The following is the April 23, 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.
Ukrainians cautiously celebrated the House finally passing further aid to Ukraine last Saturday. The moment was bittersweet — how many people died while Congress fought over the bill? And what if there’s a six-month showdown every time Ukraine aid comes up for a vote?
Nevertheless, Ukrainians are, by and large, relieved. Around two-thirds of the $61 billion aid bill will go to helping Ukraine on the battlefield, while around $9 billion was allocated for Kyiv’s economic needs, albeit this time in the form of loans (unlike the previous $23 billion of direct budget support provided by the U.S.).
On the loan part, Ukraine’s Ambassador to the U.S. Oksana Markarova told the Kyiv Independent that’s no huge deal — it’s how the country’s EU and other partners extend economic aid to Ukraine anyway.
Some more welcome news was the passage in the House of the REPO Act to allow for the seizure and transfer of frozen Russian assets held in the U.S. to Ukraine. But the lion’s share of Russia’s $300 billion or so of frozen assets are tied up in Europe (the U.S. holds around $5 billion) and the G7 countries have yet to come to an agreement on getting them to Kyiv.
Ukrainian officials were in Washington D.C. for the International Monetary Fund (IMF) meetings last week, where Prime Minister Denys Shmyhal met with IMF Managing Director Kristalina Georgieva, saying that Ukraine is working with its partners to try and find a legal mechanism that will finally get Ukraine the assets.
On the economic front, the question that looms is whether the U.S. aid is really enough. Everyone knows the short answer is no. The World Bank puts the total amount of damages and destruction caused by Russia’s war at more than $480 billion. Others estimate it at close to a trillion (more on reconstruction in a section below).
Meanwhile, Ukraine needs $37 billion of external financing this year and is unlikely to shore up those funds completely — a lack of necessary budget support could mean tough decisions for the government, like cuts to social spending.
“You should not take the passage of this bill as evidence that the U.S. obligations to Ukraine are over. Ukraine has no certainty even for 2025,” Hlib Vyshlinsky, executive director of the Kyiv-based Center for Economic Strategy, told the Washington Post. “It will need further support to prevail in this war.”
In the headlines
Reuters: World Bank financing arm plans to invest $1.9 billion in Ukraine. The private financing arm of the World Bank plans to invest $1.9 billion in projects in Ukraine over the next 18 months, Reuters reported on April 22. The new funding will go into projects such as river transport on the Danube or energy generation from solar and wind.
Zelensky signs decree to restrict online gambling. President Volodymyr Zelensky signed a decree on April 20 to restrict online gambling in Ukraine, including a ban for military personnel until the end of martial law. Zelensky tasked the government to define restrictions on all forms of gambling advertising, focusing on ads that use military symbols.
DTEK needs $350 million to rebuild power plants. Ukraine's largest private energy company, DTEK, said on April 22 that it needs $350 million to recover the lost capacity caused by Russia's attacks on thermal power plants. The estimated damages amount to $250 million plus an additional $100 million for repairs, according to the company's Executive Director Dmytro Sakharuk.
What’s happening with reconstruction?
Last night, the Ukrainian media outlet Ukrainska Pravda held an event in Kyiv on reconstruction titled "Rebuilding Ukraine. Why we can’t wait until victory."
The evening featured a number of high-profile speakers, from ministers to World Bank representatives. Throughout the panels and ensuing discussions, there seemed to be a few main questions on everyone’s minds.
Who’s deciding what gets rebuilt and what doesn’t? Who is organizing and paying for it? And is now, as Russian missiles continue to fly all over Ukraine, even the right time for reconstruction?
One thing was made very clear by Infrastructure Minister Oleksandr Kubrakov right off the bat: Whatever is repaired or rebuilt here and now will be “in vain” if Ukraine doesn’t have the air defense it needs to protect things that are rebuilt (a note for Ukraine’s friends around the world).
