Is Russia the Largest, or 3rd Largest Foreign Investor in Ukraine?

"One story shouts invasion, occupation, battalions of Russian tanks at the gates. The other story is simply business being done (between Russia and the Ukraine) calmly, albeit with greater procedural obstructions."

Mon, Oct 9, 2017
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Empty Ore Mines of Donbass
Empty Ore Mines of Donbass

The Parliament of Ukraine (Rada) this week passed a presidential bill reintegrating the Donbass (DNR) back into Ukraine. The minimum needed to pass this bill in Parliament was 226 votes; it passed with 233, a majority of 7.

After several days of vociferous disagreements and fisticuffs, the leaders of the Ukrainian parliament agreed to remove any mention of the Minsk Agreements, which were for Ukraine a politically embarrassing inconvenience, as they were not followed anyway.

It will be interesting whether the Ukranian citizens living in Donbass, now that a bill has been passed, will willingly reintegrate. I think not.

No mention of the civil war continuing between Ukrainian citizens in Donbass and the powers in Kyiv. Instead the bill refers to neighboring Russia as the country which "carries out armed aggression" against Ukraine.

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It goes further to claim that Russia, and not Ukrainian citizens living in Donbass who all speak Russian "initiated, organized and supported terrorist activities in Ukraine is engaged in the temporary occupation of parts of its territory, using regular units and units of the armed forces and other military formations."

It looks to me like the tried and true strategy of stirring up emotions focusing on the right hand to divert attention from what the left hand is doing. The reasoning and logic of what is expected as a practical result remains unclear.

The left hand is busy doing business. So far, in 2017 despite contrary noise and efforts, aggressive Russia is the third largest foreign direct investor into the Ukrainian economy at the equivalent of $4.4 billion dollars. The largest is of all places Cyprus, with investments of $9.9 billion (25.5 percent of total foreign investment), followed by the Netherlands with $6.3 billion (16.2 percent).  In the top ten category were also Great Britain, Gibraltar, Germany, the Virgin Islands, Switzerland, France, and Luxembourg.

I would venture to say that many of the investment countries mentioned are also offshore jurisdictions that have and do serve Russian business interests as well but are veiled.

Meanwhile the right hand was up to its emotional work when earlier in the year, Poroshenko (the head of state) introduced a year of sanctions against the "daughters" of five Russian banks, including Sberbank doing business in Ukraine. They are prohibited from exporting capital from Ukraine back to their parent organizations. 

Meanwhile, despite the press on shipments of coal from the USA to Ukraine, the key and main supplier of coal to Ukraine to date in 2017 was Russia.

Since the beginning of the year, Kiev has increased the purchase of hard coal from abroad by 50% - up to $1.9 billion.  During this same time, supplies from Russia accounted for 55% of all Ukrainian imports, or $1.04 billion.

So far this year Ukraine bought $478 million worth of coal from the USA, from Canada $116 million, and from elsewhere an aggregate of $262 million.

Analysts project that due to price and logistics Ukraine may buy approximately 20% additional coal from Russia before the end of this year making the annual uptake from Russia approximately 12 million tons.

It is worth mentioning that the coal from the USA and Canada is appreciably more expensive by the time it gets to Ukraine than the Russian or even the South African.

From the outside looking in, it seems that the Ukraine right hand is wholly disconnected and oblivious to what its left hand is doing.

One story shouts invasion, occupation, battalions of Russian tanks at the gates (so please send more money, arms, loans, guarantees, and subsidies). The other story is simply business being done calmly, albeit with greater procedural obstructions.

This political schizophrenia in Kyiv does not have the foundations to end diplomatically or well. We can only hope that business and common sense will prevail over delusionary rhetoric.

After all, Kyiv cannot very well expect miraculously to occupy another space and time even should they repeatedly chant the expectant mantra “Beam me up Scotty!”

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