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  UKRAINE

REPUBLICAN REFERENCE

Area (sq.km)
603,700

Population
48,760,474

Principal
ethnic groups

Ukrainians 72.7%
Russians 22.1%
Jews 0.9%

Capital
Kiev

Currency
Hryvnya

President
Leonid Kuchma

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Background:
Richly endowed in natural resources, Ukraine has been fought over and subjugated for centuries; its 20th-century struggle for liberty is not yet complete. A short-lived independence from Russia (1917-1920) was followed by brutal Soviet rule that engineered two artificial famines (1921-22 and 1932-33) in which over 8 million died, and World War II, in which German and Soviet armies were responsible for some 7 million more deaths. Although independence was attained in 1991 with the dissolution of the USSR, true freedom remains elusive as many of the former Soviet elite remain entrenched, stalling efforts at economic reform, privatisation, and civic liberties.

Update No: 258 - (27/06/02)

The Ukrainians are a long-suffering people. They need to be, with an oppressive regime and a largely subservient media (journalists who say things out of turn just disappear). The entire political class is thought to be corrupt. Indeed, the republic has a simple social structure, crooks on top amounting to one or two per cent of the population, another slightly larger slice of professional people and then the destitute masses, who are so crushed by the struggle to survive that they do not have the energy or opportunity to complain.
Nevertheless, there have of late been some demonstrations against President Leonid Kuchma, who won re-election in a highly dubious fashion in October 1999. His second term ends in 2004; and many are hoping that will see the last of him on the national stage.

Successor being groomed
Kuchma has two options of going quietly without embarrassment, (à la Yeltsin) one might say. One is to groom his present premier, Anatoly Kinakh, as his successor doing a deal with him as Yeltsin did with Putin, letting by-gones be by-gones.
The second would be to give a new turn in office to ex-premier Victor Yushchenko, former head of the central bank and a widely respected figure. He has scrupulously refused to denigrate Kuchma, saying "respect is owed to the president." This is hoping that Kuchma is keeping his options open and that a deal with Yushchenko is one of them. If the Kuchma machine, which won the presidency in 1999, were thrown behind Yushchenko next time it would be a shoo-in for him.
Indeed, an amnesty all round, not just for Kuchma may be on Yushchenko's mind. There is the embarrassing fact of US$ one million going missing from an IMF loan during his watch at the central bank. Everybody has a skeleton or two in the cupboard in Ukrainian public life. It is the general complicity with venality that will probably allow Kuchma a discreet exit.

Economy picking up
The economy has at least been growing in Ukraine, albeit from a very low base after crashing in 1998-99. GDP rose by 5.9% in 2000 and 9.1% in 2001, largely due to the bounce back factor after a big devaluation (as in Russia) and the able stewardship of first Yushchenko until mid-2001 and then of his successor Kinakh, the head of an important faction in parliament of business people and 'fixers.'
Slower growth in 2002 is to be expected, probably around 4%. But foreign direct investment (FDI) is picking up somewhat. FDI was US$594m in 2000, US$531m in 2001 and is expected to be around US$700m for 2002, still a long way from what is needed.
Kuchma called for a 10-year programme to create a market economy in June. He needs to leave the scene long before that time is up is if there is to be any chance of success. Yushchenko or Kinakh could step to the fore or perhaps the two in tandem, one the supreme technocrat , the other the supreme 'fixer.'

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AVIATION & SPACE

An-70 entry in international markets on the cards

Russian President, Vladimir Putin, and his Ukrainian counterpart, Leonid Kuchma, have expressed their support for a joint project to develop the An-70 aeroplane. At a news conference in Sochi on May17th, Putin said he and the Russian foreign minister and chief of staff of the armed forces.
"The position of experts on this issue remains unchanged. We are interested in this project," Interfax News Agency quoted Putin as saying. The Kremlin leader admitted that attempts to take the An-70 aeroplane to international markets have not been very successful so far. "But we will find the markets," Putin said.
The Russian president said that he has instructed Chief of the General Staff, Anatoly Kvashnin, to work on this issue more thoroughly. At the news conference, Kuchma said that "the An-70 is the best achievement of today's aviation industry."

