Issue 3

Roads Airlines Airports Tenders Railways Crimea Ports Borders 1

Ukraine’s Infrastructure Paves Way to Europe Managing Editor

Last year, when Ukraine’s Progress has been made, but the government secured the visa-free path ahead is still challenging and travel agreement and free trade expensive. pact with the European Union, it was rightly seen as a significant An estimated 90% of the country’s political victory. But it was also a railroad and rolling stock needs historic moment for the Ukrainian refurbishing or replacing; 80% of people. Ukrainian post offices don’t have computers and about $4.7 billion In the summer, as deals were per year is needed to repair and finalised, people unfurled banners upgrade dilapidated roads. and flags and once again took to Kyiv’s iconic Maidan Nezalezhnosti, An Infrastructure Revolution or Independence Square, site of the The challenge ahead – comparable 2014 Euromaidan Revolution. to how Eastern Europe began integrating to Europe and its But this time it was to celebrate. infrastructure in the 1990’s – can And instead of coming under sniper seem daunting. fire and attacks from Russian- backed thugs, residents of the Leading Ukraine into this new capital, public officials and foreign “Infrastructure Revolution” and friends came together to revel in period of intense modernization, is this historic step forward. 39-year-old Volodymyr Omelyan, Minister for Infrastructure. Pivot to Europe After years of constantly changing A former diplomat, Omelyan governments never firmly defining the country’s geopolitical position, is a fluent English speaker and Ukraine had now strongly pivoted persuasive advocate for improving towards the EU, and started the Ukraine through foreign investment. process of joining the European His ministerial portfolio is one family of peoples. of the broadest; he oversees an array of areas that ranges from But now, for Ukrainians to properly telecommunications, roads and benefit from the new free trade ports, to the state railroad and the pact and visa-free regime, the national post office. infrastructure must be in place to facilitate this. That means cheap To modernize his country’s flights from national and regional infrastructure, he courts a variety airports, as well as roads and rail of foreign friends who are all keen networks that seamlessly connect to invest in Ukraine, a vital cargo with Europe. corridor and important frontier for 2 3

international business. In Miami Over 2,100 kilometres of new road And now, for the new Ukraine, and New York, companies commit was laid in 2017, and 4,000 more revitalized transportation to investing in energy infrastructure will be completed in 2018. Through infrastructure will begin to while the Chinese and Europeans 2022, the state will spend at least strengthen her westward pivot, compete in tenders for improving $11 billion on more road repairs and paving the way for the country’s ports and building roads. upgrades while foreign companies future, allowing her peoples to take will finance new toll roads and their rightful place in Europe. Here, infrastructure is very much concrete highways. open for business: foreign capital Ports, roads and and expertise is seen as vital in the Regional airports are becoming coming crusade to bring Ukraine’s busier as low-cost airlines grow railways have always infrastructure up to standard. The in confidence and move into the state simply can’t foot all the bills market here. More Ukrainians than been a backbone for alone. ever before are taking to the skies and this is set to increase even successful nation Steady Progress more. For prospective investors, there are states and great plenty of reasons to start feeling Ports, roads and railways have confident. always been a backbone for empires successful nation states and great The country’s railway – carrying empires. In the 20th century United 440 million passengers and 445 States, the construction of new million tons of cargo per year – has roads was credited with helping to been privatized and is profitable. bring the country out of its Great American General Electric will Depression. upgrade their locomotives and rolling stock.

Opportunity Reports 4 Contents The Team 5

Managing Editor Page 6 Investing in asphalt: A road network for 2020 Jack Laurenson Natalia Datskevych Page 10 As air connections improve, Ukraine takes off Journalists Jack Laurenson & Antonina Tsymbaliuk Jack Laurenson Page 15 With Prozorro, everyone sees all Antonina Tsymbaliuk Natalia Datskevych & Vitalli Dubenskyi Natalia Datskevych Vitalli Dubenskyi Page 19 On the right track: Linking Ukraine’s railways to the EU Jack Laurenson Page 22 With Europe’s longest bridge, Russia tightens grip on Crimea Art Direction Jack Laurenson Martin Nunn Page 26 Upgraded Seaports funnel big business into Ukraine Design & layout Natalia Datskevych Whites Communication LLC Page 28 Upgrades needed for Ukraine’s western frontier Jack Laurenson Photo research Viktoria Nesterenko

Administration Elena Nunn

Production Alexander Bugay

Advertising sales UBJ Publications LLC

This report is published in cooperation with Ukraine’s investment promotion office, UkraineInvest.

Copyright © 2018 Frontier Markets Media Limited. All rights reserved. To republish any material please refer to / link to the Ukraine Business Journal (www.theubj.com).

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Disclaimer Nothing contained within this publication should be regarded as any form of recommendation to invest or divest. This publication may contain personal views, which are not the views of Ukraine Business Journal, UkraineInvest or its subsidiaries or associates unless specifically stated. The publisher does not carry any responsibility for views expressed in the publication.

