Contents
The Reporter's Notepad: Will loans to Ukraine be repaid? Investors from large private construction and engineering firms discuss the confusion that could stem from the concept of "blended finance," ending up with borrowers refusing to repay loans.
And, based on back-of-the-envelope calculations by an IFC official, private investment in rebuilding Ukraine could total $187 billion.
Just The Facts: The EBRD lends €62 million for a 147 MW wind farm in Ukraine and €40 million to boost Oschadbank's lending for small renewable energy projects. Plus, the US now expects North Korean troops to clash with Ukrainians "in coming days."
Here's What They Think: US interest in Europe, including the Ukraine conflict, is dwindling and the US presidential election won't change that, no matter who wins, according to an opinion piece in Politico.
Sober Second Opinion: The government debt restructuring and the $50 billion G7 loan have closed the financing gap but Ukraine could face serious economic and social consequences if international aid should falter, according to an analysis prepared for the European Parliament.
The Rebuilder's Social: The Ministry of Economy's investment portal developed with the UK government has added 31 new projects valued at a combined €2.1 billion, Nova Post co-founder announces SuperNova airline's Boeing is ready for commercial flight, and the economy minister visits Friendly Wind Technology LLC factory.
Will loans be repaid?
Dear subscribers - Following yesterday's debut of our "Way Behind the Paywall" segment, here's another snippet of overheard conversation from the 3rd Annual Ukrainian Infrastructure Forum in London.
This exchange captures part of the discussion that broke out around the suggestion that the Ukrainian side may consider some of the loans as a form of "war reparations," not to be repaid, ever.
"I do remember in the 1990s, there was confusion about what was debt to be repaid, and what was financial assistance," an audience member said to one panel of speakers. "The terms are used sometimes very broadly.
"Ukraine has been dealt a very bad war of aggression by Russia, so there's this feeling that Ukraine needs help. But of course, many people from the private sector are looking at Ukraine as a place to make money. So to what extent does that need to be fully clarified before the debt gets gets rolled out?"
Colin Ross, the general director for Ukraine of UK engineering firm Gleeds, concurred:
"One of the challenges for Ukraine is, even if there is a debt, there is an expectation that debt may be written off. The challenge is to ensure that there's a clear understanding."
The European Union's €50 billion Ukraine Facility, which is part grant and part loan, is one example that may be the center of confusion, he said.
"There is still an expectation that the loans won't be repaid," he said.
Rose Trigg, Bechtel's business development manager for heavy civil infrastructure in the EMEA region, said many future deals for the reconstruction of Ukraine will mimic this combination of debt, aid, and private-sector profit motives. Donor nations and development aid organizations could essentially piggy-back on projects carried out by private sector firms and commercial lenders.
"You'll have more of this in-between finance – somewhere between pure aid and commercial," she said, adding that her previous employer was UK Export Finance. "That's where a lot of the reconstruction work will be. Where there is commercial incentive, you've got the country's national contractors going in, and there's incentive for the donor countries to be involved.
New types of deal structures possible
"A lot of countries have institutions that are great at dispersing small amounts of overseas development assistance and technical assistance, but have no experience with capital projects, and are not able to go in and say, 'Great, we are going to start assessing and working on this hospital or this road.'
"We'll need to acknowledge that a lot of that debt coming in the form of officially supported credits will actually be aid by most definitions," she said. "And I think a number of countries are actually recognizing that up front and budgeting for that."
"It's a really interesting use case in terms of a lot of those middle-sector organizations that need to be more forward-leaning into blended finance in the aid space," she said. "And I think Ukraine is the push that will push them into that space."
Dan Aspleaf, the founder of CDM Engineering in Ukraine, returned to the original question:
"One insight from some of the discussions I have in Ukraine – it's really vital that the concept of war reparations be fully separated from money for reconstruction," he said. "Right now, the political narrative is mixing them together. And when you mix them together, the concept of any sort of debt financing just goes out the window. The narrative becomes Ukrainian people are owed this money - and they don't really differentiate between private sector investors or donor funds.
