Ukrainian newsletter #3: EU increases capacity for electricity imports from Ukraine

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Ukraine accuses Polish control services of provoking long queues of trucks at the border

The situation on the Ukrainian-Polish border is getting worse every day for truck drivers as queues at some cross-border points reach up to 45km. Ukraine accuses Polish phyto and veterinary service of provoking unjustified obstacles for truck drivers.

Since Ukrainian ports are blocked and railway transportation is limited, the movement of trucks loaded with grain and other agriculture products has become important for Ukrainian exports. “Our priority is to increase export. We need to trade with the world, otherwise our economy will not hold up,” Mustafa Nayyem, Ukrainian Deputy Infrastructure Minister said adding that by spending a day in a queue a truck owner loses on average 400 euros.

The problem with the truck queues at the border on Polish side appeared months earlier. Before the Russia’s full-scale invasion of Ukraine in February Polish phyto and veterinary services were able to сheck 80 trucks per day but recently the service processes on average only 12- 25 trucks a day.

On Sept 5, Polish truck drivers joined the strike with Ukrainians demanding to speed up the phytosanitary and veterinary control and to make it work round the clock.

Kateryna Markevych, senior economic analyst at Razumkov Center think tank:

The situation on the Ukrainian-Polish border, especially on the Yahodyn-Dorohusk cross-border point, is catastrophic from the point of view of logistics. The long queues and strike of Polish truck drivers blocks Ukrainian export to Europe. Considering the limited capacity of goods transportation by sea and rail, Polish direction is a “salvation” for Ukraine nowadays. The limited transit through Polish cross-border points will reduce the volume of exports and, as a result, revenues. Ukrainian business is trying to take advantage of the opportunity provided by the EU – the lifting of export duties for a year, and it is extremely important on the state level to contribute to solving the problem.



Ukrainian banks allowed to sell more foreign currency to residents

The National Bank of Ukraine (NBU) allowed banks to sell more foreign currency to residents. The decision is aimed to stabilize the Ukrainian hryvnya exchange rate to foreign currencies and is effective from Sept 6.

The volume of cash currency that a bank can sell will now include the entire volume of currency that a bank had purchased from people starting from April 13. Prior to Sept 6, banks could sell only half of their available volume of currency to the residents. The NBU expects that the amount of cash currency on the market will increase and the hryvnya will strengthen due to supply and demand balance. According to NBU, “the expansion of the cash currency will contribute to the stabilization of the cash segment of the foreign currency exchange market and will not have a significant impact of Ukraine’s reserves.”

After the start of Russia’s invasion of Ukraine in February the NBU banned all transactions involving purchase of foreign currency for residents. However, in April the NBU started to gradually lift its restrictions.

The NBU’s restrictions currently do not allow Ukrainian enterprises to transfer foreign currency abroad to non-residents to service debt.

Mykhaylo Demkiv, financial expert at ICU investment firm, Ukraine:

This change made by NBU is aimed to meet the demand for cash dollars among Ukrainians which has increased since February. Banks will be able to offer additional $400 million at the market rate. This is quite large amount of money, but it might not be enough to reduce the difference between the official and cash exchange rates which is now at 10-15%, which is the regulator’s goal.

However, this decision has a negative side. The additional supply of currency may not be enough to lower the “street” currency exchange rate and make it close to the official one. Eventually the demand for currency is the result of the war waged by Russia. At the same time such actions lead to the reduction of reserves. $400 million now and $400 million in summer is quite a lot even though the current reserves are at $25.4 billion as of Sept 1. Since non-emission sources of financing for 2023 are not clearly defined the spending of the reserves should be made cautiously.



EU increases capacity for electricity imports from Ukraine

European Network of Transmission System Operators for Electricity ENTSO-E increased available transmission capacity for Ukrainian power exports to the EU by 20% to 300 MW from Sept 4. Later this month Ukrainian electricity transmission system operator Ukrenergo plans to submit ENTSO-E another request to further increase its power export capacities.

During the night hours the amount of Ukrainian electricity export will remain 250 MW while during day and evening hours it will be increased to 300 MW.

On the first day of supply on Sept 5 the 125 MW of Ukrainian electricity was distributed to Romania and 175 MW was allocated to Slovakia. Starting from Sept 6 both countries will receive the power equally – 150 MW at day and evening and 125 MW at night.

On March 16 Ukrainian power system integrated into the European grid. Ukraine invested more than 600 million euros into the modernization of its power system before joining the European power grid. On June 30 Ukraine launched power exports to Romania at 100 MW capacity. In two months, Ukraine earned almost UAH 2 billion ($54.7 million) revenue from its power export to the EU.

Yuriy Onyshkiv, energy analyst at the London Stock Exchange Group:

Rising Ukrainian power export capacity to the EU is a mutually beneficial endeavor. Ukraine can export its surplus power output to the EU market where power prices are much higher than in Ukraine, while the EU is particularly eager to import any additional power it can get hold of amid low hydro power output in Europe and shrinking Russian gas supply that is often used for power generation.

Current export capacity between Ukraine and the EU is just a fraction of its true potential. Therefore, it is fair to assume that it will keep rising attracting more players into this segment.



Ukrainian counteroffensive unfolds in several directions

On Aug 29 Ukrainian army broke through the first line of defense of the Russian forces near Ukrainian southern city of Kherson and Ukraine officially announced its counteroffensive in the south. “Our counteroffensive has started long ago, it included actions to exhaust the enemy and not giving it the opportunity to advance. And today we started offensive actions in different directions, including Kherson region,” said spokesperson for the southern command on Ukraine’s Armed Forces Natalia Humeniuk.