Ukraine Business Journal Opportunity Reports 6 7

Investing in Asphalt: A Road Above: All over Ukraine, billions are being invested into repairing the Network for 2020 Ukraine country’s dillapidated roads and highways. by Natalia Datskevych

KYIV – Today, in Kyiv’s corridors of km however, and officials have a “More than $150 million will be power, legislators and planners are strategy for fixing much more in the allocated to repairing the highway mapping the highways and roads years to come. from [western] Lviv via Ternopil to that will connect Ukraine well [central] Uman,” said Volodymyr beyond 2020. Developing Ukrainian Roads Omelyan, Minister of Infrastructure, Under the government’s road in a recent interview with UBJ. It’s impossible to imagine a development program for 2018- functioning country without good 2022, about $11 billion will be spent “This highway connects the Baltic highways and robust traffic laws on repair and construction. States and the Black Sea, Gdansk that meet international standards. [Poland] and Odesa.” “Over the next 5 years, the length As for businesses, the quality of of repaired roads will be more than The bigger picture, is a planned roads directly affect the efficiency 10,000 km,” said Slavomir Novak, $1.9 billion highway project that of their activities and their ability to head of Ukrautodor. stretches across much of Ukraine. get goods to market. Most important for businesses, is According to Omelyan, the final But despite increasing car numbers the issue of highways that connect “Go Highway” route will be Lviv- and more international cargo Ukraine’s administrative regions Ternopil-Khmelnitsky-Vinnitsa- transiting the country, Ukraine and cities. Careful attention will be Uman-Odesa-Mykolaiv-Kherson. has been falling short of providing paid to the south of Ukraine, where Planners say that the duration of drivers with the quality of roads they need. Over the next 5 years, the length of With a total network of connected repaired roads will be more than roads and highways that measures 170,000 km, of which 94% have 10,000 km overdue repairs, improving the state highways is a challenge for the next decade. international cargo disembarks from average cargo transport will be advisory, more and more funds are strategy, they complain that the aren’t developing properly,” said ships entering port, and the west, reduced by 35%. being allocated to improving road road situation hasn’t improved Miagkov. “Such roads are extremely But progress has been made where thousands of trucks cross safety. Cash will be used to install much in the last 10 years. important for business.” in recent years. According to into Europe. $40 million will also be invested modern signage and reflective Ukravtodor, the state highways this year into repairing connections marking on roads and other Andrii Miagkov, a director at Gefco – a leading car transportation agency of Ukraine, the path to In 2018, ground breaks on the between certain western cities, important safety measures. the Gefco Company, has serious company with growing business interests in Ukraine – say that roads improvement is becoming clearer. build of a new concrete highway while spendings of $37 million will concerns about the quality of many connecting south-eastern Mykolaiv do the same in the eastern Kharkiv here are so bad they have to to Business Needs Better Roads roads in the country and says they impose a 100% higher depreciation In 2014 – a year famous for the with Kropivnitsky. Around Zhytomyr, region. It’s no secret that businesses here aren’t getting enough attention. rate, per kilometer, on vehicles. outbreak of revolution and war also close to the Black Sea, a put improving Ukraine’s roads Chinese contractor will begin Meanwhile, in a nation where here – only 102 km of highway was somewhere at the top of their “Development seems to be aimed One strategy to improve the construction of a vital new bypass not wearing seatbelts is standard repaired. In the last 2 years, this wish list. While many welcome only at transit roads, such as the country’s extensive road network, figure has climbed to about 3100 road. and speed limits often seem to be the government’s new transport Go Highway, but smaller roads that’s under careful consideration,

Opportunity Reports Right: Ukraine has 170,000 kilometers 8 of interconnected roads and highways 9 but most are in need of repairs and upgrades.

This highway is even more involvement of foreign Previously, such a concession investors. project would have been impossible connects the but new laws passed this year are Toll Roads: Investment Opportunity starting to open up Ukraine’s roads Baltic States and A key highway project, and an to foreign investment. opportunity for private investment in the Black Sea, Ukraine, are concessional roads that According to this law, the road drivers will pay a small fee to use. will belong to Ukraine once the Gdansk [Poland] concession – estimated to last from «Right now, we’re offering potential 20 to 30 years – ends. and Odesa investors a project that’s both understandable for investors, and According to Novak, investors who also easy to implement,” says see Ukraine as a risky investment Slavomir Novak of Ukrautodor. need not worry too much.

On offer, is the chance to finance “We’ve developed and adopted a vital new stretch of highway that a mechanism to compensate connects the western city of Lviv to potential investors for any Poland. difference between forecasted traffic and actual traffic,» he said. “This will be our first 4-lane highway,” he says. “The fee for With the toll road standing out as usage will be about Euro 0.10 per a new and fast corridor to Europe, kilometer, while the European if it’s built, the cars and trucks will average price is about Euro 0.20 per surely come. kilometer.”

