How Ukraine Delivers the Mail During Wartime

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1:35Hello and welcome to another episode of the All Thoughts Podcast. I'm Tracey Alloway. And I'm Joe Weisenthal. Joe, do you ever order stuff online? Yesterday. I don't mean just like Amazon day-to-day stuff. I mean, like, do you go out looking for interesting things to buy online? Every once in a while I get the edge. You know what I bought yesterday? What? A guitar. No, I don't have guitars online. Too many. A hat from the 90s from the Bureau of Reclamation celebrating like the 50th anniversary of the building of the Hoover Dam. Wait. And I'm going to wear it. I want one. Yeah, it's really cool.

2:11It's a baseball cap? I'll show it to you after this. It's really cool. I'm going to wear it at our next concert, I think. It's really cool looking. I am very jealous. Yeah, it's a good one. All right. Well, I buy stuff all the time. My husband does a similar thing and buys lots of vintage, not baseball hats, but rugby shirts. Oh, that's cool. And the other day he ordered a rugby shirt off of eBay and it showed up a few weeks later. And to both of our surprise, it had come from Ukraine and specifically a place called Zaporozhia. Huh. And it was not like a Ukrainian jersey or something like that.

2:43It just happened to be sent from Ukraine. It happened to be sent from Ukraine. I can't remember exactly which jersey it was. But I was kind of surprised because it was in this like perfect little box. You know, it took a while to get to the U.S., but not an inordinate amount of time. And it piqued my interest and it got me thinking, how in the world is Ukraine still shipping things in the middle of a military conflict? Yeah, I mean, it's pretty striking. You know, we talked one time about pallets in the context of the war and this idea that like logistics is the key to keeping everything going and good disciplined logistics, etc.

3:20But the idea that you could quickly get a pristine package from eBay to the U.S. in the middle of an ongoing conflict is extraordinary and raises questions about, like, how do you keep day-to-day operations of a sort of crucial delivery infrastructure, such as postal service, whether shipping internationally or just shipping domestically going under such extreme conditions? Right. And also, how does the role of the Postal Service actually change during wartime? I imagine shipping rugbies to my husband in the U.S. is probably not an essential service at the moment. But Ukraine is using the Postal Service to send medicines and AIDS and cash and things like that.

3:58So we should talk about this. I'd love to. And I am very pleased to say we do, in fact, have the perfect guest. We're going to be speaking with Igor Smoliansky. He is the CEO of the Ukrainian national postal operator Ukrposhta. And before heading Ukraine's postal service, he also worked at KPMG and Boston Consulting Group. So really a perfect All Thoughts guest, a supply chain expert with a side interest in finance. That's how I'm putting it. Let's do it. All right, Igor, thank you so much for coming on All Thoughts. Thank you for inviting me. So first of all, thank you for getting packages to me.

4:34I appreciate it. My husband appreciates it. I have since ordered things that came from Kiev as well, knowingly ordered stuff from Kiev, and those also came in pristine condition. Can you describe maybe just the challenges that the Postal Service is facing at the moment? How much have things changed now versus, you know, pre-2022? I mean, obviously it had changed a lot. Like as an example, we used to have five flights per week to New York, which would allow us to quickly deliver parcels to the U.S. And by the way, parcels to the U.S. is about 50 percent of our export volumes. Wow. Over 1.3 million Ukrainian SKUs are sold on Amazon, eBay and Etsy.

5:17so it's actually thousands of small businesses jobs people that do things for the dogs fashion ukrainian fashion is very popular things for the houses so and we understood that if you stop delivering these people will lose their jobs and you can imagine during the war you cannot get the jobs easily and so we had to face in one day that there are no more flights there are no flights from Ukraine. At the same time, if you don't deliver on time on eBay or Amazon or Etsy, your rating as a seller drops. So which is why we had to do what we could to make sure things are delivered. And we moved to new logistical routes.

6:02So during the war, hopefully not that many people know it, but during the war, you have a curfew, which means you cannot drive at night. and usually the mail is delivered overnight. So we recall that 25 years ago, we moved the mail via train. So I met with a friend of mine who's the head of Ukrainian railways and in five days, we resume moving a mail-mail railway. So we're moving, for example, from Kiev to Lviv and from there we take the truck and it goes to Warsaw or Frankfurt or London and from there it flies to New York and then it's delivered to you. Right now, we strive to deliver to any points in the U.S.

