to $7.5 million.
    Zelenskiy suspended environmental tests on the quality of water used in ship ballast. He was responding to complaints by the European Business Association that state environmental inspectors were demanding bribes from ship captains on a weekly basis. When port officials said water quality will suffer, Zelenskiy replied that if port waters were swimmable, he would worry about it. By September, he said, his team will elaborate a corruption-proof system for testing ballast water. He asked Odesa Mayor Gennadiy Trukhanov to urgently resolve the issue of allocating land for free entry to the port, UNIAN reports.
    Oleksandr Vlasov, head of the State Fiscal Service, agreed to resign Saturdayafter Zelenskiy charged him with failing to fire last week the heads of the four customs offices bordering the EU. Vlasov wrote on Facebook that he suspended two officials and placed two others on leave due to the poor health of their close relatives. Instead of firing, Zelenskiy complained to Vlasov, you have placed people on leave.
    During the first half of this year, Ukraines ports handled 13.2% more cargothan during the same period last year. Of the 72 million tons, exports grew by 20%, to 55 million tons. Imports were flat at nearly 11 million tons. Transshipment dropped by 15% to just under 5 million tons. Highlights were: grain up 35%, to 24.5 million tons; ore up 27%, to 16.5 million tons; vegetable oil up 12.4%, to 3.2 million tons; and containers up 18.4%, to almost half a million TEU.
    The top four ports were: Pivdennii - 23.4 million tons, up 20.3%; Mykolaiv - 15.3 million tons, up 19.5%; Chornomorsk - 12.3 million tons, up 21.1%; and Odessa - 12.1 million tons, up 12.3%.
    Ukraines off the books shadow economy was 30% of the nations GDP last year, two percentage points below the 2017 level, asserts the Ministry of Economic Development and Trade. Growing cashless electronic transactions helped push the estimated shadow economy to its lowest level in a decade, the ministry reports. This year, Ukraines official GDP is to hit $150 billion.
    The hryvnia is undervalued by 61%, according to the latest Big Mac Indexmaintained by The Economist magazine. Based on the hamburger price, the real purchasing power rate of the currency should be about 10 hryvnia to dollar, not the current 26 hryvnia to the dollar.
    Sigma Bleyzer economist Edi Segura writes: This is just one indicator that the hryvnia could retain its FX stability for a while. A Big Mac is not representative of all thegoods in the country. Also, the exchange rate could be affected by events such as difficulties in servicing Ukraine's large foreign debt or an invasion by Russia.
    President Zelenskiy submitted to the Rada Friday a bill that would expand Ukraines lustration of Yanukovych government to ban all officials who served during the five-year Poroshenko government from serving in government for 10 years. The ban would include the top leadership of the National Bank of Ukraine, the Antimonopoly Committee of Ukraine, the State Property Fund, and the National Commission for Securities and the Stock Market. Within hours, ambassadors of the G7 nations Britain, Canada, France, Germany, Italy, Japan, and the US tweeted a joint protest: Electoral change and political rotation are the norm in democracies. Indiscriminate bans on all participants in executive and legislative governance are not.
    With Rada elections, this Sunday, bills not approved by the current Rada have to be resubmitted to the new Rada, probably in September. With the new lustration bill banning existing Rada members from serving again, the bill is expected to die without a vote. Timothy Ash writes from London: Idiotic move by Zelenskiy and his first big gaffe thus far since taking office.
    Zelenskiy promises to build a $115 million new runway and terminal for Dnipro, the nations laggard airport. A tender for the airport project is to be posted next week, according to the Presidents website. We will help you. We will allocate funds because we understand what the airport is for a millionaire city, he said on a visit Friday to Dnipro, referring to the citys population. The airport is controlled by Igor Kolomoisky, a media backer of the president and owner of UIA. Despite anemic passenger numbers -- 149,000 for the first half of 2019 Dnipro airport officials have refused to allow flights by Turkish Airlines and SkyUp, Ukraines discount airline.
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    • UKRAINE BUSINESS NEWS

      River cargo along the Dnipro jumped by 40% to 4.2 million during the first half of this year, compared to the same period last year, reports the Ukrainian Sea Ports Authority. With trains struggling to move the 2018bumper grain crop, river barges moved 1.7 million tons of grain, more than double last years tonnage. Construction materials, largely sand, and gravel, grew by 7.5% to 1.8 million tons. Metal products rose by 45% to 647,000 tons. With larger boats on the river, the number of cargo trips dropped by 23%, to 4,453.

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      Ukraines largest river shipper, Nibulon moved 3.5 million tons on the Dnipro and Southern Bug during the grain marketing year that ended June 30. Nibulon moves grain, metal, coal, fertilizers, construction materials, and Kherson watermelons. Joining a growing movement toward private rail wagons, Nibulon started last week to use a specially commissioned fleet of 20-grain hoppers. Each is capable of carrying 120 cubic meters of grain, 26% more than standard Ukrzaliznytsia cars.

      If good weather holds up through July, farmers will match last years record 35.5 million corn harvest,Tetyana Adamenko, head of agriculture at Ukraine's state weather forecasting center, tells Ukrinform. Last week, the US Department of Agriculture also raised its Ukraine corn crop forecast to 35 million tons. The USDA also raised its corn export forecast by 1 million tons to 28 million tons. In recent years, Ukraine has displaced the US as the top exporterof corn to China.

      For the early crops, farmers have already harvested about half of the land planted in wheat, barley, and peas. Already 10 million tons of wheat have been harvested.With Ukraines grain harvest expected to hit 100 million tons by the mid-2020s, major investment is needed to upgrade the creaking state railroad, Worldgrain.com reports from the recent Black Sea Grain Conference in a lengthy article headlined: Ukraines meteoric rise in grain

      Although 20,000-grain hoppers half of the national fleet are privately owned, shippers have to rely on state railroads Soviet-era locomotives.Three have burned since May. Sergey Feofilov, director general of UkrAgroConsult, says Ukrzaliznytsia prioritizes the nations 50 to 70 elevators that are capable of filling a 54-car block train a single commodity train that goes from one station to one port. Owners of hundreds of other elevators smaller operators are at the mercy of train schedules that are often ignored.

      Major investment is needed to modernize railroad freight stations at Ukraines big Black Sea ports, writes World grain, a US-based news site.Port stations date from the Soviet era, a time when they were oriented to handling imports.

      Naftogaz Friday Eurobond placement of the equivalent of $1 billion echoed Monday through the analyst world:

      Concorde Capitals Alexander Paraschiy writes: The amount raised is more than the company was expected to raise from Eurobond placement...All in all, we consider the placement as being successful.

      Dragon notes that the Naftogaz spreads were wider from the sovereign than the Ukrzalinytsia placement of two weeks ago. Dragon writes: Uncertainty about the planned unbundling of the domestic gas transit system and unclear outlook for Russian gas transit from 2020 onwards probably affected investor sentiment.

      Some bond money is to go for filling Ukraines natural gas storage reservoirs in advance of gas transit talks with Russia in September. On Monday, Naftogaz said the company has stored 14.5 billion cubic meters, almost three-quarters of the way toward its goal of 20 bcm. Last fall, Ukraine stored only 16.9 bcm.

      Ukraine can cut household gas consumption in half, to 9 bcm, by winterizing Soviet-era apartment blocks, Gennadiy Zubko, Regional Development, Construction, and Housing minister, tells Novoe Vremya. To date, 650,000 homeowners have taken advantage of the governments warm loans program to invest in modern windows, doors, radiators and gas boilers. Last week, Zubko signed an agreement with the World Banks International Finance Corporation to extend the warm loans to apartment buildings managed by condominium associations.

      Ukraine needs to stop the smuggling of gasoline and diesel and attract investment into two to three efficient refineries Edward C. Chow, a Chevron veteran, writes for the U.S.-Ukraine Foundation. In percentage terms, Ukraine today relies more on imported oil than on imported gas, Chow writes as Ukraines first imported load of American oil flows by pipeline from Odesa to the nations lone working refinery, in Kremenchuk. Most imported crude oil and refined products continue to flow from Russia.

      Because of smuggling, there has been no investment in Ukrainian refineries in the last 15 years for much-needed modernization, he writes from Washington. The remaining idle refineries mainly serve as terminals for smuggled products...the answer here, as in gas and electricity, is to modernize the way business is done in oil so that Ukraine can integrate intothe larger European market.

      Due to a delay in receiving new jets, Wizz Air will cut 24 flights a week from Kyiv to slightly more than half of its 30 EU destinations. From Aug. 3 to 20, frequencies will be reduced to 17 EU cities, nine of them in Germany. For its Ukraine routes this year, Wizz Air has allotted 2.6 million seats. Wizz is considering re-opening its Wizz Air Ukraine unit, closed in 2015.