Most authorities aren't thinking of how to pay the money back
"Ukraine deserves war reparations – I'm not suggesting they don't. I'm simply suggesting that money for reconstruction or private sector investment be really categorized differently and talked about differently. The current state of affairs in Ukraine right now is not doing a very good job of that. It's raising expectations that I think are going to lead to some disappointment in different levels of the society. I don't see any way to avoid that at this point.
"Most of the municipal level authorities, utilities and state operators that I've talked to really aren't thinking of how to pay the money back when they get it. That's going to happen long after they've retired. It's not a consideration."
Dear readers - To follow up, here's a news story based on the rough calculations of the IFC and others in attendance on the conference, suggesting private sector investment in the reconstruction could approach $200 billion.
Private sector could invest $187 billion in Ukraine reconstruction, rough IFC calculations suggest
Private-sector business can be expected to account for a third of the investment needed to rebuild Ukraine after the war, with a focus on the agriculture, retail and energy sectors, a senior International Finance Corporation (IFC) official said.
"With major reforms in such sectors as infrastructure, the private sector could probably increase its contribution to even more significant levels," said Olena Voloshina, the IFC's chief of operations for Ukraine.
Voloshina pointed out that the latest World Bank estimate, compiled based on data available in January, placed reconstruction needs at $486 billion. That represented an increase of $76 billion from an estimate of $411 billion a year earlier. She spoke on the sidelines of the 3rd Annual Ukrainian Infrastructure forum
A similar increase for the past year would place the figure at $562 billion currently.
By those calculations, private sector investment would cover at least $187 billion
"What stays probably accurate is the fact that the private sector can cover at least a third of all the required reconstruction efforts," she said, adding that a study by the IFC conducted more than a year ago had initially arrived at the one-third estimate.
By those calculations, private sector investment would cover at least $187 billion, with the figure rising in the event of serious infrastructure upgrades, which the IFC and other organizations are trying to promote.
One such upgrade, for example, is the modernization of the two ports in Chornomorks, near Odesa on the Black Sea.
"As we speak, we are continuing with putting together concessions for the two ports," she said. "Strangely enough, there is interest from the private sector investors, so we are continuing. We're putting together the feasibility study, and we're hoping to be able to announce the tender pretty soon."
Voloshina, speaking with Ukraine Rebuild Newswire on the sidelines of the 3rd Annual Ukrainian Infrastructure Forum on London earlier this week, said the main source of funding, other than the private sector, could be the $300 billion worth of Russian assets frozen by the West and its allies after the 2022 invasion.
"I think it's a very low-end number"
"Everybody concluded that the main source should be Russian assets frozen in the West, and Western governments have all the possibilities to do that," she said. "Some of them are more active, like Canada, for example, or the United Kingdom," but there are "a lot of challenges for lawyers to do it in a proper way."
She didn't speculate as to where the bulk of the money would come from if the frozen assets aren't used for the reconstruction.
Yulia Klymenko, first deputy head of the transport and infrastructure committee of Ukraine's parliament, however, said the World Bank estimates that underpin the calculations are too low, meaning more investment would be needed.
"I think it's a very low-end number," she said, speaking at the same conference as Voloshina. But "I honestly do believe that the main part of the reconstruction will come from the private sector, not from the state."
"For that, we need to implement, in the legislation and regulations, very clear and smooth instruments, like concessions, like private public partnerships, like clear investments, clear guarantees, etc," she said. "Then we have a chance to reconstruct it fast and efficiently because the state sector, honestly, will be not so efficient as the private sector."
World Bank to launch $593 million program to support Ukrainian SMEs
The World Bank said it will launch a $593 million private sector development program in Ukraine to support 20,000 small and medium-sized enterprises (SMEs).
The Resilient, Inclusive, and Sustainable Enterprise (RISE) program will boost the efficiency of state support to SMEs with a focus on green competitiveness and help them preserve or create 40,000 jobs, the World Bank said in a press release.