6:43within two weeks maximum, which means we have 24 hours turnaround in Ukraine, about two, three days on the road, and then it gets on the plane. It's challenging, but we're making things happen. So, for example, via railway, we already moved over 20 million parcels. Talk to us about the domestic needs. I think you mentioned it's not just a postal service, but a pharmacy as well. Talk to us about the main internal priorities of delivering the mail. Sure. I mean, Ukraine is the largest country in Europe and not its only largest. There are 27 ,000 cities and villages in Ukraine and many of those very small, up to 100 people or 500 people.

7:23As you can imagine, during the war, giving refugees, they did not get any larger. What it means is in those villages, there are no pharmacies. There are no banks. Actually, banks only remain in 4 % of cities in villages in Ukraine. And you have to make sure these people do their stuff. Plus, when we talk about deoccupied areas, Russians destroy the entire infrastructure, which means when Ukraine deoccupies these villages, for about five to six weeks, you don't have mobile connection, you don't have electricity. But we have to work because you cannot leave people in the vacuum. Not to mention they would operate in Russian rubles and you want to bring them back to Ukraine.

8:05So you have to bring them Ukrainian currency. And we are the first company they see. We usually come two, three days after the occupation. We just give time to deminers to demine the fields so we can relatively safely operate. And we restructured our operations so we can work with or without power and electricity. thanks to Starlink from Elon Musk and about 1 ,500 generators we now have built a system which can work whenever under any conditions so we had to change our processes to make sure we deliver pensions in cash because obviously if there is no electricity your ATM doesn't work your post-terminal doesn't work but people still need to live I mean they have little bazaars they work so we basically create the ecosystem of life around those small villages and we keep it going.

8:56What's the labor situation like at the moment? I mean, you mentioned demining. It sounds like this is a risky job. Here in the U.S., we have a postal worker shortage even without having to worry about military conflict. I mean, it's a severe shortage. You can imagine, first of all, you have to separate male and female works, right? And you can imagine there are many male population in the army. Second, we have lots of refugees. And so, I mean, we understand it's a big problem. So, for example, now to attract personnel, we have to make sure that our offices are equipped for people with disabilities so we can get them to work.

9:38We're trying the best we can to implement automatic sorting lines. Our goal for this year, I know it sounds weird during the war, but we want to be 100 % digital, even when there is no digital. meaning we build a system where in the morning our mail carriers will download through Starlink and generators the data, work during the day, and then upload the data at night, which means, again, we are not dependent on the infrastructure if Russians shut down the electricity or mobile or anything. So we're doing our best to increase efficiency, to maintain as normal life for people as possible. Why, you can imagine, there is no rush of new stores opening in Ukraine right now.

10:20There are no rush of new banks and pharmacies. So the e-commerce becomes this tool to maintain a sense of normalcy, even on the front lines. So, for example, we have lots of soldiers that would order something on Amazon or on Alibaba, Powerbank, or the Saks, or stuff, whatever they need, and will deliver. So, you know, the e-commerce becomes the tool to keep you connected to the world, even when the world is in a difficult situation. I'm actually curious. You mentioned Starlink. I don't know that much about it, but I'm curious, are there efficiency gains or infrastructure gains that you've discovered with the use of Starlink satellite internet, such that when there's a proper rebuilding phase, that there are things that will never have to be rebuilt in their original form because of, I guess, as they say, some sort of leapfrogging or efficiency that you've discovered out of this period of duress?

11:24Good question. No, absolutely. I mean, you know, we don't want to discuss Elon and his views, but the Starlink has been really a saver to us. You won't be able to run internet cables in those areas, right? I mean, it just will be millions of dollars. Probably it will run through the field, which you need to demine, and then Russians can bomb it again and it can go off, etc. So via Starlink, you're flexible enough. Well, when you combine Starlink and the generator, when you combine the two, you're basically no longer dependent on the central infrastructure. And you can provide civilized services right away.

12:02Not five months after the occupation, not three months after Russians destroyed the buildings today. For example, it was in our case. So we rebuilt it. We put up the Starlink generator and we get back to work. So, you know, it's like a theory of broken windows. You cannot have that. You should have the services and the Starlink allows you to have that connection to the world. So I take the point about Starlink and also switching from driving the mail to going by rail. But there must be areas that you just cannot get mail to at the moment. I mean, the occupied areas, for instance. How widespread are those, I guess, pockets of non-service?

12:47I mean, roughly 20 % of Ukrainian territory is occupied by Russians. We try to be creative. If you talk strictly about the law, there is a Geneva Convention. So if Russia occupies a certain area, they're responsible for well-being of people there. Obviously, knowing Russia, the word responsible is, you know, exaggeration. So, for example, in Kherson, when Kherson was occupied by Russians, we wanted to keep Ukrainian pensions going because we wanted people to feel they're part of Ukraine. So what we've done is, for example, we knew we could not get cash to the occupied area. What we did, for example, we agreed to small shops like, you know, bakery shop or gas stations or barber shops that they would give us cash and we would pay their bills on Ukrainian territories.