National Space Agency to help Egypt build satellite

Ukraine and Egypt have reached an agreement to jointly build a satellite capable of searching for mineral resources, Interfax News Agency reported Egyptian Assistant Foreign Minister for European Affairs, Mohammed Shaaban, as telling the press in Kiev recently. The project is to be financed by Egypt, Shaaban said. "This will not be a spy satellite," he added in reply to questions from journalists.
The assistant foreign minister said that he was given a set of documents containing related technical information on this issue while visiting the Ukrainian National Space Agency. These documents will be handed over to Egyptian specialists.
Ukraine and Egypt also discussed the disposal of ageing Ukrainian satellites, which can no longer serve their purpose, Shaaban said. 
The assistant foreign minister noted that during his visit to Ukraine, the parties also discussed prospects for bilateral cooperation in the trade, economic, agricultural, military, technical and cultural fields.

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ENERGY

Ukrainian, Russian deputy premiers praise gas consortium plan


In August, Ukraine and Russia are likely to create a consortium - a joint venture to manage and develop the Ukrainian gas transport system, Ukrainian One Plus One TV has reported. This was the subject of an agreement between the presidents of Ukraine and Russia, Leonid Kuchma and Vladimir Putin. They signed a statement on strategic cooperation in the gas area in St Petersburg on 9th June. The sides say that this will ensure reliable Russian gas supplies to Western Europe.
Russian Deputy Prime Minister Viktor Khristenko, said: "It will primarily ensure enhanced reliability of long-term gas supplies to Europe. Second, with enhanced reliability in place, it will give us a clear guiding line that we will jointly consider the Ukrainian gas transport system as a key element of ensuring this reliability."
Ukrainian First Deputy Prime Minister, Oleh Dubyna, continued: "The Ukrainian gas transport system is not being used to the utmost degree, to its full extent. This will enhance the reliability of our system, as money will be invested in it and it will be developed."
Communist leader, Petro Symonenko, has already voiced support for the idea of creating the consortium. He speaks for the joint management of the transit gas pipelines. But a people's deputy [and one of the leaders of the reformist Our Ukraine parliamentary faction], Viktor Pynzenyk, described it as nonsense. He said that this is a legal way of legalizing profits.
The accord on the creation of the consortium is to be ratified by parliament. So the government and the president will have to work hard to persuade members of parliament that the project will be profitable.

LUKoil head informs Kuchma of energy investment plans

Ukrainian President, Leonid Kuchma, has met with LUKoil President, Vagit Alekperov, who informed him of the company's investment plans for Ukraine and the implementation of current projects, the Ukrainian president's administration reported recently. During the meeting, Alekperov said that LUKoil is promising to invest in the Ukrainian fuel and energy industry.
LUKoil plans to set up a separate company that will sell liquefied gas in Ukraine, the Director General of company with foreign investment LUKoil-Ukraine, Alexander Nerush, told the media. The company is now building the second unit of the petroleum storage depot in Boryspil, Kiev oblast, where a gas terminal with a capacity of 12,000 tonnes a year will be put into operation by the end of this summer.
LUKoil planned to start selling natural gas to Ukrainian industrial enterprises according to direct contracts in late 2002 or early 2003. "We have faced the problem of transporting gas from Russia via pipelines with different owners," Interfax News Agency quoted Nerush as saying.
The company plans to sell liquefied gas of the Odesa refinery and oil company LUKoil through module gas filling stations and in containers to industrial enterprises and individuals. The company also plans to build new facilities to filling stations and in containers to industrial enterprises and individuals. The company also plans to build new facilities to fill automobile transport with liquefied gas.

