The Ambassador of the Republic of Estonia to Ukraine: "The sum of russian assets arrested in Estonia amounts to over EUR 20 mill"
Kaimo Kuusk speaks on capital flight, anti-russian sanctions, Ukrainian refugees, and the damages of the war.
A few years ago, one of the Estonian ambassadors stated that Ukraine is Estonia's fifth most important country in the world in terms of investment size and that Ukraine is very significant for Estonian investors. Indeed, Estonian businesses were quite active and consistent in entering the Ukrainian sectors of metallurgy and agriculture, pharmaceuticals, chemical and food industries, construction and real estate, IT technologies, energy, and financial services. However, the initiative of Estonians was somewhat hampered by the 'peculiarities' of the Ukrainian investment climate.
Talking to Ambassador Kaimo Kuusk, we discuss how our investment dialogue has changed in recent years, how the Estonian business environment is experiencing wartime in Ukraine, how its interests are demonstrated today, what negatively affects the investment attractiveness of the Ukrainian state today, and the active support for Ukrainian society in the fight against armed aggression of the russian federation.
On Estonian investments in peacetime and wartime
– Describe the current state of our bilateral investment cooperation.
– From year to year, the level of Estonian-Ukrainian investments has been growing. There have not been any significant leaps, but we observe gradual growth. Speaking about the amount of direct Estonian investments in Ukraine, it is 1.6% of all Estonian foreign direct investments. The figure is small, it could have been more. In fact, the total amount of Estonian investments in Ukraine is approximately 190 million euros.
Regarding 2022 – our reports show a zero figure. Estonian businesses attempted to enter the Ukrainian market with some funds invested during a certain month, around 1 million euros, but for various reasons, it was withdrawn from the Ukrainian economy later on. However, as far as I know, none of our entrepreneurs curtailed their assets here with the onset of hostilities. Estonian businesses are trying to be flexible.
Meanwhile, Ukrainian investment in Estonia has increased in 2022. It can also be linked to the period of full-scale invasion. As for the total amount of Ukrainian investments at the moment, it is estimated at around 500 million euros. However, if we compare the amount of Ukrainian investments in the Estonian economy with the total number of Ukrainian investments abroad, it is also approximately 1.5% of the total amount. So there is a certain parity between Estonian investments in Ukraine and Ukrainian investments in Estonia.
– You said that in 2022 Estonians attempted to invest a certain amount in our market, but for various reasons, the money did not come in. Besides the war, what were the obstacles?
– When it comes to the key reason why we did not see Estonian investment last year, it is the full-scale invasion and military actions in Ukraine. However, some of our companies that had been working here before even increased their presence in Ukraine. For example, Bolt (taxi service, scooters). There was a period when Uber was not operating, which allowed the Estonian company Bolt to increase its share in the local market (continuing to serve customers despite martial law). We see the company's growth in terms of expanding its capabilities: the Bolt taxi service is appearing in various cities in Ukraine..
By the way, one of the Bolt services – car rental – is gaining popularity in Estonia. It works like a scooter rental in Ukraine: you can check in the app where there is a free car for rent and rent it (even for a few hours). Bolt was considering implementing such a system in Ukraine, but insurance companies are reluctant to cooperate due to military actions. And now Bolt is looking for a partner to launch a car rental service in Ukraine.
However, the company has not yet reached pre-war indicators, primarily due to the curfew (as the service does not operate during those hours). Also, due to the outflow of customers in such large cities as Kharkiv and Odesa, as a significant part of the population left for safety reasons.
Talking in general about the investment potential and fears of Estonian businesses regarding this matter, I would emphasise here the partial influence of stereotypes. In the past, there were cases of corruption and even raiding of our entrepreneurs. This drew attention and was highlighted in Estonian media. Therefore, the impression could have been formed that everything in Ukraine is allegedly corrupt and there is a mass occurrence of raiding. Although, in reality, it is not the case. However, a certain stereotype exists and affects the business environment's attitude and risk assessment.
– Name three industries that receive the highest amount of Estonian investments in Ukraine.
– These are real estate (construction of non-residential and business facilities such as supermarkets, shopping centres, business centres, warehouses, etc.), agriculture, financial services, and insurance. It is also possible that the IT sector and retail receive significant investments. The largest investments of 30 million euros were made in real estate operations, wholesale and retail trade received 17 million euros, and financial and insurance activities received 16 million euros. In addition, prior to the war, Estonian businesses invested in Ukrainian metallurgy and agriculture, pharmaceutical, chemical and food industries, construction, and energy.
