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ukraine

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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: 267 - (27/03/03)

The president of Ukraine, Leonid Kuchma, has been in deep trouble for a long time, scandal after scandal, but has always managed to wriggle out of it. He uses the executive powers of the presidency to cover up his many misdemeanours

No further term of office
One trick to preserve his immunity from prosecution would be to stand for a third term. Nobody under the constitution is allowed to do that. But the constitution was written in 1996 when Kuchma was already two years into his first term. He could, therefore, say he has not yet had his second term. This is not an argument very likely to persuade anyone not of his inner circle.
According to Parliamentary Speaker Volodymyr Litvin, Kuchma is not going to resort to specious tricks like that. He would know that it would be very difficult to rig another election, as he did his re-election in 1999. People would simply fling him out. The street demonstrations would become vast out of indignation at such a final humiliation of the public at large.

The succession
What could save Kuchma from prosecution is if the Yeltsin-Putin solution is found, a successor granting him immunity. That depends on finding someone with a comparatively clean bill of health. There are three such possibilities, the three last prime ministers.
The first of them and the least unpopular politician in Ukraine is ex-bank chief, Viktor Yushchenko, who presided over a turn-around in the economy at the beginning of the decade. He was getting too popular for Kuchma's liking and was showing disturbing signs of being a man of integrity. Clearly he had to go, which he duly did two years ago, to be replaced by Anatoly Kinakh.
As the founder and leader of the Union of Industrialists and Entrepreneurs in parliament, the party of the bosses, he was an ideal fixer type, who staved off impeachment proceedings from reaching a point at which Kuchma had to go. Kuchma owed him his political life, which he no doubt greatly resented. Anyway he knew too much. He too had to go, which he duly did last autumn, to be replaced by the present incumbent, Viktor Yanukovych, also a member of the bosses' party.
He is trying to invigorate a new sense of direction to the government, which had left things drift under Kinakh, distracted by the crises over the fate of Kuchma. A new programme of reforms has been announced with all the usual features, above all to appeal to ordinary folk, eking out a needy existence on very low wages and salaries.
"We suggest giving top priority to increasing the population's incomes, advancing small and medium businesses, forming a middle class, overcoming payment activities and countering corruption," he said.
Furthermore, the Cabinet and National Bank of Ukraine will also try to cushion the effects of inflation for the population. The prime minister said the programme includes steps designed to bring Ukraine into the European Union and the World Trade Organisation, and moves to form new relations between the country's regions.
Time will tell if anything comes of all this. If within a year it has, then this would leave time for Yanukovych to be brought forward as the regime's candidate, granting Kuchma immunity and so safeguarding the dirty secrets of the entire elite. For the elections to the presidency are not until October of 2004.
Alternatively, Yushchenko would seem in a strong position. He at one point defended Kuchma during his long crisis of legitimacy; but then when it looked a year ago, as if he was finished, he supported demos against him. Kinakh saw Kuchma through that climacteric. It is possible that to guarantee his succession Yushchenko could still do a deal with Kuchma. It might take the form of a joint ticket of Yushchenko and Yanukovych with the latter keeping his present job. But personal relations may be too strained for that ideal solution for the elite to materialise. Once again time will tell.

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AUTOMOBILES

AvtoKrAZ sets up vehicle assembly in Vietnam

Ukrainian holding company AvtoKraz (Kremenchug, Poltava region), the sole truck-building factory in the country, shipped its first 15 assembly kits to Vietnam for facilities that have been set up there, company sources said, New Europe has reported.
The vehicle assembly facilities were organised in northern Vietnam, in a coal region where AvtoKrAZ vehicles have been in use for a number of years. Among the models being assembled there is the KrAZ 65101 automobile chassis.
Interfax quoted the source as saying that the advantages of organising assembly facilities in the Southeast Asian country are avoiding the inconvenience of transporting completed vehicles and the potential for expanding into other countries in the region, with the exception of China, Japan and Korea.
The source did not say how many automobiles are planned for assembly this year in Vietnam, while the company's official web site does specify at least 100.
AvtoKrAZ delivered 300 of an initially planned 500 automobiles to the country last year. Vietnam has put more than a thousand AvtoKrAZ vehicles into usage by now, vehicles the plant has turned out in different years.
AvtoKrAZ builds heavy automotive products in roughly 150 different modifications and combinations. Aside from the Kremenchug plant, the holding comprises the Poltava autoparts plant, Kherson cardan shaft plant, Kamenents-Podolsk auto-parts plant, and the Tokmak press-forging plant. 
AvtoKrAZ also has assembly facilities in Belgorod in Russia. The holding turned out 1,339 automobiles (33 per cent fewer than in 2001) and sold 2,408 machines. The Ukrainian-German joint venture, Mega-Motors, owns 86.37 per cent of the stock in AvtoKrAZ.

