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: 276 - (01/01/04)
The Odessa file
A massively important issue dominates Ukraine's relations with the wider world at the moment, that of the Odessa-Brody pipeline, running from the Black Sea to the Polish border, where an extension onwards to Western Europe is the logical route. But that is only if the oil flows from south to north.
An alternative being proposed by the Russians is for oil to flow in a reverse direction from north to south, taking crude from Russia's Far North and even from Siberia to Odessa and the Bosporus and beyond. The ultimate destination would be Western Europe, but the reversal of flow would exclude a logical route for oil to flow from the Caspian Sea to Western markets. That oil would be from the Azeri and ultimately the Kazak areas of the sea.
An enormous amount is at stake here. Nothing less than whether Russia's dominance of the energy space of the former Soviet world is to be partially at any rate sustained. Actually also at stake is Ukraine's place in the world. Is to remain always in the shadow of Russia or is it to become truly independent?
The same is true of Kazakstan. It desperately needs an alternative route to world markets for its oil than Russia. Azerbaijan is in a different position with the option of the Baku-Supsa-Ceyhan pipeline route, linking it to Georgia and Turkey. This is almost certain to go ahead. Oil is already flowing via Georgia to tankers in the Black Sea.
Azerbaijan is amongst the players in a central role to decide the geopolitics and economics of the Post-Soviet space. Hence a furious amount of diplomacy recently, particularly with Kiev.
The US Vice-President, Dick Cheney, was the host at a meeting with the Ukrainian Prime Minister, Victor Yanukovich, a more welcome figure than his unpopular president, Leonid Kuchma, in Washington in October. Cheney was concerned to see if the Odessa-Brody pipeline would be available to take oil from the Black Sea to Poland and beyond, instead of being used in the reverse direction, as Tyumen Oil (TNK) plans to do, to transport oil from Russia to Turkey. TNK is in partnership with BP, which bought 50% of its stock recently.
No Western major has yet made a definite proposal for the pipeline, says the premier. The issue is still open, he said. Azeri and Kazak oil from the Caspian could one day be using the pipeline.
Indeed the US and others lobbied hard to keep the option open. A decision was postponed by three months and will be early made in the New Year. The Russians are very annoyed about this and are doing a lot of lobbying of their own to get a decision in Russia's favour.
Other topics on the table
The Ukrainians are pleasing the US by having dispatched a brigade of 1,650 troops to relieve American forces in Iraq. They did this in June when few NATO allies were as willing. This is not being forgotten.
The admission of Ukraine to the World Trade Organisation was also on the agenda of the Cheney-Yanukovich meeting. The US backs the proposal.
Yanukovich was given a sympathetic hearing too when he argued that it was an anachronism for Ukraine's trade with the US to still be restricted by the Jackson-Vanik Amendment, a relic of the Cold War. In addition the US is looking at ways to provide incentives for investing in Ukraine, as by OPIC funds for projects there and to facilitate trade by extending US Exim credits.
Russian influence grows
The influence of Russia, Ukraine's main supplier of energy and much else, remains enormous in Kiev, whatever the outcome of the Odessa file. It is exercised in a magisterial manner by no less a potentate than Viktor Chernomyrdin, former premier of Russia and head of Gazprom, who, unlike other former Yeltsin intimates, has kept up a rapport with Putin. He, rather than the jailed Khodorkovsky, is in all probability Russia's wealthiest man, if it is not Mayor Luzkhov of Moscow.
He insists that Ukraine will have to pay world prices for its gas and oil from Russia, even after the agreement to share a common economic space, made at Yalta in October. The Eurasian Economic Union comprises Russia, Belarus, Moldova, Kazakstan, Kyrgyzstan and Tajikistan, all with substantial Russian populations or troops on their soil.
This removes a carrot the Russians could have used to get the decision over Odessa in their favour by an inducement of lower prices. They prefer to employ the big stick. Thay cannot do it by withholding gas supplies, since the Ukrainians could retaliate by diverting gas destined for Western consumption to their own uses.
They are preferring a more direct approach to cow the Ukrainians once again. On the very same day that Presidents Putin, Kuchma and Nazerbayev of Kazakstan were signing a new accord in Yalta, Russian naval forces, with no warning, began building a causeway into the Kerch strait of the northern Black Sea in an attempt to seize control of an island and the adjacent shipping channel from Ukraine. The work was suspended as soon as Kiev rushed forces to the area. But Moscow has achieved its aim. Kuchma has had to agree to talks to surrender control of the strategic waterway and the adjoining Sea of Azov. The Sea of Azov may contain large reserves of oil. Big Brother is back
Kiev and Warsaw in fruitful Odessa-Brody pipeline talks
Ukraine and Poland will continue to discuss extending the Odessa-Brody pipeline to Plotsk shortly despite media reports that Poland intends to stop negotiating unless the pipeline is filled with Caspian oil by December 6th, Interfax News Agency reported.