      In a sign of economic confidence, Ukraines football league is expanding back to 16 teams, the number it had until 2014. Ukrainian Premier League had 16 teams in 2013-14 but lost two based in Crimea after the Russia annexation. Ukraines Football Federation says the coming 2019-20season will be the last with 12 teams. The league will expand to 14 for 2020-21and 16 for 2020-22.

      At a site near the US Embassy, AccorHotels will open next year a 261-room combo hotel a 156-room Ibis and a 105-room Adagio aparthotel. The new hotel will be at 55 Peremohy, across the avenue from Beresteiska red line metro station and a 15-minute walk through Nyvky Park from the embassy. In 2021, Accor plans to open a 58-unit Swissotel Living aparthotel at Liuteranska 14, a short walk from Kreschatyk, Andriy Davydenko, general manager of AccorHotels Ukraine, tells the UBN. Accor already operates two 3-star hotels in Kyiv: Ibis Kiev City Center and Ibis Kyiv Railway Station.
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      • UKRAINE BUSINESS NEWS
        Faced with strong foreign demand for Ukraines hryvnia bonds, the Finance Ministry cut yields on its four short term bonds by 20 to 26 basis points. Faced with UAH 4.62 billion in bids at its weekly auction Tuesday, the Ministry only filled orders for UAH 2 billion, or 43%. Cut-off yields ranged from 17% for three-month securities to 17.74% for 2-year securities.
        For foreign currency bond sales, the government managed to push yields down 50 basis points. One-year bonds settled for 6.5%. Two-year bonds settled for 7%. In coming days, the central bank is expected to lower Ukraines prime interest rate 50 basis points from its current level of 17.5%.
        Gazprom closed the Russia-Germany Nord Stream gas pipeline Tuesday for two weeks of annual maintenance, rerouting gas through Ukraine. Gazprom has said that after the second Nord Stream pipeline opens, possibly early next year, it no longer will need Ukraine as a back up route. Gazprom also announced Tuesday that two thirds of Nord Stream 2 has been built. Ukraines Naftogaz issued a statement noting that Nord Stream 1 was closed several times last year. It asserted: A rare form of aggressive rust has started to form in Gazprom gas pipelines.
        President Zelenskiy called for higher economic growth when he addressed the Economic Club of Canada in Toronto on July 3: Growth of 2-3 percent a year is not satisfactory. We need a minimum of 5-7 percent per year. We know how to do that, which is why we are preparing for very serious structural reforms to increase the speed of growth....The potential influx of resources to the state budget of Ukraine from eradicating smuggling and corruption and legalizing the shadow economy is estimated by our team as high as $10 billion a year. We need this money to build up-to-date infrastructure for honest business, to improve the lives of Ukrainians and to defend our land from enemies.
        About $40 million in real estate once owned by now-defunct banks goes for auction on ProZorro, with bids due July 29, reports the State Deposit Guarantee Fund. One eye-catching property is the former headquarters of Kyivska Rus Bank, standing at 11a Khorvya St., Podil, behind Bursa, the new boutique hotel. The Fund will also auction nonperforming unsecured loans with a face value of $557 million. The papers usually go for cents on the dollar.
        The extradition of Dmytro Firtash from Austria to the US has been suspended over a motion lodged by his defense lawyers for a new hearing with the Land Court of Vienna, reports Austria Presse Agentur. The judge granted the motion. Now Firtash can be extradited only after the court adopts a decision, Austrias News Agency said.
        Starting Jan. 1, new and rebuilt garages and parking lots must have electric chargers at 5% of parking spaces. In a further step, the government is mulling a plan to make mandatory the installation of electric chargers at all new and rebuilt gas stations, according to a Facebook post by Lev Partshaladze, deputy minister of Regional Development, Construction and Housing and Communal Services. During the first half of this year, sales of electric vehicles, overwhelmingly cars, increased by 58% y-o-y, to 3,185.
        A ship from Spain, the Gigante, and a ship from Portugal, the Jose Duarte, are joining a project to dredge Mariupol. The port and its 5 km of access channels are to be dredged to a uniform depth of eight meters. In the last 10 days, the Gigante and another dredger, the Seal Sands, started to dredge. By the end of this year, 2 million cubic meters of silt is to removed from Ukraines main port on the Azov.
        While this multinational fleet is dredging, President Zelenskiy plans to hold in Mariupol an international forum to attract foreign investment to the region.Donbas restoration will cost over 10 billion, he told the Ukraine Reform Conference in Toronto two weeks ago. We will hold a related forum in Mariupol in fall. Foreign investors who wish to finance infrastructural and humanitarian projects in Donbas are invited.
        International cruise ship are returning to Ukraine, Raivis Veckagans, CEO of the Ukrainian Sea Ports Authority, tells Interfax-Ukraine. Last year, the Danube delta port of Ust-Dunaisk received 36 passenger ship calls, up 25% from 2017. Further upriver, Izmail inaugurated this spring a new European standard river terminal. To attract foreign tourists, the city now is renovating its airport. In Odesa, the first mega cruise ship in years is to dock in October. German tour operator Phoenix Reisen plans to bring its 205-meter long ship built to carry 1,278 passengers and crew.
        A new Carpathian mountain hotel in the historic Ivano-Frankivsk resort town of Yaremche is to be privatized Aug. 13 with bids starting at $2.5 million. Located on a 2.7-hectare land plot, the Prykarpattia is 96% built, reports Vitaliy Trubov, acting head of the State Property Fund.
        The interior ministers of Israel and Ukraine signed a travel agreement in Kyiv Thursday designed to ease travel between the two countries, Chabal reports in a posting, Chabad Orchestrates Historic Israel, Ukraine Travel Agreement.
        The agreement comes after hundreds of Ukrainians were detained at Tel Avivs Ben Gurion Airport as potential visa overstayers and after rowdy Orthodox pilgrims created problems during the annual Rosh Hashanah pilgrimage to Uman.
        Last year, 300,000 tourists traveled from Israel to Ukraine and 170,000 tourists traveled from Ukraine to Israel, Yoel Leon, Israels ambassador to Ukraine, said during the ceremony which was attended by President Zelenskiy and Gennadiy Bogolyubov, Igor Kolmoiskys business partner at Privat Group. Privat controls UIA, which flies pilgrims from Tel Aviv to Vinnytsia and to Kyiv Boryspil. Ukraines Interior Minister Arsen Avakov promised to have sufficient police officers on hand to control the crowds at Uman and at the airports.
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        • UKRAINE BUSINESS NEWS
          Flush with $500 million raised two weeks ago in Eurobonds, Ukrainian Railways is stepping up talks with three foreign manufacturers to buy 200 new electric locomotives by 2025. Contenders are Frances Alstom, Chinas CRRC and Canadas Bombardier, Anton Sabolevsky, director of strategic development, tells Magistral, the state companys inhouse publication. The three companies already make locomotives sized to run on Ukraines Soviet-era 1520 mm track gauge.
          Japans Toshiba is a leading candidate to supply the railroad with shunting locomotives, Sabolevsky tells Magistral. About one-third of the railroads 3,566 locomotives are shunters small diesel locomotives designed for assembling trains in rail yards. UZ also is allocating $175 million to repair and rebuild many of the railroads 1,258 shunters.
          Ukrzaliznytsia is buying 10 new passenger cars to turn the new Kyiv-Mariupol night train into a daily service. The train connects the capital with the Azov in less than 15 hours, three hours faster than earlier trains. During the first half of this year, Kyiv-Mariupol train was the most unprofitable in UZs network, losing $3.8 million. Prime Minister Groysman at a government meeting on Wednesday defended the rail link as a key to easing Mariupols isolation.
          In a mirror reverse of Ukraines 13% increase in shipping cargo, Mariupol handled 13% less cargo during the first half of the year, compared to one year ago. The fall to 2.5 million tons is largely due to Russian coast guard harassment of 150 Mariupol-bound ships, the port director says. By comparison, Mariupol port, the main port for Donetsk region, handled 14.6 million tons in 2013, the last pre-war year.
          To turn around the cargo decline, the state railroad offers a 20% reduction on freight rates for metals and grain to Mariupol. The rate discounts are part of a $40 million port aid project that includes dredging, a large new grain silo, and EU loans for rebuilding road and rail links.
          Mariupols Azov Ship Repair Plant has shipped 410 tons of fabricated steel parts for an oil tanker superstructure to a Croatian shipyard in Trogir, on the Adriatic. Shipping was delayed as the Mariupol company had difficulty finding a company willing to move the cargo through the Russia-controlled Kerch Strait, reports theCenter for Transportation Strategies.
          Mariupol is to receive this fall 64 low-floor MAZ buses, partly paid with a 12.5 million low-interest loan from the World Banks International Finance Corporation. Separately, on Aug. 7 bids are to be opened for an EBRD tender to supply Mariupol with 72 new trolleybuses. Since the war, Mariupols population surpassed the half-million mark, swollen by refugees from the nearby Donetsk Peoples Republic.
          Cautious optimism reigns among Ukrainian company executives surveyed in the second quarter by the National Bank of Ukraine. Inflation expectations for the next 12 months dropped to 7.7%, down from 9% in the second quarter. On their companys financial situation, 29.5% of executives expect improvement, 6.6% expect deterioration and the rest are neutral. On sales, 40% forecast growth for the next 12 months, 10% forecast declines and 50% are neutral.
          The share of companies planning to raise loans over the next 12 months increased to 41.5%, from 38.2%. On wages, 65% predict continued salary hikes, down slightly from 74% during the first quarter. The most optimistic enterprises are in construction, agriculture, processing industry and trade. One third of companies expect export growth.
          As Ukraine moves toward a cashless economy, the volume of cash in circulation dropped by 1.6% in the first half of the year, to UAH 394 billion, or $15.3 billion. This trend is associated with a stable trend of the growing popularity of cashless payments," reports the National Bank of Ukraine. Although banknotes account for 99.4% of the volume of cash in circulation, there almost five times as many coins in circulation as bills.
          With the Nord Stream pipeline shut for repairs, Russia is sending an extra 60 million cubic meters of gas daily through Ukraine, Ukrtransgaz reports. Andriy Kobolyev, Naftogaz CEO, says this emergency situation should make clear to Europe why Ukraine is key to guaranting Russian gas supplies through the 2020s. He writes on Facebook: "This is another reason for European consumers to weigh well what is more profitable: to use the reliable ground infrastructure of the Ukrainian gas transport system, or to invest in building underwater gas pipelines that are difficult and expensive to repair, do not have adequate redundancy and are completely dependent on the political whims of the Kremlin."
          AGROPORT, a 3-day agricultural fair for Southern Ukraine, opens tday at Kherson airport. Running through Saturday, the fair will focus on river transportation, reviving irrigation, wine production, energy-efficient greenhouses, farm tourism, and food processing. A similar fair for Eastern Ukraine will be held Oct. 10-12 at Kharkiv airport.
          A meeting with Japanese business representatives gave presidential advisor Mikhail Fedorov a chance to spell out the Zelenskiy governments digital ambitions through 2024: Electronic services, improvement of the work of public registries, the e-residency project should make doing business in Ukraine easy and transparent. We are very interested in attracting investment and advanced innovations of Japan to develop joint projects in the field of the Internet of Things, Industry 4.0, smart cities, electronic identification, development of R & D centers and others.
          Russias ban on trains traveling between Ukraine and Central Asia has cut cargo by 90% on this east-west route, Viktor Dovhan, deputy infrastructure minister tells Interfax-Ukraine. Although two ferries leave Chornomorsk daily loaded with up 200 freight cars bound for Central Asia, China has yet to take seriously the plan to run a branch of the New Silk Road through Ukraine. He said: They use it to negotiate with the Russians, appeal on the reduction of their tariffs.
          Noting that Britain has five times as many movie screens per capita as Ukraine,Screen Daily website reports: Ukraines growth potential is huge, and more screens are gradually being built as the local film industry develops further. About 28 million movie tickets were sold in 2018 and 2017, a 44% rebound from 2014, the article says, citing Artem Vakalyuk, head of analytics at Media Resources Management.
          A new rating of 50 countries for the safety of women traveling alone puts Ukraine on a par with the United States -- tied for 20th place. According to the Womens Danger Index compiled by the Hawaii-based Asher and Lyric travel site, the three most dangerous countries are: South Africa (worst), Brazil and Russia. The safest countries are: Ireland, Singapore and Spain (best).
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          • UKRAINE BUSINESS NEWS
            Ukraines central bank cut its main interest rate by half a percentage point to 17% on Thursday, citing falling inflation trend. After inflation fell to 9% in June, the central bank forecasts that inflation will hit 6.3% in December. The National Bank of Ukraine continues its cycle of monetary-policy easing, as inflation is declining toward the target of 5%, Governor Yakiv Smoliy told journalists Thursday in Kyiv. Referring to the overwhelming lead of President Zelenskiys party in Sundays Rada elections, he added: The results of parliamentary elections are predictable. The risk of uncertainty is gradually moving to the background.

