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UKRAINE


 

 
Key Economic Data 
 
  2002 2001 2000 Ranking(2002)
GDP
Millions of US $ 41,380 37,600 31,300 54
         
GNI per capita
 US $ 770 720 690 144
Ranking is given out of 208 nations - (data from the World Bank)

Books on Ukraine

REPUBLICAN REFERENCE

Area (sq.km) 
603,700 

Population 
48,055,439

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: 281 - (27/05/04)

The Ukrainians are due to have presidential elections at the end of October. The incumbent, Leonid Kuchma, is standing down. The constitutional court has waived the objection that he cannot have a third term. But he is manifestly the most unpopular figure in the country. He patently rigged his re-election in October 1999. To attempt to do so again would scarcely be convincing.
The regime which he leads is in a quandary. Their candidate is the premier, Viktor Yanukovich, who is uninspiring, lacking any charisma. There is one figure who does have a popular appeal, easily heading the polls, Viktor Yushchenko, a former premier. He is a former central bank chief, with a strong pro-Western orientation. He would clearly win in a fair election.
The corrupt cabal that rules the country do not want him at any price. They fear that he would expose them for the crooks that they are.

Lazarenko on trial in the US
The trial of former premier Pavlo Lazarenko in the US bears out this interpretation of the Ukrainian elite. Although his salary as premier was a mere US$5,000 (on a very low exchange rate), he salted away some US$114m in US banks alone, while his country was receiving billions in US aid.
There is something incredibly cheap about the bulk of the post-communist elite. Given responsibility for the welfare of their people, all they can think about is self-enrichment. Yushchenko seems a genuine exception.
The indictment solves another mystery: How United Energy Systems (UES), a little known Dnipropetrovsk firm, in 1996 claimed revenues of US$11bn, amazingly a fifth of Ukraine's then shrinking US$50bn GDP. Thanks to Mr Lazarenko, now in the capital Kiev, and his ties with Russia's giant Gazprom, UES got a lucrative monopoly to sell natural gas in Ukraine. According to the indictment, companies controlled by UES transferred at least US$217m into Mr Lazarenko's accounts in 1996-97; Itera, an offshoot of Gazprom, allegedly gave him US$25m.
The gas monopoly was one Lazarenko-era policy that upended US funded efforts to revive Ukraine's economy. As democracy splutters in the region, policy-makers can learn from past errors. Many Ukrainians are shocked by the revelations. But all this glides over a niggling question: Exactly why is Mr Lazarenko on trial in America for, as the indictment states, "depriving the people of Ukraine of his honest and faithful services?" Ukrainian prosecutors want him extradited. This might reasonably strike one as judicial overreach.
The government claims jurisdiction since the alleged crimes were committed here. It clearly also wants to send a strong message about corruption in the ex-USSR and money laundering into the US. In short, beware. Four years ago, the Bank of New York was embroiled in a US$10bn laundering probe. In May, a US court indicted Michael Rakita on charges that the Russian émigré moved US$680m through US banks.

Local electoral fraud
In the last week of April a mayoral election was held in the western city of Mukachevo, only 25 miles from the border with Poland, now the border also of the EU. But its political life could not be further from that of the West. When an opposition candidate appeared to be heading for victory over the Kuchma stooge, police sealed off the electoral offices and blocked journalists and observers from watching, as votes were tallied. 
The stooge was declared the winner. Thugs in leather jackets beat up the observers and opposition figures who tried to enter the electoral building. 
The Council of Europe called the election an 'unfortunate dress-rehearsal' for October's presidential poll. 
Another leading opposition figure, the only woman in politics, Yumila Timoshenko, one of Kuchma's harshest critics, said "They have one aim; to maintain power at any cost." She added; "The events in Mukachevo are good and bad. They are bad because they show the state of democracy in Ukraine. The good thing is that they have showed their cards - everything they will do in the coming elections."
At stake is whether Ukraine moves, like Poland and the Baltic states, towards the West or sinks back into post-Soviet gloom and doom. Time will shortly tell.