13:37And we would use that cash to pay, you know, grandma and grandpa their pensions. So they would come back again to the store. And this way we kept the griffin operation, the Ukrainian currency going, even under Russian occupation. They did not understand how the griffin, you know, got to the occupied area. But, you know, when you're creative enough, you can make things happen.

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15:36How do you protect cash? I mean, obviously, in the U.S., we have the Brinks trucks, and there's a whole separate infrastructure for cash management that's separate from the normal postal service and their guards on the trucks and all that. Has cash delivery always been an important role that the postal service has played in Ukraine? And how do you think about protecting those packages versus sort of more normal mail? No, absolutely. They've always been important. Why? Because in small villages, if you don't have banking infrastructure, the cash is the king in reality. Because, for example, if you have a bank card, but nowhere to use it, you're not going to use it.

16:13So you're going to stay in cash. We have lots of people with guns to protect it. When we talk about the areas close to the front lines, we get help from the army that basically drives with our trucks to make sure they're protected. and make sure we're delivered. So we have the whole entire system of controls, of monitoring of our armed guards to help us deliver cash. I mean, that's the reason I've set the goal to build 100 % digital infrastructure in every single village so we can reduce the cash. So for example, right now in the village, you cannot use the bank card. We are now trying to get the banking license and so then basically devices that we're building that people will be able to use banking and e-commerce infrastructure in every single village.

17:01You know, basically it's like ecosystems. So right now we pay pension in cash. You know, you get your retirement payments in cash. And then you pay us for utility bills, you pay us for the food, you pay us for the medicine. So we can convert all of it into non-cash format. Will it happen right away? No. But slowly, once we build this digital infrastructure, we can. That reminds me, a project like that, it sounds like it costs money. So how is that being financed? And then more broadly, how is UkerPoshta financed? Because here in the U.S., there is a perpetual ongoing discussion over the financial health of the U.S.

17:36Postal Service and whether it should be treated like a private enterprise or a public service. I'm curious how it's done in Ukraine. Well, I mean, coming from the U.S., you know, I'm a big proponent of a non-socialist way of working. So the more independent you are from the government, the more successful you are. So in Ukraine, we are a joint stock company where we are not financed by the government. We are actually paying dividends to the government. So anything we do, even during the war, we have to finance ourselves. One of the reasons we went to the parliament and we had asked to reduce regulation.

18:11So, for example, in Ukraine, only first class mail is now regulated. So only first class letters are regulated by the government, meaning the tariffs and the newspapers. Everything else is a market base, which means we set the tariffs, which we believe cover our cost plus profit. And that's how we finance operations. So our goal is to reduce number of state-related revenues to less than 10 percent. You know, I was reading something not in preparation for this episode specifically. I was actually but I was reading a little bit recently about U.S. postal history and the importance of the U.S. post office and U.S.

18:46industrial development. And, you know, a post office obviously has a postal service obviously has a distinct, unique perspective on the sort of geography and territory of a population. And you probably have some of the best visibility on where people are at any given moment and the name of every road, the name of every address. How valuable is the information that must be contained within your organization into the broader, I guess, war effort right now of the government, even if it is sort of formerly disconnected, the sort of ability of the government to essentially have the insight that only a postal service can have about where people are at any given moment?

19:28I mean, in the modern world, obviously, there are different ways of getting that information. Probably the most reliable is the mobile operators, because via signal, you can exactly say how many people are in the area in any particular point and even track down how they move. Obviously, we are probably the next best choice because we physically see people. We know how many are there. We know their age. So compared to the mobile operators where they just track the signal, we actually know that, for example, people here are older or people here on retirement or here it's a younger population because, for example, you have 500 and 500 people in two villages, but one can have all the people in retirement and the other can have people of the younger age.

20:13For example, it's a farming village. So we have a better understanding of the economy of a particular area or how fast people are coming back. We see it, for example, in how they pay utility bills. Because, for example, you can pay utility bills online even when you left Ukraine, right? You can be right now in New York as a refugee and paying your electricity bill online, which means if you just track down the payments, you won't be able to see whether the person is actually in the village, like in Kharkiv or in Zaporizhia or there in New York. We know when we take the payments, we know exactly how many people are there Because when we bring utility bills, we know they are received or not.