Regarding real estate, Estonian businesses faced an issue with Sky Mall in Kyiv. It still remains unresolved. To put it briefly, the Ukrainian partner of the Estonian entrepreneur did not fulfil their obligations under the agreement. In Ukraine, it is very difficult to arrest assets in such a way that the party under investigation does not have access to them and cannot resell or do something with them during the investigation. Therefore, it is difficult to 'find the end' and stop any financial movement.
Moreover, the real competition for assets (these are related assets) takes place more in Cyprus. In Ukraine, the consequences are already felt (but assets can be frozen for a while, then something happens to them again, and the case 'goes around in circles'). Therefore, the main problem is to keep the assets immobilised to complete the case. However, in Ukrainian business conditions, it is extremely difficult to investigate such cases and make decisions about them. Although, for example, our large shopping centre City Mall in Zaporizhzhia operates without any issues.
– What is the current estimate of damages for the Estonian side regarding Sky Mall?
– As far as we know, the Estonian owner would like to include in the damages, among other things, the money that the company could not earn due to the problems that arose with the Ukrainian partner. However, the embassy does not take a certain side of the parties involved – we are interested in impartiality.
On losses of Estonian businesses due to the war in Ukraine
– Have the projects invested in by Estonian businesses been affected by the start of russian armed aggression during 2022-2023?
– There are examples. In March 2022, a warehouse complex near Kyiv was destroyed, where various companies stored their materials. Among others, the goods of Estonian company Krimelte – a producer of building chemicals – were completely destroyed. And Elme Messer Gaas had to evacuate assets from territories that turned out to be occupied. The losses consist of the fact that the territory to which the products have been supplied has significantly decreased. Significant supplies (including industrial gases) were also in Donetsk and Lugansk oblasts, which are currently not under Ukraine's control, and therefore cannot be clients of the company. Elme Messer Gaas does not comment on their losses at this time. But they continue to operate in Dnipro (a plant for the production of industrial gases) and Kharkiv (an autogenous plant) and even plan to invest in Western Ukraine. Perhaps they will build additional capacities or expand cooperation in this region. The decision has not been made yet: the company is exploring options for building production capacities.
– Do Estonian companies that suffered property damage due to hostilities in the Kyiv oblast and Elme Messer Gaas have the right to receive reparations in the future, and is this process being formalised?
– A month ago, I talked to a foreign businessman who lost assets in Crimea in 2014 (including part of the warehouses being destroyed). He confirmed that his company is preparing a lawsuit against russia, but he does not have great hopes for it because it is a very complicated procedure. After all, it is necessary to prove the loss of one's property (and he has received nothing back and has no access to his assets). Maybe something will change now, and these processes will accelerate… As for our companies, I do not know about their intentions.
On Ukrainian corruption through Estonian eyes
– Foreign businessmen sometimes complain about Ukrainian corruption, excessive bureaucracy, refusal to refund VAT, and illegal attempts to seize companies. Do Estonian entrepreneurs belong to their number?
– Over the years of the Estonian business in Ukraine, it has faced various problems. But in the last 3–4 years, the Ukrainian government has made significant progress in recognizing these problems and starting to work on them. I should mention that some of the institutions that are supposed to help foreign investors in Ukraine have been reformed or are in the process of reform, or new ones have been created.
I will give a recent example. In March, we received a request from one Estonian company (the owner does not want to disclose the name) regarding the raiding of its property – illegal changes were made to the registry and there was a physical attempt to enter the enterprise to establish control by the supposed new owner. The embassy sent a letter to the Ministry of Justice of Ukraine, and the company prepared documents and turned to the Office for Combating Corruption and Raidership in the Ministry of Justice. Now the issue is progressing: the Ministry of Justice stated that illegal changes regarding the Estonian company were revoked. Thus, its rightful owner has been restored. For us, it is a vivid example that the institution in Ukraine works.
Another example, but without names. Two years ago, an Estonian company in one of the Ukrainian regions planned to increase its activities. And it was necessary to expand the land plot. When it started the process, it was hinted that if they want to quickly process the papers, they should give a bribe. The company refused to pay, as this is an absolute Western principle – not to pay bribes.