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ENERGY

Druzhba-Adria integration


Ukrainian oil pipeline concern OAO Ukrtransnafta is ready to start implementing a project to integrate the Druzhba and Adria pipelines, the company's press service said recently. Under an agreement signed by the governments of Ukraine, Russia, Belarus, Slovakia, Hungary and Croatia on December 16th, 2002, in Zagreb, at the first stage of the project Ukrtransnafta should pump an additional 5.0m tonnes of oil per year, and later 10 and 15m tonnes. "To transport an additional 5m tonnes the company does not need extra investment, which is indicated by the utilisation of the Ukrainian section of the Druzhba pipeline in recent years," the press service said, Interfax News Agency reported.

Naftohaz Ukrayiny to up exports

Ukrainian oil and gas concern Naftohaz Ukrayiny (NAK) plans to increase the annual volume of natural gas exports to 10bn cubic metres in the next two years, NAK Deputy Chairman, Ihor Voronin, said recently in Kiev, New Europe reported.
Naftohaz Ukrayiny plans to export 6bn cubic metres of gas in 2004, which is the quota for the year in accordance with Ukrainian-Russian intergovernmental agreements. The increase in exports will be agreed with Russia's Gazprom and talks are already being held about the rise. Voronin did not say what countries the additional exports would go to, but said all gas will be exported to Europe. Ukraine produced 19.45bn cubic metres of natural gas in 2003, up 3.5%. Transit gas via Ukraine increased 6.5% to 129.3bn cubic metres.

Ukrnafta oil production up

AO Ukrnafta, a subsidiary of Naftohaz Ukrainy, increased oil production 8.0% to 746,600 tonnes in the first quarter 2004, Interfax News Agency reported recently. 
The company also produced 844m cubic metres of gas in the reporting period, up 7.0% year-on-year. Ukrnafta increased production of stable natural gasoline 17.5% year-on-year to 51,404 tonnes in the first three months of the year. Production of liquefied gas in the first quarter remained stable at 39,425 tonnes. Ukrnafta plans to increase oil production 3.61% to 3m tonnes in 2004, with gas production up 2.3% to 3.35bn cubic metres. The company increased oil production 3% to 2.89m tonnes in 2003 and natural gas - 0.6% to 3.274bn cubic metres.

Naftohaz Ukrainy, POGC team up

Ukraine's Naftohaz Ukrainy and Polish Oil and Gas Co (POGC) recently signed a memorandum in Krakow to build the Ustilug-Hrubieszow pipeline to supply gas to eastern regions in Poland, New Europe reported recently. 
The Naftohaz Ukrainy press service said that the company's Deputy CEO, Igor Voronin, and POGC Vice President, Franciszek Krok, signed the memorandum. The Ukrainian delegation in Krakow also discussed expanding mutual cooperation. In particular, the sides discussed cooperation to explore and produce gas on Polish territory and to expand the capacity of the Polish gas transportation system. 
The parties also addressed the increasingly complicated situation in Iraq, and the need to modify previous deadlines for initial work to reconstruct Iraqi infrastructure, as part of joint initiatives launched by the two companies. These efforts will be extended, to include other countries of the Persian Gulf region, such as Saudi Arabia and Qatar. POGC and Naftohaz Ukrainy signed an agreement at the start of April dealing with cooperation for the construction of underground gas reservoirs in Poland and in Ukraine, and also participation in restoring the Iraqi gas system. 
During these talks the sides discussed a project to supply gas to eastern Poland by building the Ustilug-Hrubieszow pipeline and supplying about 10-20bn cubic metres of gas through this pipe per year. The sides also discussed the reconstruction of the Komarno and Drozdovichi compressor stations in Ukraine to increase Ukraine's capacity to supply gas to Poland. The two companies confirmed their interest in building a pipeline from the Polish-Ukrainian border to the Polish-Czech border to increase gas supplies to Southern regions in the country.

Naftohaz gains ABN Amro loan

Ukrainian national oil and gas company Naftohaz Ukrainy has arranged a US$200m credit with ABM Amro Bank to intensify production of natural gas and pay for gas imported from Turkmenistan, among other projects, the company said recently, New Europe reported. 
The funds will be allocated in accordance with Naftohaz's approved 2004 investment programme. Naftohaz planned by the end of May to complete an audit and by the middle of June to obtain a credit rating from a leading agency prior to issuing US$700m Eurobonds by the end of June. ABN Amro and Switzerland's UBS will lead-manage the bond issue. Some of the proceeds will be spent on raising oil and gas production in Ukraine, primarily at offshore sites in the Black Sea and Sea of Azov, and some will be used to expand and modernise the gas transportation system. Money raised will also be used to develop oil and gas fields in Libya and to create a strategic oil reserve in Ukraine. Ukraine imported 8.9bn cubic metres of natural gas from Turkmenistan for sale on the domestic market in 2003. Naftohaz paid all its bills for Turkmen gas in 2003 and observed the schedule for settling debts from previous years, in particular 2001. The debt has topped US$250m at times, but was reduced by US$226m by the middle of December last year.

