New sanctions against Russia
Amid roadblock after roadblock in Europe over support for Ukraine, the European Union finally adopted its 12th Russia sanctions package on Monday after Austria withdrew its reservations over the weekend.
Austria’s grievances were over the fact that Ukraine had put the country’s Raiffeisen Bank International, the largest Western bank still operating in Russia, on its list of “international sponsors of war.” Kyiv agreed on Dec. 16 to remove the bank from the blacklist.
As part of the measures, the EU is banning the direct import of non-industrial diamonds from Russia — the world’s largest producer of the gem — starting Jan. 1 and committing to tightening control over the $60-per-barrel Russian seaborne oil cap, a measure that was found to be almost completely ineffective.
The sanctions also aim to curb the re-export to Russia of sensitive dual-use goods found on the battlefield in Ukraine and introduce further restrictions on goods that generate significant revenues for Russia. The list of goods includes a ban on some imports of aluminum — the first time the material is being sanctioned.
The EU imported nearly 500,000 metric tons of Russian aluminum and aluminum products worth 1.26 billion euros ($1.37 billion) in the first nine months of 2023, Eurostat data showed, Reuters reported.
But in a letter to the European Commission on Dec. 8, the industry group European Aluminium said that while it welcomed the proposed inclusion of a limited number of aluminum products in the 12th sanctions package, it lamented the fact that more than 85% of Russian aluminum exports to the EU would fall outside the scope of the sanctions.
“If aluminum sanctions are to have any effect on the Russian economy and its ability to wage war, a much more comprehensive measure will be required,” the letter read.
Cracks in the system
This past week, Ukraine’s largest mobile operator Kyivstar suffered a massive cyberattack that caused internet and network cuts to millions of people in the country for several days. Monobank, one of Ukraine's largest banks, also reported a hack the same day, on Dec. 12.
Not only was the attack a major inconvenience to many in Ukraine. It also left Kyivstar’s subscribers — which amounts to more than half of Ukraine’s population — at risk by cutting them off from air raid alerts that send warnings to their phones of incoming Russian drone and missile attacks.
On the evening of Dec. 13, Kyivstar started to gradually restore their services. That was good news for the company’s subscribers. But what’s more concerning is how Russian hackers were able to carry out what the company said was the largest cyberattack in the history of telecommunications.
Russian hackers broke through Kyivstar's cyber security through the compromised account of one of the company's employees, Kyivstar CEO Oleksandr Komarov said on Dec. 13. "It must be admitted that this attack breached our defenses," Komarov said.
Ukraine’s security service didn’t name the group behind the attack, but a Russian hacker group called Solntsepek that is linked to the Russian military and has alleged ties to Russia’s notorious Sandworm hackers, claimed responsibility.
In October last year, Sandworm carried out a cyberattack on a Ukrainian electric utility company, causing blackouts that occurred at the exact moment as a wave of Russian missile attacks.
Christmas shopping
The festive season is in full swing for Ukrainians, and this year, they’re planning on spending their money, without forgetting about donating to a war effort that’s far from over.
A survey by Deloitte published on Dec. 7 analyzed what over 1,000 Ukrainians, both abroad and in Ukraine, plan on buying this holiday season. Despite the difficulties of the war, 59% of Ukrainians still plan to shop for Christmas and New Year’s, a slight decline from 61% last year.
In terms of products, 84% said they will spend money on food, an increase of 3% compared to 2022 and largely represented by those over 58 years old, followed by alcoholic beverages with 40%, which also rose from 32% last year. Clothes and shoes are less popular this year, dropping from 42% to 32%.
“If last year we observed that buyers were in a confused state and could not predict their shopping, now they already know a month in advance what they will order online, when they will start buying offline, and what their budget is for shopping and charity,” said Leader of Retail, Wholesale and Distribution Group at Deloitte Ukraine Oleksandr Yampolskyi.
The war effort is never far from the minds of Ukrainians, even more so than last year following the disappointing counteroffensive. Sixty-eight percent of respondents are planning to donate part of their holiday budget to charity, up from 61% in 2022, with 55% saying they will donate almost half of their budget.
Read Dominic Culverwell’s full write up of the report here.
What they’re saying
An end-of-year survey on doing business in wartime Ukraine by the American Chamber of Commerce (AmCham) in Ukraine found that 74% of its member companies hit their financial targets for 2023, with around a third of those companies, or 27%, achieving more than planned.
AmCham’s members include more than 600 of the biggest U.S. and international investors operating in Ukraine, as well as major Ukrainian companies, so it may not be a total surprise some of these companies have proven resilient despite the destruction wrought by Russia’s war.
