Austrians Put Brakes on New Ukraine Investment

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Austrians Put Brakes on New Ukraine Investment 8 Business April 22, 2016 www.kyivpost.com Editor’s Note: World in Ukraine takes a look at Ukraine’s bilateral relations with different nations. To sponsor this news feature, please contact the Kyiv World in Ukraine Post’s sales team at [email protected] or call 591-7788. In partnership with FREYWILLE Austrians put brakes on new Ukraine investment BY YULIANA ROMANYSHYN [email protected] Austria, with its historically deep ties to Ukraine, is one of the coun- try’s most important sources of investment. But Ukraine’s economic crisis, unstable politics and the phantom cease-fire in the eastern Donbas have put fresh Austrian investment – which stands cumulatively at $2.4 billion – on hold for the most part. But even so, Austria remains Ukraine’s fifth biggest investor after Cyprus, the Netherlands, Germany and Russia. Moreover, some companies are even reporting growth. Insurance doing fine There are 43 subsidiary enterprises of Austrian companies in Ukraine. But no new Austrian businesses have entered Ukraine over the past two years, according to Ukrainian- based Austrian business consultant Rainer R. Staltner. The largest Austrian enterprises in Ukraine operate in the bank- ing and insurance sectors, with Raiffeisen Bank Aval and Vienna Insurance Group being the most high profile. Represented in 24 countries, Vienna Insurance Group has found- A participant practices during Red Bull’s Vienna Air King dirt jumping competition event held in Vienna on April 6, 2013. (AFP) Austria at a glance Total area: 83,871 square kilome- ters ed four insurance companies in Population: 8.534 million Ukraine: the Ukrainian Insurance Government type: parliamentary Group, Kniazha, Globus and Jupiter. republic Together, they have a market share Head of state: President Heinz of 4.2 percent, according to VIG’s Fischer 2014 report. GDP: $436.34 billion (2014) For VIG, Ukraine remains a GDP per capita: $51,159 (2014) core developing market, a senior Main sectors of the economy: executive of VIG in Ukraine, Gary food and drink industry, mechanical Wheatley Mazzotti, told the Kyiv and steel engineering, chemical and Post. automotive industry, electrics and He confirmed that despite the electronics industry, wood, pulp and economic turmoil, VIG is still doing paper industry. good business. During 2015, the income of VIG in Ukraine was €54 Ukrainian-Austrian relations million, which was still 14.6 percent less in euros compared to the year Trade: $812 million (2015) before. But Mazotti is happy with Exports from Austria to Ukraine: this result: In hryvnia terms, VIG is chemical products, machinery, phar- doing well. maceuticals The company’s trump card is its Exports from Ukraine to Austria: Austrian origin. raw metals, toys, wood “Customers in Ukraine see the Austria investment in Ukraine: $2.402 billion (2015) value of being insured by an inter- Import: $335 million (2015) national insurance group,” Mazzotti Export: $477 million (2015) said. Main business partners: Raiffeisen Bank Aval, Vienna Investors on standby Insurance Group, Fischer- Those investors who came to Mukachevo UAP, Billa-Ukraine / Ukraine before Russia launched REWE GROUP A tourist climbs a hill near the slalom course track of the FIS Ski World Cup in Kitzbuehel, Austria on Jan. 22. more Austria on page 11 (AFP) www.kyivpost.com April 22, 2016 Business 9 A Raiffeisen Bank Aval van idles outside one of the bank’s branches in Kyiv, on April 21, 2016. Documents released in the Panama Papers leak reveal ties between the bank and President Petro Poroshenko. (Kostyantyn Chernichkin) Austrian authorities review Raiffeisen after Roshen loan emerges in Panama Papers BY JOSH KOVENSKY man Christof Danz told the Kyiv Post ties, “we bid farewell to all the debts [email protected] that the bank does not comment on and started on a new page.” ongoing investigations or individual Stefes does not keep his busi- President Petro Poroshenko’s off- clients but complies with all laws. ness confined to Ukraine. The shore financial affairs may be casting Liechtenstein company DDE Farm a longer shadow than previously Links to the top that received the initial loan that was thought. In early April, Austrian magazine collateralized by Linquist Services, is The Austrian Financial Market Falter published an article implying owned by both Stefes and Valentyna Authority is investigating whether that Raiffeisen had laundered money Potapova, another Ukrainian Shtefes Raiffeisen Bank International com- on behalf of Poroshenko and gave a executive. plied with anti-money laundering $115 million loan to his confection- The Kyiv Post was told “not to controls. The review was prompt- ary company, Roshen, in 2010. call back” after telephoning the ed by leaked documents from According to Falter journalist Liechtenstein address at which DDE Panamanian law firm Mossack Josef Redl, the Roshen loan was one Farm is listed. In a phone call Fonseca that revealed a series in a decade-long series of