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Update No: 253

Ukraine is re-entering the Russian orbit after a brief flirtation with the West. The US and the EU countries were concerned at the prospect of Russia remaining the dominant partner of Ukraine in the 1990s; but not so much now. Russia is indelibly tied to Ukraine, whose ancient capital, Kiev was once the capital of the original Rus One fifth of the inhabitants are ethnically Russian and at least another fifth, including President, Leonid Kuchma, are native Russian-speaking.
Kuchma and Putin get on well. There is no mention of politically incorrect subjects, such as human rights when they meet. It is always straight down to business. After all they both have skeletons in the cupboard.
In the Russian's case it is a matter of Chechen corpses and Russian ones incurred to obtain them. In the Ukrainian's a murky scandal still attaches to his name concerning an investigative journalist, whose disposal he is heard on tapes to be calling for (as well as the rigging of his re-election, duly achieved in October 1999). The body of the journalist was subsequently found. The authenticity of the tapes is disputed by Kuchma, but stoutly maintained by his ex-bodyguard who released them, now living in the US.
So long as the Chechen war continues, there is little chance of Ukraine entertaining any thoughts of rejoining Russia in any sort of union. Hence it is in a very different situation than neighbouring Belarus or Moldova which both are.
It is a big country, the size of France and with almost as large a population. Its strategic importance, commanding the approaches to Russia, make it a prime concern of Western geopoliticians. It has been the third largest recipient of US aid (after Israel and Egypt).
The IMF is positive in its verdict on Ukraine's economic performance, which has been impressive in the last two years. GDP grew by 5.8% in 2000 and (a still to be confirmed) 7.3% in 2001. A brilliant economist and central banker, Viktor Yushchenko, presided over this recovery, a most welcome one after a decade of contraction since independence in 1991. He was premier from late 1999 to the summer of last year, when Kuchma threw him to the wolves in parliament, still dominated by ex-Soviet apparatchiks. 
The IMF has decided to re-engage with Ukraine extending a US$2.5 bn credit programme suspended in September 1999. The EBRD and other Western bodies are also closely involved. The thing about Ukraine is that it is too big and centrally placed (the literal centre of Europe) to ignore.

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DEFENCE INDUSTRY 

Ukraine willing to sell military hardware to UAE

Speaking in Abu Dhabi at a meeting with the minister of state for foreign affairs of the United Arab Emirates, Shaykh Hamdan Bin-Zayid Al Nuhayyan, Ukrainian Foreign Minister Anatoliy Zlenko, said that he believes that the support provided by the United Arab Emirates for Ukraine's entering the World Trade Organisation could become an important tool for stepping up the effectiveness of bilateral cooperation, UNIAN News Agency has reported.
Zlenko informed his foreign colleague about the prospects for developing military and technical cooperation between the two countries. He said that Ukraine was ready to supply military and transport aviation, armoured vehicles and radar equipment to the United Arab Emirates [UAE].
Zlenko also recalled the launch of the UAE commercial telecommunication satellite Thuraya by a Ukrainian booster rocket in October 2000 as an example of mutually beneficial cooperation.
According to Zlenko, Ukraine is paying special attention to the development of integration processes in the Persian Gulf region and would like to pursue active cooperation in the implementation of promising economic projects within the framework of the cooperation council encompassing the countries of this region. In particular, Zlenko stressed that Ukraine is ready to take part in the reconstruction and building of oil and gas pipelines in the UAE.
During talks the Ukrainian side also expressed interest in receiving humanitarian aid from the UAE for the resettlement of deported Crimean Tatars, and for cooperation programmes to build residential housing and for establishing the necessary infrastructure in Crimean Tatar settlements.

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ENERGY

Itera to pump 34bn cubic metres of Turkmen gas to Ukraine

Itera International Group plans to pump up to 34bn cubic metres of gas from Turkmenistan to Ukraine in 2002.
Itera signed agreements to this effect with the Ukrainian Naftogaz company, Russian natural gas monopoly Gazprom and gas transportation firms in Kazakstan and Uzbekistan, Interfax News Agency quoted the Itera-Holding's Press service as saying.
Earlier reports said that Itera abandoned its role in supplying Turkmen gas to Ukraine. In addition to its transportation commitments, Itera will buy up to 10bn cubic metres of gas in Turkmenistan and ship it to other Commonwealth of Independent States (CIS) countries.
Itera and Ukrainian Naftogaz signed their first cooperation contract in 1999. Over the past three years, Itera has pumped almost 47bn cubic metres of Turkmen gas to Ukraine. Since 1994, Itera has supplied over 150bn cubic metres of gas to Ukraine.
Itera is the second largest supplier of gas to CIS and Baltic countries after Gazprom. It pumped around 80bn cubic metres to consumers last year.
This year, Itera plans to raise deliveries through increasing its gas extraction from the Yamal-Nenets deposits. Itera intends to extract about 30bn cubic metres of gas in 2002 and expand its output to 80bn cubic metres in 2007-2010.