But the word on the street here in Kyiv is that some businesses have done exceptionally well in wartime, and are embarrassed to say so publicly given the suffering so many are experiencing in Ukraine as a result of the full-scale invasion.
Looking forward to next year, 46% of AmCham member companies said they hope to see an increase in revenues, 33% believe their companies will see an increase in the number of employees, and 37% of businesses predict an increase in investments.
The biggest threat member companies see for 2024? Elections in the U.S. are the biggest risk, 69% of respondents said, with other armed conflicts, supply chain disruptions, and resource scarcity also on the list. The companies recommend the government get moving on demining Ukrainian territory, pushing through more judicial reform, and smoothing out logistics logjams if it wants to help businesses next year.
Good intentions
On Feb. 24, 2022, the first day of the invasion, Russian forces landed at the Antonov Airport located in Kyiv’s northern suburb of Hostomel for the start of a month-long battle and Russian occupation. By the time it was liberated, nearly 40% of the once-quiet suburb had been affected by the war and damages totaled in the hundreds of millions.
Today, the streets of Hostomel don’t look far from the state they were in 20 months ago, business reporter Dominic Culverwell writes in his latest for the Kyiv Independent. Many residents have been waiting this whole time for their apartments to be rebuilt.
It’s not for want of trying that the city remains in tatters. One company, the French construction waste recycling company Neo-Eco showed up in Hostomel wanting to carry out a pilot reconstruction project, but was stymied by the local authorities.
Foreign companies are eager to invest and contribute to the recovery process but have been put off by the town’s ruling military administration which is facing several allegations of misappropriating and stealing funds, Culverwell writes.
While many of the same enthusiastic companies have found other, more suitable places in Ukraine for their investments and projects, the particular case of Hostomel is worrying. According to Culverwell’s article, the word is getting out among would-be European investors to avoid reconstruction projects not only Hostomel but Kyiv Oblast as a whole.
Read the full story here.
What else is happening
Minister: Ukraine-EU export increased by over 40% since permit system liberalized. The export of goods from Ukraine to the EU and from the EU to Ukraine has increased by more than 40% since the liberalization of transit rules for Ukrainian truckers in June 2022, Infrastructure Minister Oleksandr Kubrakov said on Dec. 18. Since the suspension, Kubrakov said that exports to the EU from Ukraine have increased by 47.5%, and imports to Ukraine have grown by 44%. The permit issue has been at the heart of the ongoing protest and blockade by Polish truckers, who have at times been joined by their counterparts in Slovakia and Hungary.
EU to discuss $55 billion for Ukraine on Feb. 1. The European Council will hold a special summit on Feb. 1, where the EU leaders will discuss the four-year 50-billion-euro ($55 billion) funding package for Ukraine, European Council President Charles Michel said on Dec. 18. During a recent summit, the EU failed to reach a consensus on the bloc's long-term budget, which includes funds for Ukraine, due to opposition by Hungarian Prime Minister Viktor Orban.
Border Guard: Polish protesters resume blockade at Yahodyn-Dorohusk crossing. Polish protesters again started to block trucks at the Yahodyn-Dorohusk checkpoint, a key crossing at the Ukrainian-Polish border, on the afternoon of Dec. 18, Ukraine's Border Guard Service reported. Protests at the Yahodyn-Dorohusk crossing, one of the four checkpoints blocked since November, were banned by local Polish authorities on Dec. 11 but a court overruled this order, allowing the blockade to resume. The organizers of the protest plan to allow only one truck through per hour.
The Telegraph: Rolls-Royce wants to build mini-nukes in Ukraine. Rolls-Royce Holdings is in talks with Ukraine’s largest private energy company DTEK to build a string of small-sized nuclear power plants, or small modular reactors (SMRs), at eight sites currently operated by coal power stations, the Telegraph reported on Dec. 17. The move is part of Ukraine’s larger goal of decentralizing and modernizing its energy system to make it both greener and less vulnerable to Russian attacks that target the grid infrastructure.
The State Property Fund of Ukraine plans to put up around 1,000 properties for privatization next year. Vitaliy Koval, head of the State Property Fund of Ukraine, made the announcement during a speech at the 6th National Forum of Small and Medium-sized Enterprises on Dec. 13. "State assets generate losses, and the number of state enterprises does not justify the direction of liberalization and market economy that Ukraine has chosen," Koval said. The head of the state agency also said that the main beneficiaries of the auctions will be small and medium-sized businesses.
