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A panel on the industrial potential of Ukraine during the 9th annual Kyiv International Economic Forum in Kyiv on Oct. 12, 2023. (Kyiv International Economic Forum)
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The following is the sixth edition of our new Ukraine Business Roundup weekly newsletter. To get the biggest news in business and tech from Ukraine directly in your inbox, subscribe here.

‘Let’s stop talking about foreign businesses’

You may start to wonder why so many of these newsletters begin with me at Kyiv’s Intercontinental Hotel. Besides being centrally located, it’s also a favorite of Ukrainian elites and foreign guests. This past week, I was back in the hotel’s ornate basement conference rooms, this time with our reporter Dominic Culverwell for the Kyiv International Economic Forum.

The forum, the pet project of Vasyl Khmelnytsky, one of Ukraine’s wealthiest businessmen, brought together representatives from Ukraine’s government, businesses, and society to discuss the “future of a free and developed economy in Ukraine.”

In one shocking moment, deputy head of the president’s office Rostyslav Shurma responsible for all matters business and economics in Ukraine told the forum that when talking about corruption he has started a new “personal experiment”: asking foreign investors if they have ever personally encountered corruption while doing business in Ukraine.

Shurma says that “no foreign investor has ever answered in the affirmative.”

I happened to be standing next to the owner of one of Ukraine’s largest manufacturing companies who just shook his head and chuckled in disbelief at Shurma’s asinine remark.

We’re all tired of the world painting Ukraine with the wide brush of the word “corruption,” but to claim that no foreign investor has encountered this problem does a great disservice to Ukraine’s efforts at real change. Everyone knows admitting you have a problem is the first step to fixing it. I seriously wondered what, if anything, Shurma’s boss might have to say about his subordinate’s pronouncement. After all, corruption is a major concern of Ukraine’s Western partners.

I was more drawn to the honest remarks of Konstiantyn Yefymenko, CEO of Biopharma, a Ukrainian biotech company, who voiced several concerns that foreign investors might have. Among them is the host of “ten or eleven” state agencies, like the infamous State Security Service (SBU) or the Financial Investigations Service, known for harassing businesses with fines and even extortion; the unresolved issue of war insurance; and the current prohibition on dividend payments in Ukraine.

But Yefymenko really wanted to talk 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 main concern? Protecting Ukrainian assets from a faulty judicial system.

In a sidebar conversation at the forum, I brought up how the Kyiv Independent was interested in how businesses are facing increased pressure from state agencies and the country’s security services. My interlocutor told me that indeed, “this is a huge problem, and you have to write about it.”

And write about it we will. Keep an eye out for an upcoming story on how Ukraine’s businesses are unable to properly function in the face of pressure and harassment from the state. Contact us if you’ve encountered corruption while doing business in Ukraine and want to share your story.

Kristalina Georgieva, managing director of the International Monetary Fund (IMF), left, Serhiy Marchenko, Ukraine's finance minister, center, and Nadia Calvino, Spain's finance minister, during a roundtable at the annual meetings of the International Monetary Fund (IMF) and World Bank in Marrakesh, Morocco, on Oct. 11, 2023. (Hollie Adams/Bloomberg via Getty Images)

Report card

The International Monetary Fund and World Bank held their annual meetings last week in Marrakech, Morocco, during which they held the “4th ministerial roundtable discussion for support to Ukraine.”

I wasn’t there, unfortunately, but I did catch the recording to bring you the highlights in case you missed it. Good news ahead — Ukraine got a glowing review from its friends in the highest of international financial institutions.

During the roundtable, World Bank Group President Ajay Banga said that if the right conditions are created, the World Bank estimates that as much as one-third of Ukraine's future needs could be met with private-sector financing.

"The minister of finance, Mr. Marchenko, and I met yesterday and discussed how Ukraine can attract more private investment for future growth by charting out a clear and predictable policy path in key sectors," Banga said, adding that he was happy to hear from the minister that Ukraine is developing a multi-year plan, including reforms that encourage competition and bring the country closer to EU standards.

The director also said that the World Bank wants to apply the lessons learned from the war in Ukraine to help countries with fragile and conflict-affected situations. Remember that investor I mentioned in an earlier newsletter who said Ukrainian tech companies should set their sights on markets in the Global South?

Sitting next to Ukraine’s Finance Minister Serhiy Marchenko, IMF Director Kristalina Georgieva was practically ebullient listing the ways Ukraine has weathered the storm of Russian aggression: revised growth estimates of around 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 bank 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 said.

The only change: The IMF has identified Ukraine’s needs next year to be some $3 billion higher than initially expected.

DTEK CEO Maxim Timchenko attends the Ukraine Gas Investment Congress at the Kyiv International Convention Center Parkovy in Kyiv on Oct. 20 , 2021. (Yevhen Kotenko/ Ukrinform/Future Publishing via Getty Images)

DTEK goes drilling

DTEK, Ukraine's largest private energy company, plans to finish drilling its first oil well in Ukraine’s central Poltava Oblast by the end of the month, the company'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 said.

