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  UKRAINE

REPUBLICAN REFERENCE

Area (sq.km)
603,700

Population
51,728,40

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: 254

The Ukrainian regime is orienting itself back to Russia as its prime ally and protector. The eleven million ethnic Russians in the east and South (Crimea) naturally support this policy. It is not so popular with the Ukrainians proper, but is now deemed as inevitable.
Winter always makes the Ukrainians feel their Russian origins. They know that they cannot last through the bitter cold without Russian gas, for which they lack the money to pay for it all. Coming to terms with Russia makes sense in another way too. The Ukrainians need Russian gas pipelines to cross their territory so that they can benefit from transit fees. 
Ukraine is to be reunited with Russia's energy grid and is to start paying off arrears of gas debt, under the tutelage of Chernomyrdin, ex-head of Gazprom and still a leading shareholder, who is now Russian ambassador to the country. Russian firms are coming into Ukraine in droves, knowing the ropes and with connections aplenty. They have been buying up oil refineries, aluminium plants, dairies, banks and media outlets, sold off in government auctions. 
The regime of President Kuchma has been in deep trouble, which never somehow quite topples it. Kuchma is adept at shuffling his ministries, especially his premiers, aware as an ex-premier himself, that they are all coveting his job. Last year he manoeuvred his premier, Viktor Yushchenko, into a position where he was forced out by parliament. His successor, Anatoly Kinakh, is for the moment a less threatening figure.
For Yushchenko had a big success to his credit, recovery in the economy, GDP grew by 5.8% in 2000 and 7.5% in 2001. As an ex-central banker, he knew that he needed to deal with inflation at the same time as the boom. He bought it down to low double figures after years of near hyper-inflation.
All this was making him popular; so clearly he had to go. 
Kinakh is a powerful operator, an engineer-businessman with his own party in parliament, the party of Industrialists and Entrepreneurs. The title reveals his power base accurately - the nomenclature in charge of state industry and the new tycoons. He gets on much better with parliament, full of people like him, than Yushchenko. But as a big tycoon he is less popular with the people than Yushchenko who even out of power gets 20% in opinion polls, the top ratings of any politician.
This does not mean that Yushchenko is a likely candidate for the succession in the next presidential election. Kuchma patently rigged the last one in October 1999, just as he clearly had a hand in the fatal disappearance of an investigative journalist at the same time. A call for his impeachment has been made and was gathering steam when 9:11 struck. This has distracted attention from the domestic crisis and bought security issues to the fore. Not that Ukraine is a likely terrorist target. Just that the switch to Russia was given a further fillip, as the US turned its attention to more urgent matters. Washington seems content to see Russia pick up more of the bills and cement a closer relationship to Ukraine, which US strategists suspect will only be temporary. The US has lent US 1.9bn since 1991; the IMF even more. Now is the time to let the newly wealthy Russian state come to the rescue - for its own reasons of course.
The regime is, nevertheless, skating on thin ice. It just would need 300 out of 450 deputies in parliament to set in train a referendum process on ratification of constitutional amendment that would recover power from president to parliament. Over 200 have already endorsed the idea. Then an impeachment of the president could commence.
The one thing saving Kuchma here is that he is not the only one with skeletons in the cupboard. Far from it, especially in parliament, which might prefer a quiet life until the next presidential election two years away.

