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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: 265 - (28/01/03)
A new broom
President Leonid Kuchmas of Ukraine has taken a leaf out of Yeltsin's book. He likes to ring the changes with his premiers. He has appointed a new one in Viktor Yanukovych, who like his predecessor, Anatoly Kinakh, hails from the Party of Industrialists and Entrepreneurs, the bosses' party in parliament. The 52-year old prime minister is confident that his premiership will mark a turning point for his country.
He has inherited an economy doing rather well. It recovered strongly from the disastrous devaluation of 1998 when the hryvna collapsed along with the rouble, wiping out whole sectors. Devaluation brings its own natural remedy of export-led growth in due course. And that is exactly what happened by 2000 and 2001, when GDP jumped up by 5.8% and 9% respectively. It rose by four percent or more in 2002 and even 2003 promises to bring some growth, despite the widespread uncertainties
Kuchma dismissed Kinakh, premier since May 2001, in mid-November, criticising his government for not dealing with social problems. The new premier is the former head of the Donetsk Regional States Administration, giving him "hands-on" experience of just such problems.
The premier speaks his mind
Yanukovych gave a New Year assessment of the situation, which is decidedly upbeat, particularly on the emergence of a new cooperation between government and parliament (the Verkhovna, Rada), which is the key to accelerating reforms.
"For the first time in Ukrainian history a basis of the mechanism of real interaction between legislative and executive authorities' branches as well as of responsibility for developments in the country has been founded," Yanukovych told New Europe.
"This gives me confidence that this government will be able to speed up the pace of economic reforms in Ukraine and that their positive results will become tangible for every citizen of our country. Without such a confidence I would never have agreed to hold office of the prime minister of Ukraine," he said.
Yanukovych leads the tenth government since independence in 1991 and would not be human if he did not consider the prospect of becoming president next year, when Kuchma's second term expires. By the constitution Kuchma cannot stand again, something that his exceptional unpopularity rules out, anyway, with murky scandals galore. The 52-year-old premier could offer a new sort of helmsmanship, having a clean record to date.
All depends on his performance over the next eighteen months or so as premier; the presidential elections will not be until October 2004. A likely contender at these polls is Kinakh's predecessor as premier, Viktor Kushchenko, who was a successful central bank chief in the late 1990s and then as premier presided over that economic turn-ground in the first year and a half of the decade. He tops opinion polls and would be a hard candidate to beat.
It is still too early for Yanukovych to so much as mention the question of the presidency. He is concentrating on the job in hand at present. The Ukrainian premier said the fulfilment of a realistic budget for 2003 would help economic growth. Kuchma has signed the Ukrainian state budget bill for 2003 but also asked parliament in a letter to make revisions. Moreover, the government plans to stabilise the economy, dismantle the state administrative system of management through liberalisation, carry out privatisation of the state property, create favourable conditions for direct foreign investment, battle the shadow economy, and develop small and medium businesses.
Yanukovych emphasised that reforms would help integration with the EU. "Complex transformations, in-depth political and economic reforms, introduction of the European standards to all spheres of national internal life must contribute to the EU and Ukraine rapprochement. Such reforms are not considered in Ukraine as a concession to the EU, but as a driving force for internal change. The creation of real internal preconditions for fulfilment by Ukraine of the Copenhagen criteria could help us make the transition from cooperation to real association and European integration," Yanukovych said. The Copenhagen criteria essentially meaning clear and democratic constitutions, which Ukraine has certainly not yet achieved.
The Greek EU presidency helps Ukraine
The six-month presidency of the EU by Greece is a favourable factor for Ukraine, Yanukovych is convinced. Greece and Ukraine already work together within the framework of the Black Sea Cooperation Organisation (BSCO). Greece supports Ukrainian membership of the World Trade Organisation (WTO). It cannot be considered a likely candidate for EU membership, however, any time soon. For one thing its agriculture, long in the doldrums, is recovering strongly and is competing only too successfully with EU farmers, such as in grain, on which Brussels has levied import quotas and tariffs.
Energy hub of Central Europe
One area where Ukraine has something to offer that the EU is unlikely to impose quotas or tariffs upon is energy. Ukraine's geographical situation makes it the natural route for Russian gas to reach European markets. Ukraine's gas transport system is second only to Russia's in Europe. Yet only 65-75% of it is used today. There is scope for a big upsurge in transmission of natural gas to Europe, replacing suspect energy sources to the south, notably the Middle East and Algeria. The construction of new compressor stations and pipelines promises to raise transit capacity by more than 35 billion cubic metres.