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FINANCIAL NEWS

Ukraine posts reduction in foreign debt

Ukraine's foreign debt has dropped by 1.67bn hryvnyas (US$86.9m), from 43.44bn hryvnyas (US$7.99bn) at the end of 2000 to 41.77bn hryvnyas (US$7.91bn) on 30th November 2001, UNIAN News Agency learnt at the Ukrainian Finance Ministry.
The Finance Ministry also said that the decline in foreign debt in November was much faster than the increase in domestic borrowing. As a result, plain state debt continued to decrease both in the hryvnya and dollar equivalents.
According to the ministry, Ukraine's plain state debt dropped by 1.85bn hryvnyas (US$10.9m) in the 11 months of 2001 and stood at 62.37bn hryvnyas (US$11.81bn) as of 30th November.
Ukraine's contingent state debt (the amount of loans provided to enterprises under government guarantees dropped by 1.29bn hryvnyas (US$177m) in the 11 months of 2001, from 12.81bn hryvnyas (US$2.36bn) on 31st January 2001 to 11.52bn hryvnyas (US$2.18bn) on 30th November 2001.
The Finance Ministry also said domestic debt dropped by 177.3m hryvnyas [US$33.55m] in the 11 months of 2001, from 20.78bn hryvnyas (US$3.82bn) on 31st December 2000 to 20.6bn hryvnyas (US$3.9bn) on 30th November 2001. However, its foreign currency component grew by US$76m.
Domestic debt is made up of the hryvnya and foreign currency components, therefore the hryvnya revaluation's impact on the domestic debt indicator is opposite in the national and foreign currencies.

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FOREIGN ECONOMIC RELATIONS

Ukraine, Brazil sign space, economic accords

Ukraine and Brazil signed nine bilateral agreements on 16th January. Brazilian President Fernando Henrique Cardoso arrived on a state visit earlier in the day, UNIAN News Agency has reported.
In particular, the sides signed an agreement between the governments of Ukraine and Brazil on protecting the know-how concerning launches from the Brazilian Alcantara space centre. The agreement safeguards Ukraine's interests in the Ukrainian-Brazilian joint venture providing space services under the project of using the Ukrainian Tsyklon [Cyclone]-4 booster rocket at the Brazilian launch centre Alcantara.
The National Space Agency of Ukraine and the Brazilian space agency signed a memorandum on cooperation involving the use of Ukrainian booster rockets at the Alcantara space centre. The memorandum lays down the principles of bilateral cooperation in creating a joint space services company.
The governments of Ukraine and Brazil signed a protocol of intent on cooperation in oil and gas output. The protocol regulates the principles of cooperation in joint prospecting and production of oil and gas on the Black and Azov sea shelf using the technology of the Brazilian national oil and gas company, Petrobras.
Nine documents were signed in total, including a declaration on deepening friendship and cooperation between Ukraine and Brazil and a convention on the avoidance of double taxation and the prevention of tax evasion. Ukrainian and Brazilian officials also signed a treaty on mutual assistance in criminal prosecution providing a legal basis for combating the spread of organised crime.
The Ukrainian Cabinet of Ministers and the government of Brazil signed an agreement and a protocol on cooperation in power engineering. According to experts, this agreement creates a legal framework for the implementation of specific cooperation projects, such as involving Ukraine's industrial companies in fulfilling government orders under the national emergency programme for the development of the Brazilian energy industry.
Ukreximbank and the Brazilian National Bank of Economic and Social Development signed a memorandum of understanding, providing for the financial safeguards of export and import transactions between the two countries.

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FOREIGN LOANS

IMF may postpone meeting on EFF programme

A meeting of the International Monetary Fund (IMF) board of directors on allocating the next tranche of an EFF loan to Ukraine, which was slated for January 9th, may be postponed, said the IMF senior representative in Kiev, Lorenzo Figliuoli. The meeting could be postponed because Ukraine has not yet resolved the problem of clearing government debt on VAT compensation, he said.
The IMF board had planned to discuss allocation to Ukraine of the next tranche of an EFF programme loan on January 9th if Ukraine met various preliminary terms before December 25th 2001.
Among these terms were the approval of the 2002 budget, strengthening of bank supervision, completion of the Naftogaz Ukraine audit, correction of tariffs on electricity in accordance with agreements between the government and investors, and the development of a programme aiming to clear government debt on VAT compensation and to prevent new debts.
If the Fund approves the next EFF tranche, Ukraine could receive around US$370m. The Fund opened a SDR 1.92bn EFF programme in Ukraine in September 1998. Ukraine has so far received SDR 1.19bn. The last tranche was allocated in September 2001.

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MINERALS & METALS

Ukraine's only smelter increases aluminium production

Zaporizhzhya aluminium combine, Ukraine's only aluminium smelter, produced approximately 106,093 tonnes of primary aluminium, including silumin and alloys, in 2001, which was 2 per cent more than in 2000, the Russian Interfax News Agency reported from Kiev.
The company told Interfax that it also produced 223,900 tonnes of alumina, down 9 per cent, and 4,804 tonnes of silicon, a decrease of 22 per cent.
The Mykolayiv alumina plant, the biggest producer of alumina in the former Soviet Union, produced approximately 1,119,500 tonnes of alumina in 2001, as much as in 2000. In December alone, the plant produced 102,000 tonnes of alumina.

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