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: 272 - (29/08/03)
The new geopolitical situation in the world could not suit the Ukrainian leadership better. The US has changed its position dramatically. It is no longer holding out against the dictator of Kiev. Just last year President Leonid Kuchma was being accused of authorizing the sale of a US$100m radar system to Saddam Hussein. He was also persona non grata for being a vile dictator, which he certainly is. But that was all before war broke out.
Today Mr Kuchma is the most valued new recruit in the US-led occupation of Iraq. He has agreed to send 1,800 troops to Iraq, at American expense, to just south of Baghdad. The illegal arms sales charges have been dropped. US ambassador to Kiev, Carlos Pascual, now talks diplomatically in public of "possibilities" opening up with Ukraine.
Whatever geopolitical benefits accrue to Washington from the demarche, it is clearly massively benefiting Kuchma, who was otherwise looking increasingly like a dead duck. In joining up with the US, Kuchma has ended his international isolation, which his domestic opposition had hoped to use against him.
"The Americans thought they hooked Kuchma, but it's the other way round," said Volodymr Polokhalo, a political commentator whose coming book includes a chapter titled "How Kuchma Used the West." "When the Bush administration closes its eyes, it understands that Kuchma is capitalizing on that, and because of the new geopolitical context, the eyes have been closed,"
Mr Kuchma, said a top Western diplomat here, "wants to have some form of international credibility. If the self-interests of one individual can bring a country's national interests in line with the US, that's certainly better than the opposite." Despite the public appearance of US support, the diplomat added, the US has continued to tell Mr Kuchma privately that "cooperation on Iraq is not a panacea for everything in the relationship."
Ukraine has long been a cipher on the map of post-communist Europe. Many experts refer to it as a strategic "grey zone" of about 50m people, veering between the spheres of Russia to its east and an expanding NATO to its west. Mr Kuchma, fighting to hold on to power amid corruption charges and allegations that he played a role in the murder of an opposition journalist, has declared Ukraine on a course of "Euro-Atlantic integration," but has often wavered in his pursuit of that course.
His latest tack westward was displayed early in August on a rain-soaked field about 80 kilometres south of Kiev, where scrawny young Ukrainian soldiers lay in the mud to practice shooting targets with their Kalashnikov rifles. After a few weeks of special training and with the promise of an enormous pay rise, they will ship out to join the American occupation of Iraq.
The new situation puts in perspective a spat that was developing in early summer. The Ukrainian Government had been annoyed with the United States for suspending promised funds for the disposal of nuclear fuel from hundreds of missiles that were voluntarily disarmed by the republic in the mid 1990s. Kuchma in particular made a parade of being incensed by their behaviour in public, but was no doubt secretly delighted that he now had an issue on which to seize the moral high ground for once against the US. He had been castigated by Washington for over a year for his many breaches of human rights and his blatant election-rigging.
His comments came after Parliament issued a statement on July 11th accusing Washington of being in breach of a 1993 agreement by suspending funding for the programme in May. Ukraine had upheld its commitments by dismantling all its missile silos and 176 SS-24 intercontinental ballistic missiles and its 1,300 warheads.
The US claims the discontinuation of finance was due to technical considerations, not a lack of commitment. About $30 million in earlier allocated funds is to go to other projects.
Kuchma claims the proposal to burn the solid rocket fuel is ecologically unsafe. As former head of the largest rocket factory in Ukraine, his opinion here is an expert one.
By playing to his strengths in this way the US is making it easier for him to retire gracefully as the champion of Ukraine' interests abroad come the end of his second term next year. On July 15th he smoothed the way for stalled political reforms by withdrawing several proposed constitutional amendments that opposition leaders said were aimed at extending his term of office.
Ukraine looks to Russia for grain imports
Russia may supply up to one million tonnes of grain to Ukraine, Interfax News Agency quoted Russian Agriculture Minster, Alexei Gordeyev, as saying. An agreement to this effect was reached during negotiations with Ukrainian Prime Minister Victor Yanukovich, in Moscow, he said.
