News (#01-02 January-February 2020)

Biznews

Agribusiness

Ukraine in top three exporters of agricultural products to EU

Ukraine has becomes the third largest exporter of agricultural products to the EU, only behind the USA and Brazil. In the 12-month period from November 2018 to October 2019, imports of agricultural food products from third countries came to EUR 119.7 billion, which is EUR 4 billion (or 3.4%) more than that for the same period of 2017-2018.

The largest exporters of agricultural food products to the EU in the last 12 months were the USA EUR 12.3 billion, Brazil EUR 11.7 billion, Ukraine EUR 7.3 billion, China EUR 6.2 billion, Argentina EUR 5.1 billion, Switzerland EUR 4.7 billion, Turkey EUR 4.6 billion, and Indonesia EUR 4.2 billion.

It is worth noting that growth in the export of agricultural products from Ukraine has become the most noticeable in annual terms worth EUR 2.1 billion (or 41%).

According to the State Statistics Service, exports of Ukrainian goods to EU countries for the first 10 months of 2019 came to USD 17.4 billion, which is 6.1% more than that for the same period in 2018. In the space of these 10 months, imports of goods from the EU to Ukraine rose by 7.9%, up to USD 20.7 billion.

Brexit

UK Parliament adopted Brexit Treaty

On 20 December the House of Commons of the United Kingdom of Great Britain and Northern Ireland approved a Draft Law on the treaty on the countrys withdrawal from the EU in its second reading.

This means that on 31 January, more than three years after the referendum was held, Great Britain will withdraw from the EU under conditions of a so-called structured Brexit.

The approved Draft envisages implementation of the Brexit Treaty, which Boris Johnson agreed with the EU in October. It also contains a prohibition on the government prolonging the transition period after 2020. During this period, Britain will no longer be part of the EU, but will adhere to many of the blocs regulations.

The Drafts approval became possible after the Conservatives won a majority in the recent general election.

The British Parliament had rejected the Treaty on at least four times, three of which were under the previous prime minister, Theresa May, which resulted in her resigning.

Energy

Ukraine and Russia signed memorandum on continuing gas transit through Ukraine

Russia and Ukraine have signed a memorandum of agreements on continuation of gas transit through Ukraine and on settlement of mutual claims. The memorandum includes agreement on continued gas transit, as well as settlement of issue of Naftogaz claims filed against Gazprom amounting to USD 3 billion following the decision of Stockholm arbitration.

The Ukrainian and Russian parties signed a memorandum of agreements on continuation of gas transit through the territory of Ukraine and on settlement of mutual claims.

The memorandum was signed following two days of talks in Berlin and Minsk with the participation of the Ministers of Energy of Ukraine and Russia, as well as the management of Gazprom, Naftogaz and GTS Operator of Ukraine.

As of 20 December, Russia and Ukraine reached a compromise in their negotiations on transit.

The memorandum formalized the terms of this compromise, including those regarding the Naftogaz claim filed against Gazprom amounting to USD 3 billion and the terms for payment of this sum.

During the negotiations, the issue of debt repayment by gas was discussed, but the final decision could include payment of debt using monetary funds and assets of Gazprom arrested in Europe.

Ukraine and Slovakia signed inter-operator agreement on gas transit

GTS Operator of Ukraine has signed a technical agreement on cooperation under European rules with Eustreamfrom, the Slovak operator, which is applicable at Budintse and Uzhgorod-Velke Kapusany from 1 January 2020. Slovakia is the main country through which Russian gas is transited via Ukraine.

OGTSU signed the inter-operator agreement with Gazprom, the Russian gas transportation system operator, in Vienna on 30 December. Thus, the new Ukrainian GTS operator signed agreements with GTS operators of Poland, Hungary, Romania, Moldova, Slovakia, and Russia. All the necessary technical and legal grounds have now been created for the successful start of the independent GTS Operator of Ukraine activities and for continued gas transit from the Russian Federation to European countries through the Ukrainian GTS from January 2020.