Greece asks Ukraine to join gas pipeline project

Greece has invited Ukraine to take part in the completion of a 650-km-long gas pipeline section from Ankara to the Greek border, UNIAN News Agency has reported. The section will be an extension of the Tabriz-Ankara pipeline, Ukrainian Fuel and Energy Minister Vitaliy Hayduk told a news conference following his talks with Greek Development Minister, Apostolos Tsokhatzopoulos.
According to Hayduk, two companies - the Turkish Botash [state-owned oil and gas] company and the Greek DEPA [public gas corporation] will build the pipelines. The cost of the project is about US$300m.
Greek-owned tankers are likely to be involved in loading the oil terminal outside Odessa (the Pivdennyy oil terminal - UNIAN), Hayduk also said.
After the talks, the sides set up expert groups and agreed to continue discussing all the issues in Athens in August 2002, Hayduk said.

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FINANCIAL NEWS

Ukrainian cabinet forecasts US$8.7bn of investment in 2003

Internal and foreign investment in the Ukrainian economy in 2003 will reach US$8.7bn, according to a forecast of economic and social development for next year approved by the government on 12th June, ITAR-TASS News Agency has reported. About 66 per cent of this sum will come from Ukrainian enterprises' own funds.
The government says the driving force of economic growth will be internal consumption that is expected to increase by 6.5 per cent and edge exports that will grow by 6.2 per cent.
The government also approved the concept of the state programme of economic and social development in 2003. It prioritises efforts to improve living standards and ensure reliable social welfare support.
On the foreign economic front, the focus will be on admission to the World Trade Organization, European integration, trade and economic cooperation with Russia and other CIS countries.

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FOREIGN INVESTMENT 

Foreign investment up 14.3% in January-March

Direct foreign investment in Ukraine totalled US$115.8m in the first quarter of 2002, up 14.3% year-on-year and down 45.4% from the previous quarter, Interfax News Agency reported, citing the state statistics committee data. Foreign direct investment reached US$4.53bn as of April 1st 2002. Foreign investment amounted to US$166.6m in the first quarter of 2001, while US$50.3m was withdrawn. Monetary investments amounted to US$129m, or 54.2% of the total, while movable assets and real estate accounted for 26.0%, or US$61.9m.
Direct foreign investment was received from 112 countries. The largest investments were US$763.3m from the United States (72.1% of the total), US$485m from Cyprus (10.7%), US$426.3m from Britain (9.4%), US$383.8m from the Netherlands (8.5%), US$317.7m from Russia (7%), US$277.8m from the Virgin Isles (6.1%), US$251.3m from Germany (5.5%), US$194.9m from Switzerland (4.3%), and US$170.5m from Korea (3.8%).
The most appealing sectors for investment included the food and processing of agricultural products, which received US$806.9m (17.8% of the total), while US$673.4m went into wholesale trade and mediation in trade (14.9%), US$375.4 to the financial sector (8.3%), US$343.2m to transport (7.0%), US$248.3m to metallurgy and metal processing (5.5%), US$200.1m to chemicals and petrochemicals (4.4%), and US$190.8m on real estate operations, leasing and legal entity services. Foreign investment went into 7,992 Ukrainian companies.

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FOREIGN LOANS

Kiev expecting US$550m from IMF by September

Ukrainian Prime Minister, Anatoly Kinakh, said his country expects to receive US$550m from the International Monetary Fund under an extended fund facility (EFF) by the time this programme expires in September.
"When we talk about the end of this programme, we also have in mind the financial component," Kinakh told reporters, adding that he hopes for understanding from the IMF on this issue. "I think this is also important for the IMF," Interfax News Agency quoted him as saying.
The Ukrainian government is working with the IMF mission in order to find constructive solutions and set out all conditions and mutual obligations for completing the EFF programme, Kinakh said. "Work is underway on completing the programme, which would provide a chance for long-term cooperation between Ukraine and the IMF, including on a non-lending basis," the news agency quoted him as saying.
Kinakh also said he was expected to meet with the IMF officials in Kiev. IMF experts began working in Ukraine on May 15th to assess the implementation of the EFF programme. The mission, which was expected to be in Ukraine until May 24th, also planned to discuss the adoption of a macroeconomic policy for 2002 that could be supported by IMF financial aid.
The IMF began lending to Ukraine under the EFF of SDR 1.92bn in September 1998, of which the country has received SDR 1.19bn. The last tranche was received last September. The programme is scheduled to end on September 3rd 2002.

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