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The following is the May 7, 2024 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.
Ukraine’s Central Bank eased some wartime foreign exchange restrictions on businesses in what it said was the largest set of currency liberalization measures since the start of the full-scale war.
The move is meant to support Ukrainian businesses by loosening restrictions on capital outflows and foreign exchange controls the bank put in place in February 2022 to stabilize the economy in the wake of Russia’s invasion.
The bank said that according to “careful analysis, the changes should not create additional risks for macro-financial stability and stability of the foreign exchange market.”
Recent grumbling by large private businesses in Ukraine over the inability to service their debts abroad prompted the government to request the Central Bank allow them to make large repayments to bondholders. The bank refused at the time, in a move supported by the International Monetary Fund, Bloomberg earlier reported.
The new measures include allowing businesses to repatriate a maximum of 1 million euros of new dividends on corporate rights or shares abroad earned after Jan. 1 of this year, and a maximum of 1 million euros per quarter for overdue payments on loans taken before February 2022.
The bank also relaxed restrictions on purchasing foreign currency to service and repay loans taken after June 20, 2023, as well as currency restrictions for importing services. Another measure included lifting restrictions on transferring funds abroad for rental contracts.
The measures will lead to "a gradual increase in export revenue to Ukraine" and help Ukrainian businesses "to enter new markets, including those from which companies from (Russia) are displaced due to sanctions," the bank wrote.
"This move, together with other measures by the National Bank, should allow Ukrainian businesses to 'breathe to their full potential' and help attract private capital to recover the economy," said Central Bank Governor Andriy Pyshny.
Bringing in the Brits
U.K. Foreign Secretary David Cameron wants to make it easier for British companies to do business in the relatively safer western Ukrainian city of Lviv.
During an official visit to the country on May 3, which included meetings with top Ukrainian officials, including President Volodymyr Zelensky, the secretary stopped in Lviv to announce the U.K. would officially add Lviv Oblast to its list of places in the “yellow zone,” meaning it’s safer than the rest of the country, much of which is still in the “red zone.”
The change will make it easier for U.K. citizens who have businesses in Lviv Oblast as well as prospective investors to get travel insurance to the region. Lack of insurance for travel and investments due to the ongoing war has been a big deterrent to attracting foreign capital to Ukraine.
Zhytomyr, Rivne, and Volyn oblasts are also being reclassified as yellow zones, in addition to previously classified Zakarpattia, Ivano-Frankivsk, Chernivtsi, and Ternopil oblasts.
If the rumors are true that the Lviv airport could be the first to open back up in Ukraine since the start of the full-scale invasion, the city could become a hot spot for businesspeople and travelers alike.
The Easter bread index
Since it was Orthodox Easter last Sunday here in Ukraine, I thought I’d include some data published by the Ukrainian media outlet The Page on the rising costs of traditional Ukrainian easter bread.
Over the last four years, the cost of baking it at home has gone up 87% as prices for its main ingredients continue to rise.
If you’re not familiar with Ukrainian Easter bread, or paska as it's known in Ukrainian, it’s a labor-intensive, semi-sweet bread made from milk, butter, eggs, flour, yeast, sugar, and often raisins. (Read more about it here.)
Prices rose in 2021 amid a backdrop of the Covid-19 pandemic, decreasing harvests, and rising grain and energy prices. But the real jump was in 2023 when prices rose 26.8% for paska ingredients: egg prices rose by 92%, sugar by 20.5%, butter by 21.9%, and raisins by 16.7%. Russia’s ongoing war against Ukraine was largely to blame.
This year it cost Hr 179.8 per kilogram (around $4.50) to make a traditional paska with all those ingredients at home, or a 5.8% increase from last year, according to Ukraine’s Institute of Agrarian Economy. The average size of one Easter bread (people usually make more than one at home) is around 300 grams.
Buying a pre-made paska at a large grocery store chain this year ran anywhere between Hr 30-200 for a 250-300-gram one, and between Hr 60-184 for a 500-gram paska.
This editor paid Hr 385 (around $10) for a 250-gram paska at an elite grocery store in Kyiv (purely out of convenience as I was nearby and already tired of grocery shopping for the big day) and now knows for certain she totally overpaid.
Just a few days after the end of a three-month moratorium on searches and raids on businesses in Ukraine, the CEO Club – a business association of Ukrainian CEOs and executives founded in 2011 — said its premises had been searched by the Bureau of Economic Security (known here by its Ukrainian acronym BEB) in April, linking the incident to a supposed smear campaign against the club.
It’s unclear exactly why the BEB showed up at the CEO’s space in central Kyiv. According to the founder and the president of the club, Serhii Haydaichuk, the detectives carried out their search, seized nothing, and left the premises. No charges have been brought to the club.