Gordeyev said that the first 200,000 tonnes would be sent in August. "The volume and dates of further supplies (up to one million tonnes) will depend on the situation in the Ukrainian grain market," he said. Gordeyev noted that the grain to be supplied to Ukraine would come from the state intervention fund. He did not give the price for the grain, saying that "the finance ministry is currently working on this issue."
Ukraine needs this supply of grain due to the low grain harvest there, which has led to a considerable increase in prices and has aggravated the situation on the food market. Ukraine's grain harvest this year is projected at 28.8m to 30.8m tonnes (against 38.8m tonnes in 2002). Experts estimate that Ukraine will have to import 2.8m tonnes of grain this agricultural year (June 2003-June 2004).
Ukraine mulls issuing extra US$112.5m in Eurobonds
Ukraine is considering an extra issue of 10-year Eurobonds if the international debt market is favourable, Finance Minister, Mykola Azarov, said, New Europe has reported.
Azarov made this announcement to a news conference in Kiev while commenting on a parliamentary decision to raise the sovereign foreign debt ceiling to US$8.71bn from US$8.59bn by the end of the year. He said there is no current need for any foreign borrowings. "But if there is a favourable situation, we will do so. And not for an annual interest rate of 7.65 per cent, but less," Azarov said. Azarov, who is also first deputy prime minister, said the government plans to put more securities on the foreign market next year to refinance high-interest short-term loans.
Ukraine's rating under Moody's review
Moody's Investor Service placed at the end of July, Ukraine's B2/B3 foreign currency country ceilings for bonds and bank deposits on review for possible upgrade. Also on review for upgrade are the ratings of bonds issued by the government of Ukraine.
Moody's said that the rating review is prompted by Ukraine's solid economic performance and especially by its strengthening external position. Because of the close connection between the Ukrainian and Russian economies, surging growth in the latter has stimulated a sustained upswing in the former. The agency noted that the overall fiscal stance remains tight while tax reforms are being introduced to combat Ukraine's extremely large shadow economy. Moody's rating review will focus on the sustainability of current trends.
Key areas for analysis concern political stability, further tax and fiscal reform, the pace of privatisation and strengthening of the financial sector.
Russia links oil shipments across Ukraine to Odessa-Brody pipeline
A senior Russian official has linked the long-term contract for the transport of Russian oil across Ukraine with Kiev's agreement on a controversial pipeline, according to a recent Interfax News Agency report. Russian Prime Minister Mikhail Kasyanov, told reporters in the Black Sea city of Yalta, that his government would support shipping Russian oil to Europe via Ukraine, after the Ukrainian government added the newly-built Odessa-Brody pipeline to the transport network available to Russian energy firms.
Kasyanov made the comments in the Crimean resort town after bilateral talks with his Ukrainian counterpart, Viktor Yanukovich.
Ukrainian officials in previous statements have maintained the Odessa-Brody pipeline will be devoted to oil from the Caspian region, and not made available to Russia.
In a clear shift of official Ukrainian attitude, Yanukovich told reporters he was seriously considering the Russian proposal and would maKe a decision based on "economic self-interest," Russian and Ukrainian diplomats for months have been negotiating a long-term contract for guaranteed shipment of some 80 million tonnes of Russian oil over the next 15 years via Ukraine.
The Ukrainian media had predicted the agreement would be signed by Kasyanov and Yanukovich in Yalta. Kiev badly needs the agreement so as to guarantee income from transit fees and cheap energy. Moscow, for its part, wants maximum reserved access to the Ukrainian pipeline network, especially after Caspian oil becomes available to world markets in the next five years.
Ukraine completed the Odessa-Brody pipeline at a cost of some US$100m. The pipeline, as originally planned, was to have an annual capacity of some 12 million tonnes, primarily for Caspian oil delivered by tanker to a terminal near the port of Odessa, after which the oil would be sent to Europe via Poland.