20:53I mean, it does sound like you are working closely with the Ukrainian military. So you mentioned the demining operations, armed escorts in some cases. I imagine that wasn't the case pre-2022. Could you maybe talk about how you built up that relationship with the military? What were those conversations actually like? And how do you start formalizing a structure of cooperation or information sharing? I think that's where Ukraine is stronger than Russia. Russia is all about vertical rules and all about rules written. There is one czar and then you go all the way down. So the reason Ukraine was overcoming Russia at the beginning is because we are flexible.

21:39For example, our military commanders have a right to make decisions. Russians don't. I even had to negotiate with Russians. It's impossible. They don't make any decisions on the ground. Every time they have to check with Moscow. So Ukrapošto was working from day one. Throughout the war, the only day we did not work was February 24th. Because I stopped all the operations because I could not understand what I can do to secure lives of people. Every single day thereafter, we continue to work. Never stop. And my day starts. We designed the procedure where my day starts. We check with the military, were it safe or not safe today to deliver.

22:20We unfortunately lost a few lives because we thought it was safe and the military thought was safe, but Russians extended too fast in the first days of the war and we lost a few people because they attacked. So it's a standard procedure where we check with them, how's the situation on the ground today? Where do they think it's okay to go? And where we should, for example, seize operations? I just, an hour ago, I got a note from the military in Kharkiv region that we should not go near certain areas today because it will be dangerous. And that's how we work in, you know, chats, in messengers, in communication where you have to quickly make a decision.

22:58The most difficult part was, you know, it's a war. So where do you delegate and where you make decisions like in the army? So I had to find the balance between decisions that I make and I'm physically able to make because in terms of the US, we have like 24 states. So I had to make decisions, each and every one of them. And where do they delegate? So I built a system where I have head of regions and they allow to make certain decisions. Certain decisions, they have to agree with me in different messengers, you know, signal, telegram, etc. And we make it quickly and then we go. So we're trying to be as informal as possible and as efficient as possible.

23:38Going back to some of the external aspects and how we started this conversation, and you mentioned that, did you say 50 % of Ukrainian exports are to the US? And, you know, there's so much conversation about commodities exports, particularly wheat and so forth. But in terms of actual value, half of it is sort of various sales of goods to the US? You know, it's the postal export, so to speak, you know, e-commerce. Oh, 50 % of postal exports. Postal exports, yeah. It's e-commerce. Mainly, you know, if you know Etsy, it has to be only handmade, right? So it cannot be mass produced. So it's the handmade things.

24:14Not sure whether the baseball shirt was handmade, but... It wasn't, but I am aware on Etsy, there's like amazing handmade fabrics and embroidery that come from Ukraine, dog clothes. I'm not saying I'm buying dog clothes for my Corgi, but I know they are there. But I also noticed that on your website, there's a whole section right on the front page, start a successful international business. And it has guides and videos like how to set up a business and sell on Etsy, how to set up a business and use Shopify. So right there, have these long been things? Or is this something that you helped accelerate and implement?

24:54Or has this been a long part of one of the services that the post office focuses on? No, I mean, it's actually the project we're very proud of. We actually got an award as the best sustainable postal operator in the world because that's how we get people. Imagine people in the smallest village, sometimes they do wedding dresses for$5 ,000 and sell it in the UK or in the US. You can imagine it's a huge part of the local economy. Or right now, many of our military guys in the trenches, they dream after the victory to set up their own business. So they're watching those videos in the trenches and think about their business that they will open once they're back.

25:32So, you know, it's a huge part of the success. And we plan to extend this project, especially, for example, for people with disabilities. You can imagine Ukraine losing a lot of people, you know, people losing limbs in the war. But they can work from home. They can set up shop. They can do this embroidery at home. we can send a courier to pick it up and they sell it on Etsy. So they don't feel like they have to get social subsidies. They feel like a part of the society. So, you know, it's very important. That's why we understand how important it is for us to deliver quickly. We kind of hope, you know, it's been two years as I'm trying to launch a postal train to Europe.

26:10So, for example, I can get down the time to deliver to the US to seven days. So I'll get, for example, overnight from Kiev to Warsaw and from Warsaw the plane will fly to New York and you will have the shorts not in 14 days, but in seven. That's sort of our goal and we're trying to strive it. But it's been a part of our work for a long time. Some of it has been helped by the war because you probably heard about our famous stamps. I was about to ask, speaking of new businesses, you also sort of have one in the form of these new edition stamps. Yep. And we actually got the prize from eBay as a rising star because we maintain delivery standards global worldwide.