            With Europes highest interest rate, Ukraines central bank says its baseline scenario is for the main interest rate to fall to 16% by the end of this year, to 11% by the end of next year, and to 8% by the end of 2021. Interest rates have been in double digits since Russia attacked Ukraine in 2014.

            The central bank also raised its economic growth forecast for this year to 3%, from 2.5%. The bank cites strong domestic demand, strong commodity prices and a bumper grain harvest matching last years 70 million tons, a record. Last week, Dragon Capital upgraded its GNP growth forecast for this year to 3.2%, from 2.5%. By comparison, the IMF on Wednesday downgraded its 2019 economic growth forecast for Russia to 1.2%.

            Ukraine could receive $6 billion in loans from the IMF through 2021, Dmitry Sologub, deputy central bank governor, predicted to reporters Thursday. If a new 3-year assistance program is worked out in September, Ukraine would receive $2 billion a year, starting this fall. Also this fall, he predicted, Ukraine could return to international markets to place a $1 billion Eurobond. One month ago, the Finance Ministry placed 1 billion worth of 7-year Eurobonds at 6.75%.

            Foreigners increased investments in Ukrainian government debt bonds by 3% on Tuesday to UAH 67 billion, or $2.6 billion. Although foreign investment in the hryvnia bonds has increased 10-fold since the start of this year, the even spread of maturities and the low portion of total holdings 8.8% -- means that this foreign investment is not a threat to Ukraines financial stability, says Sologub, the deputy central bank governor.

            Finance Minister Oksana Markarova wrote Facebook of the interest rate cut: Considering the actual inflation rate, the Ministry of Finance, of course, secretly hoped for a greater reduction in the rate, because the discount rate directly affects the cost of placing the Ministry of Finance bonds in hryvnia, but we are glad that the NBU has kept the trend towards decrease!

            Pro-Western parties will control Ukraines parliament, according to final polls prior to Sundays voting. Released Thursday, the last day for publishing polls, Zelenskiys Servant of the People won the support of 49.5% of committed voters interviewed by Ratings Group and 52% of voters polled by the Kyiv International Institute of Sociology. Other pro-Western parties expected to cross the 5% threshold and enter parliament are: former President Poroshenkos European Solidarity, ex-Prime Minister Yulia Tymoshenkos Batkivshchyna and singer Svyatoslav Vakarchuks Voice, or Golos.

            The pro-Russian vote once 30-40% of ballots cast in Ukraine, is polling 10-12%. Bolstering Zelenskiys image as a leader who can make peace with Russia, President Putin took a phone call from Zelenskiy last week. On Thursday, Russia and Ukraine agreed to swap 277 war prisoners and agreed to a ceasefire along the 300 km front line. To promote commerce across the line, Ukraine announced that it is shifting to a policy of allowing all goods that are not specifically prohibited.

            Zelenskiy has a 58% approval rating and a 19% disapproval rating, a position that is fairly constant across the nation. For the first time since the Rating Group started asking the question, in 2011, more Ukrainians say the country is going in the right direction 41% -- than those saying it is going in the wrong direction 37%.

            David Nietlispach, a fund manager at Pala Asset Management, a Switzerland-based investment company focusing on emerging market bonds, tells Reuters: Zelenskiy is saying the right things, so if he gets the majority in parliament he will have the power to do things...Expectations in Ukraine are always very low, normally nothing changes really. But this time he says he wants to change things, he has the power to change things so there will be no excuse if he gets the majority in parliament.

            President Zelenskiy has asked anti-corruption authorities to investigate why MHP, Ukraines largest poultry producer, received nearly $100 million in subsidies in 2017-2018, then paid shareholders $80 million in dividends in 2019. In fact, it does not need state support, having excess profit..It annually pays huge dividends to its shareholders, Zelenskiy said Thursday at a meeting of the National Council on Anti-Corruption Policy. In 2018, MHPs net income decreased by 44% - to $128 million. On Wednesday, the company said its Q2 poultry production rose 17% y-o-y, and it chicken meat exports rose 39%, to nearly 100,000 tons.

