How did Kyiv City Council perform in the first days of the Russian attack to protect Kyiv? What are the new rules for financial markets in Ukraine? What will happen to the Ukrainian hryvnia exchange rate, and what assets would it be wise to invest in after the war? Kyiv Post’s Aleksandra Klitina interviewed Taras Kozak, Kyiv City Council Deputy and President of the Ukrainian Financial Group Univer om May 12.
[Klitina] Good afternoon. My name is Aleksandra Klitina, I’m a journalist at the Kyiv Post. Today, we have an interview with Taras Kozak, a Deputy at Kyiv City Council and President of the Ukrainian Financial Group Univer. Good afternoon.
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[Kozak] Good afternoon.
[Klitina] Thank you for agreeing to the interview. First of all, I wanted to ask how has the war affected the work of Kyiv City Council? Which decisions of Kyiv City Council became the most important during the war?
[Kozak] There was an expectation of war, and Kyiv City Council was preparing within the auspices of its powers by passing specific resolutions to face the war and defend Kyiv.
In the first days of the war, several decisions adopted by Kyiv City Council enabled the allocation of funds to finance the army’s needs and territorial defense within Kyiv boundaries. The funds allocated enabled the proper functioning of the military registration and enlistment offices to be restored, formation of territorial defense battalions and the financing of their first most critical needs when a particular mess was present in the state.
Kyiv managed to form territorial defense battalions very quickly. I remember the queues of citizens who wanted to defend Kyiv.
Indeed, the Kyiv City Council’s Resolutions were important to finance such measures. At that time, the state could not fund all of the needs due to organizational issues because the war was a big surprise for most Deputies.
Kyiv City Council was able to organize itself, convene a meeting, and achieve a majority, which proved that it has a strong core.
[Klitina] Are there any Deputies who fled and have not returned to Ukraine, or who’ve sided with the aggressor country?
[Kozak] As to anyone siding with the aggressor, I don’t have such information. There was a particular position held by OPZZh [the pro-Russian Opposition Platform for Life] faction in Kyiv City Council before the war. However, with the beginning of the war, the faction was dissolved.
Some faction members were absent at meetings of Kyiv City Council. Some members have organized themselves into a group that also became rather pro-Ukrainian. Moreover, I could even say it became more pro-Ukrainian than many other Deputies.
It is difficult to say whether the war forced them or if there are other factors. Overall, the Kyiv City Council is legally capable. Decisions are passed by majority of over 90 – 100 votes out of 120. We convene for meetings in Kyiv City Council Hall despite the shelling and air raid alarms. The City Council and its committees are operating.
[Klitina] How has the political atmosphere changed in the Kyiv City Council? Is there any political competition between the factions today?
[Kozak] Political competition has disappeared and decisions are approved by a majority. There is no need to abstain from voting or oppose, and everyone understands that now is not a time for political fighting. The main task is to protect our country.
At the beginning of Russia’s invasion, it was a question of protecting Kyiv from capture by Russian troops. That is why we postponed political battles to the post-war period. Today, Kyiv City Council works as a single team.
[Klitina] Tell us how the war has affected the work of the Univer investment company and, in general, what is your general assessment of the state of Ukraine’s economy today? Are there any forecasts for the future?
[Kozak] Univer is one of three Ukrainian investment companies that has continued to operate during the war. We managed to switch completely to work in online mode in two days in the mode that was allowed by regulations. The company has continued to work and serve our customers. As for the volume of transactions, of course, it has been greatly reduced because the Securities and Exchange Commission, as the regulator, has banned all transactions with securities except for state-issued military bonds.
As а brokerage investment firm, we have provided Ukrainian individuals and legal entities with the opportunity to buy state military bonds for more than two months now. Univer and all other companies have followed a consensual decision: the commission for performing these operations and the storage of securities will be zero, and the yield will be the same for everyone during the war. Depending on the series of state military bonds, the interest is 10-11%. Like other companies on the market, in order to support Ukraine Univer doesn’t charge anything for its services.
Besides the investment group, Univer has other activities, but of course, income have fallen. However, so far we have not dismissed a single person from our team. Univer employees continue to receive a salary, of course, slightly less than it was before the war. Nevertheless, the social component in our work is present, and we hope that the team will remain, and after the war, the company will be able to resume its activities and return wages to the same level as before the war.
[Klitina] How quickly will the Ukrainian economy recover after the war and what factors will affect this?
[Kozak] It is complicated to discuss, but the Ukrainian economy is forecast to fall by 30-50% – it is a significant figure that is difficult to imagine. A large part of Ukrainian territory is occupied and it’s impossible to do business there. It is difficult to trade in territories liberated in Chernihiv, Sumy, parts of Kharkiv Region because a lot of damage. Many infrastructure facilities, roads, and bridges are destroyed. Of course, it is challenging to work in such business conditions.
