Ukraine’s grain harvest totaled 40.1 Mt as of Nov. 24, down 50% y-o-y, gathered from 9.2 Mha (-39% y-o-y), or 82% of the total area under grain crops (vs. 95% harvested as of the same date a year ago). The harvest of early crops was completed earlier, while corn, a late crop, was harvested from 53% of the planted area (vs. 87% a year ago), for a current crop of 13.5 Mt (‑62% y-o-y) at an average yield of 6.0 t/ha (-18%).

The Ministry of Finance placed UAH 4.0bn ($109m) of hryvnia-denominated bonds and EUR 459m of EUR paper at a primary auction yesterday.

Ukraine’s direct and guaranteed public debt stood at $103bn as of end-October, up 5.1% m-o-m and 5.3% YTD.

Russian pressure on the Donbas front is not abating, but neither Russian nor other sources reported new Russian advances there yesterday on top of small gains in recent days. As before, the heaviest battles are raging near Bakhmut (Donetsk region; see map below), in several settlements west of the regional capital of Donetsk, and between Bakhmut and Lysychansk in the neighboring Luhansk region. Russian forces were also reported accumulating troops and equipment near Vuhledar, halfway between the city of Donetsk and the Donetsk-Zaporizhya region border, likely in preparation for another offensive there (this place is also important for securing Russian logistics for the southern front).

The government expects the final approval of a EUR 18bn EU MFA+ package by the European Council on Dec. 6, after it passed the European Parliament last week, Deputy Finance Minister Olga Zykova said yesterday. She stressed it was important for Ukraine to receive financing already in January 2023. Zykova also said the government anticipates grant financing from the US, expected to average $1.1bn per month, referring to a new $37.7bn Ukraine support package proposed by the White House which includes $10bn in budget support for 9M23. She reiterated that the government counts on a full-fledged program with the IMF after finishing a four-month non-funded Program Monitoring with Board involvement (PMB), a staff-level agreement on which was reached last week.

Metinvest announced a cash tender offer to acquire up to $70m worth of its outstanding $169m 2023 Eurobonds under modified Dutch auction rules. The minimum and maximum purchase prices were set at 70% and 80% of the principal.

DTEK Holdings Limited (part of DTEK Energy B.V.) launched a cash tender offer to purchase up to $50m worth of DTEK Energy 2027 7.0/7.5% Eurobonds, out of the outstanding amount of $1,517m, through an unmodified Dutch auction. The maximum price was set at 27.0% of the principal amount of the notes.

There were no major changes on the ground yesterday aside from reported minor Russian advances near Bakhmut in the Donetsk region in the past several days. Both Ukrainian and Russian sources said Wagner private military company units entered a village 15 km south of Bakhmut, and several nearby settlements became contested. Similar to earlier Russian gains in this area, the latest small progress towards Bakhmut still falls far short of signaling any major breakthrough for Russian forces and does not yet threaten Bakhmut itself.

The state power transmission system operator Ukrenergo reported that the system-wide power shortage dropped to 20% as of Monday morning, from 30% on Nov. 25 and 50% on Nov. 24, the day following the latest Russian missile attack.

MHP reported its Ukrainian poultry production inched up by 0.6% m-o-m in October, to 60 kt (-12% y-o-y), while monthly volume sales fell 1.9% m-o-m to 62 kt (+11% y‑o‑y), with local meat sales down 11% m-o-m to 25 kt (+2.8% y-o-y) and exports up 5.8% m‑o‑m to 38 kt (+18%). Poultry sale prices averaged $1.93/kg, unchanged m-o-m and up 14% y-o-y. In the meantime, sunflower oil sales shrank by 71% m-o‑m to 13 kt (-51% y-o-y) while soybean oil sales surged by 81% m-o-m to 7 kt (+86% y‑o-y).

The frontlines remained practically unchanged over the weekend, with rainy and muddy conditions continuing to constrain both Ukrainian and Russian ground operations. But the slowdown observed in the past two weeks may shortly give way to intensified fighting as temperatures across Ukraine are forecast to drop substantially (to -5°C and lower) towards the end of the week. According to the US Institute for the Study of War (ISW), “ground conditions are likely to be set to allow the pace of operations to increase throughout Ukraine over the course of the weekend of Dec. 3-4 and into the following week.” “It is unclear if either side is actively planning or preparing to resume major offensive or counter-offensive operations at that time, but the meteorological factors that have been hindering such operations will begin lifting,” ISW said.

Russia’s latest missile attack on the energy infrastructure on Nov. 23 caused a full-blown blackout across the country, with the unified energy system splitting into several disconnected segments and cutting off most nuclear and coal-fired power plants from the grid. This led to the loss of water and heat supplies in the city of Kyiv and a number of other regions as well as disrupted mobile and internet services. By yesterday’s morning, the power system was reunited and most power plants were connected back to the grid. But their output remained very constrained due to damage to substations, which are essential components of the power transmission network linking power producers and consumers. The power shortage was estimated at around 50%, according to Ukrenergo.

The European Parliament approved a EUR 18bn support package for Ukraine to cover the country’s short-term funding needs next year.

There were no substantial developments on the frontlines on Thursday, the day marking the nine-month anniversary of the Russian invasion. Positional battles continued in the Luhansk region, while Ukrainian forces repulsed new Russian attacks slightly to the south in the Donetsk region, around Bakhmut and the city of Donetsk. A Ukrainian General Staff representative said yesterday close to 300 combat clashes had taken place on the Donbas front since last Friday (yet down from the previous week’s tally of more than 500). He characterized the Donbas situation as “difficult but controlled”. The southern front remained relatively quiet, marked by exchanges of artillery fire along both the Zaporizhya and Kherson frontlines. Russian forces continued to shell the regional capital of Kherson along with other settlements on the recently liberated western bank of the Dnipro on a daily basis. Daily tallies of Russian personnel losses reported by the Ukrainian military have fallen, reflecting the recent slowdown in fighting (see chart below).

Russia conducted another massive missile strike yesterday, firing 67 ship-launched Kalibr and Kh-101/Kh-155 air-launched cruise missiles, of which 51 or 76% were intercepted, according to Commander-in-Chief of Ukrainian Armed Forces Valeriy Zaluzhniy. Zaluzhniy said 30 missiles were fired at Kyiv, with 20 of them shot down.

The IMF and Ukrainian authorities reached a staff-level agreement on a four-month non-funded Program Monitoring with Board involvement (PMB). The underlying policy measures will focus on creating more fiscal space in view of significant financing constraints, including via boosting tax revenues and mobilizing domestic financing, maintaining NBU independence, updating financial sector strategy, and cementing good corporate governance at state-owned enterprises and banks. The IMF said it expects economic activity in Ukraine to stabilize in 2023, with real GDP seen rising by 1.0% y-o-y after a slide of 33% projected for 2022, and inflation remaining elevated at 25% on average (vs. 20% in 2022E).