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AVIATION & SPACE

Ukraine starts to design new space rocket for commercial launches


Ukraine is successfully using its five booster rockets, Tsyklon-2, Tsyklon-3, Zenit-2, Zenit-3SL and Dnipro at international launch sites, 'Ukrayina Moloda' has reported.
Oleksandr Nehoda, the director-general of the Ukrainian National Space Agency, said that in order to boost the efficiency of the space industry, the Pivdenne design bureau has started work to create a promising booster rocket operating on environment-friendly fuel: oxygen and kerosene. The new carriers, called the Mayak by their creators, will replace the Zenit and the Tsyklon when the latter become impossible to use or when they become unprofitable. Since Ukraine does not have any launching sites, Mayak booster rockets will be launched from sites in other countries.
Mayak booster rockets, which in fact have not been created yet, caused a sensation among competitors. The balance between existing and new technologies, the universal application of the new rocket family and its easy adaptability to different loads are expected to ensure a low cost of launches, high reliability and wide launching opportunities. These indicators of the Mayak are guaranteed by the fact that technologies and components tested on the Tsyklon and the Zenit will be used in their production. Ukrainian enterprises have drawn up a single control system and telemetric devices for the new booster rocket.
The new family will be based on two types of booster rockets. The two-stage booster rocket Mayak-12 will be able to put a three-tonne load into orbit. It will also be able to take a 1.5-tonne satellite to an 800-kilometre high solar orbit. The powerful three-stage medium-class booster rocket Mayak-23 will be able to put satellites weighing over three tonnes into geostationary orbit.
According to the head of the Pivdenne design bureau information centre, Yuriy Oleksiyenko, each of these booster rockets has several modifications. It will be possible to increase the Mayak's payload by 30-50 per cent by adding launch accelerators.
First launches are planned for 2006-2007. The plan may be altered by Ukraine's economic situation and by the situation at the world market of space services. Nobody has doubts about the commercial attractiveness of the project. In addition, the high technical level of the project as well as its production are important preconditions for its successful implementation.
The creators of the Mayak quite justifiably count on state support. This will be outlined in the third national space programme of Ukraine for 2002-2006, a draft of which the National Space Agency submitted to the Cabinet of Ministers at the end of last year. The Pivdenne design bureau management believe that this has to draw the attention of Western investors and, most importantly, future clients to the project.
Ukraine and Brazil have signed two space cooperation agreements in Kiev within the framework of the official visit of Brazilian President, Fernando Henrique Cardoso. The sides concluded an agreement on the protection of technologies connected with launches from the Alcantara space centre in Brazil, New Europe reported. The agreement protects Ukraine's interests in the process of forming a Ukrainian-Brazilian joint venture for offering commercial launch services of the Ukrainian-built Tsyklon-4 launch vehicle from Alcantara.
The National Space Agency of Ukraine (NSAU) and the Brazilian Space Agency signed a memorandum of cooperation on the use of Ukrainian launch vehicles in Alcantara. 
At a joint news conference in Kiev, Ukrainian President, Leonid Kuchma, called the space cooperation agreements mutually beneficial for the two countries. The advantage of the Alcantara space centre lies in its proximity to the equator, Interfax quoted him as saying. He estimated international demand for Tsyklon launch vehicles at hundreds of millions of dollars. Ukraine and Brazil are now working to prepare the launches of Tsyklon-4 from Alcantara.

Ukraine, Hong Kong sign air transit agreement

Concluding his official visit to the People's Republic of China, Ukrainian Foreign Minister, Anatoliy Zlenko, has visited the Hong Kong Special Administrative Region to meet its secretary for economic services, Sandra Lee, UNIAN News Agency has reported.
During the negotiations, the sides exchanged views on ways to strengthen economic ties between Ukraine and Hong Kong, the Ukrainian Foreign Ministry's press service has told UNIAN. The Chinese side expressed an interest in investment cooperation and participation in projects to develop Ukraine's economic structure.
Sandra Lee gave details of Hong Kong's post-war development, pointing to its clear-cut legal framework and transparent business rules as a clue to the economic miracle wrought by this former British colony.
For his part, Zlenko told the other side about economic growth achieved by Ukraine in the past two years and about new opportunities opening up for Ukraine's cooperation with Hong Kong. The sides signed an agreement on international air transit, which is the first accord signed between the governments of Ukraine and Hong Kong. The Chinese side voiced an interest in expanding the legal framework for its relations with Ukraine, specifically, in signing an agreement on sea trade shipping.

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ENERGY

Russian, Ukrainian and Kazak oil companies to operate refinery jointly


Rosneft, Alliance Group and the Kazak national oil and gas company, Kazakoil, signed an agreement on 4th February for the joint operation of the Kherson oil refinery, an Interfax News Agency correspondent reported.
This document was signed by Rosneft president, Sergey Bogdanchikov, Alliance Group president, Musa Bazhayev and Kazakoil president, Nurlan Balgimbayev.
The agreement involves joint involvement by the parties in the implementation of major programmes and projects to develop the refinery. In particular, the agreement includes an increase of oil to the refinery, the development of production, financial-economic and investment activity, an improvement in management, the establishment of stable competitive positions on the national and international markets and the organisation of efficient sales of the refinery's produce.
The refinery's supply programme will be fully guaranteed by Kazakoil and Rosneft resources. Kazakoil will annually supply 1.8m tonnes of oil under a Kazak-Ukrainian intergovernmental agreement and Rosneft will supply not less than 600,000 tonnes per annum.

