Ukraine Business Roundup — April 2
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The following is the April 2, 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.
In March, Ukraine received the largest budget financing from its allies since the beginning of Russia's full-scale invasion and the start of Ukraine's independence, Prime Minister Denys Shmyhal said on March 29.
Ukraine received more than $9 billion in financial aid in March, including 4.5 billion euros ($4.9 billion) from the European Union through its four-year Ukraine Facility, $1.5 billion in loans from the World Bank, $880 million from the International Monetary Fund (IMF), $1.5 billion from Canada, and $230 million from Japan, according to Shmyhal.
External financing from abroad has trickled in since the start of the year. In January, Ukraine received only $400 million from Japan. In February, $800 million was disbursed by Japan, Norway, and Spain.
Shmyhal said during a government meeting in November 2023 that Ukraine expects to receive more than $30 billion in financial aid from its international partners to finance Ukraine's budget deficit in 2024.
According to Shmyhal, Ukraine expects to receive financial assistance of $5.4 billion from the IMF, 18 billion euros ($19 billion) from the EU, more than $10 billion from the U.S., as well as additional financial aid from Japan, the U.K., Belgium, Norway, Sweden, Portugal, and other allies.
President Volodymyr Zelensky approved Ukraine's state budget for 2024 last November following its passage in parliament. State budget revenues were set at Hr 1.78 trillion ($45 billion), while expenditures were almost double, at Hr 3.35 trillion ($85 billion).
The remaining expenditures would fall within the deficit, which was set at 1.57 trillion ($40 billion). The budget also included Hr 2 trillion ($51 billion) in external borrowing and internal government bonds.
Calling all allies
An estimated $10 billion is needed to rebuild everything damaged or destroyed in Ukraine’s northeastern city of Kharkiv after a series of devastating Russian attacks in recent weeks, the city’s mayor Ihor Terekhov said in an interview with Liga.net published on April 1.
The mayor said the city’s officials have been trying to involve international partners to cover the costs, because "no city budget in the world can withstand such a burden."
The city's critical energy infrastructure has been heavily damaged or destroyed by Russian attacks, with "almost all" of it destroyed. A thermal power plant and all the electrical substations in the city — Ukraine’s second largest — were destroyed by Russian attacks.
"Russia is lying when it says it only hits military targets," Terekhov added. "With every attack (on the city), we have more and more evidence that this is a real genocide."
The current situation for the energy industry in the city is "very difficult," according to the mayor. Humanitarian assistance centers, also known as "Points of Invincibility," work in Kharkiv around the clock.
"We have been through more rough times, and we will survive these times too," Terekhov said.
Border update
Poland and Ukraine agreed to search for "mutually satisfactory solutions" to issues related to agricultural trade, according to a joint communique issued on March 28 following Polish-Ukrainian consultations in Warsaw.
Ukraine's Prime Minister Denys Shmyhal arrived in Poland earlier on March 28 for talks with his Polish counterpart, Donald Tusk. Ukrainian agricultural imports, which prompted large-scale farmers' protests in Poland and a blockade at the border, were a key point on the agenda.
In the document published following the talks, the parties "confirmed their readiness to conclude an agreement on providing control at joint border checkpoints and cooperation of control bodies" and, once approved by the European Commission, "to launch logistical data exchange at selected road border crossing points."
The parties also said that they had both "undertaken many efforts to establish fair rules for agri-food trade between Poland and Ukraine and that further effective dialogue based on mutual understanding is needed."
Warsaw and Kyiv agreed to find solutions to the ongoing issues, "such as a verification and control system" for trade in agricultural goods. Ukrainian and Polish ministers of trade and agriculture will continue working on this task.
Meanwhile, Polish protesters temporarily suspended the blockade of the Uhryniv-Dolhobychuv crossing on the Polish-Ukrainian border in both directions, Ukraine's State Border Guard Service said on March 28, citing information from the Polish side.
Gaining independence
Despite Russia’s incessant attacks on Ukraine’s energy system throughout its now more than two-year-old full-scale invasion, the country’s oil and gas giant Naftogaz just celebrated its first heating system without any gas imports.
It is the “greatest moment in Ukraine’s energy history,” Naftogaz CEO Oleksiy Chernyshov told the Kyiv Independent in a recent interview.
In the wake of Russia’s full-scale invasion, Naftogaz launched a record 86 wells in 2023, of which 24 had an initial flow rate of over 100,000 cubic meters, utilizing the country’s vast reserves.
The move was part of a larger goal of attaining energy independence in Ukraine, which historically imported cheap gas from Russia despite having the second-largest reserves in Europe after Norway.
Producing more gas is also about setting Ukraine up to be a contributor to the global gas market after the war, according to Chernyshov.