The owner turned to us with the problem. We went to the region and had a conversation with the local authorities and the governor. Eventually, the necessary documents were signed within a few weeks without any unofficial financial demands. In the 1990s, Estonia also had such stories, but corruption has been overcome to this day.
About interregional cooperation
– Before the war, there was investment cooperation between the Dnipropetrovsk Oblast and Ida-Viru County. The Estonian side was also interested in establishing interregional cooperation with the Chernigiv Oblast. What projects and in which sectors did/does the cooperation take place?
– Speaking of the cooperation between Dnipropetrovsk Oblast and Ida-Viru, then on the eve of the COVID-19 period, we only managed to establish contacts with local trade and industrial chambers. And then there was a full-scale invasion. Therefore, it is currently difficult to say whether there was any real outcome from this communication and whether a specific project was launched. At least there is no such information in the embassy.
However, we are now seeing interest from the Estonian Chamber of Commerce and its regional branches in resuming/activating cooperation with the Ukrainian side and searching for new opportunities for Estonian investments. There are even thoughts about organising a visit to Ukraine. Regarding the Chernigiv Oblast, there were also only introductory business meetings there. So far, there are no specific projects.
Still, there is also good news. A month ago, the Estonian company HUUM – a world manufacturer of saunas – started working with a plant in Brovary. The Estonian enterprise orders the production of metal parts for saunas (laser metal processing). It is because the production facilities of this plant are better than those in Estonia. The goal is to produce these metal components for 200 sauna heaters every week. And later, the company plans to relocate a third of its entire production to the Kyiv Oblast
About Ukrainian Entrepreneurs in Estonia
– At the beginning of the conversation, you mentioned that Ukrainian investments in Estonia increased in 2022. Name three sectors where our business is represented.
– This is real estate sales (primarily residential buildings) and retail. However, the Estonian Ministry of Economy does not provide separate sectoral figures. There are statistics on the total amount of Ukrainian investments: in 2021 it was 27.6 million euros, and in 2022 it was 46.2 million euros. In addition to real estate and retail, Ukrainian capital investments in the fintech sector are also in demand.
– And Nitrofert company, which was part of Group DF (the only producer of mineral fertilisers in Estonia), is still operating?
– This company is associated with oligarch Dmytro Firtash and was known in Estonia for supplying cheap gas. We have checked the latest data on Nitrofert: currently, only 12 people are employed there. Speaking of the taxable income of the company, it is approximately 1 million euros per year, which is very little for such a company. The Estonian holding company Viru Keemia Grupp, which unites enterprises of the shale industry, electricity production, and municipal enterprises, was interested in acquiring Nitrofert's property before the war. However, there is no confirmed information on whether VKG has become the new owner of the company's property. As for other businesses of Ukrainian oligarchs in Estonia, I cannot say anything.
About frozen assets of rich russians in Estonia
– In January, Urmas Reinsalu, the Head of the Estonian Foreign Ministry, announced that Estonia was working on a mechanism for transferring 17 billion euros of frozen russian assets to Ukraine and intends to be the first in Europe to do so. What will it look like in practice? What assets are we talking about, when will the process start, and when will we receive the first tranche?
– Regarding the frozen assets of the russian federation in Estonia, millions, not billions, are in question. The mentioned figure is the total amount for the EU.
According to rough estimates, the total amount of frozen private assets of russian origin in the EU is almost 17.6 billion euros. The amount of russian assets arrested in Estonia is over 20 million euros, including about 11.7 million euros in assets frozen in credit and other financial institutions and bank accounts, and approximately 8.4 million euros in assets stored in prepayment accounts of tax and customs services.
Unfortunately, it is almost impossible to calculate the exact value of frozen assets, as the amount is constantly changing. Companies, for example, can spend frozen assets on the storage of frozen goods (such as chemicals). It is even more challenging to estimate the total value of frozen goods or material things.
Over 90% of the assets frozen in Estonia are related to two russian oligarchs – Andrey Melnichenko and Vyacheslav Kantor. The former owns a company for handling liquid chemical products and ammonia – EuroChem Terminal Sillamäe OÜ, which is a subsidiary of the russian company JSC MCC EuroChem. The latter owns a bulk cargo terminal in the Muuga seaport of DBT AS company. They both have a network of affiliated companies.
Now, our Ministry of Foreign Affairs and Ministry of Justice have been tasked with developing a mechanism for transferring these assets to Ukraine. We have consulted with Canada, the United States, and the Ukrainian side. In May, the Ministry of Foreign Affairs should receive specific proposals on how to implement the initiative. So, we do not have any examples yet, but we have reached a stage where specific steps need to be written down and presented.