            Preparing for a deep purge of the Customs Service, Maxim Nefyodov asks business representatives to email to him the names and titles of corrupt customs officials. I will be grateful for this and it will help in personnel decisions. You can even give it anonymously, he told a European Business Association meeting that at least once broke into applause. This year, the Customs Service is being created from the Fiscal Service a bureaucratic migration that empowers Nefyodov to leave behind officials suspected of corruption. With this root and branch shakeup, he said the EU and USAID are interested in resuming program suspended 2-3 years ago due to corruption and incompetence. Two years ago, the EU suspended a 29 million project designed to modernize Ukraines checkpoints on its western borders with Romania, Hungary, Slovakia, and Poland.

            Ethnic Ukrainians "from friendly powers" willing to help Ukraine's economic development will be eligible for fast-track passports under a proposal made Thursday by President Zelenskiy. Two weeks ago, Canadas influential Ukrainian diaspora gave the new president a warm welcome in Toronto. But the new passport policy was accelerated by a Russian decree on Wednesday that all Ukrainian residents of Donetsk and Luhansk in 2014 are now eligible for Russian passports. Both In a thinly veiled swipe at Russia, Zelenskiy said that people who suffer from human rights violations and constraints on freedom in their home countries would also be eligible for Ukrainian passports. Russians and Ukrainians have declining populations.

            With passengers filling Ukrzaliznytsias new train between Kyiv and the Baltics, an Estonian bus company, Baltic Shuttle, is entering the north-south market. Traveling Tallinn - Parnu - Vilnius Kyiv, the shuttle is expected to take 30 hours to make the 2,450 km trip. Tickets are to around 60.


