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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: 268 - (25/04/03)

Kuchma at bay
One thing that President Leonid Kuchma is good at is spotting a winner. He situated himself well in 1990-91, keeping a good distance from the communist diehards, even if he understood and even sympathised with their stalwart convictions. Yet by 1994 his wariness came off, raising him from the premiership to the presidency.
His sole ambition since then has been to cling on to power, regardless of the plight of his countrymen, many of whom are in desperate straits. The main thing is to keep the industrialists happy, the real rulers of the country. His premiers are from their ranks, the Union of Industrialists and Entrepreneurs, of which he was the chairman himself up to 1994.
President Kuchma has been under mounting international pressure from the US and its NATO allies since last October. That's when the US government authenticated a secretly taped conversation between the Ukrainian president and his arms export chief in which Mr Kuchma gave his go-ahead for the sale to Iraq of the Kolchuga early warning radar system. A joint committee of American and British government experts that visited Ukraine last October determined that the Kolchuga system - which has a range of 800 kilometres - "would increase the threat to Allied aircrews… as well as to ground and maritime forces operating in the region." They determined that the system would allow "Iraq to passively track allied aircraft or geolocate ground and naval radar forces and provide enhanced early warning of allied operations in general."
Whether the radar sale to Iraq was actually completed is not established. President Kuchma's conduct nevertheless constituted a breach of trust in the eyes of the US. What followed was the cold shoulder from most European leaders and outright ostracism of Mr Kuchma - but not Ukraine - by the Bush administration.

As importantly, the forensic authentication of the Iraqgate tape by US authorities lent credibility to the authenticity of some 1,000 hours of secretly recorded conversation spirited out of the country in 2001 by a former member of Mr Kuchma's security unit. The recordings appeared to show Mr Kuchma's involvement in high corruption and criminal harassment, including violence, against opposition figures, and implicated him in the disappearance that led to the murder of journalist, Heorhiy Gongadze.

The end-game approaches
Already unpopular with Ukraine's voters (with an approval rating at a meagre 10%; and with less than 3% of voters saying they are ready to vote for him again), Mr Kuchma is now a lame duck, forbidden by law from seeking a third term in elections scheduled for the winter of 2004. And the president's growing international isolation has been eroding support for him among Ukraine's oligarchs, for whom Mr Kuchma no longer is able to open doors or promote Western investment.
Russia has skillfully stepped in to exploit the breach. Among other things, Moscow offered Mr Kuchma political support by engineering his election in January as chairman of the Commonwealth of Independent States. In return, Russia has secured from Ukraine ever more advantageous trade and economic relationships.
Mr Kuchma's dependence on Russia contributes to the unease within segments of Ukraine's political and economic elite, which rightly worries that Russia will seek to crowd them out in collaboration with oligarchs from Ukraine's Russian-speaking Eastern regions, now represented by Prime Minister Viktor Yanukovich. Skirmishes among economic interest groups within the Kuchma camp are now increasingly frequent. When Mr Yanukovich recently tried to take control of the country's oil and gas monopoly, Naftohaz, the effort was rebuffed by a nervous Mr Kuchma.
Increasingly, it looks like the broad coalition of economic oligarchs and regional leaders Mr Kuchma has assembled is beginning to fray as the sunset of the president's political career nears. Some members of his coalition, including high-ranking government leaders are conducting backdoor discussions with Mr Kuchma's opposition. 

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AVIATION

Iran mulls Ukrainian aircraft production offers

Apart from manufacturing the An-140, Ukraine and Iran are considering the possibility of jointly producing other types of aircraft, UNIAN News Agency has reported.
The ambassador extraordinary and plenipotentiary of the Islamic Republic of Iran to Ukraine, Ahmad Sadeq Banab, gave this information to journalists while answering a question about the possibility of launching a joint project to produce the An-74.
"We have received proposals from Ukraine, and now they are being considered," the ambassador said. According to him, issues of expanding cooperation on joint aircraft production between plants in Iran and Kharkiv and further stages of such collaboration were discussed during his visit to the Kharkiv aviation plant.
Answering a question from UNIAN, the ambassador said that the third serial An-140 plane "will be completed in two months' time at the most" at the NESA aircraft works in the city of Isfahan. 
The ambassador described the joint production of that plane under licence in conjunction with the Kharkiv aviation plant as "a symbol of our cooperation."

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BANKING

Ukrsotsbank to raise US$20m syndicated loan in 2003


Urksotsbank in Kiev, one of Ukraine's top 10 banks by asset volume, plans to raise a syndicated loan of about US$20m from foreign banks this year, Boris Timonkin, the bank's chairman told the press. Ukrsotsbank is holding talks with three foreign banks on a one-year loan at LIBOR plus 4%, he said, without adding what plans there were for the money, reports New Europe.

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DEFENCE INDUSTRY

Ukraine losing arms export contracts


The number of Ukrspetseksport's (Ukraine's state-run arms exporter) arms export contracts halved in the last year. It fell from 54 in the second quarter of 2002 to 28 in the first quarter of this year, Ukrspetseksport's director-general, Valeriy Shmarov, said in an interview with the "Business world this week" programme on the Ukrainian Television programme on 30th March.
Some of the reasons for the fall in the number of contracts are political, namely the scandals around alleged exports of Ukrainian Kolchuga [radars] to Iraq, Shmarov said.
At the same time, Shmarov noted that at the end of last year Ukrspetseksport managed to conclude a number of contracts to supply these passive radars systems. Shmarov did not say how significantly their price was reduced.
As UNIAN News Agency reported, the centre for army, conversion and disarmament studies estimates that Ukraine's arms exports fell by US$100m last year and were worth US$450m.