Meanwhile, the bureau said on April 30 that it had conducted searches at several addresses in Kyiv uncovering an illegal casino and fraudulent call center without specifying where exactly.
According to Haydaichuk, anonymous Telegram channels began spreading claims that the two illicit establishments were operating under the guise of the CEO Club. He called the accusations "false.” Another unfortunate occurrence in Ukraine is smear campaigns carried out occasionally against businesses. Why? Likely either to extort the business or do reputational damage.
Haydaichuk called the searches "absurd" and presented them as part of a smear campaign aimed at tarnishing the club's reputation.
"Why try to tarnish the reputation of the CEO Club? Because our club systematically and rigorously stands for the rule of law, against illegal pressure on business, against corruption, and for reforming the Bureau of Economic Security in accordance with Ukraine's international obligations."
Harsh reality
Group of Seven (G7) officials say that an all-out seizure of Russian Central Bank assets frozen in the West in response to the full-scale invasion is no longer on the table, the Financial Times reported.
It’s a blow for Ukraine and proponents of confiscating the total $300 billion or so of frozen assets to send to Kyiv. Not all hope is lost, as Western leaders are reportedly trying to reach an agreement on using the profits generated from interest on the assets.
The EU agreed on such a plan in recent months, but it would only get Ukraine around 3 billion euros annually.
The most recent plan to confiscate the profits as opposed to the whole lot comes from the Biden administration. The new idea is to put together a military package worth $50 billion that would be repaid using the windfall profits generated by the accrued interest, Bloomberg reported on May 3.
The White House plan is currently being discussed by G7 countries, with the U.S. looking to have an agreement when the countries’ leaders meet in Italy for a G7 summit in June, people familiar with the matter told Bloomberg.
Most of the assets are frozen in Europe, which means the U.S. has a lot of convincing to do to put the plan into action, which could still take months, the people said.
Company news
Naftogaz wants Azeri, Turkish gas traders to store gas in Ukraine. CEO of oil and gas giant Naftogaz Oleksiy Chernyshov met with Azeri state oil and gas company Socar President Rovshan Najaf and Turkey's Energy Minister Alparslan Bayraktar over the last week as Ukraine looks to attract more foreign traders to its underground gas storage facilities — the largest in Europe. Last year, foreign traders stored around 2.5 billion cubic meters of gas in Ukraine and this year the company hopes to get that number up to 4 billion.
Nova Poshta opens up new branch in Spain, suffers missile attack in Odesa. Just as Ukraine’s largest private postal service Nova Poshta (known abroad as Nova Post) was celebrating the launch of its latest branch in Barcelona, the company’s 12th opening abroad since the start of the full-scale invasion, one of its depots in Odesa was hit by a Russian missile on May 1. The attack injured 14 people and destroyed 15.5 metric tons of shipments worth almost Hr 3 million ($76,000), the company said.
What else is happening
Energy Minister: Russian attacks on Ukraine's energy infrastructure cause over $1 billion in damage
Russian strikes against Ukraine's energy infrastructure have cost the state over $1 billion in damage, Energy Minister Herman Halushchenko said on May 5 on national television. The most damage was caused by attacks on thermal and hydroelectricity generation facilities. "The system is stable today, but the situation is quite difficult," Halushchenko said.
Ukraine says close to $500,000 in reconstruction funds for Borodianka 'disappeared'
After an audit of the Kyiv suburb Borodianka town council, auditors found a discrepancy of Hr 14 million (around $353,000) related to plastic-metal windows earmarked for installation but never actually put in. The auditors also discovered that purchasing and installing materials at prices above their market price resulted in a loss of Hr 5.2 million ($131,000).
Ukraine expects $38 billion in external financing after fulfilling IMF requirements
Central Bank Governor Andriy Pyshny said Ukraine had already successfully passed three reviews as part of an IMF program and had implemented structural benchmarks as a result. A fourth review will take place soon. "According to the basic scenario of the National Bank, this year will bring us financing for exactly the amount we are counting on — about $38 billion," he said.
25% more passengers traveled by Ukrainian railways this year compared to 2023
More than 8 million passengers traveled on Ukrainian Railways' trains between January and April 2024 — a 25% increase compared to 2023, the company said on May 2. Additionally, Ukrzaliznytsia reported that 93% of the company's domestic trains arrived on time.
USAID allocates over $250 million to Ukraine's agricultural sector
More than $250 million will be allocated to rebuild and expand Ukraine's agricultural sector under the new USAID Harvest program, Deputy Agricultural Minister Denys Bashlyk said on May 3. The program, funded by the United States Agency for International Development (USAID) will support small grain and oilseed producers to expand their export markets, Bashlyk said.
