Today's Contents
Reporter's Notepad:
- Shifting the Ukraine story to attract investors and donors
Just The Facts:
- France started talks with Ukraine on minerals access months ago, defense minister says
- Ukraine seizes assets of Russian oil & gas giant Tatneft
- Central bank says Revolut needs license to operate in Ukraine
- European leaders to meet next week to consider appointing envoy for possible peace talks
- Oschadbank, Energy Company of Ukraine partner to support lending to communities for energy projects
Here's What They Think:
- GRF CEO: Ukraine should be integrated into global carbon markets to fill reconstruction funding gap
- Amnesty: US-drafted UN resolutions threaten human rights, peace in Ukraine
Sober Second Thought:
- Defense to drive Europe's economy post-ceasefire, fueled by Ukraine exports, BNP Paribas says
Dear subscribers,
URN Daily is attracted to the broader narrative behind the Ukraine reconstruction, which can be framed in many ways. Perhaps a heart-warming story of rags to riches, or from victim to champion. From old to new, East to West. Or a story of rebirth and renewal.
One narrative that's highly practical for investors and donors in the reconstruction came up in a conversation this morning between URN Editor Adam Brown and Markus Lux, the head of the Ukraine desk at the Robert Bosch Foundation, the philanthropic organization that owns a majority stake in Robert Bosch GmbH.
Three years into the war, the narrative surrounding support for Ukraine is shifting, due to donor fatigue, the Israel-Gaza crisis and political upset around the world, Markus said.
To keep the international help coming in and encourage investment, Ukraine can no longer be seen only as a charity case. It needs to be a font of social change and technological innovation for the Western world.
That shift in the narrative is quite possible and, indeed, already seems underway.
Here's a snippet from Markus's comments:
"The problem of declining funding for Ukraine is that, after three years, it's no longer emergency response. We have to convince funders and donors and investors to shift away from the 'oh poor people' view of charity."
"We have to switch to the attitude of: 'Oh! Ukraine has something innovative - not only for the country itself, but also for other countries as well.' This shift is already clear in the military sector, with so many investors interested in the technologies they develop. But it can include AI, where Ukrainians have so many brilliant applications of use in the European market. It can also be a shift to social innovation."
"It's really walking on the edge to make this shift from charity to mainstream (in the standard of support)," Markus said. "It's a challenge to convince the boards of foundations and private family offices to do this. Therefore we have to present a picture of not only a country in need, but as a country full of innovation with a possible impact on Europe or even the globe. This is a task I see for the near future."
In a related and equally interesting comment, he spoke of how Ukraine and its international partners can take the lead worldwide in shifting attitudes toward mental health and trauma.
"Ukraine is the first country I know where it's officially discussed: 'What does traumatization for the whole country mean?'"
"Ukraine is open. It's not afraid to show its weakness and to show its responsibility."
He said his foundation wants to help use Ukrainians as an example for other traumatised areas of the world, such as in the Middle East.
Markus also had some very interesting advice for investors in the reconstruction of Ukraine, coming from his unique perspective. But we'll save that for another day, along with further details of Robert Bosch Foundation.
Now, on with the day's headlines ...
France started talks with Ukraine on minerals access months ago, defense minister says
France has been holding discussions with Ukraine since October last year about access to Ukraine's deposits of critical minerals as it looks to diversify its supply, French Defense Minister Sébastien Lecornu told France Info on Thursday.
"We are speaking about this issue for our own French needs. I have defense industries that will need access to a certain number of raw materials in the years to come," Lecornu stated.
The minister said that French President Emmanuel Macron tasked him with initiating discussions and that he has been in direct contact with his Ukrainian counterpart to expand the number of countries France sources the rare minerals from.
"We have to diversify that. Emmanuel Macron has asked that I also start discussions with the Ukrainians ... I have been doing so since October," Lecornu said.
He said France may consider buying minerals from Ukraine but is not seeking access to them as a means to recover the billions of euros in military and other aid it has provided to Kyiv to bolster Ukrainian defenses against Russia's invasion.
"We are not looking for payback. But our defense sector will need a certain number of raw materials that are absolutely crucial in our own weapons systems ... for the next 30 or 40 years," Lecornu stated, implying the discussion is at an early stage.
Ukrainian President Volodymyr Zelensky is set to travel to Washington on Friday where he will reportedly sign a minerals deal with the US which envisions the establishment of a fund into which Ukraine would contribute 50% of proceeds from the "future monetization" of state-owned mineral resources, including oil and gas, and associated logistics.