The program, to be implemented by Ukraine's Economy Ministry, will improve the business environment with government-to-business digital services and enable SMEs to access export markets, as per the statement.
"The RISE Program is part of the World Bank's efforts to support the people and firms of Ukraine amid constant disruptions, power cuts, and labor shortages," said the World Bank Country Director for Eastern Europe, Bob Saum. "The program bolsters the Government of Ukraine's focus on private sector development as the primary engine of reconstruction and sustainable growth," he added.
Financing for RISE includes $283 million from the Japan-supported ADVANCE Ukraine trust fund, $300 million from the International Development Association (IDA) Special Program for Ukraine and Moldova Recovery, and $10 million from the Ukraine Relief, Recovery, Reconstruction and Reform Trust Fund (URTF).
The program is results-based financing that can be scaled up as additional funds become available, the World Bank noted.
North Korean troops likely to clash with Ukrainians 'in coming days,' Blinken says
North Korean troops deployed on the side of Russia are likely to enter the fight against Ukrainian forces in Russia's Kursk region "in the coming days," US Secretary of State Antony Blinken said.
"We now assess that there are some 10,000 North Korean soldiers in total in Russia. And the most recent information indicates that as many as 8,000 of those North Korean forces have been deployed to the Kursk region," Blinken said in a press conference late Thursday. "We’ve not yet seen these troops deploy into combat against Ukrainian forces, but we would expect that to happen in the coming days."
He said Russian troops have been training the North Koreans in artillery, drone use, trench clearing and other basic infantry operations characteristic of the Russia-Ukraine war, which suggests "that they fully intend to use these forces in frontline operations."
Blinken, speaking in a joint press conference with Defense Secretary Lloyd Austin and senior South Korean officials, also repeated calls for China to intervene to prevent the use of troops by North Korea, its ally.
"We’ve had communications with China," Blinken said. "In fact, we had a robust conversation just this week, and I think they know well the concerns that we have and the expectations that, both in word and deed, they’ll use the influence that they have to work to curb these activities. So we’ll see if they take action."
The press conference took place hours after North Korea conducted an ICBM test.
EBRD prepares €40 million facility to boost Oschadbank's lending for small renewable energy projects
The European Bank for Reconstruction and Development (EBRD) said on Thursday it aims to provide a €40 million unfunded portfolio risk-sharing facility for Ukraine's state-owned Oschadbank, to enable €100 million of new lending to Ukrainian entities.
The facility will partially cover the credit risk in newly originated sub-loans of Oschadbank in Ukraine, the EBRD said in a project document.
The funding will come under the EBRD's Energy Security Support Facility to finance energy generation, energy storage, and energy efficiency sub-projects, including Green Economy Transition-eligible sub-projects, to Ukrainian private businesses, regional municipalities, state-owned enterprises, and households.
Up to €20 million of risk shared sub-loans will finance long-term investments of small and medium-sized enterprises (SMEs) under the EU4Business-EBRD Credit Line with Incentives, which would enable the financing of long-term capital investments of SMEs to upgrade their technologies and equipment to EU standards.
The facility is pending approval on Dec 4, as per the document.
In April, the EBRD extended a €50 million unfunded portfolio risk-sharing facility to Oschadbank to unlock €200 million of new financing, primarily for small and medium-sized businesses in the agriculture, manufacturing, construction, transport and pharmaceuticals sectors.
Oschadbank is the Ukrainian successor to Soviet-era Savings Bank, ranking the second largest by assets (€8.7 billion, 12.6% market share) and retail deposits (17.4% market share) as of end-August 2024, according to EBRD.
EBRD plans to lend €62 million for 147 MW wind farm in Ukraine
The European Bank for Reconstruction and Development (EBRD) said it is considering providing a €62 million long-term senior loan to Wind Power GSI Volyn and Wind Power GSI Volyn 3, special purpose companies established in Ukraine to build and operate a 147 MW wind farm.