An area that desperately needs attention in Ukraine is roads and bridges, many of which have been destroyed or heavily damaged throughout the war. But Kyiv has cut state funding for road construction to a minimum, and according to Kubrakov, there are barely enough funds even for their basic operations.
Deciding what to rebuild is a question of prioritizing in the face of extremely limited resources, according to Jean-Eric de Zagon, head of the European Investment Bank's office in Ukraine. He said that with the bank’s partners in Kyiv, municipal infrastructure, transport infrastructure, particularly for exports, and energy infrastructure were designated as the top priorities.
Without infrastructure, de Zagon said, "there will be no recovery because the private sector will not be able to work, and without hospitals, schools, houses, people simply will not stay."
Indeed people need homes to live in after losing them to Russian attacks. Ukrainian lawmaker Olena Shuliak said that the state has received more than 640,000 requests — 50,000 from the now-occupied Mariupol alone — from Ukrainians whose homes have been damaged or destroyed in the war since it launched an online platform where people can submit requests last year. In 2023, the state paid out Hr 5 billion ($126 million) to people in housing compensation.
Meanwhile, Ukraine is hemorrhaging specialists who can work on reconstruction projects bogged down by salaries as low as Hr 7,000 ($177) a month outside the capital (the salaries are around $400 in Kyiv), according to Mustafa Nayyem, head of the state agency for reconstruction.
"Our specialists are leaving the civil service, we are losing a huge number of specialists who have skills. I don't know where to find them in the future," he said.
Grain woes
Ukraine’s grain exports decreased last month and may continue to fall in the coming months, according to experts. This spells trouble for the war-torn country's already struggling economy — lower export levels ultimately mean less hard currency.
Grain exports amounted to 5.2 million metric tons in March, down from 5.8 million metric tons the month before, according to various estimates.
Much to the surprise of the whole world, Ukraine set up its own grain corridor in the Black Sea in the second half of last year when Russia pulled out of the U.N.-brokered Black Sea Grain Initiative. Shippers rushed to get grain to market, exporting what they had, including backlogs from previous harvests, leading to higher export volumes.
But with those leftover stocks sold off, supply is shrinking and to make matters worse, a smaller harvest is predicted for this year. To cut costs, farmers are sowing smaller areas, which will mean smaller yields all around. Add all those factors up and you get smaller exports.
“We are very likely to see a substantial slowdown in exports very soon because the country exported everything that it could,” Andrey Sizov, managing editor of the Sizov Report that monitors Black Sea grain markets, told the Kyiv Independent.
Read the full article here.
Chart of the month
The Kyiv Independent has partnered with the Kyiv-based Center for Economic Strategy (CES) to bring you a monthly visual of what’s happening in Ukraine’s economy.
This month’s chart shows how much electricity imports have gone up in Ukraine amid an intensification of Russian attacks.
Electricity imports from all of Ukraine's neighboring countries (except Belarus and Russia, with which Ukraine has no connection) have repeatedly become a lifeline for the country, CES economist Maksym Samoiliuk says.
After a string of devastating Russian attacks, Ukraine has been forced to import extremely large amounts of electricity on some days. Consumption traditionally drops in spring due to better weather, and under normal circumstances, Ukraine would be exporting electricity.
Summer is coming, when people and businesses will start to actively use air conditioners to cool their premises, putting a load on the grid comparable to winter peaks.
Will the Ukrainian power system be able to cope with this challenge? One thing is for sure: Ukraine needs more Western air defense systems to at least preserve what is left, Samoiliuk writes.
Check out the interactive chart here.
The long read: ‘A bumpy ride’
If you’re a Mac user, like so many of us are, you’re likely familiar with the CleanMyMac X, Setapp, ClearVPN applications. You may not know, however, that all of those products were developed by the Ukrainian IT company MacPaw.
According to its CEO Oleksandr Kosovan, every fifth Mac on the planet has at least one MacPaw app. (Not a bad dinner party comment if you need to convince your interlocutor how impressive Ukrainians are, and not just on the battlefield.)