Ukraine seizes assets of Russian oil & gas giant Tatneft
Ukraine's Justice Ministry said on Thursday that assets of Russian oil and gas major Tatneft in the country have been seized and transferred to the state following a ruling by the High Anti-Corruption Court.
The confiscated assets include a 100% stake in Tatneft-AZS-Ukraine, a 92.98% stake in Kharkiv-Capital, and an 88.97% stake in Poltava-Capital.
These companies own oil depots, gas stations, non-residential buildings, land plots, fuel trucks, and cars in Ukraine's Kharkiv and Poltava regions, the Justice Ministry said in a press release.
Deputy Minister of Justice of Ukraine Inna Bohatykh said in a post on Facebook last month that these assets are estimated to be worth about UAH 2 billion ($48 million).
"This company, strategically important to the aggressor state, consistently pays substantial taxes to the Russian budget, which funds the development and maintenance of Russia's military-industrial complex," the ministry said in the statement.
"Tatneft enterprises strengthen Russia's energy and economic potential, which is being used by its political leadership to wage an aggressive war against Ukraine," it added.
Following Russia's invasion of Ukraine in February 2022, the Ukrainian government began to take measures against Russian businesses operating in Ukraine. Nationalization was seen as a way to protect the country's economy, ensure the stability of critical industries, and prevent the benefits of these companies from supporting the Russian state.
Central bank says Revolut needs license to operate in Ukraine
The National Bank of Ukraine (NBU) said on Thursday that Revolut needs a license to operate in Ukraine after the UK-based fintech said earlier this month it had launched services in the country.
Ukraine's central bank said that Revoult is providing services to Ukraine's residents through Lithuania-based Revolut Bank UAB which has a license to operate in European Union countries.
"According to the Law of Ukraine On Banks and Banking, the only permissible forms of doing banking business in Ukraine are by establishing a foreign bank's branch or by obtaining a Ukrainian-issued banking license," the central bank said in a press release. "Either of these options requires the NBU's permission."
To date, Revolut Bank UAB has obtained no licenses or permits from the NBU, has not submitted any relevant applications, and is not undergoing the business licensing process, as per the statement.
Ukraine's central bank warned that local legislation on consumer protection in financial services and on the deposit guarantee system does not apply to Revolut customers, adding it will take measures to respond to violations of the law and protect the interests of bank depositors and customers.
Earlier this month, Revolut said it had launched services in Ukraine, allowing citizens to open European Revolut accounts. The company also stated at the time the new account holders in Ukraine can undergo the onboarding process via the government Diia app used to provide digital services to citizens.
European leaders to meet next week to consider appointing envoy for possible peace talks
European leaders are considering appointing a special envoy to represent the European Union in possible talks to end the war in Ukraine, unnamed sources told Bloomberg.
The leaders will discuss the proposal at an emergency meeting set for March 6 in Brussels to discuss possible increases in European defense spending and arms supplies to Ukraine, the news agency reported.
Ukrainian President Volodymyr Zelensky has been invited to the meeting, Bloomberg reported. Ukraine earlier called for the creation of such an envoy position, as have several other European figures, including Finnish President Alexander Stubb, have supported creating an envoy position for peace talks.
European leaders are seeking to avoid being shut out of talks aimed at ending the Russian invasion of Ukraine, after the US held talks with Russia in Riyadh last week without inviting representatives from Ukraine or the EU.
Oschadbank, Energy Company of Ukraine partner to support lending to communities for energy projects
Ukraine's state-owned Oschadbank and the energy trading firm Energy Company of Ukraine (ECU), also state-owned, have established a joint program to make it easier to lend to and implement new energy projects in Ukraine's local communities.
The ECU will analyze the economic and technical aspects of community-led projects seeking funding. It will also provide communities with market-based tools to enhance the economic efficiency and sustainability of these projects, such as collaboration in self-production mechanisms and forming aggregated and balancing groups.
The economic models created by the ECU will serve as the foundation for assessing the profitability and repayment potential of projects when Oschadbank decides on lending, Oschadbank said in a press release on Thursday.
"According to our experience, one of the barriers to the development of decentralized generation is the lack of relevant competence in the vast majority of small communities," said Yurii Katsion, Deputy Chairman of the Management Board of Oschadbank in charge of corporate business.
"Engaging the specialized expertise of the ECU will allow communities to assess the potential for developing their own energy projects, which can not only ensure uninterrupted energy supply or replace it with their own generation, but also bring income to the community budget," he added.