lending with the Kyiv Post, Stefes said that of loans going from the bank to arrangements. For all of the loans, “Poroshenko’s business is a customer Poroshenko-affiliated companies, a British Virgin Islands-registered for me. Raiffeisen Bank was helping with a British Virgin Islands offshore offshore company called Linquist me when I was in Ukraine the first company used as collateral. Services Limited was held up as col- time. There was a very corrupt sit- “There have been some concerns lateral. The journalist discovered it in uation, it was helping me to get the about financing by Raiffeisen Bank the leaked Panamanian documents. first financing for my business here International going to companies According to Redl, the documents in Ukraine. And Poroshenko is no whose ultimate beneficial owner is show a series of loans going back longer in the business.” Petro Poroshenko, so we ordered an to 2003, many of which appear to The firm at the center of the on-site inspection,” Klaus Grubelnik, be linked to companies close to Panama Papers controversy – a representative of the Austrian Poroshenko. Linquist Services – also appeared Financial Protection Authority, For example, in February 2003 in the 2013 sale of Ukrainian told the Kyiv Post in a telephone Raiffeisen extended a €191,625 loan Media Holdings by Presidential interview. to a Liechtenstein pesticide manufac- Administration chief of staff Borys “It’s all due to concerns under the turer called DDE Farm AG. Lozhkin to now-exiled oligarch law against money laundering," he According to Ukraine’s customs Serhiy Kurchenko, suspected to be added, declining to comment further, registry, DDE Farm exports pesti- the front man for ex-President Viktor citing secrecy requirements due to cides to two Ukrainian companies: Yanukovych. the ongoing investigation. Zorya Podillya, a sugar production According to a 2015 investiga- For Raiffeisen, however, the firm owned by Poroshenko, and tion by news website Expres.ua, Poroshenko-related transactions are Margo. Poroshenko held shares in UMH only the latest in a series of transac- Margo is owned by a firm called through Linquist Services. Expres tions over decades involving promi- Shtefes, according to the company’s claimed that Linquist’s shares in nent Ukrainians. website. Shtefes is an agriculture UMH disappeared days before Industrialist Dmytro Firtash had company owned by a man named Lozhkin sold the company to a Raiffeisen account frozen by the Johannes Herbert Stefes, an 88-year- Kurchenko. U.S. Justice Department as part of old German who moved to Ukraine his indictment on bribery charges, in the 1990s to start a business. Longstanding ties allegations that he is denying from In a 2010 interview with Ukrainian Raiffeisen appears to have main- his exile in Vienna. agriculture magazine Zerno, Stefes tained links with top Ukrainian busi- Poroshenko Bloc lawmaker Ihor said that his business’s first main nessmen and politicians since the Kononenko, meanwhile, was found client was Oleksiy Ivanovych early 2000s. to be linked to an account at the Poroshenko, the president’s father. In 2006, U.S. diplomatic cables bank through a British Virgin In the interview, Stefes said that his leaked by Wikileaks showed that top Islands-registered offshore company fledgling company was owed money U.S. officials pressured Raiffeisen called Intraco Management. by local farmers, but that after meet- Raiffeisen International spokes- ing the elder Poroshenko in the nine- more Raiffeisen on page 11 10 Business April 22, 2016 www.kyivpost.com Despite Austria’s neutrality, Ukraine gets some backing BY BRIAN BONNER Minsk peace agreements: cease-fire, [email protected] disarmament and return of Ukraine’s eastern borders to its control. One of American President John But Austria is not actually neutral F. Kennedy’s favorite quotes was in all areas. While not a NATO inspired by Dante’s Inferno: “The member, Austria is a member of hottest places in hell are reserved the European Union and supports for those who in time of moral crisis the economic sanctions imposed preserve their neutrality.” against Russia for its forced seizure But what about Austria, where of Ukraine’s Crimean peninsula in neutrality is enshrined in the 2014 and the current war in the Constitution, in the law and in the Donbas. psyches of this nation of 8.5 million Russia’s annexation of Crimea people? Neutrality became the price was “done against international law,” -- or condition -- that Austrians paid Poppeller said. “We will not recog- for national independence, insisted nize that breach of international upon by the Soviet Union, after the law.” World War II allies left in 1955. Another grievance for Ukrainians Today, this means that Austria is what is seen as Austria’s pro-Rus- has a hard time taking a stance sian political and economic stance. and assigning blame in Russia’s war The big Austrian energy company, against Ukraine, in particular the the OMV Group, has strong connec- failure of the Minsk II agreements of tions with the Kremlin’s Gazprom.
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