Ukraine is introducing new royalties for private gas exploration, in an attempt to attract investment into the country’s energy sector. “The proposal is to be submitted to Ukraine’s parliament immediately after the government’s approval of the relevant draft law,” finance minister Natalie Jaresko told attendees at the first US-Ukraine Business Forum held in Washington, DC in July.

Based on best international practices, the new law proposes to reduce royalty rates from 55% for wells less than 5000 metres and 28% for wells deeper than 5000 metres to 29% and 14%, respectively, as of October 1, 2015. Furthermore, for investment in new wells, the ministry proposes as of January 1, 2016 a 20% and 10% royalty rate, maintaining the existing corporate income tax rate, but adding an additional corporate surcharge tax at a 30% rate.


“By properly unleashing the potential of our domestic resources we can improve national security and create more competition, which in turn will create more jobs in the energy sector and put less pressure on our balance of payments,” Ms Jaresko said. She emphasised that the proposal takes into consideration what business needs, expects and requires making these investments, and balances business expectations with Ukraine’s own fiscal needs.

"The government is doing its part to create conditions that will attract private investment and technology, and take Ukraine out of the energy stalemate it has endured for decades," she said.

Aivaras Abromavičius, minister of economy and trade, noted US businesses have shown interest in agriculture, food processing, the defence industry and information technology. “Key areas for future co-operation are first, agriculture, second, energy, third, infrastructure, and fourth, US businesses participating in large scale privatisation of Ukrainian enterprises,” Mr Yatsenyuk said.

Agriculture minister Oleksiy Pavlenko emphasised that despite despairing events in Ukraine, multinational companies remained committed to the country. In fact, during the conference, several US investors announced agreements: private equity fund manager Horizon Capital is investing in Ukraine’s online store Rozetka and food, agriculture, financial and industrial products firm Cargill will further its investment in the country by building a port in Yujniy in the south of the country. 

Recent Unctad estimates indicate net FDI into Ukraine totalled a negative $300m in 2014. Announced greenfield foreign investment projects sank to 25 in 2014, from 69 in 2013. Employment in the country hovers at about 11%.

Foreign investors give weight to critical factors: political stability, the rooting out corruption, simplifying the tax code and ending arbitrary regulatory enforcement. Yet new Ukrainian ministers speaking at the US-Ukraine Business Forum emphasised their commitment to fair competition, rule of law and measures that reflect a gradual shift towards a functioning, rules-based, market economy.

"Ukraine’s best asset is our people, who will never give up,” prime minister Arseniy Yatsenyuk told attendees.

US vice-president Joe Biden said in his closing remarks: "This may be the last genuine opportunity the people of Ukraine have to establish a democratic republic in a way that is economically prosperous and fully integrated within Europe."