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Ukraine Business Roundup — November 28

by Liliane Bivings December 1, 2023 9:30 PM 8 min read
Ukrainian President Volodymyr Zelensky participated with Ukrainian and European officials at the second international "Grain from Ukraine" summit held in Kyiv on Nov. 25th. (President of Ukraine’s Office)
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The following is the Nov. 21, 2023 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.

Grain from Ukraine

As Russia launched more than 70 drones at Kyiv on Nov. 25, European leaders were gathering in the capital to participate in the second international “Grain From Ukraine” summit. That Saturday also commemorated the victims of the Holodomor, Stalin’s man-made famine in Ukraine from 1932-33 widely considered a genocide today.

The timing was no coincidence, according to President Volodymyr Zelensky who likened Russia’s Vladimir Putin to the Soviet dictator Stalin, saying that “if he could arrange another Holodomor for Ukraine, he would do it.”

Ukraine created the summit as a way to bring leaders together to find ways to ensure Ukrainian food exports are getting to those who need them most, particularly the Global South. Russia’s ongoing blockade of Ukraine’s Black Sea ports have choked a major lifeline for Ukraine’s agricultural products. Before the war, Ukraine’s food exports fed more than 400 million people worldwide, according to the UN.

During the summit, Lithuania announced it would add 2 million euros to the initiative, which already has a pledged $100 million in support, according to the president. Ethiopia, Somalia, Yemen, Kenya have already received over 170,000 metric tons of food products thanks to the initiative, Zelensky said.

“Our position is principled: no one in the world has the right to block free navigation and weaponize food scarcity. The use of famine as a weapon is an element of genocide policy, and any state that engages in it must be held accountable,” said Zelensky at a press conference following the summit.

A banner reading ‘Get Russian business out of Ukraine!’ is seen during a protest against Russian business inside the Ocean Plaza shopping mall in Kyiv on Nov. 28, 2018. (STR/NurPhoto via Getty Images)

Privatization powers

Two months after now-Defense Minister Rustem Umerov was plucked from his previous post as chief of the State Property Fund, the state agency finally has a new head.

Ukraine’s parliament appointed Vitaliy Koval, governor of Rivne Oblast, as the head of the fund. But according to five sources in Ukraine’s parliament who spoke to Forbes Ukraine, the decision to appoint Koval wasn’t made by the Cabinet of Ministers like the law calls for, but by the president’s office.

This is no huge surprise. Koval is the second regional leader close to the president’s party chosen to lead a state agency. The parliament on Sept. 6 appointed Pavlo Kyrylenko, the former head of the Donetsk Regional State Administration, as the head of the Antimonopoly Committee of Ukraine.

Why does any of this matter, you might ask? Despite its unassuming name, the State Property Fund is Ukraine’s state agency in charge of leasing and privatizing a huge registry of state assets, including the numerous Russian assets seized since the start of the full-scale invasion. Koval will also yield a lot more sway at the fund after parliament in May passed a bill expanding the powers of the fund’s head.

Holding that much power over so many valuable assets has tempted previous leadership of the fund. Ukraine’s National Anti-Corruption Bureau (NABU) and Specialized Anti-Corruption Prosecutor’s Office (SAPO) said on Nov. 24 that they had renewed suspicions against all members of the criminal group led by fugitive Dmytro Sennychenko, the head of the State Property Fund from 2019 to 2022. The group is now suspected of laundering more than $275 million.

The Cube Houses of Rotterdam, the Netherlands. (Planet One Images/UCG/Universal Images Group via Getty Images)

Rebuilding from Rotterdam

It is a widely known fact at this point that Russia’s invasion has caused mass destruction across Ukraine. The World Bank estimates the cost of rebuilding at least $400 billion, while other estimates put it at $1 trillion.

The problem, writes reporter Elsa Court in her latest article for the Kyiv Independent, is not only the scale but also what exactly and how to rebuild. In other words, how do you make sure that what the country’s officials, architects, and urban planners are rebuilding actually suits the needs of modern Ukrainians?

One of the Ukrainian urbanists Court spoke with, Anastasiia Palii, who now resides in Rotterdam, gives a simple answer: “Bravery.” “Ukraine is a super brave nation, but not in terms of architecture right now.” “It takes bravery to recognize mistakes.”

Palii and her colleague Oleksandra Naryzhna run the NGO Urban Reform in Rotterdam. Their overall goal is to learn from the experience of the Dutch city post World War II to rebuild Ukraine in a more modern, people-focused, and sustainable way.

One of the biggest challenges reconstruction in the country faces is a lack of expertise and brain drain, according to many people with whom I’ve spoken personally. Indeed, Ukraine will need ingenuity and creativity to rebuild. But it will also need a lot more people like Naryzhna and Palii to return to Ukraine and stay, for reconstruction to have a chance.

Read the full article here.

Trucks stand in a queue to cross the border in Medyka as Polish farmers start a strike and block truck transport in Medyka, a border crossing between Poland and Ukraine, on Nov. 23, 2023. (Photo by Dominika Zarzycka/NurPhoto via Getty Images)

Border blockade

The Polish trucker blockade at four Polish-Ukrainian border crossings appears to have no end in sight as two Ukrainian truckers have died in the 2,000-truck-long lines and the protests start taking a noticeable toll on Ukraine’s economy.

This past week, analysts reported that the ongoing blockade has led to a sharp drop in motor vehicle gas (LPG) deliveries to gas stations in Ukraine that are now experiencing fuel shortages.