The wind farm is expected to generate about 380 GWh of renewable energy annually, resulting in CO2 savings of over 245,000 tons per year, the EBRD said in a project document published on Wednesday.
The EBRD said the total project cost amounts to €235 million.
Wind Power GSI Volyn and Wind Power GSI Volyn 3 are majority-owned by GNG Retail Limited and its subsidiary JSC Concern Galnaftogaz, or jointly GNG Group. GNG Group is Ukraine's largest transportation fuels retail company in terms of sales volume, according to EBRD.
The loan is pending an approval on Dec 4.
EBRD to provide €10 million grant to Ukrenergo
The European Bank for Reconstruction and Development (EBRD) has agreed to provide a €10 million grant to Ukraine's state energy transmission system operator, Ukrenergo, to cover the company's critical operational costs and help it maintain liquidity.
The grant agreement was signed on Oct 30, Ukrenergo said in a post on Telegram on Thursday.
"The EBRD is Ukrenergo's reliable partner, providing substantial support to the company during the war," Ukrenergo said, noting the lender's previous grants and loans were directed to the restoration of the transmission system network, the purchase of autotransformers, and to support the company's liquidity.
The EBRD also finances works on the installation of passive protection at key Ukrenergo substations, as per the statement.
New York-based entrepreneur support network Endeavor opens Ukraine office
The New York-based global entrepreneur network Endeavor has opened an office in Ukraine, it said in a post on LinkedIn on Thursday.
"Endeavor Ukraine will select and support high-impact entrepreneurs, connecting them with a global network of mentors and investors, whether they're in Ukraine or abroad," the company said.
Endeavor is an entrepreneurial-support community that connects entrepreneurs with mentors and investors. It has over 45 offices globally which have supported 2,600 entrepreneurs, created over 4.1 million jobs, and generated annual revenues of over $67 billion, it says on its website.
The European Bank for Reconstruction and Development (EBRD) and the Ukraine-Moldova American Enterprise Fund (UMAEF) supported the opening of the Endeavor office in Ukraine. The EBRD provided $250,000 and the UMAEF provided $200,000, Forbes Ukraine reported.
Ukraine budget passed in initial parliament vote allots $54 billion to defense
Ukraine's draft 2025 budget, approved by parliament on Thursday in the first reading, allots UAH 2.2 trillion ($54 billion) to national security and defense, the finance ministry said in a press release.
The spending is equal to 26% of Ukraine's GDP and represents an increase of UAH 46 billion from the 2024 budget, the ministry said.
Overall, budget revenue is set at UAH 2.7 trillion, which is UAH 411 billion more than 2024. Expenditures are also expected to rise to UAH 3.6 trillion, which is UAH 535 billion more than in 2024.
Since the government submitted the draft budget to the parliament on Sept 14, MPs, and parliamentary factions, groups, and committees submitted 2,099 proposals to the draft law, the ministry stated.
The second reading is to be completed by Nov 20, and final adoption by Dec 1.
Longer Reads
NY Times: Russia’s swift march forward in Ukraine’s east
In a feature story studded with charts and maps, the New York Times tracks recent gains made by Russian forces in eastern Ukraine, concluding that "relentless attacks are now starting to pay off."
In October, Russia made its largest territorial gains since the summer of 2022, seizing more than 160 square miles of land in the Donbas region, as outnumbered Ukrainian forces grow weary, the newspaper writes.
"Ultimately, experts say, these gains, among the swiftest of the war, will help the Russian army secure its flanks before launching an assault on the city of Pokrovsk, a key logistics hub for Ukrainian forces in the Donbas," according to the article.
Politico: It doesn't matter if Trump or Harris win. Europe has already lost.
US interest in Europe, including the Ukraine conflict, is dwindling and the US presidential election won't change that, no matter who wins, Politico writer Nicholas Vinocur says in an opinion piece.
He argues that outgoing President Joe Biden engaged firmly on the Ukraine issue, but his successor, whether Donald Trump or Kamala Harris, will not likely follow his example.