I asked the company why it had decided to get into drilling oil, and in a written comment to me, it said that oil extraction has always been a part of DTEK Oil & Gas’s strategy, but that Russia’s full-scale invasion had disrupted their plans.

But more than a year and a half in, the company’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 also reminded me that in 2022, DTEK Oil & Gas was the only gas production company in Ukraine that kept up its pre-war gas production volumes, extracting 2 billion cubic meters last year.

I also wanted to know when the company could expect to start refining oil. According to Antosha, the company “first needs to build up a sufficient amount of drilling.” The timing, Antosha said predictably, is difficult to predict given Russia’s ongoing war.

When they do get around to it, the company said it plans to build its own processing facilities instead of purchasing existing infrastructure so that “that production meets the most modern standards of industrial safety and environmental friendliness.” According to the company, “existing capacities are mostly outdated.”

The bulk carrier Maranta, under the flag of Cameroon, floats to collect grain from one of the ports of Odesa region on Oct, 3, 2023. (STR/AFP via Getty Images)

New frontiers

President Volodymyr Zelensky announced the creation of a new grain corridor through Moldova and Romania during an official visit 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 said, referring to a corridor Ukraine set up in the Black Sea to free ships that had been stuck at Ukrainian ports since the start of the full-scale invasion and that has since loaded a limited number of ships with grain for export.

To date, 21 ships have used this export corridor and 25 ships have entered the loading ports, Kubrakov said. “We continue to work to expand the corridor, it is our responsibility for world food security.”

Pedestrians pass a giant advertisement for diamonds in the diamond district of Antwerp, Belgium, on Thursday, July 20, 2017. Antwerp is the most prominent diamond hub in the world. (Dario Pignatelli/Bloomberg via Getty Images)

Diamonds are (not) forever

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” details how Russia has managed to keep selling its diamonds to the West, primarily through intermediaries located in Dubai.

At the outset of Russia’s full-scale invasion, luxury brands like Tiffany and Cartier announced they had stopped buying Russian diamonds, but according to the investigation, this is very much not the case.

Weak American sanctions and an absence of sanctions in Europe, mostly due to the fact that Belgium’s Antwerp is the most prominent diamond hub in the world, have meant that diamonds from Russia’s largest diamond producer Alrosa’s diamonds have continued to find their way onto the European market, with profits likely funding Russia’s war – and the company bragging about directly sponsoring a Russian military submarine.

Belgium now seems to have had a change of heart. On Oct. 11, Belgian Prime Minister Alexander de Croo announced that his country along with the EU and G7 countries were “very close to finalizing” a system that will ban Russian diamonds from the market.

Under this proposed system, mixed bags of diamonds, the primary way small Russian diamonds get to the West, would be banned. Larger diamonds would be tracked with the help of blockchain technology.

The latest proposal to curb the sale of Russian diamonds would also require diamonds entering G7 states to go through Antwerp or Western hubs that do not compete directly with Belgium.

In other words, Belgium didn’t like that the diamond trade had found a new home in Dubai and is likely looking to take back the market share Antwerp had lost.

What else is happening

European Parliament votes to support $53 billion financing package for Ukraine's recovery. The European Parliament voted to endorse a proposal for financing Ukraine's "recovery, reconstruction, and modernization from 2024" worth 50 billion euros ($52.8 billion), the parliament's press office announced on Oct. 17. The Ukraine Facility will be part of the EU's long-term budget, which "has been severely depleted following the multiple crises that have occurred since 2021," according to the press office.

PM Shmyhal: US allocates $522 million to aid Ukraine’s energy system. The U.S. has allocated $522 million to purchase energy equipment for Ukraine and protect the country’s electricity infrastructure, Prime Minister Denys Shmyhal said on Oct. 16. "We are on the brink of a challenging winter. Thanks to the support of our partners, we survived the most difficult heating season in our history (last year),” Shmyhal told regional and local officials at a meeting.

US to provide almost $700 million for modernization of Ukrainian transport, logistics. The U.S. will provide Ukraine with nearly $700 million in funds to improve and modernize the country's logistics and transport infrastructure, Infrastructure Minister Oleksandr Kubrakov said on Oct. 17. The announcement came 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 companies storing 24 billion cubic meters of gas in Ukraine. Foreign traders are storing 2.4 billion cubic meters (bcm) of gas in Ukraine’s underground gas storage facilities (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 said.

Ukrainian developers receive more than $1 million in grants for defense technologies through the Brave1 platform. With these grants, Ukrainian creators have developed 57 unique products that have been “thoroughly tested” by the General Staff of the Armed Forces of Ukraine, Digital Transformation Minister Mykahilo Fedorov said on Telegram. The technologies, which include combat robots with turrets, AI drones, naval drones, and electronic warfare systems, “are already saving the lives of our soldiers at the front and helping to destroy the enemy,” according to Fedorov.

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