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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: 266 - (27/02/03)

There is a see-saw in Russian-Ukrainian relations that is governed by how well either is getting on with the West. At the moment neither are, especially Ukraine. But Putin is tilting against the US over Iraq, true in company with France and Germany. The old closeness to Washington is over or at least on hold.

Out in the cold
As for Ukraine its relations with the US could not be frostier, or with the UK. Washington and London became convinced that Kiev had been authorising sales of radar equipment to Iraq capable of being used against their pilots in the "no-fly zones." When Kuchma tactlessly insisted on going to the off-day of the Prague NATO summit in November, open to the 49-member North Atlantic Partnership Council, he was expecting to be seated between the leaders of the US and the UK. But Bush and Blair would have none of this. Lord Robertson, Secretary-General of NATO, had the brainwave of changing the language of the seating arrangements from English into French, as it so happens the organisation's second language. Whereupon Kuchma found himself at the bottom of the class with Etats Unis and Royaume-Uni nowhere to be seen, next to Turkey on one side and vacancy on the other. The snub was well made.
Bush and Blair would both know what sort of character Kuchma is and what sort of regime he runs. Probably a murderer, certainly a dictatorial manipulator of elections, a suppressor of media independence, all of these and a foul-mouthed vulgarian if tapes released by his ex-bodyguard are genuine. Nobody in Ukraine doubts that they are, nor would the Western leaders. Not somebody one wants to sit next to at a conference or across a dinner table. The West is waiting impatiently for his term of office to expire, which it does at the end of 2004. So are nearly all Ukrainians.

A welcoming Russia
Being damaged goods in the West is no bar to doing business with Russia. Moscow is not at all averse to conducting relations with dubious characters. Indeed, it rather likes doing so. As Putin put it last year when asked why he tolerates Lukashenka of Belarus, an even more unsavoury character than Kuchma, he replied: "He may be a scoundrel; but he is our scoundrel."
So is Kuchma, Putin must think Kuchma now has nowhere else to go but to Moscow. Actually out of great tact Putin went to Kiev instead in late January. The obvious thing to do with a leader in Kuchma's situation is to press him to make concessions on long run issues. He must be so fixated on what is going to happen next that long-term questions of border disputes can have little meaning for him, concerning the two countries' 2063-km border. To get him in the right frame of mind, Putin came to launch with him a year-long festival of Russian culture in Ukraine, ahead of a meeting of ex-Soviet republics in Kiev.
The key issue of Russian-Ukrainian relations at the moment is that of finalising details of a huge gas consortium, which would make Ukraine the energy corridor of its part of Middle Europe, linking Russia to the European markets of the EU. But nearly all talks are on hold. Everybody is awaiting the outcome of the Gulf war. If the price of oil falls to US$16 per barrel, then that transforms the economics of many a mega-deal. And that is exactly what oilmen are expecting if the US starts up oil exports in a big way from Iraq. 

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AUTOMOBILES

Avtozaz-Daewoo restructured into ZAZ

AvtoZAZ-Daewoo, a major Ukrainian carmaker, has been restructured into ZAZ following the purchase by Switzerland's Hirsch & Cie of a 50% stake in the company from Daewoo. Ukravto, which controls the other 50%, said in a press release that ZAZ would implement the previously adopted investment programme and establish production of well known makes such as Opel and DaimlerChrysler, as well as Daewoo. Welding, painting and assembly of the Opel Astra is expected to be launched in September 2003. 
It was initially expected that one of the world famous carmakers would become the new shareholder. However, because of the market situation and the investment climate in Ukraine, a buyer among the major automobile concerns that was ready for such a level of participation in the development of Ukraine's car industry could not be found, New Europe reported.

