The following is the sixth version of our new Ukraine Business Roundup weekly publication. To get the largest information in business and tech from Ukraine straight in your inbox, subscribe right here.
‘Let’s cease speaking about overseas businesses’
You could begin to surprise why so many of those newsletters begin with me at Kyiv’s Intercontinental Hotel. Besides being centrally situated, it’s additionally a favourite of Ukrainian elites and overseas visitors. This previous week, I used to be again within the resort’s ornate basement convention rooms, this time with our reporter Dominic Culverwell for the Kyiv International Economic Forum.
The discussion board, the pet undertaking of Vasyl Khmelnytsky, considered one of Ukraine’s wealthiest businessmen, introduced collectively representatives from Ukraine’s authorities, businesses, and society to debate the “future of a free and developed economy in Ukraine.”
In one surprising second, deputy head of the president’s workplace Rostyslav Shurma chargeable for all issues business and economics in Ukraine advised the discussion board that when speaking about corruption he has began a brand new “personal experiment”: asking overseas traders if they’ve ever personally encountered corruption whereas doing business in Ukraine.
Shurma says that “no foreign investor has ever answered in the affirmative.”
I occurred to be standing subsequent to the proprietor of considered one of Ukraine’s largest manufacturing firms who simply shook his head and chuckled in disbelief at Shurma’s asinine comment.
We’re all bored with the world portray Ukraine with the huge brush of the phrase “corruption,” however to assert that no overseas investor has encountered this downside does a fantastic disservice to Ukraine’s efforts at actual change. Everyone is aware of admitting you might have an issue is step one to fixing it. I significantly questioned what, if something, Shurma’s boss might need to say about his subordinate’s pronouncement. After all, corruption is a serious concern of Ukraine’s Western companions.
I used to be extra drawn to the trustworthy remarks of Konstiantyn Yefymenko, CEO of Biopharma, a Ukrainian biotech firm, who voiced a number of issues that overseas traders might need. Among them is the host of “ten or eleven” state businesses, just like the notorious State Security Service (SBU) or the Financial Investigations Service, recognized for harassing businesses with fines and even extortion; the unresolved challenge of struggle insurance coverage; and the present prohibition on dividend funds in Ukraine.
But Yefymenko actually needed to speak about Ukrainian business: “Let’s stop talking about foreign business and talk a little bit about Ukrainian business. Look, we are already here, thank God, and we should be accepted as we are. And we are not perfect. But we are already here.” His major concern? Protecting Ukrainian property from a defective judicial system.
In a sidebar dialog on the discussion board, I introduced up how the Kyiv Independent was thinking about how businesses are dealing with elevated stress from state businesses and the nation’s safety companies. My interlocutor advised me that certainly, “this is a huge problem, and you have to write about it.”
And write about it we are going to. Keep a watch out for an upcoming story on how Ukraine’s businesses are unable to correctly perform within the face of stress and harassment from the state. Contact us should you’ve encountered corruption whereas doing business in Ukraine and wish to share your story.
Report card
The International Monetary Fund and World Bank held their annual conferences final week in Marrakech, Morocco, throughout which they held the “4th ministerial roundtable discussion for support to Ukraine.”
I wasn’t there, sadly, however I did catch the recording to deliver you the highlights in case you missed it. Good information forward — Ukraine obtained a glowing evaluation from its associates within the highest of worldwide monetary establishments.
During the roundtable, World Bank Group President Ajay Banga stated that if the proper circumstances are created, the World Bank estimates that as a lot as one-third of Ukraine’s future wants might be met with private-sector financing.
“The minister of finance, Mr. Marchenko, and I met yesterday and mentioned how Ukraine can appeal to extra non-public funding for future progress by charting out a transparent and predictable coverage path in key sectors,” Banga stated, including that he was completely satisfied to listen to from the minister that Ukraine is creating a multi-year plan, together with reforms that encourage competitors and produce the nation nearer to EU requirements.
The director additionally stated that the World Bank desires to use the teachings realized from the struggle in Ukraine to assist international locations with fragile and conflict-affected conditions. Remember that investor I discussed in an earlier newsletter who stated Ukrainian tech firms ought to set their sights on markets within the Global South?