New oil deposit discovered in central Ukraine

Oil was struck at Reshetnyakivske oil field 30 year ago and has been intensively extracted since then. So the chance of finding new deposits was slim, Ukrainian Television First Programme has reported.
Oleh Salmin, head of the Ukrnafta board, said: " Today, we should exercise a more individual approach to each oil field, each well in Ukraine. At this oil field, we successfully used horizontal drilling in veins that had been left untapped in previous years. This enabled us to find new oil reserves."
Four oil horizons have been discovered by probe drilling at a depth below 2,000 metres in well No 102 at the Skhidno-Reshetnyakivske oil field.
Salmin added: "This opens up long-term prospects and a better outlook for this region because we are selling our oil resources on 100 per cent advance cash payment terms. This money will go into the budget and for the development of Poltava Region as a whole."
The exact size of this deposit is unknown at present. Only the first well is being explored. Now Ukrnafta is going to check other oil fields by using new technology which allows oil extraction at levels hitherto beyond reach. Thanks to technical innovation and the new approach, 2001 saw stability achieved in oil production and more than 0.1m t of hydrocarbon in extra output.

US offers Ukraine chance to participate in Baku-Ceyhan Pipeline

Ukrainian companies have the opportunity to take part in the construction of the Baku-Ceyhan Pipeline, Steven R Mann, advisor to the US Secretary of State on Caspian Energy Issues, said while commenting on the results of his meeting with the Ukrainian Prime Minister Anatoly Kinakh on January 29th. In particular, Ukraine could supply pipes and build compressor stations for the pipeline, Interfax News Agency quoted Mann as saying.
Mann made it clear that the consortium would make the decision on a commercial basis as to whether Ukraine participates in the project or not. The dates on which the first contracts will be signed should be known in March, while the construction of the pipeline is scheduled for this summer, he said.
Mann stressed that the Baku-Ceyhan Pipeline would remain the central element of US policy aimed at the diversification of transport of Caspian energy resources.
Speaking about the prospects of the Ukrainian Odesa-Brody pipeline, the ambassador mentioned the attractive possibility it provides for the transport of Caspian oil to Europe. 
Washington wants to support Kiev's efforts aimed at the commercialisation of the Odesa-Brody project. Mann also said that the Baku-Ceyhan and Odesa-Brody pipelines are not competitors as they are oriented towards different markets.
Speaking about the importance of Caspian oil, Mann said it would have a considerable impact on the oil price on the world market, although its resources in the region account for only four per cent of the world's resources.
Kinakh said that the Caspian region is key to Ukraine from the point of view of diversification of its energy supply. He thanked the US for providing technical, expert and financial assistance in the formation of the Euro-Asian transport corridor.
Kinakh also said that the second important component of Ukrainian-American cooperation in this sphere, is the reform of the Ukrainian energy industry on market principles. The value of the Baku-Ceyhan project is estimated at US$2.3bn, the length of the future pipeline at 1,730 kilometres (468 kilometres in Azerbaijan, 225 in Georgia and 1,037 in Turkey) and the capacity at 50 million tonnes of oil per year. The launch of the pipeline is tentatively scheduled for 2004. It is planned to use the pipeline for transporting oil from Azerbaijan and Kazakstan to world markets.
Ukraine completed the construction of the Odesa-Brody oil pipeline (674 kilometres long and 1,020 millimetres in diameter) in August 2001. In December it launched the first stage of the Yuzhny oil terminal (capacity nine million tonnes per year, with a possible increase of up to 14.5 million tonnes per year).

Bucharest invites Kiev to cooperate in transit of energy sources

Romanian President Ion Iliescu said his country has invited Ukraine to expand cooperation between the two countries in transporting energy sources such as oil and gas, and to involve as many states of the region as possible in transit routes, New Europe has reported.
Meeting with Ukrainian Prime Minister Anatoly Kinakh in Bucharest, Iliescu noted that the trade turnover of US$360m between Ukraine and Romania in 2001 is a modest result, despite its 25 percent growth against the previous year. The Romanian president noted that there is every reason for a more successful development of trade and economic relations between the two countries and an increase of their economic roles in the region.

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