UKR Dispatch: September '24
Forward Horizon Group (FHG) has been on the ground in Ukraine since June 2022, supporting humanitarian aid organizations, conducting due diligence, and assessing the feasibility of reconstruction projects. We have been collecting and analyzing data across a broad range of issues related to the conflict - from agricultural de-mining to emerging technology and governance trends. We are a mission-driven company dedicated to supporting Ukraine in its fight to resist Russian authoritarianism and aggression. The fighting since the full-scale invasion has now dragged on for over 2 years, and Ukraine continues to struggle for its sovereignty.
The FHG team has been immersed in the daily economic, military, and geopolitical ramifications of the conflict, and keeping up to date on the conflict has become second nature. With our unique combination of experience in international affairs, security, business, and law, combined with our experience and network on the ground in Ukraine, we are uniquely positioned to identify key trends in the war. Our viewpoint also allows us to plan for Ukraine’s post-war reconstruction and development.
We designed this newsletter to distill our on-the-ground information and analysis, combining it with our expertise to provide a simplified, in-depth, bi-weekly reader on key issues in the Ukraine-Russia conflict and eventual post-war reconstruction.
Security
Following a week of deadly drone attacks deep into Ukraine, Russia began a counter-offensive in the Kursk region on September 12th. Both sides confirmed the counter-offensive, but details on its success are murky. Russian military bloggers and officials have claimed Russian troops recaptured territory, but these appear to be areas “that Ukrainian forces were not yet fully controlling nor attempting to control.”
Additional Updates from the Institute for the Study of War
Russian forces struck a civilian cargo ship transiting through the Ukrainian grain corridor in the western Black Sea on September 11, likely as part of a renewed Russian effort to undermine international confidence in the safety of the corridor.
Russia continued its efforts to enhance relations with non-Western countries at the meeting of BRICS high-ranking security officials and advisors in St. Petersburg.
North Korean missiles produced in 2024 used in Ukraine. The confirmation of North Korean missiles being used by Russia in Ukraine “illustrates North Korea’s robust acquisition network for its ballistic missiles programme, capable of evading multilateral sanctions regimes,” as well as North Korea’s rapid production capabilities.
White House finalizing plans to expand where Ukraine can hit inside Russia. This plan, being made in parallel with the United Kingdom, prompted Russian President Putin to again state that equate any expansion of the limits on Ukrainian strikes to be equivalent to active engagement by NATO.
Russia launched production of new drone with Chinese parts in 2023. “Russia began producing a new long-range attack drone, the Garpiya-A1, using a Chinese engine and other parts in 2023…China has positioned itself as neutral in the ongoing war but has deepened economic ties with Russia and become Moscow's leading source of dual-use goods during the full-scale invasion of Ukraine, feeding the Russian defense industry.”
Economics & Trade
In the first year of the full-scale war, Ukraine’s GDP shrank by almost a third, inflation jumped 20%, and the government deficit ran at more than 15%. The US, EU, and other allies have helped Ukraine absorb the impact on their economy and budget through loans for institutions such as the International Monetary Fund, which extended $15.6B to Ukraine over a four year period in a deal struck in 2023. Countries that accept loans from the IMF are required to make policy changes that the IMF determines will make the country receiving the loan more likely to be able to pay back the loan. This process is known as conditionality. The loans are then periodically assessed on whether they meet conditionality standards which are evaluated through Quantitative Performance Criteria or QPC’s. To date, Ukraine has met 94% of its QPCs.
NBU Eases FX Restrictions for Businesses and Tightens Some Regulations to Prevent Unproductive Capital Outflows. The National Bank of Ukraine (NBU) is introducing changes to its foreign exchange (FX) rules. The new measures will make it easier for state-owned companies to buy foreign currency for carbon emission quotas and allow e-commerce businesses to pay VAT in the European Union. Additionally, companies will be able to receive reimbursements for certain bond coupon payments. However, to protect Ukraine's international reserves and maintain stability in the foreign exchange market, the NBU is also tightening restrictions on using foreign currency for purchasing luxury goods and real estate abroad.
Despite hype around Ukrainian weapons tech, foreign investors remain gun-shy. Ukraine’s weapons startups’ fight against the Russian military machine has drawn the eyes of the world, but key financing barriers are blocking them from going worldwide.
Weekly digest of news on investment and business development in Ukraine and the world from UkraineInvest. Ukrainian company Velta has secured more than EUR 7 million in grants from the European Union for innovative titanium mining.
Група "Лемтранс" відкрила новий контейнерний термінал у Вінниці. A new $15M rail logistics hub and container storage terminal has opened up in Vinnytsia, roughly 300km for the Moldova border and 800km from the Romania border.
September Macroeconomic and Monetary Monthly Review - National Bank of Ukraine. Inflationary pressures eased and the stabilization of the energy system improved business expectations and consumer sentiment in Ukraine.
Government
President Erdogan of Turkey, said that Crimea should be returned to Ukraine under international law at the Crimean Platforms Leaders Summit last week. Turkey has emerged as a potential key mediator in the ongoing conflict between Russia and Ukraine, given its credibility and recent success in brokering the Black Sea agriculture export deal in 2022, although the deal later fell through. Turkey has maintained relationships with both Ukraine and Russia, supplying the Ukrainian military with Bayraktar drones, even as the number of Russian-owned businesses in Turkey has skyrocketed. As one of the few countries capable of facilitating peace negotiations, Turkey joins the United Arab Emirates, which has already negotiated a prisoner exchange deal between the warring nations, on the short list of prospective intermediaries.
Ukraine government approves 2025 draft budget, PM says. Ukraine's government has approved the 2025 draft budget, which has a strong focus on defense spending, Prime Minister Denys Shmyhal said. The draft includes roughly $53.5B for defense.
Russia expels six UK diplomats as tensions rise over Ukraine missiles. Britain described the accusations as "completely baseless", saying it was a tit-for-tat action after the UK expelled the Russian defense attache and removed diplomatic status from several Russian properties in May.