Lawsuits, failed taxes, land market, and trade licenses — last week in Ukraine’s economy
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NV Business has selected the main economic news, the most interesting statements, and indicative figures of the past week.
Lawsuit against Ukraine. ABH Holdings S.A. (ABHH) filed a request for arbitration and a statement of claim against Ukraine, seeking full compensation for the unlawful expropriation of Sense Bank (formerly Alfa-Bank) through enforced nationalization.
The claim has been filed with the International Centre for Settlement of Investment Disputes (ICSID) under the aegis of the World Bank in Washington, D.C.
“ABH Holdings S.A. filed a request for arbitration and a statement of claim against Ukraine in a case that is an acid test of the rule of law in the West,” the company said in a press release on Jan. 4.
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“ABHH seeks full compensation for the unlawful expropriation of Sense Bank (the Bank) by the Ukrainian authorities through enforced nationalization.”
“The amount claimed is more than $1 billion. The legal basis for the claim is the Treaty between the Belgo-Luxembourg Economic Union and the Government of Ukraine on the Reciprocal Promotion and Protection of Investments.”
ABHH added that “by combining methods of corporate raiding and war profiteering, the Ukrainian authorities have unlawfully taken the Bank from its rightful owners, beneficiaries, and shareholders including UniCredit Bank and The Mark Foundation for Cancer Research.”
Fridman’s share in Kyivstar. The Kyiv Court of Appeal has confirmed the October 2023 seizure of 47.85% of the shares of Ukraine’s largest mobile operator Kyivstar and 100% of the IDS Ukraine mineral water producer and other companies. The assets were owned by Russian oligarch Mikhail Fridman.
The court consolidated the appeals of VEON Ltd. VEON Holdings B.V., Kyivstar.Tech LLC and Ukraine Tower Company, as well as New World Value Fund Limited, which owns 34.83% of IDS Ukraine, and several other persons.
Read also: Former Kyivstar chief denies link between recent cyberattack and Russian oligarch’s return to Moscow
“The case materials show that at this stage of the criminal proceedings, the needs of the pretrial investigation justify such interference with the rights and interests of the specified property owners for the purpose specified in Clause 1 Part 2 of Art. 170 of the Criminal Procedure Code of Ukraine, i.e. to ensure the preservation of material evidence in criminal proceedings,” the panel of judges said.
In turn, VEON emphasized that it’s not part of any consortium and has no contractual relationship with the Alfa Group consortium controlled by Russian oligarch Mikhail Fridman, while Fridman himself and other sanctioned persons have no status of VEON’s ultimate beneficiaries.
The company also indicated the seizure of Kyivstar corporate rights would lead to the suspension or excessive restriction of legitimate business activity, which is of critical importance during the war.
The appellants on the seizure of IDS Ukraine group’s shares emphasize that only 18.23% of the share of corporate rights will be in question if Fridman’s assets are seized, while the share of other Alfa Group sanctioned representatives, who aren’t involved in this criminal case, is 31.76%.
At the same time, former Kyivstar CEO Petro Chernyshov told NV in an interview that Fridman had zero involvement with Kyivstar’s network or its IT systems.
Land market for legal entities. A new stage of implementation of the Law on the Land Market kicked off in Ukraine on Jan. 1, 2024, i.e. the market opened for legal entities.
From now on, legal entities, like individuals, can buy up to 10,000 hectares instead of 100 hectares. The sale of state and communal agricultural land to foreign nationals is prohibited.
Legal entities can take part in online auctions for the sale of seized agricultural land plots, which are implemented by private and state executors through the Prozorro electronic procurement system.
Legal entities can also compete in auctions from Jan. 1, 2024, purchase agricultural land plots sold via the system by private landowners.
The lawmakers submitted a bill that would postpone the opening of the land market for legal entities until Jan. 1, 2025.
According to the explanatory note to the bill, an October 2023 survey of over 1,000 agricultural enterprises found out that 87% of respondents were categorically against increasing the limit of agricultural land sales from 100 hectares to 10,000 hectares per person.
Of all interviewed farmers, only 3% are ready to increase the maximum amount of land purchased by one legal entity.
“The desire of small and medium-sized farmers to postpone the increase in land purchase limits from 2024 is explained by the critical financial condition of agricultural enterprises in 2023. They simply have no funds to buy land in wartime,” the document states.
In addition, the bill proposes to leave 100 hectares limit for both legal entities and individuals until the end of the war and for another two years after it.