Around a million Ukrainian drivers use LPG as a cheaper alternative to gasoline, and farmers and households use the fuel for drying grain and heating homes, with Ukrainians consuming about 1 million metric tons of LPG in 2022, Reuters reported.

The blockade is also complicating the import of goods, which may lead to higher prices for some products like imported food, a survey published by Interfax-Ukraine on Nov. 27 showed.

Proposals from Poland and offers to help from Latvia in recent days have done nothing to bring an end to the protests. As Poland is still in the middle of forming a government following elections, it’s unclear when a solution will be found.

What is more clear is that trade with Poland is going to be a sticking point with Ukraine in its negotiations for EU accession. If the last year of grain bans and trucker protests is any indication of what’s to come, the road will be long and bumpy.

Werner Hoyer, the head of the European Investment Bank (R), and its vice-president Teresa Czerwinska (L) in Kyiv on Nov. 27, during a meeting with President Volodymyr Zelensky. (European Investment Bank)

EU money for reconstruction

Werner Hoyer, the head of the European Investment Bank (EIB), and its vice-president Teresa Czerwinska were in Kyiv on Nov. 27 to announce a new 450-million-euro package ($493 million) to Ukraine and inaugurate the bank’s new regional hub in the capital.

The sum, approved by the EIB on Nov. 15, includes 250 million euros ($273 million) to build and repair social housing, district heating, hospitals and schools, roads, and bridges across the country. Another 200 million euros ($220 million) will be used to restore vital water supply systems in areas affected by the war.

In a press briefing with reporters ahead of the meeting, Hoyer said the EIB may approve another 200-million-euro package for Ukraine before the end of the year.

That’s all good and well, but our reporter Alexander Query wanted to know what the EIB thought of Ukraine’s anti-corruption efforts and how the EIB manages risk associated with any wrongdoing.

The EIB has “an army of people” watching, Rafal Rybacki, the head of the public sector lending department for Eastern Europe at the bank, told the Kyiv Independent.

"Every project financed by the bank has to follow strict procurement rules in line with the EU’s transparency directives. “It's costly and difficult, but Ukrainians will have to learn to follow these rules soon,” Rybacki said. “They will have to if they become part of the EU.”

Read the rest of the article here.

What else is happening

Second top Ukrainian cyber official arrested over embezzlement accusations. After being dismissed last week, Viktor Zhora, ex-deputy head of Ukraine’s State Service for Special Communications and Information Protection (SSSCIP) was arrested on Nov. 27 with a bail set at $276,000, Ukraine’s anti-corruption court said. His boss, ex-head of the SSSCIP Yurii Shchyhol, was released from custody on $700,000 bail on Nov. 24. Shchyhol and Zhora were dismissed by the government following a probe into a corrupt scheme to procure equipment and software for the SSSCIP. The investigation found that Shchyhol and Zhora, along with four others, had embezzled $1.72 million between 2020 and 2022.

Economy Ministry launches accelerator for demining startups. Ukraine has launched an accelerator program in cooperation with the Kyiv School of Economics for startup companies that focus on humanitarian demining, the Economy Ministry announced on Nov. 27. The accelerator provides startups with business development skills, mentoring from industry experts, and the ability to test technologies at a training ground, allowing entrepreneurs to attract investment and grow their company in the field of humanitarian demining. "We have an ambitious goal to return up to 80% of these lands to economic use over the next 10 years," Svyrydenko said. "I believe that the technologies developed in Ukraine will not only help to clear the territory of our country faster, but will also become an export product in the future."

Ukraine’s GDP grows by more than 10% year over year in October. Thanks to a strong harvest, a stable energy sector, and the temporary corridor in the Black Sea, GDP growth in October 2023 compared to last year is about 10.5%, Ukraine’s Economy Ministry said on Nov. 24. The economy showed growth of 5.5% for January– October this year compared to the same period last year, the ministry said. “Significant destruction of infrastructure and fixed assets, preservation of significant security risks, restrictions on export logistics, slow recovery of the labor market, lack of sufficient equity capital, and available credit funds remain the restraining factors of economic growth. But in general, positive factors in October outweighed the balance of influence on GDP,” Economy Ministry Yuliia Svyrydenko said. Ukraine’s economy is slowly recovering after a whopping 29% GDP drop in 2022.

Media: Court launches bankruptcy case against Ukraine International Airlines. Kyiv's Commercial Court on Nov. 22 started bankruptcy proceedings against Ukraine International Airlines (UIA), the country's largest airline, Ukrainska Pravda reported. The Ukrainian state-owned bank Ukreximbank filed a lawsuit against the airline on Oct. 31, Forbes Ukraine said, adding that the company currently held Hr 20.5 billion ($568 million) in debt. Forbes previously reported on Oct. 30 that the company's assets were being auctioned off for prices significantly below their market value, citing sources from the airline.

Naftogaz signs 200-million-euro loan with EBRD. The European Bank for Reconstruction and Development (EBRD) will lend 200 million euros ($218 million) to Ukraine’s state-owned energy giant Naftogaz to help build up its strategic gas reserves, the EBRD announced on Nov. 23. The signing of the loan follows an agreement between Kyiv and the EBRD in June for a 600 million ($654 million) financing package to bolster energy security. The deal allocates 200 million euros to Naftogaz, 200 million euros to Ukrenergo, and 200 million euros to Ukrhydroenergo.

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