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ENERGY

Ukraine proposes JV to build energy infrastructure in Vietnam


Ukrainian Fuel and Energy Minister, Serhy Yermilov, has proposed the setting up of a Ukrainian-Vietnamese joint venture to build and operate energy companies in Vietnam, the ministry's press service said, reports New Europe. Yermilov tabled this proposal at a recent meeting with Vietnamese Ambassador to Ukraine, Wu Ziong Huan and Trade Secretary, Wu Wan Kuang. 
Yermilov also said that Ukraine might participate in a pilot project to launch in Vietnam a modern, highly productive mechanised mining complex, meeting world standards. Using this equipment, Vietnam will be able to significantly increase coal production, which currently amounts to about 60 million tonnes per year, he added.
In addition, the minister noted the possibility of exchanging experience in the effective management of energy companies and of training Vietnamese specialists in Ukraine. The sides also discussed further participation by Ukrainian maintenance and repair workers at the Tkhakba hydroelectric plant, in a tender for repairs and upgrading of the Chian Hydroelectric Plant and in the development of designs for the construction of new energy installations in Vietnam. 
Yermilov noted the possibility for Ukrainian companies to supply Vietnam with technical backup for projects for the construction and modernisation of hydroelectric plants and the construction of power lines. "We are ready to quickly consider concrete technical proposals from the Vietnamese side," he said.

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FOREIGN ECONOMIC RELATIONS

Ukrainian, Kyrgyz premiers keen to boost trade


Ukraine and Kyrgyzstan are keen to step up trade and economic cooperation, Ukrainian Prime Minister Viktor Yanukovych and Kyrgyz Prime Minister Nikolay Tanayev said in Kiev on 27th March, UNIAN News Agency has reported.
In particular, Yanukovych expressed confidence that the meeting and the sessions of the bilateral intergovernmental commission for trade and economic cooperation would make a solid contribution to efforts to step up such cooperation.
According to the Ukrainian prime minister, the difficulties that exist in economic relations with Kyrgyzstan have to be addressed by concerted efforts. He proposed that the meeting of the intergovernmental commission should discuss a whole range of bilateral economic relations and should fill them with real content.
Yanukovych also informed his Kyrgyz counterpart on the stability of the economic situation in Ukraine over the last three years and its growing GDP. He expressed hope that the positive trends would continue into next year. 
For his part, Tanayev noted an increase in the 2002 trade turnover between Ukraine and Kyrgyzstan, stressing that that it was only a fraction of the trade potential the two countries have. He also expressed hope that the first meeting of the intergovernmental commission would produce expected results.

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MINERALS & METALS

Ilyicha to buy US$30m in equipment from Air Liquide


The Ilyich Metallurgical Combine of Mariupol (Ilyicha), one of Ukraine's three biggest steel producers, has signed a deal to buy US$30m worth of equipment for an oxygen station from France's Air Liquide. The mill won the contract at a tender, Deputy Director General, Anatoly Volovikov, said, Interfax News Agency reported. 
He said the equipment should be delivered in March 2004. It would take 18 months to install it and launch the oxygen unit. The Ilyich combine in January-February raised finished roll output 27.1% year-on-year to 741,000 tonnes. Figures were up 5.4% to 993,000 tonnes of raw steel and 8.3% to 1.992m tonnes of agglomerate, but down 1.1% to 801,000 tonnes of pig iron.

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SPECIAL ECONOMIC ZONES

Ukrainian premier urges transparency in free economic zones


Ukrainian Prime Minister Viktor Yanukovych, is in favour of creating transparent conditions for special economic zones in order to attract investment, Interfax-Ukraine News Agency has reported.
At the moment Ukraine is not aiming to close the economic zones or suspend their operation; it is necessary to create transparent conditions - for Ukrainian and foreign investors alike. "This issue has really come to a head," the prime minister said on 28th March during a meeting devoted to the functioning of free economic zones.
According to him, initially free economic zones were meant to attract investment to the regions of Ukraine and to create new jobs. "This mechanism should not be used for [personal] enrichment, but rather for solving social problems," Yanukovych said.
However, such requirements have not always corresponded to those being actually applied in the zones, the prime minister noted, recalling that the president and law-enforcement bodies had made critical remarks about this.
On 5th February President Leonid Kuchma subjected the operation of free economic zones to scathing criticism.
Currently there are 11 free economic zones and 66 priority-development territories in Ukraine, which constitute about 10 per cent of the country's land area. In August 2002, the Cabinet of Ministers introduced a moratorium on the consideration of proposals for new free economic zones and priority-development territories till 1st January 2005.

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TRANSPORT

EBRD may finance Kiev-chop highway reconstruction


The European Bank for Reconstruction and Development is thinking about lending Ukraine €100m to renovate the Kiev-Chop (M06) highway, which is part of the fifth International Transport Corridor. Interfax News Agency quoted a government spokesman as saying the loan was discussed during a recent meeting between Georgy Kipra, the transport minister, and Olivier Descamps, the EBRD's director for Southern and Eastern Europe and the Caucasus, at the beginning of March.
The loan would finance efforts to bring a 210-kilometre stretch of the highway in the Carpathians up to European standards. It would cost €115m to renovate the whole 350km of the highway. The EBRD launched the M06 highway project and a highway sector reforms project in Ukraine back in 2000. Ukraine has already received a 19-year loan of €75m at 7.2% annually from the EBRD for the project.

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