On the losses of the Estonian economy from anti-russian sanctions
– According to Eurostat, as of the end of 2022, annual inflation in 19 Eurozone countries reached a record high of over 12%. The highest rates of annual inflation were recorded in Estonia (24.2%), Latvia (22.5%), and Lithuania (22.4%). The main reason for this is the rise in energy prices and, as a result, most other groups of goods. What economic positions (in connection with the anti-russian sanctions regime) has Estonia found itself deep into the red?
– First and foremost, this is the cessation of trade with russia and belarus. There is a long list of sanctioned goods that are no longer being supplied. However, some positions remain outside of the sanctions. It means that some trade still exists. But there has been a 40% decrease in the volume of goods supplied to Estonia. Accordingly, the price of non-sanctioned goods has risen. However, I should note that russia and belarus were not our main trading partners.
– Is there a total figure for the losses of the Estonian economy due to anti-russian sanctions in 2022?
– I'm not sure if there is statistics for that specific parameter. In any case, we accuse russia of high inflation in our country. And when we talk about a decrease in GDP of almost 1% compared to 2021, we also blame russia for this.
On military and economic aid to Ukraine
– Let's talk about aid to Ukraine during the war. At the beginning of the year, Bloomberg estimated how much weaponry had been transferred to Ukraine since the beginning of the war, and Estonia was ranked 10th. Is there any criticism of this policy within the country?
– When it comes to military aid and societal attitudes, questions have arisen at the beginning about how Estonia would defend its territory when it is giving weapons to Ukraine. However, our Prime Minister and Minister of Defence have explained that it is an investment in our own security. Of course, there were voices against it. In particular, the right-wing Conservative People's Party of Estonia (Estonian: Eesti Konservatiivne Rahvaerakond, EKRE) tried to use this "war argument" during the election campaign, but it did not find support among Estonians. Therefore, there is a general consensus in Estonian society regarding the provision of weapons to Ukraine.
It should be noted that the transfer of weapons from Estonia is purely donor aid. As early as the summer of 2020, we were the first to start providing lethal weapons to Ukraine (from pistols to Javelin missiles, howitzers, anti-tank weapons, and so on). Last year, the EU established the European Peace Fund (EPF), from which countries that provide weapons to Ukraine can receive certain compensation (to restore military potential) in exchange for the weapons they have given away.
If we talk about Estonia, we have provided Ukraine with military assistance worth 400 million euros, and we may be able to compensate for a quarter of this amount from the EPF.
– In January, representatives of the defence ministries of nine European countries (including Estonia) signed the Tallinn Declaration – a commitment to provide tanks to Ukraine. What does the agreement involve on Estonia's part?
– The main idea of the Tallinn Declaration is to push larger countries to provide military assistance. So it's a political move. If we talk about Estonia's share, we have pledged to transfer all of our towed howitzers (122 and 150 mm) to Ukraine. And that's already done. We have also provided Carl Gustav anti-tank weapons (Sweden-made).Estonia, unfortunately, does not have tanks in service, otherwise, they would already be in Ukraine.
Our country positions itself as a 'taboo breaker': when someone hesitates, we come first and act. For example, the story with the supply of 1 million rounds of 155 mm calibre shells: while France and Poland are arguing over how to order them, on April 20, the proposal of the Minister of Defence Hannes Hanso was supported at a meeting of the Estonian government. And Estonia will transfer its share of these shells to Ukraine. We do not announce specific delivery dates (for security reasons), but they will already be in Ukraine at the beginning of May. In addition to shells, night vision devices will be included in the package.
– Estonia reportedly sent aid to Ukraine in December to restore energy infrastructure. How much money was sent and what infrastructure did it go towards?
– This was aid from the company Elektrilevi (which covers 95% of Estonia's electricity distribution network), which sent transformers and various electrical equipment for Ukrainian power plants. There were a total of three transfers – in January, February, and March. If we're talking about the first two, our Ministry of Foreign Affairs has paid for the delivery of the cargo, and the third has been delivered using EU funds. For security reasons, the Ukrainian side did not disclose which specific energy infrastructure objects the equipment was directed to.