The Kyiv Independent sat down with Chernyshov to discuss Ukraine’s gas independence, why Ukraine is important for Europe’s energy independence, and the recent Russian strikes on the company’s gas facilities in Lviv Oblast.
Read business reporter Dominic Culverwell’s full interview with Chernyshov here.
Getting London drunk
In March 2024, Ukraine’s largest restaurant group !Fest brought its very popular ruby cherry liquor to an entirely new market and opened a Piana Vyshnia (Drunken Cherry) in London’s Soho district.
Though this marks the first franchise opening in western Europe, Piana Vyshnia has experience in branching out beyond Ukraine’s borders. There are more than 20 franchises in nine countries in central and eastern Europe, most of them in Poland.
One would think that amid an ongoing full-scale invasion, economic uncertainty would pose the biggest challenge for a Ukrainian company opening a franchise abroad.
“For us, actually the tricky part was to find a location we could rent in the center of London,” Taras Maselko, the head of PR for Piana Vyshnia’s owner !Fest, told Kyiv Independent reporter Elsa Court in her latest.
Opening another location abroad isn’t just an exercise in business expansion. !Fest hopes that Piana Vyshnia will develop broader associations with the idea of a product being made in Ukraine, which for a long time has been associated with heavy industry or cheap labor, Court writes.
“We want to show that Ukraine can develop brands itself and create entirely new products,” Maselko said. Foreigners can try a quality product from Ukraine “and be surprised.”
Read Kyiv Independent reporter Elsa Court’s full article here.
What else is happening
Ukraine has attack drones with a range of over 1,000 kilometers, says Fedorov. Ukraine has domestically-produced attack drones capable of flying over 1,000 kilometers, Digital Transformation Minister, Mykhailo Fedorov, said in an interview with Die Welt on April 1. "Most of the drones that attacked Russian oil refineries have a range of 700 to 1,000 kilometers, but now there are models that can fly over 1,000 km," Fedorov said. Fedorov also said in the April 1 interview that the outcome of the war will likely depend on drone technology but at present it is impossible to say if Russia or Ukraine has the upper hand.
Zara, other fashion brands to re-open some stores in Ukraine starting April 3. Inditex, the Spanish parent company of popular clothing brands including Zara, Bershka, and Pull&Bear, will gradually resume operations in Ukraine. The world's largest listed fast-fashion company by sales will resume online store operations for Ukrainian consumers on April 2. Starting April 3, approximately 20 physical stores, including three Zara locations in Kyiv, will be re-opened. Inditex halted operations in Ukraine over two years ago, following the start of Russia’s full-scale invasion.
DTEK's says 80% of energy capacity damaged, destroyed after Russian March attacks. In March, Russian attacks damaged or completely destroyed 80% of the thermal generating capacity of Ukraine's largest private energy company DTEK, the company's Executive Director Dmytro Sakharuk said on March 30. Over the past month, DTEK's facilities have been reportedly targeted at least 10 times. Five of the company's six thermal power plants have been "severely damaged," with some units almost completely destroyed and some partially destroyed, according to Sakharuk. DTEK said that on March 29 three of its power plants were struck and seriously damaged, without disclosing where the impacted power plants were located. Russian attacks injured one of the company's workers and at least five other civilians.
EU ambassadors agree on 'new compromise' regarding extension of Ukraine trade deal. EU ambassadors "agreed on a new compromise" regarding the extension of the trade agreement with Ukraine, ensuring a "balanced approach between support for Ukraine and protection of EU agricultural markets," the Belgian presidency of the EU Council announced on March 27. "This compromise will now be presented to (the European Parliament) in view of a swift agreement," the presidency wrote on X. The International Trade Committee on March 7 supported the European Commission's proposal to again extend the trade agreement from June 2024 until June 2025 while introducing an "emergency brake" in case the import of Ukrainian poultry, sugar, and eggs exceeds the levels from 2022 and 2023.
Air Baltic planning to resume flights to Ukraine as soon as airspace reopens. Latvian airline Air Baltic plans to resume flights to Kyiv, Lviv, and Odesa as soon as Ukraine's airspace reopens, the airline announced on March 26 after a visit to Kyiv's Boryspil airport. Air Baltic CEO Martin Gauss said that he met with Infrastructure Minister Oleksandr Kubrakov at Boryspil on March 25, along with the Boryspil management team and the team of Lviv airport. The Air Baltic delegation inspected the airport's infrastructure, equipment, and ability to resume flights. "Impressive preparations have been made, and Boryspil International Airport is renewed and ready to welcome millions of passengers again," Gauss said on X. "We presented our plans to reconnect Ukraine with the world by air and as soon as the airspace is open and safe." "Air Baltic will contribute to the rebuilding of Ukraine's aviation," Gauss said.
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