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BONDS

NB chief supports Eurobond issue delay

Ukraine should issue Eurobonds at the end of the first half of 2003, not in the first quarter as initially planned, Interfax News Agency quoted Ukrainian National Bank Chairman, Serhy Tyhypko, as telling a news conference recently. "It would be reasonable. When the market knows that we are due to make a major foreign debt payment of US$310m in March, it will react and wait, which will naturally affect the rate. If Ukraine makes the payment easily - and we are not due any big sums later - this will definitely reduce the rate," he said. Tyhypko is sure that Ukraine will make its foreign debt payments this year without difficulty. "Part of the money has been reserved on Treasury accounts. The government made the first payment quite easily. There is money for the second and partly for the third," the news agency quoted him as saying. 
This year, Ukraine is due to make US$1.53bn in foreign debt payments. Some US$1.02bn of that amount is principal debt. To finance the payments, the budget law provides for borrowing US$1.22bn on the foreign market, including an issue of US$600m in Eurobonds. The issue may be larger to substitute for other forms of borrowing.

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CREDIT RATINGS

Fitch ups support rating of Privatbank

International rating agency Fitch Ratings has raised the support rating of Ukraine's Privatbank to 4T from 5T, reports New Europe. However, the bank's Individual rating of D has been placed on Negative Rating Watch, Fitch reported in a press release. The bank's other ratings have been affirmed as follows: long-term CCC+, and short-term C. The outlook for the long-term rating is stable. The change in Privatbank's support rating reflects the growth in its franchise in 2002. In the second half of 2002 it became the largest bank by retail deposits in Ukraine with a 15% market share. Its increased presence in this segment of the market has been strengthened by its takeover of the majority of branches of the collapsed Bank Ukraine. However, the Negative Rating Watch on the individual rating highlights Fitch's concerns over the bank's continuously low profitability and weak capitalisation. The Rating Watch will be resolved following a review of the audited financial statements, expected to be available in April 2003.

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ENERGY

Moscow, Kiev continue setting up gas consortium

Russia and Ukraine are ready to take further steps to set up a gas consortium. The two countries' "experts were to prepare the next step and have done so," Russian President, Vladimir Putin, said at a meeting with Ukrainian President, Leonid Kuchma, in the Kremlin on February 22nd. 
Kuchma said in turn that Ukraine and Russia "were somewhat dragging out the establishment of the gas consortium."
The Ukrainian leader said, "We signed the agreement. The subsequent steps must convincingly show everybody that it is not just an idea."
Putin pointed out that Germany has expressed interest in the project. During a recent visit to Germany, "I reassured the German chancellor that all agreements reached in St Petersburg will be carried out," the Kremlin leader said.
Moreover, Gerhard Schroeder "is ready to come to either Kiev or Moscow or to welcome us in Berlin" to coordinate issues related to the consortium, he said.

Ukraine may receive 18m tonnes of Russian oil in 2003

Ukraine may receive 18m tonnes of Russian oil in 2003, Bogdan Klyuk, deputy state secretary at the Fuel and Energy Ministry, said recently, Interfax News Agency reported. He was quoted as saying this volume was set down in a protocol for supplies this year that is being prepared for signing.
Klyuk noted that Russia and Ukraine plan to sign a long-term agreement to transit Russian oil through Ukraine, in addition to a protocol between the Russian and Ukrainian energy ministries for 2003. "We plan to sign an agreement for 15 years on condition that a protocol is signed every year, to set down the volume," he said.
However, he did not say whether all of the 18m tonnes would be supplied for refining at oil refineries. "We are providing our transit capacities, Russia is reserving oil for us, and companies will decide later how much they will be able to refine," Klyuk said.

Ukraine keen to develop alternative pipeline projects

The development of the project on transporting oil through the Druzhba-Adria pipeline, especially the first stage with a capacity of 5m tonnes, does not contradict the implementation of the Odessa-Brody oil transportation project, Ukrainian deputy prime minister, Vitaliy Hayduk, told Interfax-Ukraine News Agency when commenting on statements by US representatives on possible problems which may emerge if Ukraine develops the two oil transportation directions simultaneously.
"The first stage of the project with a capacity of 5m tonnes (of oil annually - Interfax-Ukraine) in no way contradicts the Odessa-Brody project ," Hayduk said.
He added that the further increase of Druzhba-Adria's capacity to 15m tonnes would require significant investment in many segments of the pipeline, particularly in Belarus where the pipeline's maximal capacity currently stands at about 6m tonnes.
Speaking about a long-term agreement with Russia on oil transit via Ukraine, which was expected to be signed in late March, Hayuduk said that Kiev offered Moscow to "fully" load the Ukrainian oil transportation system, including the Sukhodolnaya-Rodionovskaya segment, where Russia had built a by-pass.
Hayduk said that at issue is the transportation of about 70m tonnes of oil annually.