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            • UKRAINE BUSINESS NEWS
              Flush with a strong showing in Sundays Rada vote, President Zelenskiy said he would choose as Prime Minister a professional economist who hasnt held that job or led a party. That fits the description of former Finance Minister Oleksandr Danylyuk, who has expressed interest in the post. Zelenskiy also said he would reach out to Svyatoslav Vakarchuk, the countrys most popular rock singer, to form a pro-Western government for Ukraine in August.
              In Sundays vote, Zelenskiys Servant of the People Party won 44% of a national exit poll and 41.5% of initial returns. Vakarchuks Golos, of Voice, the party won 6% of the exit poll. The pro-Russian Opposition Platform - For Life party came in second place with 12% of initial returns and a similar amount in the exit poll. Ukraines pro-Russian fell to one third its historic levels, partly due to the loss of pro-Russia voters in Crimea and in Russia-controlled areas of Donetsk and Luhansk. In the exit poll, former President Poroshenkos European Solidarity party won 9%, and Yulia Tymoshenkos Fatherland Party won 8%.
              From London, Timothy Ash writes: Encouraging comments from Zelenskiy that he wants a professional economist as Prime Minister, who has not held that job before but is respected in the West - Danylyuk, [Aivaras] Abromavicius or [Vladyslav] Rashkovan fit that bill... A victory for reform - close to three-quarters of voters backed pro-Western, pro-reform parties.
              With 10% of the vote counted by midnight, the composition of the Rada should be known by the end of today. Of the 424 seats, 225 members are elected on party lists and 199 in single-member districts. Voters cast ballots for one of each category.
              Detectives of the National Anti-Corruption Bureau of Ukraine searched the headquarters of ICU investment bank on Friday as part of an investigation into the Rotterdam + formula for pricing coal. ICU posted on its website that it had earlier complied with all requests for information and denounced the search as an attempt to exert pressure on it, which has an obvious political context. The bank is seen as affiliated to former President Poroshenko. Valeria Gontareva was chairwoman of ICU until June 2014, when she became governor of the National Bank of Ukraine, a post she held for three years.
              Following Zelenskiys complaints last week that Ukraines largest steel mill is polluting air in Kryvyi Rih, the presidents home town, agents of the Ukrainian Security Service, or SBU, searched the company headquarters of ArcelorMittal on Saturday. Alexander Ivanov, the acting head of the mill, said the company has invested $235 million in air pollutions controls. Mittal has invested $9 billion in the plant complex, Ukraine's largest integrated steel company, since buying it in 2005. The companys production capacity is: 6 million tons of rolled steel, 6.7 million tons of pig iron, and 7 million tons of steel.
              Andy Hunder, president of the American Chamber of Commerce of Ukraine, comments to the UBN: Discouraging news from Ukraine's top investor that has invested over $9 billion in Ukraine. Investors will be concerned about selective justice. Ukraine is sending the wrong message to the investment community at a time when business is watching closely the changes taking place.
              By the end of June, electricity generation from renewables hits 585 million kwh almost three times the level of one year earlier. Renewables share of national electricity production hit 5%, compared to 1.8% one year earlier. Excluding large scale hydro, Ukraines installed capacity of renewable energy is: solar -- 2,640 MW; wind - 777 MW; biogas - 66.4 MW; and biomass -- 51.3 MW.
              Working on early grains, farmers have harvested 21.6 million tons or almost one-third of the total forecast 2019 crop of 70 million tons. Farmers have threshed 6.2 million hectares of grains or 63% of the early sown area, reports the Agriculture Ministry.
              To speed up construction of major highways, Zelenskiy proposes opening tenders to foreign companies. Shall we will make a plan in the near future to give the construction of priority roads to leading Western companies, he asked Friday at a road infrastructure meeting in Kyiv. Also on Friday, Zelenskiy invited a Chinese delegation to build a toll highway around Kyiv. Earlier, Slawomir Novak, head of Ukravtodor, said that this fall the highway agency will hold a competition for Ukraines first road concession a 70 km toll road between Lviv and Krakovets, on the Polish border.
              Construction of a new cargo terminal for Kyiv Boryspil is the subject of a new tender by the Infrastructure Ministry. By Aug. 19, applications are to be submitted for building and operating the cargo terminal for 25 years. Last year, airport officials failed to act in face of rapidly rising air cargo traffic and were forced to suspend air cargo service during the Christmas-New Years holiday. Since a new terminal will not be built in time, airport officials plan to use temporary measures to cope with th annual year-end rush.
              The Israel-Ukraine free trade pact ratified last week by the Rada will stimulate Israeli investment in Ukraine, Natalia Mikolska, Ukraines former chief trade negotiator, tells UNIAN. The agreement will give the green light for cooperation between Ukrainian and Israeli enterprises in many areas: high-tech, engineering, processing equipment for the food industry, she says, noting that dozens of Israeli IT companies already work in Ukraine. This fall, Israels Knesset is expected to ratify the pact. Trade expert predicts that implementation will fuel a 10% increase in bilateral trade every year.
              Construction of a new, free access road to Odesa port is the goal of a new task force composed of Ukraines Sea Ports Authority and the City Council. After Odesa banned big trucks from city streets, Euroterminal presented itself as the only road alternatives. However, this private company charges $17 per truck, a levy that hikes logistics costs and contributes to the ports comparative decline.
              Peugeot Citroen Ukraine has opened six dealerships in Ukraine this year: Dnipro, Kharkiv, Khmelnytskyi Kharkiv, Lviv, and Zaporizhia. The French company plans to increase its sales five times this year, to 1,100 new cars and commercial vehicles.
              Although Kyivs hotel occupancy rate only inched up by 1.6% in the last year, to 53%, STR, the global hotel industry research organization, reports that the number of hotel rooms in the construction pipeline represents a 10% increase. In Lviv, the increase is 9%.
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              • UKRAINE BUSINESS NEWS
                President Zelenskiy appears to have won 60% of the seats in the Rada, making him Ukraines first-post independence leader to enjoy an outright parliamentary majority. After his Servant of the People party won 43% of Sundays vote, candidates affiliated with the party did surprisingly well in the 199 single-seat districts.
                This should give the new President unprecedented power to pursue his free-market, modernizing agenda creating an independent court system, cutting regulations, automating processes to cut corruption and auctioning off many of Ukraines 3,000 state companies. Beyond his immediate party supporters, his pro-Western outlook is shared two-thirds of the voters: Servant of the People -- 43%; Poroshenkos European Solidarity - 8%; Tymoshenkos Fatherland 8%; and Vaharchuks Voice 6%. Among the five parties that will enter parliament, the lone pro-Russian party, Opposition Platform won 12% of votes.
                Starting Friday and continuing on Monday, markets welcomed the prospect of Zelenskiy winning control of parliament. Ukraines 2015 foreign debt warrants rallied 2.5 points reaching an all-time high, near 78. Eurobonds have remained strong. Timothy Ash writes from London: Zelenskiy and Servant of the People represent liberal, market, democratic ideals.
                To combat corporate raiding, Zelenskiy signed a decree Monday to protect property rights by ordering upgrades in software used by notaries. This would involve setting up a trigger system for operations with high risks of fraud, the capture of photo and video images of people using notaries and improved password protection. The question of raiding has become one of the most painful for business, says Oleksiy Goncharuk, deputy head of presidential administration. According to various estimates, over the past six years, more than 3,000 [company thefts] have taken place.
                Sundays electoral earthquake overturned two long-serving businessmen-politicians
                Kostyantyn Zhevago, CEO and majority owner of Ukraines largest iron ore pellet exporter Ferrexpo (FXPO LN), lost to Oleksiy Movchan, a political neophyte and member The Peoples Servant party. Concorde Capitals Dmytro Khoroshun dismisses the financial impact of the loss of Zhevago, an MP since 1998, writing: Ferrexpos fundamentals remain strong. We expect Ferrexpos 1H19 EBITDA, which will be reported on Aug. 2, to have reached $350-375 million, or a 50-60% yoy jump.
                Separately, Chinas plans to buy Motor Sich aircraft engine factory may have been dashed by the election defeat of Vyacheslav Boguslayev, the long-serving CEO. Boguslayev attempted last year to sell much of the Zaporizhia-based company to Skyrizon, also known as Beijing Tianjiao Aviation Industry Investment Company. However, Ukraines SBU security service stepped in an stopped the sale. Last week, Beijings Global Times reports Ukraines Antimonopoly Committee was to rule on the sale on Monday. After Zaporizhia turned against Boguslayev, Rada member since 2006, the Committee may decide that local opinion is against the sale.
                Appealing to foreign investors, Zelenskiy says in a promotional video: My vision is to have Ukraine as one of the fastest-growing emerging economies in Europe. Speaking mildly accented English, the actor-turned-president says his team wants to inject economic growth into the countrys DNA. We need to change a lot here, fire nonprofessionals and hire professional ones, deregulate industries, simplify rules, improve the infrastructure.
                Officials at ArcelorMittal Kryvyi Rih, Ukraines largest steelmaker, say that at the end of a 17-hour search on Sunday, state security officers confiscated machine parts, paralyzing a $150 million investment in a continuous casting machine. Anna Gatilova, Arcelor press secretary, wrote Monday: ArcelorMittal Kryvyi Rih considers the recent events...a serious signal to the business community about the real situation with the protection of business in Ukraine...The company's management personally appeals to the President of Ukraine and the international community to intervene and stop unprecedented pressure on a foreign investor.
                Ivan Bakanov, acting head of the state security agency, told reporters Monday: It was not pressuring for sure. The raids started after Zelenskiy visited his home town of Kryvyi Rih two weeks ago and complained that the steel mill was polluting the air.
                Cargo and port revenue to Ukraines Azov ports have been cut in half since the war with Russia started five years ago, reports Raivis Veckagans, head of the Sea Ports Autority. The two ports, Berdyansk and Mariupol have lost $230 million in revenue, he said. Veckagans did not estimate losses by shippers and exporters due to delay. Veckagans said that in the face of international pressure, Russia has reduced harassment this year of Ukrainian shipping.
