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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 

  

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: 270 - (26/06/03)

The president survives
The president, Leonid Kuchma, is a marked man. He is detested by the population, but protected by key elite elements, particularly the tycoon figures who dominate parliament. 
Kuchma is an embarrassment even for them, but there are too many skeletons in their own cupboards to start rattling those in Kuchma's one. He has had journalists 'removed,' rigged elections and run a repressive regime. But there are people who have made a lot of money out of the regime and others who are privileged under it, the local big-wigs, mayors and the like and the security forces, who carry out his bidding. His term expires late next year. He cannot stand for a third term and will be put out to grass. Probably abroad, by then. How much he has filched for his 'retirement' is one thing that people are wondering.

Lukewarm relations with foreign leaders
Kuchma had somewhat more success attending the 300th anniversary celebrations of St Petersburg in late May than he had had in November at the Prague summit of NATO on the day it was thrown open to candidate nations and Partners for Peace. Then he was cold-shouldered by the US and the UK, who blame Ukraine for selling Iraq radar equipment used against their pilots.
In St Petersburg Kuchma met Schroeder, who of course began the anti-Iraq War bandwagon last year. The Germans know that for a host of reasons they have to be on good terms with the Ukrainians, above all for security and energy. A Russia-Ukraine-Germany energy corridor is being set up, with a recent Russian-Turkmen deal making possible extra gas.
The Russians are not fussy about the morals of their interlocutors, and not much about their own. Putin and Ivan Ivanov, the Russian Foreign Minister, have been courting Ukraine of late, hoping to lure it away from the West. So long as the likes of Kuchma rule in Kiev, they are likely largely to succeed.

Succession problems
With a vibrant economy at the moment, industrial production growing by 11.4% this year, the establishment may be able to get one of their own into the presidential seat in October 2004's elections. That is former premier Anatoly Kinakh or present one Viktor Vanukovich. Both belong to the Union of Entrepreneurs and Industrialists.
There is one maverick who might slip in, former central bank chairman and premier, Viktor Yushchenko. The problem is that he is genuinely popular and might run a populist campaign against corruption. That would never do. And so far the Ukrainian elite have lived up to Stalin's dictums! "People think that what matters in an election is who the voters vote for. Actually only one thing matters - who counts the votes."
It is not surprising that more than 50% of 2,000 Ukrainians polled recently wanted political reforms. They are not clear what they should be. But one would obviously be impartially conducted elections. But that is a difficult matter in the entire FSU, excepting the Baltic states. 

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AUTOMOBILES

Eurocar to start assembly line production of VWs


In the near future Eurocar of Ukraine will begin the assembly line production of Volkswagen automobiles, company sources said, reports New Europe. The first VW Passats have been rolled out for certification in both Ukraine and Germany. Before the end of the year, Eurocar plans to turn out 1,020 vehicles and is looking to build VW Bora, Golf and Polo model cars in the future. 
Eurocar and VW Group signed a memorandum on the start of production in April. Right now, Eurocar builds the full range of Skoda automobiles. Skoda is part of VW Group. Since production began last April, 3,315 Skoda automobiles have been built, 2,010 of them last year. Eurocar plans to turn out at least 7,000 Skodas this year. Production of the Passat is the next phase in the company project for setting up assembly line production of VW Group vehicles at the plant. 
The enterprise's production capacity enables it to produce 15,000 vehicles annually, and future plans include upping that figure to 40,000 a year. Eurocar is the official exclusive importer and producer of Skoda autos in Ukraine.

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BONDS

Ukraine readies US$800m offering over 10 years

Demand for emerging market bonds remained strong as Ukraine prepared for its first new dollar issue since the country's debt restructuring in 2000, the Financial Times has reported. 
Orders received for the 10-year deal, expected to total US$800m, were thought to have reached US$4.5bn. The yield on the bonds, which is expected to be priced on 4th June, was seen at 7.65 per cent.
Yields spreads on Ukraine's existing 2007 dollar bonds have tightened by about 150 basis points to some 550bp over US Treasuries since the beginning of the year, or one-third of the peak spread over its launch in 2000.
Ukraine is returning to the international market to extend the maturity of its debt and to take advantage of low interest rates.
The global issue follows the International Monetary Fund's decision to delay a US$800m loan to Ukraine.
"Not only is this Ukraine's first bond since the restructuring, but it comes despite no agreement with the IMF," said Jerome Booth at Ashmore Investment Management.
Dresdner Kleinwort Wasserstein, JP Morgan and UBS Warburg are lead managing the sale for Ukraine.

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ENERGY

Kiev ready to let go of energy company shares

Ukraine plans to sell 25% packets of shares in the energy supply companies Chernihivolblenergo, Poltavaoblenergo, Sumyoblenergo, Prikarpattyaoblenergo and 26.98% of shares in Lvivoblenergo during the exchange trading at the end of the year, Ukrainian State Property Fund Chairman, Mikhail Chechetov said recently, New Europe reported. Earlier the Property Fund planned to sell the share packets in the five regional energy companies during exchange trading in June. Chechetov said that the decision not to rush the sale of these companies was due to the receipt of significant privatisation revenue. To date, only six energy supply companies have been privatised in full - Kirovogradolblenergo, Khersonolblenergo, Zhitomirolblenergo, Kyivolblenergo, Rivneolblenergo and Sevastopolblenergo. The Ukrainian Property Fund planned to sell controlling shares in 11 regional energy companies in 2002, then the sale was postponed until this year. It is planned to hold tenders for the sale of 75% packets in Vinnitsaolblenergo, Volynolblenergo, Zakarpattyaolblenergo and Dniproolblenergo and 65% packets in Kharkivolblenergo and Donetskolblenergo. In addition, it is planned to hold tenders to sell 71% of shares in Cherkassyolblenergo, 60.25% of Zaporizhzholblenergo and 51% of Ternoplolblenergo.