Ukraine's Naftohaz Ukrainy and Russia's Gazprom are in close contact on developing the country's gas transportation networks. The fact that the Russian ambassador to Ukraine is Viktor Chernomyrdin, ex-head of Gazprom and ex-premier, is a sign of the importance that Moscow attaches to gas cooperation with Kiev.
Regarding oil transportation, three of the seven main export routes to Europe from Russia and Central Asia, pass through Ukraine. Ukraine is hoping that a project to lay an oil pipeline linking Odessa, Brody and Gdansk and bringing Caspian Sea oil to market will go ahead. Says Yanukovych: "The main advantage of this route is its stage of completion - the oil-transferring complex Yuzhny near Odessa is already constructed and is connected with the oil Odessa - Brody pipeline with its extension through the territory of Poland till the ports of the Baltic Sea."
The ecological catastrophe caused by the tanker Prestige and the heavy traffic already passing through the Bosporus Straits makes the utilisation of the oil pipeline even more necessary, he said. Ukraine is mulling the creation of an international consortium and has invited the EU and leading world companies to Ukraine. European Commission Vice President, Loyola de Palacio, and Polish Prime Minister, Leszek Miller, plan to hold in Brussels in the coming weeks a business-conference intended to attract European private capital to this project.
Furthermore, Yanukovych said there are considerable possibilities for the extension of cooperation in the sphere of electrical energy. "In particular, since July of last year a part of the energy system of Ukraine, the so-called Burshtynskiy island, works in parallel with the united energy system of Eastern Europe. This raises the reliability of the system's work and allows for an increase in the amount of Ukrainian energy's export to the countries of Eastern Europe, in particular - to Poland, Hungary, Slovakia and in the long term - to other European countries," he said. As these countries become part of the EU, the cooperation between Ukraine and the EU in the sphere of electrical energy will acquire new features and will become a next step of Ukraine towards united Europe.
Domestic economy rights itself
Not only is the economy growing, it is so for the present, it is recovering from the nadir of 1998's devaluation. In 1999 the rate of inflation was officially 19.2% (almost certainly a big underestimate), in 2000 25.8% (likewise), in 2001 6.1% and in 2002 2.1% (down from an initial estimate of 9.8% by the Economy Ministry). The ministry is lowering its forecast for 2003 consequently from 7.7% to 5.2%
Prices of foodstuffs actually fell in 2002, state statistics show, by 2.3% (after rising by 7.9% in 2001). Something of a 'feel-good' factor is working for the government, although not too much should be made of this in a country still desperately poor by Western standards.
Ukraine to present aircraft at air shows in Asia, Australia
The Kharkiv state aircraft manufacturing plant will shortly present the new short-range plane. An-140 and upgraded modifications of the An-74 at international exhibitions in Asia and Australia. In particular, the Kharkiv plant planned to present the An-140 and An-74-TK-300 to potential Asian partners at a Ukrainian industry exhibition in Ra's al Khaymah in the United Arab Emirates on January 21st-25th, Interfax News Agency reported.
The presentation of the new Ukrainian aircraft will be held in response to a request from foreign partners, who expressed interest in these Ukrainian planes during Air Show China in Zhujai in 2002. The presentation of the An-140 and An-74 is planned for February 5th-9th at the AeroIndia 2003 exhibition, to be held at the Indian airforce base Yelahanka in Bangalor.
In addition to aircraft manufacturing, experts say the two countries could also cooperate in air defence. The An-140 and-74-TK-200 were also due to be presented at the Australian International Airshow on February 11-16.
Ukraine International Air ready to expand its wings
Ukraine International Airlines has announced it will expand its sales and marketing agreement with Discover the World Marketing, a group based in Scottsdale, Arizona, reports New Europe. The airline company said it hopes to boost sales in Argentina, Brazil, China, Hong Kong, Japan, southern Africa (Botswana, Lesotho, Namibia, South Africa and Zimbabwe) and the United Arab Emirates. Officials said the deal is due to take off in the near future.
