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Printed pages from books lie burnt in the Faktor-Druk printing plant's building hit by a Russian S-300 missile in Kharkiv, Ukraine on May 23, 2024. (Ivan Samoilov/Gwara Media/Global Images Ukraine via Getty Images)
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Last week, I wrote in this newsletter that the biggest problems business leaders said they were facing in Kharkiv weren’t Russian attacks, but mobilization.

And just like that, Russia launched missile attacks at a publishing house and a building materials hypermarket in the city.

In the first of the two large-scale attacks, Russia practically destroyed Ukraine’s largest printing presses, killing seven employees and injuring 22. Just a few days later, Russia launched an attack at Epicenter, a building materials hypermarket, killing 18 and injuring 48.

The publishing industry in Ukraine has gone through somewhat of a renaissance since the start of the full-scale invasion. Bookstores have sprouted up amid a renewed interest in Ukrainian literature.

The strike destroyed over 50,000 books in the printing house, owned by Faktor-Druk. The company accounts for 30% of Ukraine’s printing market. Faktor-Drunk plans to restore operations, but the delays will cause serious disruptions to the market. (Read more about it here.)

The symbology of the attack is hard to miss. If you’re looking to eradicate a nation, an obvious place to start is that culture’s written works. And as our chief editor Olga Rudenko wrote in her Ukraine Weekly newsletter, by attacking Epicenter Russia made it clear “it doesn’t want Ukrainians to build new homes and new lives.”

Except it isn’t symbolic. Epicenter and the printing house are not military targets, and Russia knows where it’s aiming. The country and its predecessors have been targeting Ukrainian culture for centuries.

Some of the books printed in these publishing houses were by the very authors the Russian Empire and its successor the Soviet Union banned and in some cases, executed. Some in Ukraine had only begun to discover their incredible works, hidden from the public for decades throughout the USSR and not popular until now.

Ukrainian servicemen of the 22nd Brigade launch a Leleka reconnaissance UAV drone near Chasiv Yar, Donetsk region, on April 27, 2024, amid the Russian invasion of Ukraine. (Genya Savilov / AFP via Getty Images)

The business of drones

Many Ukrainian drone companies are facing death, consolidation, or migration abroad after their dramatic surge in production has outpaced what the government can afford.

How big is the funding shortfall? Ukraine has more than 200 domestic drone companies, whose rapid rise after the full-scale invasion has helped Ukraine battle its better-resourced foe. But only 58 companies had government contracts as of February.

Ukraine expects to fund $10 billion of domestic defense production this year, but has double the capacity, according to Minister of Strategic Industries Alexander Kamyshin. Around one-third of the $6 billion already contracted is dedicated to drones, he told the Kyiv Independent.

And, because exports of dual-use goods are effectively banned, drone companies can't access international markets to stay afloat.

How are Ukraine and its drone companies reacting? Ukraine is looking to raise the remaining $10 billion from foreign partners through its new "Zbroyari" initiative: It wants to convince partners to directly fund Ukrainian defense companies.

So far, Denmark, Canada, and the United States have signed on, though more agreements are in the works.

In the meantime, some drone companies are looking to move production abroad through joint ventures. There, they can sell to buyers outside of Ukraine, and factories are out of reach of Russian missiles. They've also asked the government to ease export restrictions, though the issue is politically contentious.

Either way, drone experts and manufacturers expect that some consolidation is inevitable. Cheaper, mass-produced drones that would compete against the likes of DJI on the international market are the most likely to struggle.

This section was brought to you by Kyiv Independent reporter Andrea Januta. Read her full story here.

Victoria Gardens in Lviv. (Victoria Gardens)

Unwanted attention

In the latest episode of law enforcement raiding businesses: Dragon Capital, one of Ukraine’s largest investment firms, said one of its key assets was facing undue attention from the state.

What happened? Last week the firm announced that over the last few months, the Bureau of Economic Security had started paying “increased attention” to the activities of Lviv’s Victoria Gardens mall, which Dragon acquired after it bought the Europolis holding company in 2018.

In a statement, Dragon Capital said the bureau first approached the company over a 2017 tax evasion case related to the mall’s previous owners. Dragon said that the issue was resolved.

Then in May, a different regional department of the bureau in Lviv opened a similar parallel case, interrogated the company's employees, and began threatening it with raids.

"Dragon Capital believes that duplicating the work of the bureau's detectives and involving the company in such 'historical' proceedings is a form of pressure on our business," the statement read.

Who cares? Folks in Ukraine’s business sector have repeatedly complained about growing pressure from the authorities, particularly from the controversial bureau. The government promised steps to put an end to heavy-handed treatment by law enforcement, but not much has changed.

It’s unclear why Dragon may be the subject of pressure by the state, but it’s worth noting that Dragon Capital owns Ukrainska Pravda, Ukraine’s leading newspaper known for exposing corruption.

