The following is the Jan. 15, 2025 edition of our Ukraine Business Roundup weekly newsletter. To get the biggest news in business and tech from Ukraine directly in your inbox, subscribe here.
Metinvest, Ukraine's largest steel producer, said on Jan. 14 that it had suspended operations at the Pokrovsk coking coal mine in Donetsk Oblast due to worsening security conditions as Russia advances in the area and power outages.
Located 6 miles west of Pokrovsk, the mine is one of Eastern Europe’s largest and Ukraine’s sole producer of coking coal, a key component in steelmaking — Ukraine's second-largest export after agriculture.
The closing is as much a symbolic loss as it is an economic one, as the mine and its workers had kept working under extremely difficult conditions and had become a sign of Ukraine’s business resilience amid Russia’s war.
The mine remains under Ukrainian control, and Metinvest is evacuating employees and their families.
"The suspension of operations is a necessary step to preserve lives during these challenging times. We believe in Ukraine's victory and are prepared to resume operations and rebuild Pokrovsk after the Russian invasion is repelled," said Metinvest CEO Yuriy Ryzhenkov.
Steel exports generated nearly $2 billion in the first eight months of 2024, with production projected to reach 7.5 million metric tons by year-end.
Plans to increase output to over 10 million tons in 2025 are now threatened, as the loss of Pokrovsk could slash annual production to 2-3 million tons, Reuters reported.
Running out of options
Russia’s gas sector is running out of options after Ukraine refused to renew an agreement with Russia’s Gazprom to transit 40 billion cubic meters of Russian gas annually through Ukraine to buyers in the EU.
Kyiv’s decision to end the deal will further undermine gas revenue to Russia’s economy as Moscow will struggle to find alternatives to replace this lost gas market in the near future, business reporter Dominic Culverwell writes in his latest.
For now, Russia still has its claws on Europe with cheap liquified natural gas (LNG) and growing gas transit through the TurkStream pipeline. Those two revenue streams could run out, however, as sanctions bite and Europe looks to continue distancing itself from Russian energy.
The majority of European states have already looked to gas alternatives from the U.S., Norway, and Algeria to reduce dependency on Russia. The end of the agreement forces those who clung to the Ukraine route, namely Slovakia, Hungary, and Austria, to find other options.
“This development is a step toward a Europe that is less susceptible to energy blackmail, marking a geopolitical win for Ukraine and its allies,” the former head of Ukraine’s gas transport operator (GTSOU) Sergiy Makogon told the Kyiv Independent.
Read the full article here.
An improved outlook
The Group of Seven’s $50 billion loan program “will help to ensure the financing of Ukraine’s budget until 2027 and significantly improve macroeconomic stability,” the Kyiv School of Economics said in its recently published Ukraine Macroeconomic Handbook.
In total, $75 billion in loans and $18 billion in grants are expected for budget needs from Ukraine’s partners through 2025-2027, with more than half of it coming from the Extraordinary Revenue Acceleration loan initiative or ERA — the official name for the G7’s $50 billion loan, KSE said.
“This will also provide critical support for Ukraine's external balance and offset a larger trade deficit, still suppressed foreign direct and portfolio investment, as well as outflows of resident capital, and allow Ukraine to accumulate $12 billion in reserves, thereby boosting macroeconomic stability,” KSE wrote in its report.
“Actions by Ukraine’s partners have, thus, led to a dramatic improvement in our outlook.”
Ukraine received the first tranche of the ERA loan of around $3 billion from the EU, Prime Minister Denys Shmyhal said on Jan. 10. The loans under the ERA will be paid back with proceeds from frozen Russian assets.
Read the full handbook here.
A possibly welcome shake up
Members of the Ukrainian parliament’s Energy Committee led by MP Inna Sovsun, on Jan.10 initiated a resolution to dismiss Energy Minister Herman Halushchenko. The resolution has been registered in parliament and sent to its leadership for consideration.
Opposition MP Yaroslav Zhelezniak has cited several reasons for the moves, including "systemic corruption in the energy sector," "failure to protect parts of the energy infrastructure," and "lies and manipulations."
From my own experience reporting on and following Ukraine’s energy sector, it’s widely believed that Halushchenko is largely responsible for — directly or through looking the other way — corruption and mismanagement in the energy sector.
One of the key controversies involves the proposed use of donor funds to complete the construction of power units at Ukraine’s Khmelnytskyi nuclear power plant.
In addition to the public wondering why the Energy Ministry would allocate resources to such a project amid a worsening energy crisis brought on by Russian attacks, last summer, Ukraine’s parliamentary Anti-Corruption Committee said there were corruption risks associated with the project.
Opening doors
Ukraine's government approved a measure allowing foreign companies to participate in modernizing military equipment for the Ukrainian Armed Forces, the Defense Ministry said on Jan. 13.
The initiative focuses on upgrading state aviation aircraft, ships, and their components using advanced Western technologies as Ukraine looks to expand its defense production capabilities amid the ongoing war with Russia.
Foreign firms with special permits for transferring military technology and exporting defense-related goods and services will now be eligible to collaborate, according to Deputy Defense Minister Brigadier General Anatolii Klochko.
"Modernizing outdated equipment will significantly enhance the military’s efficiency, leveraging high-tech solutions from foreign partners," Klochko said.
What else is happening
Ukraine's inflation accelerated to 12% in 2024, exceeding government forecasts
The accelerated rate surpassed forecasts made by Ukraine's National Bank in November, which estimated that Ukraine would end 2024 at an annualized 9.7% inflation rate. The main driver for inflation growth in 2024 was the increasing cost of groceries as well as electricity costs.
Ukraine offers defense industry jobs, draft exemptions for citizens abroad, minister says
"We have a shortage of professionals, and Ukraine is ready to exempt most of them from military service," said National Unity Minister Oleksii Chernyshov — until recently CEO of Ukraine’s energy giant Naftogaz, who now heads a newly-created ministry tasked, among other things, with returning Ukrainians home. The government plans to establish centers to assist citizens abroad in finding jobs in both Ukraine and their current countries of residence, he said.
Denmark, Norway to buy $183 million in arms for Kyiv from Ukrainian manufacturers in 2025
Ukraine has already received weapons worth almost $554 million through direct Danish purchases from Ukraine's defense industry, the Defense Ministry said on Jan 9. Denmark is the first country with which Ukraine has started joint weapons production, announcing in September that it would invest a total of around $630 million in Ukraine’s defense industry.
Parliament reinstates monitoring and reporting on greenhouse gas emissions
The move was crucial for Ukraine’s goals to align with the EU’s decarbonization goals, Ukraine’s EU accession, and a mandatory step under the Ukraine Facility Plan, the bloc’s 50-billion-euro financial assistance program to Kyiv. Ukraine’s Environmental Protection Minister said the law takes into account the realities of war, providing relaxed requirements depending on the location of facilities and the degree of their destruction to reduce the financial burden on companies.
In case you missed it. Economy Minister: ‘They said no one would invest in a country at war. They were wrong.’
“Today, Ukraine's primary investors are domestic companies and investors committed to the country's future — foreign companies are cautiously following suit,” Ukraine’s Economy Minister Yulia Svyrydenko wrote in a recent op-ed for the Kyiv Independent. Read the op-ed here.