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As Air Connections Improve, Ukraine Takes Off by Jack Laurenson & Antonina Tsymbaliuk

Kyiv and Lviv – Here in Europe’s from the state. The city – almost over one million passengers per the country’s airspace and needed For his part, Infrastructure Minister largest country, Ukrainians are 800 km from Kyiv – is currently year, while Ivano Frankisvk – 175 km special permission and assistance,” Volodymyr Omelyan agrees. In early taking to the skies like never before. reachable only by a 13-hour east of Uzhhorod – handles about he says. “And as Slovakia has joined April, on a visit to Zakarpattya, he From twenty airports around the overnight train or an 11-hour car 100,000. and integrated with the European surprised journalists by promising country, passenger numbers are ride. Union, bilateral agreements that the airport would reopen by climbing each year. But these airports are seen as between our countries have the end of 2018. In recent years, Slovakian day- basically useless for the residents of gradually become invalid.” Improvements to international trippers have begun shopping at Zakarpattya region. “We have a clear goal to launch and regional airports as well as cheaper Uzhhorod supermarkets, Rebirth of Another Air Hub full operation of Uzhhorod airport increased competition in the airline and many businesses being “Kosice International Airport in Today, Uzhhorod airport is ready to by the end of 2018,’’ he said. market has seen the total number purchased or started in the region Slovakia is 75km away,” says Edvard re-open for business. ‘‘ It should be ready for winter of fliers across all airports increase are being done so not by investors Malyar, in charge of infrastructure navigation as early as this autumn.’’ by almost 28%, year-on-year. from Kyiv, but Budapest, Prague or for Zakarpattya region. “And we Waiting areas and international Bratislava. don’t have to cross any mountains border points have been renovated, With Kyiv having approved $58,000 Visa-free access to the European Above: More Ukrainians than ever to get there. But this is a dynamic restaurants and bars upgraded and in necessary funding for the EASA Union, biometric passports and Situated behind the Carpathian before are taking to the skies as large and important border region new x-ray machines await passenger audit, and talks underway with economic recovery has also boosted mountains and with historical and investments are made into improving for Ukraine – we need our own luggage. a Slovakian company who are confidence in Ukrainians, who are cultural ties that deeply connect regional and international airports. airport.” interested in operating the airport now traveling abroad much more them to Europe, it’s no surprise that “We only need two things now to under concession, it looks as if frequently than in the past. people here can feel disconnected For Malyar, rejuvenating and start services again,” says Malyar, residents of Zakarpattya can once from Ukraine. reopening Uzhhorod airport who sees the airport becoming again take to the skies. 16.6 million travelers used Ukrainian became something of a pet project. an affordable regional hub for airports in 2017, and while the The region was better connected 16.6 million He believes it’s very important for Slovakians and Hungarians too. “We majority of these fliers (10.5 million) in the past. Up until 2013, his city’s future. need the The European Aviation passed through Kyiv Boryspil in the Uzhhorod International Airport – travelers used Safety Agency (EASA) to audit and Below: Ukraine International Airlines capital, regional air hubs are also the smallest air hub in the country “As we’re so close to Slovakia, approve the airport, and we need has been upgrading their fleet with the newest Boeing aircraft. becoming busier. – was operational and servicing Ukrainian airports flights to and from Uzhhorod use some airlines to move in.” a modest 550 flights per year, For 45 million inhabitants spread including a regular connection to in 2017 over 600,000 square kilometers of Kyiv. territory, more flight connections are seen as essential to reduce Fast-forward to 2017, and service journey times and bring people from the airport had dropped to together. only a handful of charter flights annually. Last year, only 182 Behind the Carpathians: Latest passengers passed through. In Airport to Reopen contrast, rival western airports have grown and expanded. The inhabitants of Ukraine’s western-most regional capital, Lviv – 175 km to the north, on the Uzhhorod, have often felt detached Polish border – now handles just

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New Airlines for New Airports the opening of regular Ukrainian This year, in a further boost to and international destinations,” said Ukrainian fliers, the country’s infrastructure minister Volodymyr flagship carrier Ukraine Omlyan, a persuasive advocate for International Airlines, or UIA, low-cost air travel in Ukraine. announced ambitious plans to improve their fleet and boost This summer, additional Boeing capacity. 737-800 planes will enter service for the airline, as they gear up to With 44 jets flying to 50 capital start regular flights. SkyUp have cities – or 3,000 total destinations, reportedly paid over $620 million via international connecting for five of the popular passenger partners – they’re the biggest airline aircraft. here. As SkyUp expand the number Yuri Miroshnikov In March, UIA announced plans to of aircraft in their fleet, they’re President Ukraine International Airlines modernise their fleet with the latest expected to carry more than Boeing 737s and Embraer 195s. 650,000 passengers within a year. By May the carrier had already welcomed their 30th Boeing 737- The airline plans to begin 800 and begun the final phase of connecting the airports of Kyiv, replacing their older aircraft. Kharkiv, Lviv and Odesa to 16 Plans for the first international destinations, including year of the airline Modernization is important, when Hurghada, Barcelona, Tenerife, competition is increasing. In the Alicante and Dubai. are not only the same month that UIA welcomed their new planes, low-cost carrier By the end of June, the company implementation SkyUp officially entered the market plans on adding regular domestic here, operating their first chartered flights too. of international flights to Sharm-el-Sheikh in Egypt. “Ukrainians want to fly,” said charter flights, but “Plans for the first year of the airline Omelyan. “So they should be given are not only the implementation of the opportunity.” also the opening of international charter flights, but also regular Ukrainian and international destinations

Opportunity Reports With ProZorro, Everyone Sees All by Natalia Datskevych and Vitalli Dubenskyi

KYIV – Few things affect the relationship between states and the businesses within them than the transparency and fairness of contract procurements. Levels of openness in this area are proven to build trust in political systems and make societies fairer and more open.

