DHis warning shot came Tuesday evening. During the day, Ukrainian state-owned company Naftogaz CEO Yuri Vitrenko said 7.6 billion euros were needed to buy additional gas to fill the storage facility with 19 billion cubic meters of gas and protect it over the winter. Later in the evening, international lenders were asked to agree to a two-year grace period for interest on principal and current bonds – including payments due in the next few days. The deadline for approval is Thursday next week.
As Naftogaz is Kiev’s biggest taxpayer, some in the market see it as a harbinger of an even bigger bankruptcy: that of the Ukrainian state. The finance minister had ruled out such a move, but MPs speculated about it. Already last week there were heated discussions. By then, Naftogaz announced it was reviewing its “liquidity and operational needs in favor of Ukraine’s strategic priorities. As a result, the price of Ukraine’s foreign currency bonds fell again. They are now hovering around 20 percent of face value, just as they were after the Russian raid began.
The effects of war are everywhere
Gunter Deuber can understand concerns about payment defaults. But that’s how the chief economist sees the Austrian Raiffeisen Bank International (RBI) financial situation does not exist. Actually, Naftogaz is not very big. The gas company must keep enough cash in its foreign currency accounts to pay the $335 million. Teuber likes to distinguish “between ability and willingness to pay.” “A warning signal from Ukraine to the West: You have to do more,” he said, seeing the moratorium as a political wake-up call for creditors.
Naftogaz justified the move with war-induced liquidity constraints imposed by Russia. Many customers are unable to pay their bills. The war led to a “significant economic and business downturn in Ukraine.” A month ago, Eastern European Bank EBRD gave Naftogaz a $300 million loan for gas purchases. Apparently that is no longer enough. Electricity suppliers are also feeling a slowdown in business, reporting payment defaults and hoping for an improvement, as 80 percent of the revenue from recently launched electricity exports to Central Europe is now shared with all utilities.
The effects of war are everywhere. Employees of the Ukrainian branch of the steel conglomerate ArcelorMittal work only two-thirds of regular working hours – and only they get paid: “We are forced to radically reduce our costs in all directions,” wrote company boss Mauro Longobarod. According to Ukrainian media, to workers.
Fresh harvest in full swing
Economic activity is recovering only slowly, according to Olga Bintyuk, an economist at the Vienna Institute for Comparative Economic Research. Capacity utilization is 40 percent below pre-war levels. The country’s economic output will fall by more than a third from the previous year.
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