                To make the Azov ports more attractive to shippers, Veckagans says his agency is investing $40 million over three years to dredge the two ports, to re-build a berth in Mariupol and to build a new grain terminal in Mariupol. Mariupol port authorities say that Russias new bridge across the Kerch Strait is so low that it blocks one-third of the ships that historically docked at the port, Ukraines largest on the Azov.
                Kherson port, the closest Black Sea alternative to the Azov, handled 31% more cargo during the first half of this year compared to the same period last year. Grain was up 32%, to 461,920 tons. Ferrous metals were up 21%, to 225,390 tons.
                South Koreas Posco International inaugurated in Mykolaiv port last week a terminal capable of storing 140,000 tons of grain at one time. Working with Ukraines Orexim Group,Posco executives discussed with port administration officials the possibility of investing in three other berths. Posco officials say the port investments in Ukraine contribute to South Koreas food security.
                With average crop yields jumping by 11% y-o-y, Ukraines crop farming output grew 19% y-o-y in the first half of this year, compared to the first half of 2018, reports the State Statistics Service. The surge in yields are attributed to good weather and to an injection of capital into the countryside to due last years record 70 million ton grain crop. As of Monday, 23.5 million tons of early grains have been harvested.
                Ukraines food exports to the EU were up 50% in May, compared to May 2018, reports the European Commission. Exporting 6.5 billion worth of food to the EU during the 12 months ending in May, Ukraine is enjoying far faster growth rate than the three other major suppliers, the United States, Brazil, and China.
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                • UKRAINE BUSINESS NEWS
                  In a vote of confidence in a Zelenskiy government, investors bid Ukraines GDP warrants up to 81.5 points on Tuesday up 30% since late May. Half of that jump was in the last two weeks -- before and after Zelenskiys sweep of Sundays parliamentary vote. Dating from the 2015 debt reconversion deal, these warrants make payouts indexed to economic growth over 3%, starting this year.
                  With $3.6 billion of the warrants designed to pay out through 2040, observers now predict the Finance Ministry will start buying them back. Timothy Ash writes from London: One of the issues for the new government to sort out will be GDP warrants, which represent a huge contingent liability on the state...they will eventually have to be dealt with in some liability management style exercise.
                  Also from London, Gabriele Foa, a money manager for Algebris Investments, says Ukraines forecast 3% GDP growth could trigger payments. The market is getting excited for early payments or a bond exchange, he tells Bloomberg. The warrants looked favorable already at the time of issuance, but 2019 growth seems to be turning better than expected and the incoming government may support the idea of a buyback.
                  Facing strong investor demand, the Finance Ministry again lowered yields in its weekly government bond auction. Deciding to sacrifice one-third of demand, the Ministry lowered all yields, by a range of 20 to 75 basis points, compared to levels of one week earlier. For investors, the flavor of the week is 3-year bonds. Demand hit UAH 5.5 billion four times more than last weeks level. Overall, the hryvnia equivalent of $271 million was sold, roughly comparable with the two other auctions this month. On the secondary market, Ukraines sovereign Eurobonds continued Tuesday to ride a post-election rally.
                  Election tally for Rinat Akhmetov, Ukraines richest man: one down, two up.Boris Kolesnikov, a partner of a magnate, was not reelected. Two other allies of Akhmetov, Vadim Novinsky, a co-owner of Metinvest, METINV, and Musa Magomedov, CEO of Metinvests Avdiyivka Coke Plant, were elected.
                  Concorde Capitals James Hydzik writes: The losses among businessmen are among the largest surprises in this electoral cycle. They also point to the tectonic shift in Ukrainian politics over the last decade, when the loss of a seat by a top businessman would have been inconceivable.
                  Zelenskiys twin win -- presidency and parliament is catching the attention of the wider world. Here is some editorial reaction:
                  Ukraines Reform Opportunity headlines a[http:///www.wsj.com/articles/ukraine...y-11563838089]Wall Street Journal editorial. The new political elite will have to move quickly to improve the rule of law, privatize more state-owned enterprises, and liberalize property law. Corruption retards growth more than the war does. One challenge is that few in Mr. Zelenskys party have much policy experience. He may prefer ruling alone, but the country would be better off with veteran reformers and the Voice party, another insurgent political force, helping to run the government. Mr. Putin fears nothing more than a strong, democratic and prosperous Ukraine as a model for his own citizens. The U.S. should keep standing with the country as its unconventional leader tries to make good on his promises.
                  A Comedian's Triumph Is a Test for Benevolent Populism asserts a Bloomberg Opinion piece by Leonid Bershidsky. Ukraine's new president has a better chance of reviving the country's economy than ending the war with Russia. Bershidsky, a former editor of Forbes.ua, writes approvingly of Vladyslav Rashkovan as a Zelenskiy Prime Minister, citing his essay [nv.ua/opinion/zelenskiy-i-mvf-novosti-ukrainy-ekonomika-50033042.html]Saturday in Novoe Vremya. Rashkovan writes: Everything private business can do should be left to private business. The state should not get in the way, no matter how much it wants to help. Bershidsky: That, plus a focus on increasing labor productivity and stimulating domestic demand, should lift Ukraines growth to between 4% and 7% a year, according to Rashkovan. His libertarian agenda should appeal to Zelenskiy, who has often spoken disparagingly of government regulation, Ukrainian-style.
                  The Risks of Radical Renewal in Ukraine, the New York Times frets in an opinion piece by Una Hajdari. The headline writer reminds: Expectations were also high too high after the 2014 revolution.
                  Summer shopping is off to a strong start with retail turnover suging 14% y-o-y in June, reports the State Statistics Service. The sales jump follows a 28% percent jump in consumer confidence in April and May, to 82.4 points, the pre-crisis levels of 2012-2013. Overall, retail trade grew by 10% y-o-y in inflation-adjusted terms during the first half of this year, to about $20 billion. Consumer demand is a big driver of this years expected 3% GDP growth, fueled by 10% y-o-y real growth in salaries and strong flows of wage remittances from Ukrainians working in the EU.
                  Industrial production grew by 0.5% y-o-y during the first half of this year. After increases in March-April-May, production fell by 2.3% y-o-y in June, reports the State Statistics Service. By contrast, agricultural production grew by 5.8% during the first half. Last year, industrial production grew by 1.1% over 2017.
                  ArcelorMittals Ukrainian steel mill will lose $1 million this month after a key piece of steelmaking equipment was seized Sunday during a security service investigation, the plants acting director Oleksandr Ivanov told reporters in Kyiv Tuesday. Ukraines security service, or SBU, said it discovered radiation exceeding safe levels in a new piece of equipment at the plant. The plant director said the investigation was triggered by President Zelenskiys criticism of the plant for polluting air in Kryvyi Rih, his hometown. Ukraines largest steel plant and largest foreign investment -- ArcelorMittal plant sold 4.5 million tons of metal products last year.
                  UkrOboronProm, the state defense production group, posted a tender Monday on ProZorro for a $1.2 million contract to audit the conglomerate of 130 companies. Ernst & Young, Baker Tilly, and Grant Thornton plan to submit proposals by the Aug. 21 deadline, reports Interfax-Ukraine. After the winner is announced Sept. 26, the auditing company will have 18 months to complete its report. The audit is strongly backed by President Zelenskiy and Aivaras Abromaviius, the new chairman of the UkrOboronProm supervisory board.
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                  • UKRAINE BUSINESS NEWS
                    Monday marks the start of business school for the more than 250 new lawmakers of Zelenskiys Servant of the People party. This new crop of Rada members, most of them new to politics, will undergo a mandatory, one week course at the Kyiv School of Economics, a business school with a free-market orientation. Macroeconomics and sectoral economics will be two focuses of the intensive skills upgrade for a group who could be in office for as long as five years, Tymofiy Milovanov, the schools president, writes on Facebook.
                    A free-market development path for Ukraine in the 2020s is advocated by Vladislav Rashkovan, a leading candidate for the economist kind of prime minister that Zelenskiy has called for. Our task: to ensure growth at the level of 47% for at least the next 10 years, in order to show a reduction in the gap with the main neighboring countries - Poland, Slovakia, and Hungary, Rashkovan deputy executive director for the IMF, writes in Novoe Vremya. Privatization, deregulation, breaking up monopolies and modernizing education for the future economy are the long-awaited structural reforms that can give Ukraine a chance for an economic breakthrough, he writes.
                    Oksana Markarova may continue as finance minister in the new government,reports Ukrinform, the state-owned news agency. Andriy Gerus, the presidential representative to the cabinet, said: Perhaps the minister, perhaps, the deputies will work. In a sign of presidential approval of Markarova, she flew with Zelenskiy in the presidential jet to Toronto earlier this month. She has had the post since June, 2018. Her predecessor, Oleksandr Danylyuk, is now Zelenskiys secretary of the National Security and Defense Council.
                    Ukraine has a unique chance to make free-market changes that will more than double its growth rate to 7% a year, Anders slund, an economist with decades of experience with Ukraine, writes on the Atlantic Council UkraineAlert blog site. Calling for Zelenskiy to establish rule of law and property rights, Aslund says: Ukraine should grow by 7% a year given that Ukraine has gained access to the big European market. Ukraine needs to raise its investment ratio from 20% of GDP to 28-30% of GDP to grow that fast.
                    Construction was up 21% y-o-y in the first half of this year, reports Lev Partskhaladze, deputy minister of Regional Development, Construction, and Housing. While residential was down 2%, non-residential largely office and retail was up 35%. From January to June, $2.6 billion worth of construction was underway in Ukraine. Kyiv accounted for almost one-quarter of that amount.
                    Driven by IT demand, Class A and B office space in Lviv will nearly double over the next three years, hitting 378,000 square meters, calculates UTG, the real estate consultancy. Growing office space demand, triggered mainly by the IT sector has led to a shortage of quality space in the market, a decrease in vacancies to 2.2%, an increase in rental rates, and, unthinkable years earlier, a surge in developer activity, writes Oksana Gavrilevich, a UTG analyst. Reviewing projects nearing completion and in the pipeline, she gives these figures: 2019 56,400 square meters; 2020 31,500; and 2021 88,200 .