The embassy is in contact with Ukrenergo (Ukraine's National Power Company – Mind): the company provided us with a list of necessary equipment, and Estonia fulfilled this request. In January, I was in Tallinn. I gave an interview to a local business media outlet, where we talked about Ukraine's need for transformers and electrical equipment. After the interview, Elektrilevi called the radio station and announced that they could provide such equipment and asked for contacts at the Ministry of Foreign Affairs.
We know that in Ukraine, Soviet equipment is often still used. In Estonia, the infrastructure is gradually being updated, and therefore there is still perfectly functioning equipment (or equipment that was kept in reserve) that is not being used. So why not provide it so that it can work successfully here?
About Ukrainian refugees in Estonia and a scandal with charitable donations
– In December, Prime Minister Kaja Kallas announced that Estonia was no longer able to assist Ukrainian refugees at the same level as before because there was no longer housing or work in the country. Therefore, from the beginning of 2023, the country will redirect refugees to Finland. How many Ukrainian refugees are currently in Estonia, what is the size of their social benefits? How actively are migrants integrated into society? What is the state policy on the labour migration market for Ukrainians (the percentage of employed people), and is there a difference in salaries compared to locals?
– If we talk about the message that Estonia is no longer able to accept Ukrainian refugees, then this message appeared in winter when there were fears that the russian federation would bomb the energy infrastructure in Ukraine and the influx of refugees would double. Currently, the situation is stable.
As for the total number of Ukrainians who came to Estonia from February 24, 2022, it is 129,000 people. Of these, about 70,000 stayed in the country, 45,000 applied for temporary protection, and as of now, 35,000 have valid temporary protection.
Regarding adaptation, 9,000 Ukrainian children attend kindergartens and schools in Estonia. 11,000 Ukrainians aged 20-64 are employed, which is 43% of all employed in this age group. If we talk about the monthly assistance from the state that families receive, its amount depends on the number of children or people supported, disabled people, etc. The maximum amount of assistance per family is 1,200 euros.
Data from the Estonian Ministry of Social Affairs regarding elderly people indicate that there are 2,300 pensioners whom the state pays the difference in pension provision. Thus, if a Ukrainian pensioner's pension is less than the minimum Estonian pension (295 euros), the difference is paid. Our government also provides subsidies for rental housing (the state cannot provide free social housing permanently). There is a well-known example when Ukrainians in Estonia lived on a ship. But in the summer, this project is closing down. It means people have to find accommodation – for this, Estonia provides certain discounts/subsidies for renting housing.
After receiving temporary protection, Ukrainian war refugees have the right to receive a minimum subsistence level on the same basis as other people who permanently or temporarily reside in Estonia.
The subsistence minimum is calculated as follows: the first member of the family is paid one subsistence minimum (200 euros), the second adult is paid 0.8 of the subsistence minimum (160 euros), and children under 18 are paid 1.2 of the subsistence minimum (240 euros).
If you have housing for which you do not have to pay rent, you can receive 150 euros per month from the subsistence minimum scheme to buy food and essential items. If you need to pay utilities (for living in a place where you have to pay for utilities rather than rent), you need to submit an agreement for the use of the living space and documents confirming your utility payments in addition to the application.
Those who rent housing and have to pay for it must attach a rental agreement and documents confirming utility payments to their application. We already have 6,300 cases where the state has provided compensation for rental housing.
As for salaries, Ukrainians and Estonians in equivalent positions receive equal pay. And if the opposite is found to be the case, the employer will be punished. If such discrimination exists, it should be reported to the authorities, and the case will be investigated.
– Estonian media sometimes write that part of the donations in Ukraine are simply being embezzled. Non-governmental organisations that help Ukraine receive fewer and fewer donations. The Estonian charity organisation Glory to Ukraine suspended cooperation with some Ukrainian partners in March. The NGO Council suspects that the collected donations were not used for their intended purpose. Can you comment on this?
– Speaking of humanitarian aid to Ukrainians from the Estonian private and public sectors, it mostly reached the people who needed it. Regarding the case of Glory to Ukraine, financial control should indeed be in place. I am aware of journalistic investigations in Estonia and Ukraine on this topic. However, regarding Glory to Ukraine, at the moment, I would refrain from certain speculations. It undergoes an international audit, and we should wait for the results: what amount was/was not improperly used. And I wouldn't generalise this case – rather consider it as an isolated one. After all, most humanitarian aid is used for its intended purpose. Thus, it is not a common practice when funds are misused. But if organisations cooperate, then both sides are responsible.
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