After centuries of authoritarian Russian influence here, Ukraine is beginning to catch on.

Signaling a tectonic shift in attitude, Ukraine this year climbs up all data, down to the tiniest detail, is Ukraine is starting to properly adopt international rankings into the disclosed. a new, open-source e-procurement the Top 50 most open countries in system, created as the result of the world, passing Italy, Portugal, That includes the list of all partnership between business, Greece and Israel to sit alongside participants, their bids, decisions government and civil society. Austria, Poland and Slovenia. of the tender committee and all the documents. This information The new system, ProZorro, derives Everyone Can See Everything is publicly accessible through its name from the Ukrainian word Today, the ProZorro platform has ProZorro. that literally means “transparent” almost 124,000 active suppliers, – and, reportedly, the fictional with more than 50,000 open “For procurement entities, it is Hispanic character Zorro, who tenders for contracts. absolutely free of charge to use this famously defended his people platform, but each supplier pays a against corrupt officials and tyrants. Such contracts are big business in specific fee in order to place a bid Ukraine. Annually, about $20 billion in the system,” Vasyl Zadvornyy, The system offers users access to all worth of goods and services are ProZorro CEO explained to UBJ in an information from central databases transacted with the help of these interview. of electronic procurements. tenders. “The system is absolutely Before the implementation of According to ProZorro bosses, the independent; it cannot be this system, problems with public Building bridges system is responsible for about 10% influenced,” he adds. procurement were obvious: shady of all public spending savings due to deals and billions in public funds for 25 years increased competition and better But ProZorro Can’t Fight Corruption spent carelessly had created transparency. Alone an image of Ukraine as a global Nevertheless, some suppliers point corruption capital. “Everyone can see everything,” is to loopholes employed by dishonest International Public Relations the official – and highly suitable – competitors to fool the system. With reforms in the area and a Telephone: +38044 536 1508 motto of ProZorro. huge drive for more transparency, Email: [email protected] After a tender procedure is finalized Web: www.whites.com.ua 16 17

Above: Thousands of companies and international organizations like the World Bank have started using ProZorro since it was created.

Among the most common, is the citing unfairness, the tender was Zadvornyy knows inclusion in a posted tender of canceled. requirements that can clearly only that his system, be met by a specific supplier. “Only by having such a system, we can deal with those cases,” said like most, has Zadvornyy knows that his system, Zadvornyy. like most, has vulnerabilities. vulnerabilities. “ProZorro can’t overcome Recognition of ProZorro corruption on its own,” he told In 2016, the Ministry of Economic “ProZorro journalists earlier this month. Development and Trade of Ukraine became a winner in the World can’t overcome “Even Robin Hood had his merry Procurement Awards for the men. And while there are a number creation and implementation of the corruption on of advantages, the system still has ProZorro Electronic Government its flaws.” Procurement System. its own,” he told

The system has also been criticized The same year, the System was journalists earlier for cases of contract prices being honored at the annual Open changed after the initial signing Government Awards, for civic this month of the contract in additional, new initiatives that use government data agreements. to achieve socially important goals. This year, government efforts in Observers say that this isn’t actually these reformative areas have seen a direct violation of any law, but Ukraine considerably improve her as a result, corruption can begin Open Data position in the latest to infiltrate its way into even a rankings from the Global Open Data sophisticated system like ProZorro. Index. In spite of the challenges, ProZorro has already managed to significantly Most recently, the World Bank reduce the level of corruption in public procurement. announced their first tenders for projects through the ProZorro As a recent example, the system, further marking it as a vivid Department of Education in the example of a successful reform here Obolon district of Kyiv announced in Ukraine. a procurement for children’s meals in one of the schools, giving very For foreign investors, it’s a welcome specific requirements, according to turnaround for what was a source which only a few companies could of major corruption and huge lost have won. But after several other revenues for the state, into one suppliers made an appeal to the of the most transparent areas of Accounting Chamber of Ukraine, Ukrainian governance.