Ukraine has been focused on decentralizing generation as Russia has been targeting the country's power network, reportedly destroying more than 80% of energy infrastructure since the start of the full-scale invasion in February 2022.
Loans for decentralized generation projects are thus becoming increasingly important as Ukraine seeks to enhance its energy security and promote renewable energy sources.
Ukraine Finance Ministry adopts Bloomberg 'switch auction' feature to ease debt exchanges
Ukraine's Ministry of Finance and the National Bank of Ukraine carried out the country's first "switch auction," a mechanism that eases the exchange of old government debt into new debt, using the new Bloomberg Auction System, according to a press release.
Ukraine has been using the Bloomberg auction system for government bond auctions since 2019, and the introduction of the new feature allows the mass exchange of previously issued government debt, referred to as "off-the-run," with newer issued or auctioned instruments, or "on-the-run."
The new feature lets market participants bid on new bonds in exchange for shorter-maturity or illiquid bonds in a single transaction, instead of in two separate transactions, streamlining the settlement process, Bloomberg said in a press release.
"The introduction of switch auctions marks a significant step forward in the development of Ukraine’s government bond market and its alignment with other markets internationally," said Yuriy Butsa, Ukraine’s government commissioner for public debt management, adding it will "positively impact the liquidity of the instruments traded on the market."
He said the "new auction mechanism enhances the efficiency of debt operations in the local market, while providing market participants with an additional tool to manage holdings of Ukrainian government bonds."
Beyond News: Tidbits Found Around the Internet:
Top 5 ways for foreign businesses to invest in Ukraine’s mineral resources
Oleksandr Melnyk, partner at Ukrainian law firm Golaw, outlined five ways that foreign investors can access investments in Ukraine's mineral resources in an article on legal research platform Lexology.
#1 - Participating in auctions for special permits for subsoil use.
Special subsoil use permits are granted through competitive electronic auctions on the Prozorro.Sale platform.
#2 - Investment through a production sharing agreement.
"The law allows both Ukrainian and foreign legal entities to be parties to a PSA."
#3 - Acquiring a company with a subsoil use permit.
"This process requires the availability of acquisition opportunities, which is not always common."
#4 - Privatization of state-owned mining assets
"Ukraine is currently undergoing privatization of state-owned enterprises, including mining companies."
#5 - Partnership or establishment of a joint venture
"Foreign investors may also partner with Ukrainian companies that already hold the necessary permits by establishing a joint venture."
Metinvest's Steel Dream
In an interview on the S&P Global website, Metinvest CEO Yuriy Ryzhenkov explains his company's Steel Dream project.
Steel Dream aims to rapidly rebuild Ukrainian infrastructure using steel in a compendium of more than 200 ready-made projects based on three prefabricated steel solutions: frame, module and platform, according to the article.
Ryzhenkov said his company also plans to restore its steel mills and blast furnaces to full operational capacity to help with the reconstruction.
GRF CEO: Ukraine should be integrated into global carbon markets to fill reconstruction funding gap
Access to carbon trading access would provide Ukraine with the financial resources to undertake large-scale projects, including energy, infrastructure, and restoration, Nataliya Katser-Buchkovska, CEO of Green Resilience Facility, wrote in an op-ed for TheCityUK.
Directing the reconstruction fund through carbon credits and green finance will fast-track sustainable rebuilding, enhance energy security, restore nature, and support communities, as well as small and medium-sized businesses, benefiting both Ukraine and its partners, Katser-Buchkovska noted.
Amnesty: US-drafted UN resolutions threaten human rights, peace in Ukraine
The US failed to refer to Russia as an aggressor in two UN resolutions it drafted to mark three years since the war in Ukraine started which undermines efforts to hold perpetrators of human rights violations and international crimes accountable, Joyce Bukuru and Ben Linden, experts from Amnesty International, wrote in an analysis.
Experience from other conflicts shows that unchecked impunity for human rights violations and war crimes fosters further crimes under international law, which is why the US should work with its partners to make sure that Russia's aggression against Ukraine is condemned, Bukur and Linden argued.
Defense to drive Europe's economy post-ceasefire, fueled by Ukraine exports, BNP Paribas says
A potential ceasefire in Ukraine, under a scenario where the agreement freezes the conflict along the current frontline, should drive near-term GDP growth of European countries through increased demand while also creating opportunities for long-term gains in potential output, Isabelle Mateos y Lago, BNP Paribas Chief Economist, wrote in a recent research note.