Sitting subsequent to Ukraine’s Finance Minister Serhiy Marchenko, IMF Director Kristalina Georgieva was virtually ebullient itemizing the methods Ukraine has weathered the storm of Russian aggression: revised progress estimates of round 3% (which, Georgieva says her “Ukrainian friends tell me they will beat even that”); the continuation of “difficult structural reforms”; “inflation in the single digits”; and a central financial institution that has “moved gradually to manage flexible exchange rate from a position of strength.”
“I strongly believe that our investment in Ukraine is not charity. It is an investment that is going to pay back to the Ukrainian people and to the economy of the region,” Georgieva stated.
The solely change: The IMF has recognized Ukraine’s wants subsequent yr to be some $3 billion larger than initially anticipated.
DTEK goes drilling
DTEK, Ukraine’s largest non-public vitality firm, plans to complete drilling its first oil effectively in Ukraine’s central Poltava Oblast by the tip of the month, the corporate’s CEO Maksym Timchenko announced on Oct. 11.
“This is new for us. The first time our company is starting to produce oil. Accordingly, all the infrastructure for this is being created so that we become a player in the oil market,” Timchenko stated.
I requested the corporate why it had determined to get into drilling oil, and in a written remark to me, it stated that oil extraction has all the time been part of DTEK Oil & Gas’s technique, however that Russia’s full-scale invasion had disrupted their plans.
But greater than a yr and a half in, the corporate’s press secretary Antonina Antosha says its investments “are our practical evidence of developing the energy sector of Ukraine and a successful case of how it can be done in war conditions.”
Antosha additionally jogged my memory that in 2022, DTEK Oil & Gas was the one fuel manufacturing firm in Ukraine that stored up its pre-war fuel manufacturing volumes, extracting 2 billion cubic meters final yr.
I additionally needed to know when the corporate might anticipate to start out refining oil. According to Antosha, the corporate “first needs to build up a sufficient amount of drilling.” The timing, Antosha stated predictably, is troublesome to foretell given Russia’s ongoing struggle.
When they do get round to it, the corporate stated it plans to build its personal processing services as a substitute of buying current infrastructure in order that “that production meets the most modern standards of industrial safety and environmental friendliness.” According to the corporate, “existing capacities are mostly outdated.”
New frontiers
President Volodymyr Zelensky introduced the creation of a brand new grain hall by way of Moldova and Romania throughout an official go to to Romania on Oct. 10.
“Soon the grain corridor from Ukraine through Moldova and Romania will start operating. And this is an example of how much we can do together. It will be significant, and not only for us, but also for Europe and the world as a whole,” Zelensky said in Bucharest.
Speaking at a joint press conference with Zelensky, Romanian President Klaus Iohannis said that currently, nearly 60% of Ukrainian grain exports go through Romania. According to Iohannis, over 27 million metric tons of Ukrainian grain have transited through his country since the beginning of the full-scale invasion.
The new grain corridor could be a boost to Ukraine’s grain exports following the collapse of the Black Sea Grain Initiative after Russia pulled out of the deal in July. The U.N.-backed deal allowed for the export of some 33 million tons of grain to be exported from Ukraine’s Black Sea ports.
Since Russia refused to extend the initiative, there have been 17 mass attacks on Ukrainian ports, resulting in a 40% reduction of Ukraine’s export potential, Infrastructure Minister Oleksandr Kubrakov said during a meeting with Dutch Prime Minister Mark Rutte on Oct. 13.
Some 300,000 tons of grain have also been destroyed by Russian attacks, according to the minister.
“Russia poses threats to navigation in the Black Sea, but the Ukrainian military knows how to give a tangible rebuff to the occupiers. Thanks to this, we were able to create an opportunity for a temporary corridor for civilian ships,” he stated, referring to a hall Ukraine arrange within the Black Sea to free ships that had been caught at Ukrainian ports because the begin of the full-scale invasion and that has since loaded a restricted variety of ships with grain for export.
