The Ukraine government says a first wave of buyer credit deals involving foreign export credit agencies will “happen soon” as efforts to kickstart the country’s near half-a-trillion dollar rebuild gather pace.

In recent months, several European export credit agencies (ECAs) have pledged to boost their market capacity in Ukraine, in a bid to drive up trade volumes and foreign direct investment in the war-torn nation.

French and Polish ECAs have said they will provide coverage for businesses seeking to invest in Ukrainian projects or companies, including protection against war risks.

And in Sweden and the Netherlands, agencies have committed to providing tens of millions of dollars in fresh capacity from next year onwards, with a primary focus on boosting exports linked to Ukrainian reconstruction projects.

Such commitments are part of plans to finance Ukraine’s rebuild which, according to World Bank projections, will cost US$410bn over the next decade.

Ukrainian officials have emphasised the need for strategic alliances and collaboration to ensure the successful realisation of these ambitious rebuilding plans.

GTR speaks with Oleksandr Gryban, investment team lead at Advantage Ukraine, an investment promotion initiative set up by the government last year, to understand the role that ECAs can play in helping to secure vital imports and exports and support the nation’s reconstruction efforts.


GTR: The World Bank’s cost estimates suggest substantial private and public capital will be required to help rebuild Ukraine. How advanced are Kyiv’s reconstruction plans currently, and how many deals has Advantage Ukraine secured with project developers or investors?

Gryban: Advantage Ukraine is actively working on filtering a pipeline of feasible projects to funnel capital in from international and development finance institutions. The International Finance Corporation has said it will invest over US$1bn in Ukraine, the US government’s International Development Finance Corporation (DFC) has vowed to mobilise US$1bn and the European Bank for Reconstruction and Development (EBRD) has pledged €3bn.

There are a number of institutions that have made public commitments, but when you get down to utilisation and absorption of the funds, we are saying to them: ‘Okay, where are these deals?’ These international financial institutions typically support existing clients, provide refinancing, or undertake risk-averse activities – despite the fact that feasible and bankable projects exist.

Our team understands which Ukrainian companies are solid and meet all the eligibility criteria of these financiers. For instance, are they producing financial statements, are they audited by the ‘big four’, or hold sound legal structures? Advantage Ukraine is working especially closely with the DFC, which treats us as an outsourced execution team capable of leading and generating the projects, while also analysing these deals.


GTR: Which ECAs have you been speaking to in the past year, and what specific requests have you made to them? Are we likely to see a significant increase in ECA-backed transactions in Ukraine this year?

Gryban: We are in close dialogue with most of the OECD ECAs. We keep a matrix of all these agencies and map what limits they hold in the Ukrainian market, and whether these limits are restricted to public sector projects, or if ECAs are open to backing private sector transactions.

We expect the first pile of buyer credit transactions involving commercial banks and ECAs will happen soon.

The Export and Investment Fund of Denmark is incredibly flexible and is providing direct finance as well as credit and political risk cover of up to 100%. Not only do they have a capacity limit of about DKr1bn (US$140mn), but they are flexible when treating the financials of potential clients in Ukraine. For instance, they are willing to analyse Ukrainian companies based on their performance five years ago, long before Russia’s full-scale invasion and even pre-Covid-19. This is a very positive move in terms of being less risk-averse and encouraging development.

UK Export Finance is mostly focusing on the public sector and is largely active in defence-related transactions, aimed at securing Ukraine’s military supplies. They hold private sector capacity and are offering political risk insurance, though not up to 100%. In such instances, we still need other partners to mobilise bank financing because commercial lenders will only extend funding if they have full coverage in Ukraine.

At the same time, there is a list of projects involving Japan and Germany’s agencies that are progressing well. In mid-October, Germany’s Euler Hermes agreed to provide investment cover for a domestic construction materials manufacturer, Fixit, to build a second plant in Ukraine. This was the first case of ECA investment insurance since the war.


GTR: What role is Ukraine’s own ECA going to play in the country’s reconstruction efforts? Are you expecting its activity to increase?

Gryban: On paper, the Ukrainian ECA has also been engaged to supply war risk insurance in Ukraine. This is predominantly for SMEs who cannot get direct insurance from Miga or DFC because of the scale of their business or capital volume. This function is currently awaiting a second reading and vote in the Ukraine Parliament, and if passed, would extend the agency’s mandate and enable it to offer war risk insurance.

Ukraine’s ECA does not conduct traditional export credit business. Instead, it offers short and mid-term products, as well as providing additional collateral to Ukrainian companies – typically SMEs – seeking local bank loans.


GTR: Another key area of focus for Kyiv has been securing cover for the ships, trucks or trains importing goods into Ukraine. To what extent is insurance or reinsurance capacity constrained for the transport sector and can ECAs or international financial institutions address this shortfall?

Gryban: The EBRD is rolling out an initiative aimed at trade facilitation. As part of this, the bank has created a trust fund and is doing fundraising to issue war risk insurance for short-term trade operations, insuring vehicles and cargos, as well as life insurance for the drivers.

The European Commission has pledged €50mn, while the Swiss and Norwegian governments have also committed funding to the programme. The EBRD operated a similar structure in Africa involving Munich Re as the reinsurance company. For the Ukraine initiative, they are running a tender to decide who the operator will be – likely one of the big (re)insurance companies.

The Polish ECA Kuke’s reinsurance plan will also bring benefits to Ukrainian firms. Currently, it is possible for Ukrainian importers to secure transport and cargo insurance, but prices are skyrocketing and businesses are overpaying. If we can decrease the price of operational expenses, to some extent, this will be a great initiative. Anything that can bring costs down and increase their margins, which are very, very narrow at the moment, will be hugely beneficial.

Kuke is also set to issue political risk insurance even if there is no Polish content. The initiative was only recently announced and hasn’t been tested yet. Their government took this decision right before the elections in October, but their new ministry is quite progressive and we are hopeful the offering will be extended by the new administration.


GTR: The OECD Arrangement’s country risk classification has placed Ukraine in category seven, its highest risk grouping. What challenges does this pose to Ukrainian businesses seeking export credit support?

Gryban: Being in category seven increases the cost of financing dramatically. Before the war, companies could expect to pay a premium of roughly 1% per annum; this has since increased to roughly 2 to 3% per annum. The OECD risk category is a big issue for Ukrainian businesses, but that’s where different financing instruments can help. For example, ECAs or their wider governments can supply a grant which compensates Ukrainian companies for the high premiums.


GTR: How is trade through Ukraine’s Black Sea grain corridor progressing? Are you hopeful the private insurance market will restart cover for these flows in the coming weeks?

Gryban: Since its launch in August this year, over 50 ships have passed through the Black Sea humanitarian corridor, bringing over 2 million tons of agricultural products and other cargo to the world.

The Black Sea Grain insurance plan is on the verge of being finalised. Talks have been ongoing for the past few months and currently the Ukrainian government is in the process of selecting an official vendor for the initiative. This has been the missing component in the overall structure of the plan that would trigger the involvement of the Ukrainian banks, who will provide letters of credit enabling the whole system to work.

The vendor will act as a backstop for the scheme and provide first loss cover, reimbursing Lloyd’s of London insurers for losses they may incur. There are two questions: who is this vendor going to be, and what guarantee instruments can they provide to give comfort to the insurance companies?