Pyshnyy has been named the Central Banker of the Year 2024. UK magazine The Banker has named Andriy Pyshnyy, the head of the National Bank of Ukraine (NBU), the Global and Europe Central Banker of the Year 2024. The NBU’s key achievements have included the fight against inflation, increased confidence in the hryvnia [Ukraine’s national currency], and effective cooperation with the International Monetary Fund (IMF).
“Mr. Pyshnyy led the country’s innovative response, aptly titled ‘Power Banking,’ which enables more than 2,375 bank branches to provide essential financial services to the public even during long power outages,” the magazine noted.
In addition, confidence in the hryvnia increased – according to data provided by the NBU, hryvnia term deposits of individuals rose by 28% in the first 11 months of 2023. The domestic debt market recovered with a 98% increase in the volume of loans relative to 2022, while inflation fell from 26.6% to 5.1% in the first 11 months of 2023.
In October 2023, the NBU successfully transitioned from a fixed exchange rate to managed flexibility of the exchange rate. After the transition, the central bank says the difference between cash and non-cash rates decreased to 3%.
A failed tax. Tax revenues for real estate, other than land, amounted to UAH 9.1 billion ($239 million) for 2023. Such data was made public by the parliamentary Finance Committee chair Danylo Hetmantsev.
A total of UAH 1.2 billion ($31.5 million) of taxes were collected from residential real estate and UAH 7.8 billion ($204.8 million) from non-residential one, he said.
“This tax is probably one of the least effective. The main problem is the efficiency of administration,” Hetmantsev said.
The reasons for such a situation include a low level of interaction between local self-governing bodies and the tax office, as well as the insufficient work of local communities on the inventory of taxable objects, he added.
Export and import licenses. The Cabinet has approved the lists of goods that are limited in their import/export quotas for 2024.
According to the document, the following are subject to licensing: wheat and a mixture of wheat and rye (code 1001 according to the Ukrainian classification of foreign trade goods); rye (1002); barley (1003); oats (1004); corn (1005); soybeans, ground or unground (1201); rapeseed or colza seed, ground or unground (1205); sunflower seeds, ground or unground (1206 00); soybean oil and its fractions, refined or unrefined (1507); sunflower, safflower or cottonseed oils, refined or unrefined (1512); rapeseed or mustard oils and their fractions, refined or unrefined (1514); cakes and other solid waste and residues obtained from the extraction of vegetable or microbial fats and oils, excluding waste of 2304 or 2305 headings, ground or unground, granulated or non-granulated (2306).
Read also: Poland maintains Ukraine grain import ban, proposes new trade rules to EU
The State Customs Service was obliged to enter information on the volume of export or import of goods, the licensing of which is provided for by the resolution, on the day of export or import of goods into the single state information web portal called the “Single Window for International Trade.”
Pensions and social benefits. Several benefits standards, including the minimum wage and living wage, have been updated in Ukraine on Jan. 1, 2024.
“The minimum wage has increased by 6% from UAH 6,700 ($176) to UAH 7,100 ($186). Another increase is scheduled for spring. The living wage has increased by an average of 12% to UAH 2,920 ($77). The minimum state pension in Ukraine has increased from UAH 2,093 ($55) to UAH 2,361 ($62). Pension [inflation] indexing is planned from March 1. This will be one of our priorities this year. We’ll pay pensions and benefits on time. We have internal resources, as well as support from our partners,” said Ukrainian Prime Minister Denys Shmyhal.
The week in numbers
Ukraine expects to receive $37 billion in international aid from partners in 2024.
UAH 40.5-41 per U.S. dollar is the projected exchange rate by late 2024, as predicted by Vitaliy Vavryshchuk, the head of the Macroeconomic Research Department of Investment Capital Ukraine Group (ICU).
$44 billion is Ukraine’s need to finance the budget deficit, according to Chief Investment Officer at Capital Times Artem Shcherbyna.
Notable quotes
“Kyivstar nationalization is a bad idea. No one would want to manage a stolen asset,” said former Kyivstar CEO Petro Chernyshov.
“No collapse in the power system will take place. The enemy won’t achieve this,” said Volodymyr Kudrytskyi, CEO of Ukraine’s power grid operator Ukrenergo.
“The IMF program foresees a reduction of security risks at the end of 2024 and, accordingly, a reduction of Ukraine’s external financing needs in 2025 by 40% year-over-year, to $24 billion,” said investment company Dragon Capital’s Chief Economist, Olena Bilan.
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Read the original article on The New Voice of Ukraine