The project however, has stalled for lack of Caspian oil deliveries, and because of low international interest in construction OF additional pipelines needed through Poland. Russia has proposed using the Odessa-Brody pipeline to export Russian oil, primarily from west Siberia and the Tima-Pechora region, via the Black Sea and the Mediterranean.
Shorter distances and lower sulphur content in Russian oil would increase the Odessa-Brody line's capacity to a maximum of 40 million tonnes a year, proponents of the plan argue.
Ukrainian nationalists and the US government have both criticised the idea of reversing the direction of flow of the Odessa-Brody pipeline, as it would increase Ukrainian dependence on Russian energy.
Brody-Plotsk deal brings Ukraine, Poland together
Ukraine and Poland have signed a memorandum to set up a joint Ukrainian-Polish company to implement the Brody-Plotsk oil pipeline project. The document was signed in Donetsk on July 31st by Uktransnafta CEO, Alexander Todiichuk, who has been specially authorised to deal with Eurasian Transport Corridor issues, and Stanislav Jakubovsky, CEO of the company for the operation of the Druzhba pipelines - PERN Przjazj, in the presence of Ukrainian Prime Minister Victor Yanukovich and Polish Prime Minister, Leszek Miller, Interfax News Agency has reported.
The memorandum sets down the plans of Ukrtransnafta and PERN Przyjazn to set up a joint venture to build this pipeline. The project to extend the Odessa-Brody pipeline to Plotsk has received political support from the Ukrainian and Polish governments, and from the European Commission. Commercial support, in the form of a business plan confirming sales markets for oil that will be transported via the pipeline to Europe, has also been given.
World Bank considers financing coal sector reform
A group of specialists from the World Bank is preparing an analysis of the coal industry in Ukraine, with the aim of establishing the possibility and need to finance the industry's reform, Luca Barbone, World Bank director for Ukraine, Belarus and Moldova, told a press conference in Kiev, New Europe has reported.
He noted that in principle, the bank's aid strategy for Ukraine includes support for a new project to restructure the coal industry, but to implement this it is necessary to agree with all potential participants.
Interfax News Agency quoted Barbone as saying the analytical work would take several months. The World Bank and the then Ukrainian Prime Minister, Victor Yuschenko, developed a US$100m credit programme to ease the social and ecological consequences of restructuring in the coal industry. However, after a government reshuffle, his replacement, Anatoly Kinakh, did not with to continue negotiating on this project.
At the start of 2002 the World Bank criticised the policy of the Ukrainian government in the coal industry, which was aimed at keeping unprofitable mines afloat, instead of restructuring the industry.
World Bank crediting for Ukraine under a previous project to restructure the coal industry began in 1996. The total credit amounted to US$300m. Ukraine received the last US$70m of this in October 2000.
The Ukrainian Fuel and Energy Ministry began to restructure the coal industry in 2003 by reorganising state holding companies into state companies. After the completion of this restructuring it is planned to incorporate the coal companies and privatise them, which the ministry plans to do by carrying out additional share issues. It is planned that instead of 18 state holding companies, seven coal production companies and over 200 companies that are part of these, 21 joint stock companies will be set up in the coal industry.
Japanese companies consider Ukrainian investments
Some companies in Japan are now studying the possibilities of investing in the Ukrainian economy and say a favourable investment climate is the most important factor for them, New Europe has reported. Secretary General of the Parliamentary Association of Japanese-Ukrainian Friendship, Hakuo Yanagisawa, made this announcement at a meeting with Ukrainian President, Leonid Kuchma.
Interfax News Agency quoted Kuchma's press service as saying recently, that during the meeting, Kuchma stressed that Ukraine attached great significance to political and economic relations with Japan. "I am glad that our dialogue is growing," he said. The president also stressed that during the past three years, Ukraine has been enjoying stable economic growth and is interested in Japanese investments in its economy.
Yanagisawa spoke of the high level of cooperation between the two countries. "Ukraine is a very important country for Japan from the viewpoint of economic and political relations," he said. He also pointed to the high speed of Ukraine's economic development and favoured active efforts to promote bilateral investment in all fields.
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