In its statement, Dragon called “for the cessation of such practices and the provision of favorable conditions for doing business in Ukraine.”

For its part, the bureau clapped back at the company, calling its statement “manipulation.”

The building of the National Bank of Ukraine in Kyiv. (Panama7/ Getty Images)

Bold moves

The Central Bank wants to limit card-to-card money transfers to 30 transactions a month with a limit of Hr 100,000 (around $2,400).

What's this about? Bad actors involved in shady business activity in Ukraine, such as gambling or drug trafficking, can easily transfer large sums of cash to entire networks of individual cards.

The scheme is referred to as a “drop” in Ukraine. Individuals (called “droppers”) provide access to criminals to transfer, or “drop” funds into their accounts for a fee. Sometimes, the “droppers'” account information is stolen.

As part of wider government efforts to combat illegal gambling, the bank has been pushing through a set of changes. It recently forbade banks and pawn shops from taking drones and other dual-use equipment as collateral for loans to curb gambling among military personnel.

Not to worry! The change would only affect outgoing transfers, which means volunteers and individuals raising money for Ukraine’s brave defenders on the front lines will still be able to receive an unlimited amount of funds. (The concern was top of the list when this news broke).

For people with Ukrainian bank accounts wanting to donate sums over Hr 100,000 in more than 30 transactions a month, the change is limited to one card only. Many people here have multiple accounts.

But if dubious characters think they can get around it by opening more accounts, the proposed restrictions will also make it much more expensive to send money between cards.

If anyone is still concerned, the Central Bank said the move would only affect around 5% of consumers.

“I'm looking forward to the introduction, I'm curious to see the effect. I will also be watching closely who will oppose it and how. They've touched on some hot topics. I think many in this ‘business’ believed that the Central Bank would not dare. Therefore, traditionally, in such cases, there could be a lot of howling,” Center for Economic Strategy economist Yuriy Gaidai wrote on Telegram.

The seal of the International Monetary Fund (IMF) is seen outside of a headquarters building in Washington, DC on April 7, 2021. (Mandel Ngan/AFP via Getty Images)

Pending review

Ukrainian authorities are holding discussions with the International Monetary Fund this week as Kyiv seeks to unlock a $2.2 billion tranche within a $15.6-billion loan program.

If the Ukrainian government passes the IMF’s review, the funds will be disbursed under the Extended Fund Facility (EFF) program. Ukraine is expected to get the green light.

"We have already successfully passed three reviews of the program and expect to receive the next tranche of about $2.2 billion due to the successful fourth review in June," said Finance Minister Serhii Marchenko.

The EFF is set to provide $5.4 billion in budgetary assistance in 2024, with $880 million already disbursed following a successful review in March.

Every dollar counts. Ukraine will need around $38 billion in external financing this year to keep its government afloat. The Central Bank is confident the country will get what it needs this year but with elections looming in the U.S., high levels of support in the future are still uncertain.

What else is happening

Sweden announces new energy aid package for Ukraine worth $60 million

"The new energy aid will help to secure Ukraine's energy supply so that basic public services such as schools, hospitals, transportation, water supply, and business can continue to operate," the statement on the Swedish government website said. Ukraine's power generation capacity has decreased by up to 8 gigawatt hours (GWh) and needs nearly $1 billion to compensate for the losses, according to Prime Minister Denys Shmyhal.

Former head of state tax service accused of taking bribes released on $1.4 million bail

Ukraine’s National Anti-Corruption Bureau in 2023 concluded that Roman Nasirov, during his tenure as the head of the service from 2015-2016, had received $5.5 million for granting Hr 540 million in fraudulent value-added tax refunds to an agricultural holding company in 2015. Later in 2016, he allegedly received another 21 million euros for granting Hr 2.7 billion in illegal VAT refunds.

Special tax regime for IT companies Diia.City has 1,000 residents

The Diia.City tax regime, launched in 2022 by President Volodymyr Zelensky and the Digital Transformation Ministry to attract and promote IT companies in the country now has 1,000 residents, the ministry said. Those residents have already paid Hr 4 billion in taxes to the state in the first quarter of 2024.

Ukrainians have purchased $25 billion in domestic government bonds since start of full-scale war

"Thanks to the funds raised from domestic government bonds, we were able to finance more than 200 days of our security and defense, which is equivalent to 15% of Ukraine's GDP (gross domestic product) in 2023," Finance Minister Serhii Marchenko said. "Investments in government bonds have become the second largest source of financing for the State Budget after international aid," he added. Ukraine received $42.5 billion in external financing last year.

Latvia to allocate nearly $6.5 million to Ukraine's infrastructure development

Latvia will allocate six million euros (nearly $6.5 million) in 2024 to support infrastructure development in Ukraine, the Ukrainian government announced on May 22. A Latvian delegation met with Ukraine's Infrastructure Ministry to discuss developing logistics routes, increasing transport via the Baltic ports, increasing Ukrainian product exports, and improving rail and road transport.

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