To date, 21 ships have used this export hall and 25 ships have entered the loading ports, Kubrakov stated. “We continue to work to expand the corridor, it is our responsibility for world food security.”
Diamonds are (not) eternally
A recent investigation by the Kyiv Independent’s investigative reporter Daniil Ukhorskiy titled “That Diamond Ring? It May Have Helped Pay for Russia’s War” particulars how Russia has managed to maintain promoting its diamonds to the West, primarily by way of intermediaries situated in Dubai.
At the outset of Russia’s full-scale invasion, luxurious manufacturers like Tiffany and Cartier introduced they’d stopped shopping for Russian diamonds, however in accordance with the investigation, that is very a lot not the case.
Weak American sanctions and an absence of sanctions in Europe, principally on account of the truth that Belgium’s Antwerp is probably the most outstanding diamond hub on the earth, have meant that diamonds from Russia’s largest diamond producer Alrosa’s diamonds have continued to seek out their means onto the European market, with earnings seemingly funding Russia’s struggle – and the corporate bragging about straight sponsoring a Russian navy submarine.
Belgium now appears to have had a change of coronary heart. On Oct. 11, Belgian Prime Minister Alexander de Croo introduced that his nation together with the EU and G7 international locations had been “very close to finalizing” a system that can ban Russian diamonds from the market.
Under this proposed system, blended luggage of diamonds, the first means small Russian diamonds get to the West, could be banned. Larger diamonds could be tracked with the assistance of blockchain know-how.
The latest proposal to curb the sale of Russian diamonds would additionally require diamonds getting into G7 states to undergo Antwerp or Western hubs that don’t compete straight with Belgium.
In different phrases, Belgium didn’t like that the diamond commerce had discovered a brand new home in Dubai and is probably going trying to take again the market share Antwerp had misplaced.
What else is going on
European Parliament votes to help $53 billion financing package deal for Ukraine’s restoration. The European Parliament voted to endorse a proposal for financing Ukraine’s “restoration, reconstruction, and modernization from 2024” value 50 billion euros ($52.8 billion), the parliament’s press workplace introduced on Oct. 17. The Ukraine Facility shall be a part of the EU’s long-term funds, which “has been severely depleted following the a number of crises which have occurred since 2021,” in accordance with the press workplace.
PM Shmyhal: US allocates $522 million to assist Ukraine’s vitality system. The U.S. has allocated $522 million to buy vitality gear for Ukraine and shield the nation’s electrical energy infrastructure, Prime Minister Denys Shmyhal stated on Oct. 16. “We are getting ready to a difficult winter. Thanks to the help of our companions, we survived probably the most troublesome heating season in our historical past (final yr),” Shmyhal advised regional and native officers at a gathering.
US to supply almost $700 million for modernization of Ukrainian transport, logistics. The U.S. will provide Ukraine with almost $700 million in funds to enhance and modernize the nation’s logistics and transport infrastructure, Infrastructure Minister Oleksandr Kubrakov stated on Oct. 17. The announcement got here after talks with Penny Pritzker, the U.S. Special Representative for Economic Recovery in Ukraine, who arrived in Kyiv on Oct. 16.
Energy Ministry: Foreign firms storing 24 billion cubic meters of fuel in Ukraine. Foreign merchants are storing 2.4 billion cubic meters (bcm) of fuel in Ukraine’s underground fuel storage services (UGS), Ukraine’s Energy Ministry said on Oct. 16. “This activity demonstrates the full integration of the Ukrainian gas infrastructure into the European one. This is an important step towards creating an energy hub in Ukraine and making Europe independent of Russian gas,” Energy Minister Herman Haluschenko stated.
Ukrainian builders obtain greater than $1 million in grants for protection applied sciences by way of the Brave1 platform. With these grants, Ukrainian creators have developed 57 distinctive merchandise which have been “thoroughly tested” by the General Staff of the Armed Forces of Ukraine, Digital Transformation Minister Mykahilo Fedorov said on Telegram. The applied sciences, which embrace fight robots with turrets, AI drones, naval drones, and digital warfare programs, “are already saving the lives of our soldiers at the front and helping to destroy the enemy,” in accordance with Fedorov.