"Discover will focus on developing new business to Kiev for Ukraine International through its extensive network of western European gateway cities," Discover the World Marketing Chairman, Derek Shanks, was quoted as saying. "Our success in generating revenue for the carrier throughout Scandinavia, where Ukraine International operates online routes from Copenhagen and Helsinki to Kiev, led the airline to look for new sales opportunities using our global network."
Gazprom to operate Turkmen gas exports to Ukraine in 2003
Ukraine's national company, Naftohaz Ukrainy and Russian gas monopoly, Gazprom, signed a package of agreements in Moscow recently, which regulate the volume and parameters of cooperation in 2003, and names Gazprom as the operator of Turkmen gas transit to Ukraine, the Ukrainian company has announced. A direct transit agreement is expected to cut down spending on a gas transit to Ukraine. Whereas in 2002 spending on transit stood at 41% of the cost of Turkmen gas, in 2003 this figure will go down to 38%, Interfax News Agency reported. Previously, the Itera company was the operator of Turkmen gas exports to Ukraine. It received part of the gas in payment for its services and sold it in Ukraine.
FOREIGN ECONOMIC RELATIONS
Ukraine may join WTO in 2004
Ukraine is unlikely join the World Trade Organisation (WTO) in 2003, but joining the organisation in 2004 is quite possible, Ukrainian Minister of Economy and European Integration, Valery Khoroshkovsky, told a press conference in Kiev, reports New Europe.
He pledged to work to accelerate this process and concentrate on problems that arise in negotiations with the WTO. In particular, the minister said the US would host talks under the Ukrainian-US economic cooperation commission early in the year, during which Washington could hopefully support Kiev in its bid for WTO membership and decide when Ukraine could be recognised as a country with a market economy. The minister also recalled his idea to sign an agreement with Russia on synchronising the two countries' accession to the WTO to rule out any negative consequences that could arise when one country joins the organisation before the other.
Ukrainian-EU trade increases in 2002
Ukrainian Foreign Ministry state secretary for European integration issues, Alexander Chaly, said that 2002 was a "very fruitful" year for relations between Ukraine and the European Union. "We maintained constant political dialogue at the highest level," said Chaly. "It was the first year when dialogue in the sphere of justice and interior affairs began to be conducted effectively." Speaking about the level of trade-economic relations between Ukraine and the European Union, Chaly said, "The EU share in Ukraine's foreign trade is constantly increasing."
Vietnamese and Ukrainian provinces boost cooperation
Senior officials of central Khanh Hoa province of Vietnam and Kharkov province of Ukraine have signed a framework agreement on their economic, commercial, cultural, educational and sports exchanges, VNA reported. The agreement was signed during a visit to Khanh Hoa province by a delegation of Kharkov province led by Kusnaryo Ecgeny Petrovich, chairman of the provincial administrative committee.
Under the agreement, Kharkov province will provide Khanh Hoa province with equipment and machines for industrial and agricultural production, electrical appliances, fertiliser and medicines. It will help train university and post graduate students, scientific researchers and football players. In return, Khanh Hoa province will supply farm products to Kharkov province, including rice, refined sugar and seafood. It will also supply wooden products, textiles and garments and exchange specialists in economics, education and sports between the two provinces. During their stay in Khanh Hoa, the delegation also visited a number of economic and cultural establishments.
Vietnam has offered Ukraine the possibility of participating in a tender to build hydro-electric plants and to take part in a satellite communication project, Ukrainian Prime Minister Viktor Yanukovych told journalists on 20th January after a meeting with Vietnamese National Assembly Chairman, Nguyen Van An, Interfax-Ukraine has reported.
According to Yanukovych, Vietnam is currently interested in the construction of hydro-electric plants and in supplying the necessary equipment. "Ukraine will participate in the tender," Yanukovych said.
Yanukovych also said that Vietnam had expressed interest in cooperation with Ukraine in the space industry. "This is about satellite communication, and Vietnam is offering Ukraine to participate in the project," he said.
US to fund reform of law enforcement system
Under a memorandum on mutual understanding between Ukraine and the United States signed in Kiev, Ukraine will receive US$3m from the US to develop its law enforcement system. The Ukrainian Interior Ministry's press service told Interfax News Agency that the memorandum was signed by Alexander Motsyk, the Ukrainian foreign Ministry's Assistant Secretary of State, and by US Ambassador, Carlos Pascual.
The first tranche of US$318,000 will arrive in Ukraine in 2003.
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