Ukrainian counter offensive in the Kharkiv region in the northeast which officially started on Sept. 7 has helped liberate over 30 villages and several cities, including Balakliya, Kupiansk, and Izyum. The US-based Institute for the Study of War think tank wrote that “Ukrainian forces have penetrated Russian lines to a depth of up to 70 kilometers in some places and captured over 3,000 square kilometers of territory in the past five days since Sept. 6 – more territory than Russian forces have captured in all their operations since April.” Commander in Chief of the Armed Forces of Ukraine Valeriy Zaluzhnyi said on Sept. 11 that the Ukrainian army started advancing in Kharkiv region in three directions – south, east, and north. Some 50 kilometers are left to reach the Ukrainian-Russian border.

In July, after Zelensky’s counteroffensive announcement of the Kherson region, Russia started sending to Kherson more heavy weapons and army personnel to hold its positions there. Ukrainian army destroyed all the bridges across the Dnipro River in the south cutting Russians off of the supply of food, drinking water, weapons, and fuel. Nearly 15 thousand Russian soldiers are now trapped on the right bank of the Dnipro River in Kherson region.

Oleksandr Kovalenko, military and political expert at Information Resistance NGO:

This counteroffensive in Kharkiv oblast has been carefully planned for a long time. The success in Kharkiv region relates to the situation in the Kherson region when General Staff of the Armed Forces of Ukraine announced counteroffensive and Russian army redeployed a great amount of its personnel and army exposing its defense in other areas of the frontline. The Russian occupants did it chaotically and did not pay much attention that Ukrainian army forces could take advantage of such situation. It should also be mentioned that Ukrainian counteroffensive is advancing in Kherson, Luhansk, and Donetsk regions. I think that Zaporizhzhya region is the key region for liberating the left bank of Kherson oblast and temporarily occupied Crimean Peninsula so I would not be surprised if we soon start getting good news from Zaporizhzhya.



IAEA calls for safety zone at Russian-occupied Zaporizhzhya power plant in Ukraine

On Sept 6 the nuclear watchdog IAEA issued a report regarding the situation in Russian-occupied Zaporizhzhya Nuclear Power Plant (ZNPP) in Ukraine. It says that all seven pillars of ensuring nuclear safety and security have been broken. The IAEA team observed shelling close to the reactor buildings and many damaged buildings on its territory. The watchdog also confirmed the presence of the Russian military personnel, vehicles, and equipment at various places at the ZNPP. Besides, experts of Russian nuclear body Rosenergoatom were seen at the Russia-held Ukrainian plant as well.

The IAEA called for the immediate establishment of a nuclear safety and security protection zone. “There is an urgent need for interim measures to prevent a nuclear accident arising from physical damage caused by military means,” it reported.

The nuclear watchdog visited ZNPP on Sept 1, but two IAEA representatives will permanently remain on the site as a part of the agency’s plan to establish continuous presence at the plant that could help prevent the possible nuclear disaster.

Ukrainian Energy Minister Herman Halushchenko said that Ukraine will be able to implement the recommendations of the IAEA report on the safe operation of the ZNPP only after it gains full control over it which means after Russians leave the plant.

The UN secretary general Antonio Guterres called for a demilitarized zone around the ZNPP.

Olha Kosharna, independent nuclear safety expert:

The fact that the IAEA mission at the ZNPP has become permanent and that two IAEA experts will be constantly at the plant is a very positive sign. The IAEA in its report did not mention who shells the plant but they have neither the mandate, nor the means or expertise to make such conclusions officially. The members of the mission are very professional. The IAEA wrote clearly that the physical integrity of the facilities was broken, that Russian military forces and its vehicles are present on the territory. Ideally what should happen after this IAEA mission is the removal of all the Russian military equipment and explosive materials from the nuclear plant. Ukraine and our partners should make all the efforts in that direction.



UN mission to visit Olenivka, the site of Ukrainian POWs’ mass murder

In the nearest future the UN mission will come to the Russia-occupied Olenivka village in Donetsk region where 53 Ukrainian prisoners of war (POWs) were killed at the end of July.

“In the coming days the UN investigative mission in Olenivka will examine the incident that happened on July 29 in which 53 Ukrainian POWs were killed and another 75 to 130 were injured,” said UN Deputy Secretary General for Political Affairs Rosemary DiCarlo at the UN Security Council meeting on Sept 7. “The head of the mission General Carlos Alberto de Santos Cruz is travelling with the team of senior officials and experts. The mission must complete its task without any hindrance, get full access to people, places, and evidence.”

Previously Ukrainian military intelligence said that Russians struck thermobaric weapon on the colony in Olenivka where soldiers from Azov regiment, a unit of Ukrainian army, were held.  In August, the UN created a commission aimed to investigate the deaths of Ukrainian POWs in Olenivka.

Oleksandr Pavlichenko, executive director of Ukrainian Helsinki Group for Human Rights:

This UN mission pursues two goals. The first one is to find out what exactly happened in Olenivka where 53 Ukrainian POWs were killed. The second aim is to establish the permanent control and access to the places of detention of Ukrainian POWs. The Red Cross does not perform its duties and now we don’t have any information about their locations, state of health, state of maintenance. We don’t know whether Ukrainian POWs have the elementary rights – the right to live and not to be tortured. It’s important how effectively the UN mission will work, we will see it in their report after the visit. Independently from the international investigation, the crime in Olenivka is also being investigated on a state level by Ukraine’s prosecutor general.

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