"We continue to have productive talks with Poland on drafting an agreement on the use of the Odessa-Brody pipeline and extending it to Plotsk. The talks are being conducted on an expert level," Alexander Chaly, Ukrainian deputy foreign minister, said.
Chaly went on to say that backing for the pipeline from the European Union and the governments of countries aspiring to join the EU was as "strong as ever."
"I think political support for the project is as strong as ever. Concrete negotiations are being conducted on signing the relevant contracts with leading European and American firms," Chaly said.
Ukraine and Poland were originally due to sign a deal to extend the pipeline to Plotsk on October 30th-31st. The event was put back, though, tentatively to November 13th or December 6th.
Ukrainian and German businessmen meeting for a roundtable in Kiev on November 7-8th urged the heads of states concerned to give their support to the Odessa-Brody pipeline.
"Ukrainian and German business people believe the Odessa-Brody project is acquiring strategic importance for Europe in the context of EU enlargement," the Ukrainian Union of Industrialists and Entrepreneurs said after the roundtable meeting.
Ukraine, Poland and the EU in May 2003 signed a declaration of their support for transiting Caspian oil along the pipeline and extending it to Plotsk. The oil would be piped from Plotsk to Gdansk.
The United States, Kazakstan and Azerbaijan also back these plans, but Russia would rather see the pipeline used in reverse to carry its own crude. The Odessa-Brody pipeline, which is 674km long and 1,020mm in diameter, and the Yuzhny or Southern oil terminal were completed in May 2002.
The first stage of the Odessa-Brody transport system has capacity for 9.0-14.5m tonnes of oil per year, and 200,000 cubic metres of tank farms. It is thought through capacity will be augmented to 40-45m tonnes of oil annually and storage capacity to 600,000 cubic metres. The terminal would be capable of accepting tankers with deadweight of up to 100,000 tonnes.
Ukraine is torn between using the pipeline to ship Caspian oil to Europe or to ship Russian Urals crude to the Black Sea.
The latter option would involve using the pipeline in reverse mode. The Ukrainian government aims to reach a decision in January.
FOREIGN ECONOMIC RELATIONS
Ukrainian, Turkish premiers discuss trade, rebuilding Iraq
Ukrainian Prime Minister, Viktor Yanukovych, made an official visit to Turkey. The Ukrainian and Turkish prime ministers highly praised cooperation between the two countries and outlined ways to boost it during their meeting. They paid much attention to trade, in particular the prospects of signing a free-trade agreement between Ukraine and Turkey. Maksym Sukhenko of UT1, Kiev gave the details:
Relations between Ukraine and Turkey have to become the model ones as early as 2005. Trade turnover last year was US$1.3bn and it is planned to double that next year.
Yanukovych said: "I am sure that the structure of the Ukrainian and Turkish economies complements each other. We agreed that if there is an opportunity to unite and do more then we will surely do that."
The Turkish Prime Minister, Recep Erdogan replied: "I think that it is a message to the world community that Viktor Yanukovych's visit is taking place after the acts of terrorism in Istanbul in such a quiet and effective mode. We will sign agreements during my visit to Kiev, after they are approved by Turkish government."
Traditional areas of cooperation remain the most promising ones - projects in the energy sector, construction, metallurgy and now joint investment into the reconstruction of Iraq. Cooperation in the area of military technology is a separate issue. Representatives of the biggest Ukrainian aviation companies came to Turkey together with Yanukovych. During a reciprocal visit to Kiev, Recep Erdogan is to bring a reply from his government regarding the joint use of the Black Sea basin together with the Baltic states.
Ukraine to allocate funds for warship construction in 2004
Ukraine will allocate funds from the state budget to complete the Ukrayina missile cruiser and the Ternopil anti-submarine boat, Interfax-Ukraine News Agency, has reported.
The 2004 draft budget which was approved by parliament on 27th November, allocated US$20m for this purposes.
Interfax-Ukraine learnt from the Kiev-based Leninska Kuznya shipyard that the Ternopil was launched in March 2002. Given proper financing, the warship could be commissioned in the second half of 2004. The Ternopil is designed to combat high speed submarines and guard the coast line. It is equipped with anti-submarine and artillery weapons, air defence systems and the Frehat MA radar.
The chief designer of the Mykolayiv-based 61 Komunar shipyard, Valeriy Ahafonov, told Interfax-Ukraine that the Ukrayina missile cruiser is 96 per cent ready. He said that the funds allocated from the 2004 state budget would make it possible "to take the cruiser out to sea unarmed."
Commissioning the cruiser will cost about 150m hryvnyas.
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