"Biden is bound to be America’s last Cold War president," he writes, then predicts an incoming "crop of policymakers who don’t feel Russia poses a core threat to U.S. interests, or have a vastly shrunken sense of Washington’s role in the world. Even Biden, when push came to shove, let Washington’s prioritization of the Indo-Pacific area shine through.”
"Europe just isn’t as important to Washington as it once was. Aging and shrinking, allergic to power politics, fractious and risk-averse, Europe increasingly elicits not fondness in many Americans but sneering disdain — a place good for holidays and not much more," he writes. "It doesn’t help that the performance gap between the American and European economies is widening inexorably, to America’s advantage."
Atlantic Council: Putin faces tough choice as Russia's economy overheats
Russia's economy is stable but increasingly reliant on wartime dynamics, which leaves President Vladimir Putin with a dilemma: sustaining the war risks economic overheating, while peace could halt the military-driven economy and trigger a downturn, according to an Atlantic Council op-ed piece.
Russia's central bank raised its key policy rate to 21% in October, reflecting struggles to manage an economy strained by war, Mertens wrote, arguing that the Russian economy's long-term stability is increasingly uncertain. Rising inflation, the impact of sanctions, and unprecedented defense spending are among the factors fueling economic pressures, wrote professor of economics and finance at Kyiv's International Institute of Business, Alexander Mertens.
However, Russia's economy shows little sign of immediate danger. Still, prolonged conflict, combined with sanctions, military inefficiency, and corruption, could push the country into recession, according to Mertens.
Russia's defense allocations stand at 6% of GDP, the highest since the Cold War, Mertens wrote, arguing that this is not sustainable in the long run. While official figures suggest stability, declining export revenues and a dwindling National Welfare Fund signal deeper issues, he noted.
Drop in foreign aid could trigger domestic default, lower social spending in Ukraine, reports for European Parliament says
The recent government debt restructuring and the $50 billion loan promised by the G7 have closed the country's financing gap but Ukraine could face serious economic and social consequences if international aid should falter, according to an analysis prepared for the European Parliament.
A drop in international aid in the future "could lead to substantial economic and social consequences for Ukraine, with the likelihood of social spending cuts or domestic debt defaults," says the "in-depth analysis" report titled "IMF Lending to Ukraine: State of Play and the Road Ahead."
The report, which looks in detail at the IMF's loan conditions, also concludes that, if the war lasts much longer than expected, Ukraine could find it "very challenging" to meet core objectives of the IMF program, such as restoring fiscal and debt sustainability and achieving external viability.
"Despite these important risks, strong reasons for optimism can be derived from Ukraine’s resilience and performance under severe conditions so far, from the continuing support of international partners, and from the adaptability of the IMF in face of exceptional uncertainty," the report concludes.
Ukrainian Economy Minister Yulia Svyrydenko, one of the most prominent and prolifict Ukraine-related posters on LinkedIn, highlights her visit to the factory of Friendly Wind Technology LLC, which she said "plans to produce up to 20 wind energy units annually, each with a capacity ranging from 4.8 to 5.5 MW."
UNDP Ukraine announces a water plant in the Ukrainian city of Brovary signed a contract to install solar power under the ESCO loan facility. "In addition to five ESCO contracts for the thermal modernization of educational institutions, the city concluded two more energy service contracts for the installation of solar power plants (SPP) on the water supply facility."
Viacheslav Klymov, co-founder of Nova Post, Nova Group and SuperNova airlines, announced that the airline's new Boeing is ready to make its first commercial flight. "We received a commercial permit to fly within the EU. Our Boeing 737 is being prepared to fly charters for third-party companies. It has a Ukrainian certification number and will fly the Ukrainian flag."
The Ministry of Economy of Ukraine announces that the investment portal it developed with the UK government has added 31 new projects valued at a combined €2.1 billion, including in the energy, agriculture, mechanical engineering, logistics and green metallurgy sectors.