Opportunity Reports 18 19

On the Right Track: Linking Ukraine’s Railways to the EU by Jack Laurenson

LVIV – Three rail tracks that tons of reinforced steel – has been approach Ukraine’s far-western completed on time. Carpathian mountain range used to converge into a bottleneck as they Engineers from the approached the Beskidy Tunnel, Interbudmontazh construction originally built in 1886 by engineers company have been working around from the Austro-Hungarian Empire. the clock since October 2013 to complete the 1,800 meter tunnel by For decades, the tunnel has been the deadline of spring 2018. part of a vital transport corridor for goods and passengers headed Costing $120 million, the tunnel west to Europe, but old rails and build was funded jointly by the the seven meter width of the European Bank for Reconstruction original one-track passage had and Development, the European meant limited speed and limited Investment Bank and the Above: 22,000 kilometers of capacity. interconnected rail track carry over 450 “This new tunnel million passengers and 400 million tons But now, passengers and cargo of cargo each year. zoom through the new, $120 million tunnel that seamlessly effectively connects Ukrainian train lines with doubles capacity the European Union, eliminating troublesome bottlenecks and on the line,” delays, dramatically increasing the speed of travel. says Oleksander Tunnelling to Europe Pushkash, head “This new tunnel effectively doubles capacity on the line,” says of railways for the Oleksander Pushkash, head of railways for the Transcarpathian Transcarpathian region. region “The two-track line through the Ukrainian state railroad company, tunnel will accommodate up to 100 Ukrzaliznytsia. trains – about 1,000 carriages – every day.” “It’s a very significant project for the improvement of rail links through Unlike some infrastructure projects the Zakarpattya region to the EU,” here in Ukraine, the tunnel’s says Pushkash, who manages over construction – which required 400km of busy railway in the region. 160 tons of explosives and 7,000 20 21

Above: The Beskidy Tunnel in Zakarpattya has greatly reduced Above: To better connect Ukraine to journey times to Europe by removing Europe, billions are being invested into troublesome bottlenecks on the line. the country’s railways.

“With the geography and As the biggest country in Europe, topography of our region limiting and a strategically-located transport train speeds to 70kmh, laying more hub that connects western and track and building new tunnels eastern Europe with Russia, the is how we can increase capacity Baltic States and the Black Sea, and decrease journey times,” he Ukraine’s extensive railway system concludes. is also becoming increasingly important for global trade. With only 13,000 square kilometres of territory, Ukraine’s far-western But modernizing the world’s Zakarpattya is one of the country’s fourteenth largest railway network, smallest administrative oblasts. But brining it up to international with ten border crossings spread standards and integrating it with along four different international networks in neighbouring EU states borders, and thousands of tons of is a lengthy, difficult and expensive cargo transiting the region, it’s also task. one of the most important. According to Victor Dovgan, “We might be small, but with two Deputy Head of the Ministry of border posts with Romania, two Infrastructure here, responsible for with Slovakia and six with Hungary European integration, railways are – not to mention a new post with Railways for a Modern Ukraine And developing rail a vital part of Ukraine’s National country’s Soviet-era wide-gauge Investing in the modernization Poland that’s in development – The improvement of railway Transport Strategy, which aims track causes connection challenges of Ukraine’s railways is a costly, this is Ukraine’s most important infrastructure and the construction infrastructure in this to overhaul the country’s entire with Europe’s narrow-gauge lines. long-term commitment, but it’s frontier with Europe,” says Edvard of the Beskidy tunnel in western transport infrastructure, bringing it increasingly seen a sure-fire way Malyar, head of infrastructure for Ukraine stand out as flagship border region is very His department will oversee the to continue along the track to Zakarpattya. in line with European standards by projects for Ukrzaliznytsia, but 2030. construction of a new narrow-gauge integration with Europe. they are only part of a grander important cargo connection in the western city “And developing rail infrastructure plan to modernize and expand the “We need a joint strategy for the of Lviv, as well as a new passenger in this border region is very country’s large but outdated rail development of all transport – rail, connection between Lviv and important,” he says. “The new network. Beskidy tunnel will form a vital road, ports, and air,” he wrote in a Warsaw. section of the fifth Pan-European Ukrzaliznytsia currently operates recent op-ed for Ukrayinska Pravda transport corridor.” After this, if investment is secured, train services over 22,000 km of newspaper. “At a time when the work is expected to begin on an connected rail network – 45% of whole world is investing in their The 1,600km corridor in question, 8-year project to connect Lviv (and which is electrified – transporting logistics potential, we will simply will connect Italy, Slovenia, Hungary roughly 440 million passengers and lose out if we aren’t strategic.” Poland) with the Black Sea port city and Slovakia, before weaving and 445 million tons of cargo annually. of Odesa, via 1100 km of high-speed tunnelling its way through the In other words, the rail company For Dovgan, rail infrastructure is rail capable of transporting 1 million Carpathian mountains into western handles 58% of Ukraine’s cargo and a vital part of further Ukrainian freight containers per year, in each Ukraine, through Uzhhorod, Lviv 43% of all passenger traffic. integration with the EU, but the direction. and finally on to Kyiv.