Ukraine's Eurocar to start assembling Audis soon

Ukraine's official exclusive importer and producer of Skoda automobiles, Eurocar, intends to start putting together Audi A4s and A6s in the first half of this year, Interfax News Agency reported. This project will be implemented together with the automotive group Vipos, Ukraine's official Audi importer. 
The assembly kits will be shipped directly from Audi to Eurocar, and Vipos would do the actual assembly. With this aim, the two companies have set up and registered a joint venture called EuroVip. It is not known how many vehicles are to be built; production will be determined by dealer orders. How much the Audis assembled in Ukraine will cost was not disclosed. 'Avtotsenter' weekly quoted Vipos's director General, Viktor Postelnikov, as saying prices would be lower than for Audis assembled in Germany. The weekly quoted him as saying that the prices should remain lower, taking into account the increased duties on imported vehicles. 
Eurocar was set up on 19th December 2001. In March of last year, it gained production certification and following an audit and inspection by Skoda Auto began the assembly line production of Skoda Octavias, with production of Skoda Fabia's beginning in June. The enterprise is currently capable of producing 1,500 automobiles per year. Skoda Auto and Audi AG are Volkswagen subdivisions.

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BONDS

Ukraine to name lead manager of Eurobond issue 

The Ukrainian government in the near future will announce the results of a tender to select the lead manager for the issue of US$600m in Eurobonds in 2003, Minister of Economics and European Integration, Valery Khoroshkovsky, said recently. "It would be desirable to make the choice before March," he said, noting that the receipts must be spent on refinancing the payment of foreign debts in the first half of he year. In 2003, Ukraine is to repay US$1.53bn in foreign debt, including US41.02bn in main debt, reported New Europe. 
The Law on the State Budget provides borrowing of US$1.22bn, including the issuing of US$600m in Eurobonds, to finance these payments. The Eurobond issue may be increased to replace other types of borrowings. The Ukrainian Finance ministry has received applications from at least 10 leading international investment banks offering to place the Eurobonds for 5-10 years, or even 30 years. He said yields will be below 10% per year. A more exact figure will be named after the banks' proposals have been analysed, he said.

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ENERGY

Ukrtransnafta to transport Caspian oil through Odessa-Brody pipeline

Ukrtransnafta plans to transport Caspian oil through the Odesa-Brody-Uzhgorod-Omisalj pipeline over the next three years, while implementing the Druzhba-Adria project at the same time, Interfax News Agency quoted CEO, Alexander Todiichuk. He said that this issue was discussed at a meeting of a coordination committee of participating countries to integrate the Druzhba and Adria pipelines. The meeting took place on January 30-31st in Kiev.
"The Odessa-Brody pipeline, joined with the Druzhba-Adria project, will allow Caspian oil to reach the American continent," Todiichuk said. He noted that reserves of oil on the Druzhba pipeline (on Ukrainian territory) amount to 9.2m tonnes, of which 5m tonnes may be used during the implementation of the Druzhba-Adria project.
"It was agreed to split the project into two parts - at the first stage transportation will amount to 5m - 8mtonnes, and later 8m - 15m tonnes," Todiichuk said, explaining that an increase in transportation to over 8m tonnes will require significant investment from countries participating in the project.
The Russian oil companies YUKOS and Tyumen Oil Company will equally provide the first 5m tonnes of oil, Todiichuk said, adding that YUKOS, as the co-owner of the Hungarian and Croatian company that owns the Druzhba-Adria system, is interested in increasing transport through this pipeline. "We can easily transport another 4m tonnes of oil through the pipeline," Todiichuk said.
Oil transit through the Odessa-Brody-Uzhgorod-Omisalj pipeline will not begin sooner than through the Druzhba-Adria system - it is necessary to finish construction of the pipeline in Croatia and to relay a section of the current pipeline, which will require investment of US$50-60m.
It is planned to load the first oil received through the Druzhba-Adria pipeline onto a tanker in Omisalj in December 2003.
An agreement to join the Druzhba and Adria systems was signed in Zagreb on December 16, 2002, for a 10-year period with the right to extend, by representatives from Russia, Croatia, Ukraine, Belarus, Slovakia and Hungary.
The Druzhba-Adria project involves setting up an export route to transport oil from Russia and possibly the Commonwealth of Independent States to the world market, including the North American market, through the deep-water port of Omisalj. It is planned to gradually load and increase the current pipeline capacity. The total length of the route is over 3,000 metres. There will be a single tariff in place for the entire route of US$0.64 per tonne per 100 kilometres. It is planned to set a tariff for handling oil at Omisalj of US$2.5 per tonne.