Competition

AMCU allowed acquisition of Idea Bank by Dragon Capital

The Antimonopoly Committee of Ukraine has permitted Dragon Capital Investments Limited to acquire shares in Idea Bank.

On 20 December Dragon Capital Group companies and private investors signed the agreement on acquisition of 100% of shares in Idea Bank owned by Getin Holding S.A. (Poland).

Dragon Capital is one of the largest groups of companies in Ukraine operating in the field of direct investment and financial services.

Major gas stations obliged to cut petrol and diesel fuel prices

The Antimonopoly Committee of Ukraine has distributed its binding recommendations to reduce retail prices for high-octane petrol and diesel fuels among major gas station networks.

The Committee analyzed fuel markets and found the following facts based on the results of appropriate activities in June-November:

- average wholesale prices for A-95 petrol and diesel fuel were cut by almost 20%;

- the USD/UAH exchange rate, which has a significant impact on pricing due to import dependence of these markets, fell by almost 12%;

- average retail prices for A-95 grade petrol and diesel fuel were decreased by 5-5.6%.

At the same time, according to the AMCU, the level of retail prices for A-95 petrol and diesel fuel at stationary gas stations of the main market players (operating under the WOG, OKKO and UKRNAFTA brands) remained virtually unchanged.

Given this, the Committee adopted binding recommendations requiring the setting of prices for high-octane petrol and diesel fuel at a level that would have existed subject to significant competition in the market and gave a 10-day period for consideration of these recommendations.

The recommendations were sent to WEST PETROL MARKET (WOG brand), OKKO-RETAIL (OKKO brand), UKRNAFTA (UKRNAFTA brand), AMIC Ukraine (AMIC Energy brand), Alliance Holding (SHELL brand) SOCAR PETROLEUM (SOCAR brand), Ukrpaletsystem (UPG brand), and GLUSCO Retail (GLUSCO brand).

Trade Policy

USA and China ended trade war by signing first phase of trade agreement

On 15 January US President Donald Trump signed the first phase of the trade agreement with China, thereby ending the first round of the continuous fight against the worlds second largest economy.

The aim of the treaty is to open Chinese markets to more US companies, to increase exports of agricultural and energy resources, and to ensure better protection of US technology and trade secrets. China has undertaken to buy additional US goods and services worth USD 200 billion by 2021, and is also expected to reduce some duties imposed on US goods.

However, the agreement retains most of the duties valued at USD 360 billion that Trump imposed on Chinese goods, and also retains the threat of additional sanctions if Beijing fails to comply with the terms of the agreement.

EU announced new trade claim to Ukraine

The EU noted a new breach of trade agreements on the part of Ukraine. Another trade barrier is the absence of VAT refunds for soybean and rapeseed exporters, and this has not yet been resolved, the associations annual report on agreement performance states. It is noted that the aforementioned matter supplements the issue of round wood. The EU elaborated further on the round wood issue by noting that it suggested acceptable ways, in the opinion of European officials, of dealing with the crisis specific proposals related to the forests conservation, but Kyiv did not respond to these proposals.

The EU also criticized Kyivs actions in the field of intellectual property protection, where Brussels finds limited progress. A lot of draft laws introduced by the government as part of the intellectual property reform package contain controversial provisions to be reviewed by the government, the report adds.

Sanctions

USA extended sanctions against the Democratic Peoples Republic of Korea

The US Department of the Treasury imposed sanctions on two North Korean companies involved in sending illegal manpower overseas.

The sanctions are imposed on Namgang Trading Corporation (NTC), which, according to the US authority, has been transporting workers from North Korea to generate revenue for the North Korean government. It is reported that workers have been transported to Russia, Nigeria, and numerous countries in the Middle East. The sanctions list also includes North Korean company Beijing Sukbakso located in China, which serves at least part of the travel and logistics for NTC employees working abroad. Inclusion of individuals and legal entities on the US blacklist means freezing their assets in the USA and a ban on US citizens and companies doing business with them.

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