                    Russias Transneft has set a cap of half a billion dollars in compensation to Western buyers and refiners who received 37 million barrels of contaminated oil last spring. The contamination by organic chloride affected buyers along the Druzhba pipeline, in Germany, Poland, Hungary, Slovakia, Ukraine, Belarus, and the Czech Republic. Buyers interviewed by Reuters called the $15 a barrel compensation too low, with one calling it nonsense.
                    Ferrexpo plc, the Swiss-based commodity trading, and mining company with iron mines in Ukraine increased its investments during the first half of the year by 71% y-o-y to $47.5 million. In March the company delayed publication of its results pending an investigation into charitable donations in Ukraine. The company trades as FXPO on the London Stock Exchange.
                    Blanketing Ukraine, Nova Poshta, the delivery company, opened 1,200 new branches during the first half of this year, increasing its network by 43%, to 4,000. By June, one-third of its 8 million customers had used the companys new mobile app. With international shopping increasingly popular, the privately-owned company registered these increases in deliveries: from the US up 20%; from Britain up to 86% and from Poland 200%. During the first half of the year, the Kyiv sorting center handled 46 million parcels, up 34% over the same period last year.
                    With the US the largest source of parcel imports, Nova Poshta reports that the top three e-commerce companies for its clients are: eBay 28%; Amazo 22%; and 6 pm 13%. The average parcel check is $66, and the average weight is 1.6 kg. The most active buyers are men -- 59% -- and aged 25-34 years -- 53%. The most popular stores are Carters, H&M, and Victorias Secret. Most often, buyers buy clothes and shoes, children's clothes, gadgets, cosmetics from abroad. They are attracted by prices, which, as a rule, are lower than in Ukraine, a large selection and good quality of goods, says Yuriy Benevitskiy, director of Nova Poshta International.
                    With business growing by 20% a year, Nova Poshta is building seven high volume parcel sorting centers, each costing 10 million. The first two, in Kyiv and in Khmelnytskyi, feature Dutch Vanderlande equipment capable of sorting 8,500 packages per hour. Next, in line for the regional sorting centers are Lviv and Kharkiv.
                    After Kyiv Boryspil could not handle the cargo flow last Christmas, Ukrposhta has diversified its international cargo import/export points, adding Lviv, Odesa, and Kyiv Sikorsky. The state postal system is working with LOT Polish and Turkish Airlines to handle the international cargo flow. Last year, Ukrposhta processed 34.4 million international shipments.
                    Faced with a surge in international e-commerce, Ukraine lowered by one third to 100 euros the value of a parcel one person can receive duty-free. Above that value, a new 20% tax is levied. Last fall the Finance Ministry proposed lowering the duty-free level to 22 but backed off in face of popular opposition.
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                    • UKRAINE BUSINESS NEWS
                      In a tit for tat, Russia and Ukraine took each others ships hostage over the last 48 hours. On Wednesday, in the Sea of Azov, Russian officials stopped the Lizori, a vessel homeported in Mariupol. On the pretext that the 14-man crew were owed $11,230 in back wages, Russian authorities detained the vessel in the port of Yeysk and deported the crew back to Ukraine.
                      On Thursday, at the mouth of the Danube river, 500 km to the west, agents of Ukraines state security service, or SBU, detained a Russian oil tanker, the Nika Spirit in Izmail, an Odesa region river. SBU agents said the ships International Maritime Organization identification number matched that of the Neyma.
                      Last November, the Neyma blocked the Kerch Strait under Russias new bridge,setting up three Ukrainian navy boats for an armed attack resulting in the capture of 24 Ukrainian Navy sailors. A representative of the Russian shipowner, Altomar Shipping, told Russian media that the company bought the ship last winter, after the attack. In the Izmail case, the crew was also returned, but the ship was impounded.
                      The ship seizures come as dtente seemed to be in the cards for Russia-Ukraine relations. After President Zelenskiys overwhelming victory in Sundays parliamentary elections, the Kremlin signaled it would talk with Ukraines new leader. If the naval standoff is contained, there will be a minimal economic impact. As the boat drama unfolded on Thursday, President Trump and President Zelenskiy talked by telephone. Trump congratulated Zelenskiy on his partys electoral victory, Zelenskiys office said. It is not clear who initiated the call.
                      Preparing for a potential cutoff of Russian gas on Jan. 1, Ukraine is negotiating the supply of Qatari gas to Greeces sole LNG landing terminal. This gas would get to Ukraine via Bulgaria and Romania, on the Trans-Balkan pipeline. Earlier this year, Qatargas delivered the first load of gas to Greeces newly modernized and expanded terminal, Revithoussa, near Athens. We are working to ensure that gas supplies to Ukraine from the southern direction via the Trans-Balkan gas pipeline could be made already from January, says Sergiy Makogon, director of Ukrtransgaz. For safety reasons, Turkey does not allow LNG tankers to pass through the Bosporus, which cuts through the center of Istanbul.
                      After Tuesdays auction, foreigners now own 9% of Ukraines government hryvnia bonds, up from 1% at the start of the year. These foreign holdings are the equivalent of $2.8 billion.
                      As of Monday, Ukrainian exporters had fulfilled 2019 duty-free quotas for exporting nine food products to the EU: apple juice, butter, corn, cereals, flour, grape juice, honey, starch, and wheat. This time last year, Ukraine had used up seven of its quotas. During the first five months of this year, Ukraines food exports to the EU rose 37% y-o-y, hitting 3.1 billion. With Britains new Prime Minister Boris Johnson promising Brexit by October, a working group is studying a UK-Ukraine free trade pact. Ukraine is Europes largest food exporter. Britain is Europes largest food importer.
                      Japan and Saudi Arabia have approved the import of raw milk and dairy products from Ukraine, reports Ukraines State Service for Food Safety and Consumer Protection. Although the national dairy herd is gradually declining, Ukraine ranks third in the world for exports of casein, or milk protein, fifth for butter, and eighth for dried milk.
                      Europes hot weather this summer is expected lower water levels on the Danube, cutting cargo and passengers to Izmail. Last year, the port handled 5% less cargo than than the forecast 4.7 million tons due to late summer limits on shipping in the middle and upper Danube. After the Danube hit record low levels in August, Budapest lost 300,000 due to reduced cargo handling. Lower water levels also could cut Danube cruise ship traffic, just after Izmail inaugurated a $2 million, EU-standard river passenger terminal. Based in Izmail, the Ukrainian Danube Shipping Company has four cruise ships plying the river this summer, with several going the full 1,000 km Alps to the Black Sea route.
                      Russia is building a $9.3 billion stretch of Chinas New Silk Highway designed to run 2,000 km from Kazakhstan across Russia to Belarus, cutting out Ukraine.Built with private Russian money, this Russian toll road is to become the main truck route between China and Europe. When completed, the Meridian Highway is to allow trucks to travel between China and Europe in 11 days, as opposed to 15 days by rail, and 30-50 days by the sea, Wade Shepard writes in Forbes. But as configured the road adds to a series of Russia-led transport projects that limit Ukraines connectivity with the east," Jonathan Hillman of the Center for Strategic and International Studies tells Forbes.
                      Landlocked Belarus is working to win an outlet to the Black Sea by restoring north-south river waterways that date back to the Vikings. On the Pripyat River in May, Ukraine and Belarus surveyed navigation depths, calculated dredging work, and studied radioactivity contamination of river sediments from Mazur through the Chernobyl Exclusion Zone, Raivis Veckagans, CEO of Ukraines Sea Ports Authority, tells Interfax-Ukraine.
                      On the Dnipro, Belarus has drawn up plans to build its first international port -- at Nizhniya Zhary, Gomel region. Near Ukraines Chernihiv region, this complex would include a 109-hectare port, a 250-hectare marina/yacht club, and a multimodal hub for highway trucks and containers. To open passage for large river boats, dredging will have to be done on parts of the 103 km between Belarus and locks on Kyivs hydroelectric dam. The EBRD supports the study work.
                      To soften the economic impact of Russias ban on flights to Georgia, Tbilisi is drawing up a plan to pay airlines up to 90 for each passenger brought to Tbilisi or Batumi through Yerevan, Armenia. In the three weeks since Russia stopped flights between the two countries, Russian tourism has dropped by 20%. Although cross border car traffic is unaffected, tourists who arrive by plane, spend more. Georgian authorities expect to pay two airlines a total of 1.2 million for the one-year subsidy program, reports Russian Railways Partner. The flight from Yerevan to Tbilisi takes 30 minutes.
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                      • UKRAINE BUSINESS NEWS
                        Russia has closed one-quarter of the Black Sea for almost one month, reportsUkrainian Military Portal, a civilian defense news site. The five blocks totaling 118,570 km¯ -- will force cargo ships passing from Turkeys Bosporus strait to Ukraines Black Sea ports to pass through a narrow shipping lane. Ukraines ferries from Chornomorsk to Turkey and to Georgia will have to take circuitous routes to reach their destinations. Through Aug. 19, ships will have to take detours to reach ports in Bulgaria, Georgia, Romania and the Sea of Azov.
                        Russia imposed the restrictions Wednesday, 10 days after Bulgaria hosted two weeks of exercises over a far smaller part of the northwest Black Sea. Ukraine joined these exercises, which involved 27 ships from 12 NATO allies, including Bulgaria, Romania and the United States. Under the 1936 Montreux Convention, non-Black Sea nations can only send warships with displacements of less than 15,000 tons into the Black Sea for 21 days. On July 10, Russian Black Sea Fleet missile destroyer Smetlivy ignored warnings and entered a Black Sea area closed to navigation where naval artillery shooting was underway, reports the Ukrainian Naval command. The intrusion ended without mishap.
                        The day after the Russian shipping restrictions were imposed, a 30-year-old Russian gasoline tanker entered Ukrainian waters, near Izmail, on the Danube. The ship had the same International Maritime Organization identification number as the Neyma, a tanker used to block the Kerch Strait last November, contributing to Russias seizure of three Ukrainian Navy boats. Ukraine immediately impounded the Neyma. Over the weekend, the Ukrainian Military Portal analyzed: It is likely that the decision to move [the Neyma] to Ukraine was taken in order to provoke our state and may also be part of a special operation, along with the overlapping of a large area of the Black Sea.
                        Meanwhile on the Azov, a green beam of light from a Russian Coast Guard boat illuminated boats of Ukraines State Border Service in Mariupol on two nights after sunset last week, reports Ukraines Joint Forces Operation. No injuries or material damages were reported. Separately, Russian officials impounded in Yeysk the Lizori, a vessel homeported in Ukraines Mariupol. Russian authorities deported the crew back to Mariupol, 100 km by water.