Ukraine's biggest oil terminal begins operation

The Pivdennyy oil terminal near Odessa has received its first order. Ukraine's biggest oil terminal had been under construction since the beginning of the 1990s and now it is operating at last. The first oil tanker will carry 90,000 tonnes of oil to Bosporus, One Plus One TV has reported. 
The client is the Russian oil company TNK, which has not revealed where exactly it is exporting its oil, saying that this is a commercial secret. The Odessa-Brody oil pipeline is also partially being used in conjunction with the oil terminal. In 2003, the Ukrainian oil pipeline company, Ukrtransnafta, is going to pump over 4m tonnes of Russian and Kazak oil through the pipeline. Ukrtransnafta has already signed four contracts with their clients. The oil terminal will provide funds to maintain the Odessa-Brody oil pipeline.

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FOREIGN LOANS

EU grants 3m Euro for electricity sector reform

The European Commission, as part of a Tacis programme, is financing a project aimed at supporting reform of the Ukrainian energy system being implemented by the Fuel and Energy Ministry and the National Commission for the Regulation of Electricity. Interfax News Agency reported that the Energy Ministry's press service said that it is planned that the project, which will cost €3m, will be implemented over a two-year period. It will be carried out by a consortium headed by the French engineering company BCEOM. The main task is to provide technical support for the institutional and professional development of the Fuel and Energy Ministry and the National Commission for the Regulation of Electricity.

World Bank, Ukraine to revise portfolio

World Bank and Ukrainian Cabinet officials recently started a new revision of the portfolio of projects to be carried out by the bank and Ukraine. Economics Minister, Valery Khoroshkovsky, and the World Bank's Director for Ukraine, Belarus and Moldova, Luca Barbone, chaired the first session, New Europe reported.
The two sides discussed ways to improve the efficiency of planning and implementing World Bank-backed projects in expansion of the Ukrainian economy and the planning of the Programmatic Adjustment Loan (PAL-2) project.
The US$750m project is the mainstay of the bank's programme, approved in September 2000, to aid Ukraine in 2001 to 2003. A new strategy spanning the period from 2003 to 2007 is being planned now.

Ukraine needs no more international regular loans

Ukraine no longer needs regular loans from international financial bodies but needs their advice, the governor of Ukraine's central bank said. "Ukraine is in a position today to cope with its own problems without any financial support from international financial organisations. But this by no means implies that we should cease to cooperate - we are interested in consulting," Interfax News Agency quoted National Bank Chairman, Serhy Ti-hipko as saying in Moscow.
He said Ukraine and the International Monetary Fund (IMF) should have programmes of cooperation today and in the future. "This would at least make it possible, in case bad times should come, to quickly sort out some sort of support from international financial organisations," he said.
Nevertheless, after the completion in September last year of a four-year extended fund facility programme to a total of 1.92 special drawing rights, Ukraine expects to launch a standby loan programme under which it would receive money from the IMF whenever it needs it. The programme would take three to five years and involve a loan amounting to between US$600m and US$800m. Tihipko said Ukraine hoped the IMF would release the US$250m second tranche of a systems loan this year.

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TRANSPORT

UkrZalyznytsya to bid in Saudi railroad tender

Ukraine will take part in a tender to build a railroad in Saudi Arabia; Interfax News Agency quoted UkrZalyznytsya Director general, Hryhoriy Kirpa, as saying. Kirpa, who is also Ukraine's transportation minister, told journalists in El-Kuwait on January 19th that Saudi Arabia plans to construct more than 3,000 kilometres of railroads. He said that a design for the first 940 kilometres would be ready within the next two months. "We will participate in the tender," said Kirpa. 
According to the minister, a delegation of Saudi experts will visit Ukraine in the near future to "discuss the issue in detail." Talks with Saudi leaders also addressed the possibility of having Saudi experts help build highways in Ukraine. "They have good specialists. I think we will find investment sources for road projects," Kirpa said. He noted that they also discussed maritime contacts and options for delivering Saudi oil via the Southern port and the Odessa-Brody pipeline.

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