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KYIV – For a great deal of Crimeans ‘‘The illegal construction of [this] goods and people crossing into billion for Ukraine at this point, a living and working here in Ukraine’s bridge is the latest evidence of the Crimea is coming. sum that the country is not likely to With Europe’s capital, the completion of Russia’s Kremlin’s disregard for international see compensated. Kerch Strait Bridge is seen as both law,’’ President Petro Poroshenko Ukrainian companies are less happy. Longest Bridge, an injury and an insult. said in a statement. The Hague court just ordered New revelations that indicate Russia Russia to pay Ukrainian businesses could start using the new bridge to The 19km flyover, connecting the ‘‘It is particularly cynical that its $159 million in compensation for blockade Ukrainian cargo ships en- Russia Tightens Krasnodar region of mainland Russia opening is happening on the eve losses since the 2014 annexation of route to Ukraine’s two main ports with the illegally-occupied Crimean of the latest anniversary of the Crimea. on the Sea of Azov (at Berdyansk Grip on Crimea peninsular, was opened this week deportation of the Crimean-Tatar and Mariupol) are also causing concern in Kyiv’s corridors of power. by Jack Laurenson as Vladimir Putin symbolically people by the Stalin regime,’’ he One large car company here drove the first truck into annexed added. recently told the UBJ that the loss of Ukrainian territory. the peninsular, and the large market This month, Russian border Derided and criticized here in for them there, had almost halved forces have started stopping and inspecting such ships, as EU officials While most infrastructure projects in Ukraine are aimed Kremlin Closer to Crimea Ukraine, the opening has been their profits in recent years. warn that the completed bridge is at improving connections and bringing the country ‘‘At last, thanks to your talent, largely welcomed and celebrated already limiting the passage of vital closer together, one divisive project has created a huge this project, this miracle, has While 18 plaintiffs succeeded in Russia. The bridge will make shipping through the Kerch Strait. If headache in Kyiv. Russia’s recently opened, 19km bridge happened,’’ the recently re-elected crossings from the Federation in securing a ruling from the such interference by Russian border across the Kerch Strait – now the longest in Europe Putin told assembled workers and into Crimea – a long-time summer Netherlands-based court, the forces continue, Ukraine can be – is a powerful metaphor for Putin’s ‘‘reunification’’ reporters, as he stepped out of the playground for Soviet and Russian broader economic ramifications and expected to respond by blocking ideology. While it connects Russia to Crimea, it further truck’s cabin onto the Crimean side tourists – a lot easier. losses to the Ukrainian state are Russian shipping access to the isolates the Kremlin from the international community. of the bridge. much more significant and long- Danube. Loss for Ukraine, Russia’s Gain? lasting. Here in Kyiv, officials blasted the Russian businesses in particular But as Ukrainian businesses tangle media stunt and the bridge’s have welcomed its opening: access All in, when lost energy reserves are with Russia in the courts, the opening. to ports, energy reserves and a taken into account, accrued losses human cost for ordinary citizens is boost to the steady flow of Russian are estimated to be well over $100 also significant.

Opportunity Reports Right: Construction companies close to 24 Vladimir Putin will profit greatly from 25 the construction of the Kerch Strait Bridge.

Further From Home to Ukraine’s capital when Russian partner, Arkady Rotenberg – has Completion of the $3.7 billion troops moved in. already been hit by EU and US bridge project has brought Crimea sanctions for its close ties to the closer to Russia; a strong step “When I have gone home, I don’t Kremlin and its business activities in towards complete integration of even recognize this place any occupied Crimea. the illegally-occupied territory and more,” she says. a powerful metaphor for Putin’s And the impressive bridge, seen ideological legacy. The Cost of Europe’s Biggest Bridge by most observers as the latest Russian state media has gone Russian action that undermines the While Russians have never before into overdrive to celebrate their territorial integrity of Ukraine, might been able to so easily travel back country’s accomplishment, calling well connect the Russian mainland and forth to Crimea, many Ukrainian it the “construction of the century”. with annexed Crimea, but it’s the Crimeans living in mainland Ukraine But while bridges are meant latest dividing wedge between Putin have never felt further from home. to connect, this one could well and the international community. Anastasia, a 27-year-old IT become a costly symbol of Russia’s developer working for a software growing isolation. company in Kyiv doesn’t know “I guess the new when she will next see her family in The British wanted to bridge the Kerch Strait in the late Sevastopol. bridge is great for nineteenth century, as part of an ambitious railroad route to India Russian tourists,” “I guess the new bridge is great for through Crimea. Planners deemed Russian tourists,” she says. “For it to to be too expensive and plans she says. “For me, me, travelling home to Crimea is a were scrapped. Nearly a hundred nightmare and I don’t know when I years later, the Nazis would start travelling home will next do it.” construction, seeing the bridge as vital to spearheading their invasion to Crimea is a From Kyiv, a journey to Sevastopol into the Northern Caucasuses. can take over 20-hours, with nightmare and I Russian military checkpoints, border The Red Army, as they pushed the controls and inspections making Germans out of Central and Eastern don’t know when I the only bus route stressful and Europe, put an end to that plan. humiliating for Crimeans wanting to Today, as the long-contemplated, will next do it.” go home. Russian-built bridge finally opens to millions of cars, rail carriages and Her software company relocated to millions of tons of cargo each year, Kyiv, with most of their staff, shortly the full cost of Europe’s longest after annexation. bridge is yet to be seen.