Kuchma suggests boosting Odessa-Brody pipe project

Ukrainian President, Leonid Kuchma, has suggested boosting the implementation of the Odessa-Brody oil pipeline project. Russian companies have proposed "supplying Russian oil to the Black Sea via the Druzhba pipeline," Kuchma said at a joint press conference with Polish President, Alexander Kwaniewski, in Guta, Ivano-Frankivsk region, on February 13th. "Thus, we have no right to delay the global decision. I am confident that the Odessa-Brody oil pipeline is a global, strategic decision," the Ukrainian leader said. The project is also a good stimulant for deeper economic cooperation with Poland, he noted. 
The two prime ministers have reached a firm agreement on the project, while the European Commission "is also interested in supporting it," Interfax News Agency quoted Kuchma as saying. Bearing in mind international developments, confidence in the project's future is growing day by day, Kuchma stressed. The news agency quoted the presidents as saying that the Ukraine-Poland economic forum planned for June 2003 in Odessa would promote economic cooperation. 

France keen to join Ukrainian gas project

The French ambassador to Ukraine, Philippe de Suremain, has said that his country, particularly Frances' biggest company Gaz de France, is interested in being invited to take part in an international gas transportation consortium project involving Ukraine, Russia and Germany, Interfax-Ukraine News Agency has reported.
Suremain discussed this issue during his meeting with Ukrainian Prime Minister Viktor Yanukovych in Kiev today. Suremain told journalists following the meeting that France is watching the progress of the talks. He said that currently the talks are held in the trilateral format between Ukraine, Russia and Germany. He said that this is "a big project which has room for other states too."
"This project has the European scope, and you will understand our natural interest in it because gas supplies to the EU and France in particular depend much on the Ukrainian gas transportation system. The issue of gas transit is a question of survival for us," Suremain said. "We are waiting to be handed the ball," Suremain said.

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FOREIGN INVESTMENT

Linde to invest 13m Euro in Lukor this year

ZAP Lukor in Kalush (Ivano-Frankovsky region) has reached agreement with Germany's Linde on the implementation of investment projects in 2003 worth a total of €13m, Interfax News Agency reported. In particular, it is planned to start work on the installation of a unit for the hydrogenation of C4 and C5 fractions in April this year and to complete this project in 2004. This project will allow the company to sign a contract for the construction of a unit to produce suspended polyvinyl chloride resin. This work will be tendered out. It is also planned to hold a tender to find a company to build a power supply for the plant. Linde is to prepare a feasibility study by April to increase the capacity company's polyethylene production unit by 60%. LUKoil increased ethylene production 71% year-on-year to 208,292 tonnes in 2002, with polyethylene production up 100% to 99.007 tonnes. Propylene production increased 76.4% to 91,965 tonnes, benzene - 56.9% to 93,909 tonnes, caustic soda - 32.8% to 70,390 tonnes. The company increased the level of processing of pyrolysis raw materials by 67.4% to 749,900 tonnes. Total output climbed 83.5% year-on-year to 1.13bn hryvnias. Lukor was set up equally by Russia's LUKoil-Neftekhim and Ukraine's Orianna in December 2000 with a charter capital of 1.324bn hryvnias. According to an investment programme for the development of Lukor until 2012, LUKoil-Neftekhim plans to invest US$200m in Lukor.

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FOREIGN LOANS & AID

EBRD ready to allocate 200m euros in loans to Ukraine

The Ukrainian government can count on at least €200m. This is the amount to be allocated by the European Bank for Reconstruction and Development [EBRD] in loans. If the drafting of projects for these funds is completed in a half-year's time, the sum could go up to €350m, the EBRD director for Southeast Europe and the Caucasus, Olivier Descamps, said in Kiev on 6th March, One Plus One TV has reported. 
One of the projects is the modernization of the Ukrzaliznytsya railway monopoly. The EBRD is allocating over US$50m towards this goal for 15 years under state guarantees. The completion of nuclear reactors at the Khmelnytskyy and Rivne nuclear power plants was not discussed this time. Ukrainian Prime Minister, Viktor Yanukovych, is to sign a cooperation agreement at the EBRD central office in London on 3rd April.

Ukraine receives over US$57m in humanitarian aid in 2002

The share of humanitarian aid in Ukraine's foreign trade in 2002 was US$57,630,400, US$57,629,100 of which was imported, the State Statistics Committee said, Interfax-Ukraine News Agency has reported.
Fifty-two countries sent humanitarian aid to Ukraine, in particular, the USA - 43.3 per cent of the total, Germany - 25.3 per cent, the Netherlands - 4 per cent, Finland - 3 per cent, Denmark - 2.9 per cent, Great Britain - 2.1 per cent, France and Italy - 1.8 per cent each.
Textiles accounted for 22.9 per cent of the total amount of humanitarian aid sent to Ukraine, appliances and apparatuses - for 14.7 per cent, printed materials - for 13.7 per cent, boilers, machines and mechanical tools - for 5.5 per cent, vehicles (except railway vehicles) - for 5.2 per cent, medicines - for 4.9 per cent and furniture - for 4.7 per cent.
For its part, Ukraine sent US$1,300 worth of humanitarian aid to Azerbaijan in 2002.

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