                        This summers Russia-Ukraine naval shadowboxing will not spiral out of control, predicts Leonid Bershidsky in a Bloomberg Opinion piece, The Seas Are Unsafe in a Transactional World. He writes: Russia, for its part, cant start an all-out war with Ukraine over a tanker built-in 1989. The costs would clearly outweigh the benefits; besides, just to be on the safe side, Ukraine has let the crew go after treating it with the utmost politeness. Russia only threatened consequences if its sailors are held, hostage.
                        US company Trident Acquisitions has won the competition for a 50-year contract to explore and produce oil and gas from Ukraines offshore Dolphin block, nearly 10,000 square kilometers in the northwest corner of the Black Seas continental shelf. One year ago, Trident raised $201 million in an IPO on the NASDAQ. The CEO is Ilya Ponomarev, a former Russia Duma Deputy. In the 1990s, he worked at Yukos and Schlumberger. In May, he received Ukrainian citizenship. One contender for the production sharing agreement, Azerbaijans Caspian Drilling Company, withdrew its application under pressure from Russia, says Igor Nasalik, Ukraines Energy Minister. Trident offered to invest $200 million in the Dolphin block for the first five years -- 3.5 times the minimum set by the competition -- and to drill at least seven exploratory wells.
                        Russia wants to strike a short-term deal with Ukraine on gas transit to Europe when the current 10-year agreement expires to buy time to complete pipelines that will bypass Ukraine, Reuters reports from Moscow and Brussels, citing four sources familiar with Russian thinking. Ukraine is looking for a long-term, 10-year deal. Its not beneficial for us. A one-year deal would be OK so we would build up our strength and launch all those streams, one source told Reuters of the contract that expires Jan. 1. Another source said: Its clear that they (Russians) want to phase out, dry out Ukraine transit...They want a short contract, with a low commitment on volumes.
                        Russia, the EU, and Ukraine are to resume gas transit talks on Sept. 16. Maro efovi, European Commission vice president for energy, stands by his January offer: a 10-year transit contract with a guaranteed minimum yearly transit volume of 60 billion cubic meters. Europe gets one-third of its gas from Russia. The EU, Russias largest gas client, is expected to stand by its demands, its back stiffened by anger over Russias oil contamination scandal of April-May. Preparing for a showdown this winter, Europes gas storage reservoirs were 80% full last week 38% more than this time last year, reports Gas Infrastructure Europe, an industry association.
                        The Cabinet has authorized the Finance Ministry to attract 250 million in loans from Cargill Financial Services International, the financial arm of the US grain conglomerate. The loans would be 100 million for two years at 5.15% per annum, and 150 million for five years at 6.25% per annum, Ukraines official gazette, Uryadovy Courier, reports Friday. The Cabinet resolution was two weeks earlier.
                        Concorde Capitals Alexander Paraschiy writes: Its positive that the Finance Ministry has an option to borrow from a private international company, but it will not necessarily use such an option...
                        The rates on Cargill loans look in line with the rates at which MinFin attracted its EUR-denominated Eurobond in late June (6.75% for the seven-year bond). However, since that time, yields on Ukrainian international bonds have plunged (yield to maturity on the seven-year bond was 6.0% on July 9, and its 5.0% today), making the Cargill loan not much attractive now.
                        If UK Prime Minister Boris Johnson keeps his promise to pull Britain out of the EU by Oct. 31, Ukraine and the EU can sign an open skies aviation agreement within weeks, Hugues Mingarelli, the EUs outgoing ambassador to Ukraine, predicts in an interview with Evropeiska Pravda. For years, the holdup on signing the agreement has been the dispute between Spain and Britain about the status of Gibraltar. So, when the UK leaves the European Union, this dispute will not be inside the EU, Mingarelli says. My colleagues in Brussels say that as soon as Brexit takes place, the obstacles for signing this agreement will be removed.
                        Paris Hilton, the celebrity hotel heiress, is negotiating to buy Derenivska Kupil, a late 17th-century health resort complex located in the foothills of the Carpathians, 25 km east of Uzhgorod. A deal is expected to be closed by the end of the summer, reports Ukrinform. The fairy tale castle setting would host international beauty contests sponsored by Paris Hilton. The American entrepreneur found out about the Zakarpattia resort in April 2018, when she performed as a DJ at the opening of the Grand Hotel in Lviv, 250 km north of Derenivska Kupil.
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                        • UKRAINE BUSINESS NEWS
                          Real monthly wages rose 18% y-o-y in June, reports the State Statistics Service. The current average wage is UAH 10,783, or $420. Donetsk saw the largest increase 28%, following by Sumy with 20%. In the highest wage region, Kyiv, residents are paid almost twice as much as in the lowest wage region, Kirovohrad UAH 15,650 versus UAH 8,574. With investment rates low, a key driver of wage growth is competition with wages in Poland.
                          About 3.2 million Ukrainians permanently work abroad, about 18% of the nations economically active population, Hromadske reports, citing a new macroeconomic study drafted for the Finance Ministry. Last December, in a nationwide poll by Rating, 35% of the 40,000 respondents said they want to work abroad. About one third said they want to earn money to open a business in Ukraine.
                          Seeking to bolster the Slavic core of its population, Russia in the first half of this year granted citizenship to 44,898 Ukrainians, issued residence permits to 30,772 Ukrainians and temporary residence permits to 29,000 more. Russians have complained to pollsters that the 5-year war with Ukraine has cut Ukrainian immigration and raised Central Asian immigration. Leaders of EU nations and Canada say they will not honor Russian passports issued to Ukrainians living in Russia-controlled Donbas.
                          Dragon Capital won two ProZorro electronic auctions last week, committing to pay nearly $7 million for two commercial properties at prestige addresses in Kyiv and Lviv. In Kyivs Podil district, Dragon will pay $2.4 million for the former headquarters of Kievan Rus bank, a 1,400 square meter building at Khoryva St. 12-a, behind the Bursa boutique hotel. In Lviv, Dragon will pay $4.5 million for a total of 945 square meters for the ground floor and basements of three buildings on Market Square Rynok 19, 20 and 21. Lviv Mayor Andriy Sadovy said: Transparent, open and public. Today Lviv has sold the most expensive lot in the history of the city 945 square meters on Market Square for Hr 116 million.
                          Chinese investors primarily are interested in IT and infrastructure projects,Anatoly Kinakh, president of Ukraines Union of Industrialists and Entrepreneurs, said after meeting in Kyiv on Monday with a 10-company delegation from the Chinese Association of Enterprises. Participating companies included: Shandog Kunlun Road and Bridge Engineering Co. Ltd., Zhuhai Henglong Real Estate Co. Ltd., and Tongling Huacheng.
                          After Ukraines corn exports to the EU doubled during the last marketing year, Ukrainian farmers increased their area planted in corn by 9%, Pro-Consulting reports. In addition to Europe, China may also improve as a market due to the trade war with the US. Last year, corn accounted for half of Ukraines record 70 million grain harvest and 60% of its grain exports.
                          Farmers have threshed 30 million tons of early grain, largely winter wheat reports the Agrarian Policy and Food Ministry. The Ministry predicts the nation will match last years bumper harvest of 70 million tons.
                          With agronomists forecasting annual grain crops of 100 million tons in the mid-2020s, Evrovneshtorg is increasing its Mykolais terminal to handle 4 million tons. Evroneshtorg will take a leading position, not only in Mykolaiv region but also in the Black Sea-Azov basin, Sergei Gunko, company head and director of EVT Grain, said last week at a ceremony marking EVTs 20th anniversary. Translated as Europe Foreign Trade, EVT ships grain for Louis Dreyfus, Soufflet Ngoce, Cargill, Glencore, and Austrias VA Intertrading.
                          Fruit exports were up 16% by value during the first half of this year y-o-y, pacing last years 17% growth, reports Ukraines Agrarian Economic Institute. Apples and pears were up 75% to 42,000 tons. Walnuts were up 74% to 33,000 tons. Frozen fruits were up 28% to 18,000 tons. Of the $116 million in sales, the biggest buyers were: Turkey -- $18 million; France -- $11 million; Poland -- $10 million; Belarus -- $9 million; Iraq -- $7 million; Italy and Greece -- $5 million; and Germany $4 million. The EU buys about half of Ukraines fruit and berry exports.
                          The number of pigs in Ukraine may plummet to 1.7 million by 2025, less than one-third of the 5.9 million counted last year by the State Statistics Service. From 200 to 500 farms annually phase-out pigs, largely because the farms are inefficient and cannot afford sanitary controls needed to fight African Swine Flu, reports the National Association of Pig Breeders. The future belongs to large industrial farms with more than 5,000 pigs, predicts the Association.
                          The first three weeks of Russias ban on flights between Russian and Georgia has cost Georgian Airways $25 million, largely due to ticket refunds and drops in bookings, the airline reports. Georgias government plans to spend up to $700,000 to subsidize tickets for Russians flying to Tbilisi and Batumi via Armenia. The Kremlin decided to punish Georgia for allowing large anti-Russian demonstrations last month. No Russians wee injured. Russian tourists continue to visit Georgia by car. Last week, Turkeys AtlasGlobal started flying a new discount route: Istanbul-Tbilisi-Istanbul. This year, 190,000 Ukrainians are to visit Georgia, a number that Georgian tourism officials would like to double in 2020.
                          After Ukrainians filed petitions last week with President Zelenskiy to restore train service to Crimea and air service to Russia, Rosavitsia, Russias air navigation agency said Monday it is open to talks with Ukraines new government about restoring air links with Ukraine. Since flights were cut almost four years ago, Ukrzaliznytsias trains to Moscow have become the railroads most profitable routes. Ukraines SkyUp discount airline estimates Crimea residents account for one-third of its passengers from Kherson, the closest Ukraine-controlled airport to the peninsula. Under sanctions laws, flights from Crimea can only go to Russia.
                          Ukraines largest online store, Rozetka.ua is launching a virtual travel agency - Rozetka.Travel. Without visiting a travel agency, clients can buy tickets for charter tours to Egypt, Greece, Turkey, and other popular no-visa destinations. Positioning itself as a potential rival for JoinUp!, the nations largest travel operator, Rozetka has already created links with major tour operators: Anex Tour, TUI, Tez Tour, Pegas Touristik and Mouzenidis Travel.
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