Estonian entrepreneurs head for Ukraine to save business

Photo: Erakogu

Shrinking value of local currency sets question mark over solvency of Estonians’ partners in Ukraine.

Bloody and destructive battles between the kindred nations of Ukraine and Russia Estonian businessmen deem quite unlikely; even so, due to threat of war, contracts entered earlier may not hold water any longer.

Real estate developer Hillar Teder, who opened a large shopping mall in Simferopol last Thursday, on the very eve of Russian invasion, is today flying to Kiev in order to rearrange the business plans of his company Arricano – in the light of crisis.

«I intend to postpone a part of the works planned in Ukraine, to invest less in the insecure situation,» said Mr Teder. «We need to review the contracts with the rentees, as the hryvnia is dropping. The loans are assumed in dollars, wherefore the merchants cannot pay the difference created on their own.»

Also, Mr intends to pay back loans taken by his company from commercial banks belonging to the Ukrainian state, using new loans from private banks. «Ukraine’s purse is empty, and entrepreneurs can by refinancing release large sums which the state can draw, from its banks, to cover costs,» explained the businessman.

Ukrainian retailing, on which Mr Teder’s business feeds, seems to have recovered from the turmoil of the revolution; still, what comes next depends on Russia’s behaviour. Ukraine’s industry exports close to 40 per cent of its production to Russia. Should the Kremlin, in order to deepen the crisis, close down existing orders, payments of wages will start to be late and people will not be able to spend on shopping.

No fear of destruction

The shopping malls, all of a sudden in the midst of a revolution and invasion, still aren’t threatened by destruction of war. «I do not believe that Russians and Ukrainians would start shooting at each other from cannons,» said Mr Teder. «In Ukraine, there was a short period of time during the revolution when masked men with automatic weapons were involved in robbery and extortion; by now, however, that king of clime has also been pushed back.»

In Ukraine, Mr Teder owns five shopping centres; according to current business plan, three more are to be opened in near future. The 40,000 square metres Southern Gallery in Simferopol is the largest on the peninsula; in addition to the French Auchan hypermarket, it holds hundreds of smaller stores such as Pierre Cardin and Fellini.

The security businessman Urmas Sõõrumaa, who also flew to Kiev yesterday, noted that crime running rampant during the revolution meant new orders for his company. «Demand for security service rose, both from apartment owners and embassies,» said Mr Sõõrumaa.

Hastening to Tallinn airport, at yesternoon, Mr Sõõrumaa couldn’t say how he would rearrange his business in Ukraine. «It’s all so fresh; once on the ground, I will get more clarity,» he added.

VKG, applying for oil shale mining licence in Boltyshk, 250 kilometres to the South-East from Kiev, froze its operations, as the Ukrainian ministry of energetic and mineral resources is not able to proceed with the project development due to the crisis.

At standstill

«To get a mining licence, we need to do exhaustive geological prospecting; however, right now the state agencies have other priorities. Also, right now no investor wants to talk about placing money into Ukraine,» explained Priit Rohumaa, CEO of VKG. «Local authorities are highly interested in our activities, as this is an economically depressed region; even so, oil shale is a national resource and all decisions are taken in Kiev.»

Operating in Ukraine since 2007, VKG intends to develop oil shale industry in Kamenski region,  Tsherkassy oblast, to the same model as Eesti Energia in USA and Jordan. In addition to the mines, shale-derived oil and electric power are planned to be produced.

Tõnis Palts, planning a holiday resort in Crimea, close to Sevastopol, into a former repair base for submarines, suspended his project after the Russian invasion. «In an ordinary situation, we could say that in half a year we would get a building permit and in a year we’d stick in the shovel; now, however, no-one is in a hurry to invest more money into Ukraine,» said Mr Palts. «Now, I’m peacefully waiting for my time, as, in spite of the alarming news it is surprisingly calm in Crimea.»