Hybrid war: How Russia became Ukraine's largest investor

Author : Oleksandr Moyseyenko

Source : 112 Ukraine

For 9 months of 2016, investments from Russia reached 1.2 billion dollars
23:21, 26 January 2017

Read the original text at

What happened?

January 23, Ukrainian media quoted First Deputy Prime Minister Stephen Kubiv and reported that foreign investors in 2016 invested 3.8 billion dollars in the economy of Ukraine.

Kubiv noted that positive rating of Ukraine and investor confidence are growing as a result of systemic reforms conducted by the government of Volodymyr Groisman, so Ukraine is able to attract more investment.

Related: Poroshenko urges foreign investors to join privatizing business in Ukraine

"This is evidenced by the following indicators: Ukraine took the 80th place by the ease of doing business ranking of the World Bank and has improved its position by 3 points compared to last year. In 2016, foreign investors invested in the economy of Ukraine 3.8 billion dollars, which is twice more than last year!" according to the official information.

Related: NBU: Hryvnia fell due to seasonal decline in business activity

What is wrong with an investment of $ 3.8 billion?

The voiced figure looks amazing. A few months ago, the same figure was voiced by State Statistics Service, but it was only about 9 months of 2016.

This figure actually does not show the faith of investors in Ukraine, but the weakness of the Ukrainian statistics. The former head of the NBU did not say that the biggest investment of about 2.2 billion dollars from 3.8 billion occurred in the banking sector.

Are investments in the banking sector bad?

Actually, no. However, they are made not by Groisman’s reforms and credibility to Ukraine, but through a systemic financial crisis. Foreign banks are investing money here, not because they want to and believe in Ukraine, but because they have to, as required by the NBU.

Related: PrivatBank nationalization will not affect price level and inflation, - Groysman

Otherwise they will not be able to fulfill their obligations and go bankrupt, as happened with many other banks. This is the process of capitalization.

In addition, these must not be necessarily real cash infusion. Often this is conversion of subordinated debt into capital. The real amount of currency in Ukraine does not increase from such transactions.

Moreover, the main investor in the Ukrainian economy was Russia.

Why Russia?

We must understand that Russian banks do not longer enjoy wide public confidence. Moreover, a large number of assets was concentrated in the ATO area. So, taking advantage of the political situation, their borrowers often ceased to serve their loans.

Related: Economy Ministry: Ukraine needs to develop exports and tourism

Therefore, Russian banks continue to suffer from a major damage and are forced to get additional capitalization in large amounts. According to "Univer" investment group, for 9 months of 2016 investments from Russia reached 1.2 billion dollars.

Almost all of them were sent to support the banks.

Yet still there are 1.6 billion dollar investments in the economy. Is it a lot?

For comparison. The "dictatorial" Republic of Belarus in January-September 2016, received 6.25 billion dollars of total foreign investment, in the real economy (excluding banks), including direct investments of 5.1 billion.

In Ukraine in 2012, foreign direct investment reached $ 6 billion, most of which were sent to the industry. But the problem is that even these figures are questionable.

Related: Ukraine, Estonia agree to intensify economic cooperation

That is, even 1.6 billion dollars are in doubt?

There are doubts whether they are real foreign investments. In many cases it is actually Ukrainian capital, which was previously withdrawn out of Ukraine because of its unreliable jurisdiction.

Moreover, if you move away from harsh statistics, it seems that many important investors continue to leave Ukraine.

In recent years, a lot of famous brands appeared at the Ukrainian market. For example, this year such great players as Unicredit, Aegon, Universal bank have left Ukrainian market.

What are the signs of capital flight?

External liabilities of the financial and real sectors of economy of Ukraine decreased by 3.9 billion, while state obligations increased.

Related: Lipetsk factory will be closed for economic and political reasons, - press secretary

Part of this reduction was reflected as 3.9 billion investment through conversion of subordinated debt capital. However, a significant part of capital include withdrawal or reduction of financing the real economy. This figure is greater than the amount of foreign investment in Ukraine.

It is an obvious improvement - Ukraine rose by 3 points in Doing Business!

In fact, these three points are only the result of methodological changes in the ranking, namely the introduction of gender component performance and expansion in the field of taxation.

Retrospective application of methodological changes (when compared not with the actual place of Ukraine in the previous ranking, but with the last year place, which is listed under the new methodology) changes the previous year data to 81st in the report.

Ukraine real achievement is only one point in the rating.

Related: Davos and populist fervour: Key points of World Economic Forum 2017

Система Orphus

If you find an error, highlight the desired text and press Ctrl + Enter, to tell about it

see more