While Anastasia sends money The Stroygazmontazh construction home when she can, her family company – owned by Putin’s close didn’t have the luxury of relocating personal friend and judo sparring

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Upgraded Sea Ports Funnel Big Business into Ukraine by Natalya Datskevych

ODESA – With access to the ‘‘This year, the Administration of amounted to 23.5 million tons. At Black Sea and Sea of Azov in the Sea Ports plans to allocate a record both ports, new trade agreements country’s south and southeast, as $24 million in funding for upgrades and investments in coastal well as dozens of major waterways here in Mykolaiv,” said Oleg infrastructure will result in increases throughout the land, Ukraine has Protochenko, the Head of Mykolayiv to capacity. excellent capacity for handling vital Sea Port, in a recent interview with cargo from or destined for the sea. UBJ. Chinese Dragon Focuses on Ukrainian Ports Despite the illegal annexation of “The reconstruction of the Before further capacity can be coastal Crimea by Russia, harbours Mykolayiv freight terminal, in added, Ukraine’s sea ports are in here continue to play an important particular, will increase the access dire need of dredging, especially role in both the economy of Ukraine capacity of the railroad coming with global shipping companies and the wider region. into the port, supporting 840 cargo now preferring more large-tonnage wagons per day.” fleets. Common practice now for The 13 sea ports of Ukraine handle shipping fleets are vessels that carry about 132 million tons of cargo more than 400,000 TEUs. For Ukraine, it means their ports annually at the moment, and this need to be dredged to a depth of is set to increase after upgrades at least 21 meters. On cue, enters a and improvements are completed. powerful new infrastructure ally. Ports are big business; generating combined revenues of $585 million At Yuzhny port last year, the China and profits of $157 million in 2017. Harbor Engineering Company were Combined, all sea-based services paid $40.5 million to complete their and sea ports in Ukraine generated first dredging operation in Ukraine. $1.7 billion in 2016. Now, they compete with European companies for the tender to dredge Put another way, this is two percent yet more of the country’s harbours. of the country’s entire GDP. As Russia watches from the sidelines, China has been making While railways and highways that Container terminals located in strong moves into Ukraine, investing criss-cross the country are being the four largest ports here have a heavily in the infrastructure of a heavily invested into, 40% of all combined total capacity for 3.13 country that represents a logical international trade here originates million TEUs passing through each corridor into the world’s richest from a handful of important ports. year. However, according to the consumer market: the European Upgrading Ukraine’s Biggest Ports Ukrainian Sea Ports Authority Union. Yuzhny, Odessa, Mykolaiv and (USPA), that volume is set to Chornomorsk are the largest among increase by 600,000 this year. “We can expect more such projects Ukraine’s seaports. Combined, they Odessa seaport currently has being undertaken by the Chinese,” account for 80% of the port capacity capacity for 56 million tons of says Infrastructure Minister in the country and this is set to goods, while cargo turnover Volodymyr Omelyan. “They have increase further. at Mykolaiv Sea Port in 2017 become very interested in Ukraine.”

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Upgrades Needed for Above: Ukrainian highways that lead to Europe often suffer from bad Ukraine’s Western congestion and are need of repairs and upgrades. Concessions for toll roads Frontier to Europe are becoming available to international investors. by Jack Laurenson