The biggest driver of economic growth in Europe will be higher defense spending, Mateos y Lago wrote. Previously, analysts expected peace to boost Europe's economy by increasing confidence. However, this is now being offset by the unexpected possibility of the US shifting its focus away from Europe.
To compensate, Europe may need to spend an extra $250-300 billion a year on defense, raising total defense spending from 2% to 3.5% of GDP. Studies suggest that for every 1.5% increase in defense spending, GDP could rise by 0.9% to 1.5%. In addition to this short-term boost, investing in defense-related R&D could also improve productivity and benefit the broader economy, according to Mateos y Lago.
Europe's economy could get an extra boost from increased exports to Ukraine as the country begins rebuilding, Mateos y Lago wrote. Funding of Ukraine's reconstruction, now estimated at the cost of over $500 billion, will be a challenge, especially since there is no global agreement yet on using frozen Russian assets. However, the EU has already pledged €50 billion to help rebuild key infrastructure like housing, transportation, and industry, Mateos y Lago pointed out.
In the long run, closer economic ties between Ukraine and the EU could benefit both, as Ukraine has valuable natural resources and the potential to become a tech and AI hub, according to the BNP Paribas expert.
The return of refugees to Ukraine may slow European growth, but the impact is expected to be small and gradual, while decisions on using Russian gas through the Ukraine pipeline will greatly affect both growth and inflation.
"In sum, while deep uncertainties remain, a ceasefire broadly along the lines of our central scenario, coupled with sensible economic policy decisions, can be seen as another upside risk to the European outlook," Mateos y Lago concluded.
3 Years no Vacation
Kostiantyn Koshelenko, deputy minister of social policy for Digital Transformation and the author of the book "Management in Times of War," announced on social media that he will leave the post next week .
"The decision was made last fall after delivering major projects and finalizing the digital strategy until 2027," he said. "What’s next for me? A new challenge in the private sector, while continuing impact-driven work via NGOs & supervisory boards. But first, some time with family—three years, no vacation!"
Plan for Energy-Efficient Reconstruction
The Ukrainian think tank DiXi Group promoted a "step-by-step plan" it drafted together with BPIE - Buildings Performance Institute Europe to achieve an energy-efficient reconstruction.
"Our think tank has already been working with communities and helping them develop municipal energy plans. The experience gained, as well as the opportunities available in both 🇺🇦 and 🇪🇺, have been summarized by experts in the analytical document presented."
Future Ride-Hailing Law
Yuliia Malich, head of public policy and government relations at Bolt in Ukraine, recapped a roundtable discussion it had with Deputy Minister Serhiy Derkach and others on the future of ride-hailing legislation.
She said they agreed on the following next steps: work with the Ministry to simplify the licensing process for drivers, ensure alignment between ride-hailing regulations and upcoming taxation reforms, develop a framework that fosters innovation, enhances safety, and ensures fair competition.
New Rapid Enterprises Survey (NRES)
ECA Ukraine, the government export credit agency, promoted the latest New Rapid Enterprises Survey (NRES) looking at the situation of businesses in Ukraine, along with insights from the IER (Institute for Economic Research and Policy Consulting).
The NRES for January showed 54% of businesses were operating at full capacity and 39.4% of exporters expect shipments to grow in the first quarter. At the same time, labor shortages affect 65% of companies and security risks are a major concern for 52%.
Review of Trump-Zelensky Deal
Maksym Maksymenko, partner at Ukrainian law firm Avellum, published a clearly written review of the natural resources deal that Ukrainian President Volodymyr Zelensky is expected to sign with US President Donald Trump today.
"The deal, officially titled the Bilateral Agreement Establishing Terms and Conditions for a Reconstruction Investment Fund, marks a new level of interstate cooperation," he said. "Despite the tough negotiation process, the Agreement can boost economic ties between the two countries if correctly implemented."
The Reconstruction DREAM
DREAM - Digital Restoration EcoSystem for Accountable Management, the platform that collects and publishes data on reconstruction projects, posted a series of statistics and infographics about how it is being used.
"As of February, over 1,265 communities, military administrations, and all sectoral ministries have worked with the ecosystem, according to the post. "Over 4,100 projects are being implemented in the education sector, and over 1,500 in the healthcare sector."
URN Daily: Sense Bank and Ukrgasbank for sale? And US seeks to cancel $4.7 billion of Ukraine's debt
