Business Update: April 16 – Better trade conditions with EU, UK on horizon for Ukraine

The European Parliament may move to improve European Union trade relations with Ukraine with the creation of a “common economic space” between the EU and six former Soviet republics in its Eastern Partnership program. The new proposed initiative would be part of a process of “gradual integration” of those countries into the 27-nation bloc trade, according to a draft report seen by Radio Free Liberty on April 15. The document is to be debated by the European Parliament Foreign Affairs Committee in the coming weeks and could potentially be endorsed by the full chamber in May. The common economic zone is expected to improve the flow of goods, services and people between the 33 nations. 

A Brussels summit bringing together leaders of the 27 EU member states and those of the six Eastern Partnership members is scheduled for June 18. But several EU diplomats told RFE/RL the gathering might be postponed to the second half of the year due to the coronavirus pandemic. 

Meanwhile, the United Kingdom and Ukraine are set to finalize a deal on free trade and strategic partnership. “Despite the coronavirus crisis, work on the agreement document continues, and we expect it to be finished soon,” said Ukrainian Ambassador to the United Kingdom Natalia Galibarenko. “The talks are in their final stages. The Free Trade Agreement (FTA) part is nearly finished, while we’ve still got a number of issues to discuss on the political part of the agreement.”

Ukrainian businesses had a good year in 2019 – they increased their profits by 26%, according to the State Statistics Service. Officially declared profits before tax were up to UAH 422.2 billion, or about $15 billion. 

But Ukraine has seen a 5% drop in its international trade through the first quarter of 2020 compared to the same period last year, according to Maksym Nefodov, Head of the State Customs Service of Ukraine. It was triggered by the closure of borders, low prices on essential imports, and a decline in industrial demand, he said in a briefing with the European Business Administration (EBA). A further 10 border crossing points were closed on April 15 amid the COVID-19 lockdown that is expected to last into May.

Nefodov hopes there will be no more closures of checkpoints because the lockdown is undermining trade, he said. The state customs service has published an interactive map of border crossing points with their current status. 

Recent changes to the 2020 state budget will not affect customs reform, Nefodov also told members of the EBA, with only certain expenditures facing cuts. Companies were also told that there would not be any significant delays in the introduction of business status approvals that improve transit regimes with bordering countries. The first businesses with the so-called AEO status are expected to appear by the end of the year. 

Nefodov also said that the SBU State Security Service should have minimal involvement when it comes to customs inspections. However, for as long as there isn’t a separate financial investigation service, the security service will still be involved in certain investigations of smuggling. 

A draft law on the criminalization of the import and export of certain goods that violates customs rules was submitted to the Ministry of Finance in February, but has not yet been approved because of the constantly changing ministers in the government.

The Ministry of Justice says that for now it will not collect on a $259 million judgement issued by a court against state-owned PrivatBank. The Kyiv Court of Appeals on April 15 ruled that state-owned PrivatBank must pay UAH 7 billion to six British companies owned by the families of Ihor and Hryhoriy Surkis, the controversial business partners of the bank’s former co-owner, the oligarch Ihor Kolomoisky, who allegedly defrauded the bank of $5.5 billion, leading to its 2016 nationalization. 

The justice ministry stated on April 16: “As the body that implements court decisions, the Ministry of Justice will not collect any billions from PrivatBank, because there has not been and there is no court decision to recover this money from the bank. Such… will be possible only if the offshore companies sue about collecting money… and will receive a court decision, which is subject to compulsory execution.”

The unemployment level in Ukraine has reached 13.7-15.4% of working age adults. This is the highest level in fifteen years, according to the Chamber of Commerce and Industry, the body that issued the new report. During the COVID-19 lockdown the number of unemployed in Ukraine increased by at least one million and now totals to 2.5-2.8 million people. 

PrivatBank sold 25 Kolomoisky oil depots for UAH 100 million, Liga.net reports. At online auctions, state-owned PrivatBank has already sold property for UAH 332 million. These are collateral for non-performing loans left behind after Ihor Kolomoisky’s former bank was nationalized in 2016 with a $5.5 billion hole in its books. In total, there are 66 oil depots on the balance of PrivatBank, which they got from the former owners Ihor Kolomoisky and Hennadiy Boholyubov under mortgage agreements.

After delivering a huge batch of coronavirus medical supplies to Poland, Ukraine’s An-225 Mriya is now bound for France. The record-breaking superplane that can carry more than 200 tons of cargo will deliver medical supplies for fighting COVID-19 from China to France. According to the company website, Antonov Airlines has already transported more than 1,400 tonnes of cargo from China to various countries in Europe, the United States, and the Middle East, during the COVID-19 pandemic.