The constant threats of rocket firing reduce the interest of investors in setting up industries or new businesses to zero. Millions of Ukrainians have gone abroad, and even more Ukrainians have moved from the eastern regions to the central and western parts of Ukraine, so it is challenging to continue doing business or keep it to a minimum in such conditions. The economy will fall, which will lead to a fall in the living standards of Ukrainians.
Unfortunately, as a result, Ukrainians will become much poorer and will not have access to a large number of goods and services to which we are accustomed. Ukraine will face quite a tricky times in the next few years.
Moreover, we will not be able to cope without the help of the civilized world. Ukraine cannot exist without the support of our international partners. This assistance is coming, but it is not enough. In such conditions, the National Bank of Ukraine has begun to print unsecured funds. About one hundred billion hryvnias have so far been printed.
According to the Minister of Finance, we expect the budget deficit to be five billion dollars a month. Nevertheless, providing Ukrainians with salaries and pensions, starting to rebuild infrastructure: railways, bridges, railway stations, power plants, and substations require enormous funds just to meet the minimum needs.
I am calling on our international partners to understand that Ukraine is fighting against the aggressor, defending the whole of Europe and the civilized world. Ukraine deserves this help to ensure the necessary needs of Ukrainian citizens.
[Klitina] There is usually growth after an economic downturn. What areas of the economy do you think will grow most actively? What assets on the Ukrainian market will it make sense to invest in in the future?
[Kozak] It is essential to understand how this war will end. We hope for victory and that Ukrainian Armed Forces will be able to expel Russian troops entirely from the territory of Ukraine, including from the occupied Donetsk and Luhansk Regions, Crimea, and thus ensure a secure peace. It’s necessary to ensure that Russia does not try to attack again in this case, and active recovery will begin.
Ukraine will require huge investments to rebuild and modernize the entire economy. The funds are estimated at EUR 500, 600, 800 billion, and the government has even mentioned a trillion. Not sure that such funds would be possible to obtain as aid.
However, there is a vital role for private businesses interested in new opportunities. Ukraine has a great chance of becoming part of the EU, voting for Ukraine’s EU candidacy will take place in June.
Ukraine will get assistance from the governments of the United States, Britain, EU, and other countries. Under such conditions, exists hope that private businesses will start to actively invest in Ukraine.
First of all, I expect investment in housing and infrastructure projects. Hundreds of thousands, perhaps millions of Ukrainian families, have lost their homes, requiring large-scale funding to restore them. Of course, a considerable part of these needs will be funded by donors, who will fund the government through grants or loans. The sources of funding are also clear – the seized assets of Russian oligarchs.
Ukraine has a preferable geographical position, so foreign investors will be interested in starting a business here and investing in the processing of agricultural products, IT, probably space technologies, and weapons.
[Klitina] How do you assess the work of the government and the National Bank during the war? To what extent do you think it will be possible to keep the hryvnia exchange rate and inflation stable?
[Kozak] I would divide the work of the government and the National Bank. The leadership of the National Bank was strong and its decisions were made in a timely manner. The precise actions of the National Bank allowed to avoid vulnerability on the foreign exchange market and kept the hryvnia exchange rate stable. The market rate of the hryvnia differs little from the official rate, which means that the currency restrictions which the National bank imposed were justified.
Regarding the government and Parliament, many unclear actions and strange decisions were approved after the start of the Russian attack. Apparently, under the influence of a certain shock. In particular, politicians wanted to help Ukrainian businesses and adopted amendments to the Tax Code, which confused the business sector.
The first shock has passed, and the government is preparing quite effective recovery programs that are progressive and liberal, and which I support.
[Klitina] How does the fuel shortage we see in Ukraine affect the economy? Will rising gasoline prices affect consumer prices? What steps do you think the government needs to take to eliminate fuel shortages?
[Kozak] I think this is one of the mistakes. The government began to limit the consumption price of fuel in the face of global growth in oil and gas prices, which resulted in a shortage of fuel. Economic rules are inevitable.
In addition, Russian bombing damaged the Lysychansk Oil Refinery, the second-largest in Ukraine, which is why there are problems with refining fuel.
Government price restrictions and Russian attacks have led to huge fuel shortages in Ukraine. The abolition of market price restrictions by the government will, in my opinion, put an end to the deficit and fuel will appear, competition will begin, and the price will fall to market levels.
[Klitina] Thank you for this interview.
[Kozak] Thank you.