Ukrainian energy minister urges privatisation of thermal power plants

Ukrainian Fuel and Energy Minister, Serhiy Yermilov, suggested at a news conference in Kiev, the lifting the moratorium on the privatisation of thermal power plants and selling them through open tender, Interfax-Ukraine News Agency, has reported. 
He argued that Ukraine's thermal power plants need non-state investments to improve their technical and financial condition. Thermal power plants need investment in their development. The situation will not improve without non-state investments," Yermilov said. 
Of Ukraine's 17 thermal power plants, the best situation is at Kharkiv's thermal power plant No 5, which has been transformed into a joint-stock company. Its supervisory board includes representatives of the State Property Fund, the Fuel and Energy Ministry and the Kharkiv Regional state administration.
Yermilov negatively assessed the situation at most of Ukraine's thermal power plants saying that the state has lost control over those ones that were handed over to be run by local authorities or companies.
Most thermal power plants, specifically those in Kherson, Mykolayiv and Kremenchuh, are bankrupt, producing no electricity or heat," the minister said. Kharkiv's thermal power plant No 5 has a rated capacity of 470 MW.

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FOREIGN ECONOMIC RELATIONS

Ukrainian, Kazakh president urge CIS free trade zone

Ukrainian President Leonid Kuchma, who made a four-day working visit to St Petersburg to mark the city's 300th anniversary, held a bilateral meeting with Kazakh President Nursultan Nazarbayev.
UNIAN News Agency has learnt from Ukrainian presidential press secretary, Olena Hromnytska, that the parties exchanged views on foreign policy. They paid special attention to economic cooperation between CIS member states. The Kazakh president, in particular, remarked that he had always actively supported and would continue to support the economic component of CIS collaboration.
Kuchma and Nazarbayev stressed the need to sign a treaty on the setting up of a free trade zone spanning the CIS.
In addition, Kuchma and Nazarbayev noted a recent reduction in trade turnover between Ukraine and Kazakhstan and emphasized the need to rectify the situation.

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FOREIGN INVESTMENT

Direct foreign investments rise to US$252.8m

The rise in direct foreign investments in Ukraine amounted to US$252.8m in the first quarter of 2003, soaring 118.3 per cent year-on-year and dropping 35.8 per cent from the previous quarter, reports New Europe. On April 1st overall direct foreign investments stood at US$5.6bn. The state committee for statistics said that in January-March foreigners invested US$295.2m in the Ukrainian economy, US$20m of which came from Commonwealth of Independent States countries. However, simultaneously they imported capital for US$73.3m. Investments came form 114 countries. In the first quarter of 2002, ahead of the March 30 parliamentary elections, direct foreign investments amounted to US$237.9m and capital imports to US$116.9m. Direct foreign investments in Ukraine in 2002 grew 15.2 per cent to US$783.7m. In its estimates for the 2003 budget, the Economics Ministry predicted a US$750m rise in investments for this year.

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FOREIGN LOANS

Banks offer Ukrrechflot US$30.9m for new boats

The European Bank for Reconstruction and Development (EBRD) is set to offer the shareholders of Ukrainian shipping lines Ukrrechflot a credit of US$20.9m, and together with the Bank of Scotland a syndicated loan of US$10m, for the procurement of new vessels, the EBRD's Kiev office said, Interfax News Agency reported.
The loan funds will go to buying dry-cargo vessels under an Ukrrechflot fleet-renewal programme.
Ukrrechflot holds a monopoly over river shipping in Ukraine. Agreement on financing the project will be signed during a two-week visit to Ukraine by EBRD President, Jean Lemierre. 

Kuchma urges EBRD to implement large-scale projects

Ukrainian President, Leonid Kuchma, has urged the European Bank for Reconstruction and Development (EBRD) to implement large-scale projects in Ukraine. Kuchma made this comment at a meeting with EBRD chief, Jean Lemierre, in Kiev.
Ukraine and the EBRD are expanding ties dynamically and "have no disagreements" on existing problems, New Europe reported.
Kuchma reiterated the invitation to visit the Rivne and Khemelnytskyy nuclear power plants. Kuchma is prepared to accompany Lemierre during the trip. The construction of the plants should be finished, he pointed out.

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PRIVATISATION

SPF to sell chemical, metallurgy plants in May

The Ukrainian State Property Fund is to sell 53.86% of shares in Rivneazot, 39.48% of shares in Crimea Soda Plant and 43.36% of shares in the Petrovsky Metallurgy Plant in Dnepropetrovsk, fund Chairman, Mikhail Chechetov, said at a press conference, reports New Europe. 
He said that in June it is planned to sell 90.34% of shares in the state holding company Black Sea Shipyard (Nikolayev) and also shares in the Dzerzhinsk Metallurgy Plant in Dnepropetrovsk. 
In addition, in the autumn it is planned to sell 43.054% of shares in Ukrnafta, he said. "An analysis of a 25% packet of shares in Nikopol Ferroalloy Plant will be completed within a week, and the estimated value of the shares will be several times higher than the start price. If the buyer does not agree to acquire the shares at this price, then they will be put up for sale again," the Property Fund chairman said.

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