The Kyiv Independent recently sat down with Kosovan to discuss his company, which he founded in 2008, and how he and his team have managed to navigate the last more than two years of Russia’s full-scale invasion.
“It’s been a bumpy ride, marked by adaptation and resilience, to maintain pre-war performance levels,” he told Kyiv Independent contributor Nina Mishchenko.
In 2022, the first year of the full-scale war, the company’s staff increased by 22%, and last year saw its personnel grow a further 14%, bringing its total workforce to over 540. The company took a step to strengthen its international presence even more in September 2023, when it opened an office in Boston to connect it with its key markets.
Despite the difficulties, Kosovan is ebullient about what his company has managed to achieve (his usual demeanor if you ever see him around Kyiv). “But I’m nostalgic for the times when the team worked together from one peaceful office in Kyiv.”
Read the full profile here.
What else is happening
Russia partially destroys Kharkiv TV tower
Russian forces struck Kharkiv's television broadcasting tower on April 22, causing the top half of the mast to collapse. Kharkiv Oblast Governor Oleh Syniehubov reported that television infrastructure had been attacked and explosions were heard in the city at around 4:35 p.m. local time. No casualties were reported as people sheltered during the attack, according to Syniehubov. "There are interruptions in the digital TV signal at the moment," the governor said. The State Special Communications Service reported that the tower's structure was "partially damaged," with work underway to restore broadcasting signals.
Bloomberg: Ukraine bonds continue losses after brief spike following US aid vote
Ukraine’s hard-currency bonds extended losses after the approval of $61 billion in aid for Kyiv triggered a brief uptick, Bloomberg reported on April 22. Ukrainian debt was among the best-performing emerging-markets dollar bonds when trading opened on Monday before slumping again. “There hasn’t been any meaningful buying flow” into Ukraine bonds following the U.S. vote over the weekend, Viktor Szabo, investment director for emerging markets debt at Abrdn Plc., told Bloomberg, adding that “upcoming restructuring talks are adding a layer of complexity,” he said.
State-owned Oschadbank earns a record near Hr 6 billion profit in 2023
Oschadbank on April 19 reported that its boards had approved the company's 2023 audited financial statements and that the bank had posted a net profit of almost Hr 6 billion ($151 million) — the highest in its history. Oschadbank’s net profit in January-March 2024 was Hr 4.9 billion ($123 million), up by 91% compared to the same period in 2023, largely the result of operating income that increased by Hr 900 million ($22 million), or 14%, and a positive revaluation of domestic government bonds by Hr 1.2 billion ($30.2 million), Oschadbank wrote in a press release.
Minister: Denmark first to buy military aid for Ukraine from Ukrainian manufacturer
Denmark has become the first country to buy weapons and equipment for Ukraine's Armed Forces from a domestic manufacturer as part of a military aid package, Strategic Industries Minister Oleksandr Kamyshin announced on April 18. "This is the first and so far unprecedented decision to purchase military products from Ukrainian manufacturers at the expense of another country," the Strategic Industries Ministry said in a statement. "This decision is extremely important for both the Ukrainian Armed Forces and the Ukrainian economy. The production capability of our defense industry far exceeds the purchasing power of the state budget."
High Anti-Corruption Court confiscates former Motor Sich president’s assets
Ukraine’s High Anti-Corruption Court on April 18 approved sanctions and asset seizures the Justice Ministry had requested for Vyacheslav Bohuslayev — the former president of Ukraine’s leading aircraft engine manufacturer, Motor Sich, that was nationalized in late 2022 and handed over to the Defense Ministry. The Prosecutor General’s Office reported that around $15 million, 11 real estate units, including five plots of land, shares in 11 companies totaling $9.2 million, including Motor Bank, and other assets were seized as part of the decision. The seizure of Motor Bank will likely mean that Ukraine will now have seven state-owned banks. Bohuslayev was arrested in October 2022 for treason and has been in custody since.