UZHHOROD – On a frozen Monday Ukraine’s State Border Guard morning in March, hundreds “We’ve been waiting here for a long Service, now an arm of the of trucks block a portion of the time,” complains one driver, from Ukrainian Armed Forces, is highway leading to Hungary as they the cabin of his icy truck, parked headquartered in Kyiv. With line up to enter Europe. meters from the Hungarian border. border control highly centralized, “But this is normal, sometimes we regional officials like Malyar often On a recent weekend, bad weather can be waiting here for a few days.” feel powerless about making local and daily EU quotas limiting cargo improvements. crossings has caused the delay. In town, Edvard Malyar, head of Such congestion is unacceptable, infrastructure for the regional “Proper function of these border say local officials here. But it is administration, says: “It’s not a good posts is really in the hands of Kyiv,” common. situation, and not normal.” says Malyar. “Positive changes need to come from the top.” The line of heavy goods vehicles “We’ve been waiting – carrying goods to and from the Border Integrity in Ukraine’s Far EU – stretches for 3km from the here for a long West Chop border crossing with Hungary, Few issues in Ukraine are seen as to the outskirts of Uzhhorod, the time,” complains more important right now than the integrity of the country’s borders. capital of Zakarpattya region. one driver, from In the east, Russia has annexed the With 13,000 square kilometers of the cabin of his icy territory of Crimea, while Russian- territory and 1.2 million inhabitants, backed separatists wage war against Zakarpattya – “Behind the truck the Ukrainian state in the Donbas Carpathians” in English – is one of region. Ukraine’s smallest regions. “It has been the weekend and weather is bad, which slows things But trouble has also brewed in the But with a total of 10 international down,” he says. “But we must west, with regional authorities border crossings with three EU allocate some responsibility to and Kyiv struggling to keep a lid on countries – Slovakia, Hungary officials in Kyiv and the EU as to why security challenges here. Meanwhile, President Petro Budapest, in relation to the status and Romania – Zakarpattya is our border crossings here can be so Poroshenko compared the actions of ethnic Hungarians, who number of Saakashvili and his followers to increasingly key in Ukraine’s pivot to slow.” In September 2017, Georgian about 100,000 in Zakarpattya, the west. politician Mikheil Saakashvili forced separatists in the east. mostly in towns and villages close to Previously, when traffic to the his way across the border with the border. Busiest Border Region Poland into western Ukraine with “This is a question of the national border stalled, border guard security of the state,” he said at the The waiting trucks display license doubled staff on duty at posts. But hundreds of his political supporters, Cross-border relations reached plates from a range of EU countries, sparking violent clashes with border time. “It is all the same to me who a new low recently, when Kyiv if authorities on the Hungarian breaches the state border, whether Ukraine and Russia. Ukraine’s guards. announced plans to deploy a 1,000- or Slovak side don’t do the same, fighters in the east or politicians in western-most region might be movement of people and goods can man combat battalion to Beregovo, The event was seen as an the west.” provincial and picturesque, but grind to a snail’s pace. a border city that is overwhelmingly it has become a busy east-west embarrassment to the DPSU and At the same time, tensions are inhabited by Hungarian speakers, transport corridor. Ukraine’s borders. often high here between Kyiv and citing security concerns.

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But while regionalist tensions can “The potholes are a nightmare,” “The potholes seem high in western Ukraine – says Andriiy, an Uzhhorod taxi especially along the border with driver, on a bumpy ride to the are a nightmare,” Hungary – few here believe that Slovakian border. “But at least they there is any appetite for serious keep us awake while we’re driving.” says Andriiy, separatist movement. Currently, the region has two an Uzhhorod “We have always been a very border posts each with Slovakia independently-minded, European and Romania and six posts with taxi driver, on region,” says Olexander Kovach, an Hungary. A planned border crossing influential Uzhhorod businessman with Poland has been approved and a bumpy ride to with restaurants, bars and vineyards financed, but Kyiv is busy resolving the Slovakian in this city and Lviv, closer to Poland. a land dispute with villagers before construction can start. border. “But at “It’s true to say that people here feel very distant from Kyiv. Other The standard of the 2,440km of least they keep us important cities like Budapest, roads that leads to these border Brattislava and Krakow are much points, however, is a big concern awake while we’re closer – geographically and here. It’s estimated that the total culturally. But there is no separatism cost of repairs is about $260 million, driving.” here. We all identify as Ukrainian but so far the state and the State and know how important our Road Fund has only invested a political and economic ties to Kyiv fraction of this. are.” Business-leaders and officials here, Earlier this year, Infrastructure in Ukraine’s western-most outpost, Minister Volodymyr Omelian say that more attention from the pledged about $1.24 billion to fix capital and better investment into the country’s roads, and officials in infrastructure – especially roads, rail Zakarpattya hope to see their fair and air transport – would go a long share of this. way to making the region feel more “The state is already placing a included. taxation on fuel for these trucks,” says Malyar. “It’s for fixing roads, The Road to Europe: Repairs and we think it would be better if Needed those funds remained in the local With 20,000 cargo trucks passing budget for us to use.” through Zakarpattya to Europe each year – pounding the asphalt with Bolstering the Border their heavy loads – that the roads The border posts themselves are in a severe state of disrepair is here, are also in a varied state of no surprise. 32

disrepair, with much more attention ranking regional official, who asked “Making repairs to the roads and needed to get them up to European not to be named. “As you can see, border infrastructure here is a huge standards. it’s going very slowly and there’s still priority,” says infrastructure director a lot of work to be done.” Edvard Malyar. “But as usual, many In the buffer zone between Ukraine repair projects remain unfinished.” and Slovakia, at the Uzhhorod The delays haven’t gone unnoticed border crossing, sits a large, by the EU, deepening doubts about But with more than one million derelict building that should be in Kyiv’s ability to deliver reforms tourists forecast to visit the region usage by the DPSU for scanning in return for billions in European this year, plenty of international goods, running security checks and aid. Earlier this year they scrapped cargo transiting through and managing this important border. a project that was financing the foreign investors eyeing business upgrade of checkpoints. opportunities, there are lots of Instead, it looks more like a reasons to finally finish all the bombed-out building in Donetsk “Following our assessment we repairs. and has been undergoing repairs concluded that the projects could and renovation for years. not be finalised in time,” an EU spokesperson told Reuters in “The European Union provided the February. “The 6 projects are now in state with $40 million to have this the process of being closed, and the repaired years ago,” said a high- unspent money reimbursed.”

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