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FOREIGN ECONOMIC RELATIONS

Ukraine coordinates WTO entry terms with Lithuania

Ukraine recently signed the bilateral protocol with Lithuania on access to the markets of goods and services within the framework of its joining the World Trade Organisation (WTO), New Europe reported recently.
Having completed the talks with Lithuania, Ukraine gave over to the WTO secretariat the 24th bilateral protocol, the press service of the economics and european integration ministry reported.
The protocol was signed by Volodymyr Belashov, Ukraine's permanent representative to the UN and other international organisations' offices in Geneva.
Ukraine is continuing bilateral talks with WTO work group member-states, particularly, the US, Australia, Argentina, China, Japan, Turkey, Ecuador, Columbia and other countries.
The bilateral protocol on access to the markets of goods and services with Lithuania was signed within the framework of the 12th official meeting of the ad hoc team for examination of Ukraine's application for WTO membership, which took place in Geneva in late April.

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FREE TRADE ZONE

Ukraine wants free trade zone

Ukraine believes the first stage of implementing the Common Economic Space agreement should be the setting up of a free trade zone, the country's finance minister said. "It is time to take practical steps to create a common market of the four countries," Ukrainian First Vice Premier Mykola Azarov said during a meeting with Russian Vice Premier Alexander Zhukov. Ukraine, Russia, Kazakstan and Belarus are taking part in the Common Economic Space project. Azarov said Ukrainian President Kuchma wanted to see creation of the free trade zone during the first stage (of implementing the agreement), plus the cancellation of indirect taxes, restrictions and free trade withdrawals. Azarov said the CES member countries should prepare well for the forthcoming Yalta summit of the "foursome", New Europe reported recently.

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MINERALS & METALS

Ukraine incorporates Krivorozhstal steel mill

Ukraine moved a step closer to privatising Krivorozhstal, the country's biggest steel mill, by incorporating the enterprise, initially as a wholly state-owned joint stock company, Interfax News Agency reported recently.
The Ukrainian Industrial Policy Ministry issued an instruction to incorporate the steel mill, which has charter capital of 3.9bn hryvnias, on April 7th, said Anatoly Fedyayev, a deputy industrial policy minister.
The State Property Fund has hired the Kiev-based Otsenka to value Krivorozhstal's long-term assets.
The Property Fund and the industrial policy ministry have been preparing the mill to be privatised by corporatising it, for example, and the parliament is drafting a bill to sell the company off.
The parliament back in November 2003 entered Krivorozhstal on a list of enterprises that cannot be privatised, but the Ukrainian president vetoed this law.
Krivorozhstal controls up to a fifth of the Ukrainian steel market. It is capable of turning out more than 6.0m tonnes of rolled steel products, about 7.0m tonnes of crude steel and 7.8m tonnes of pig iron a year.

Severstal, Arcelor to make joint Krivorozhstal bid

Russia's Severstal and European steel giant Arcelor will make a joint bid at a tender for Krivorozhstal, Ukraine's biggest steel mill, Irakly Mtibelishvili, managing director for Russia and the Commonwealth of Independent States at Citigroup Global Markets, said recently, Interfax News Agency reported.
Mtibelishvili said Citigroup planned to act on Severstal's behalf at the tender and had notified Mikhail Chechetov, chairman of the Ukrainian State Property Fund, of this.
Alexei Mordashov, director general of the Severstal Group and chairman of the board of directors at Severstal, said: "Active consultations are in progress with our Ukrainian partners on joint participation in the project."
Mordashov said Severstal North America, the fifth biggest steel producer in the United States, also planned to join the bidding consortium. "Our American subsidiary will be involved because we would like to supply Krivorozhstal's steel to the United States to be processed by Severstal North America. We think we could eventually raise output at the Ukrainian enterprise to 10m tonnes of steel annually," Mordashov said. "I'm sure the tender conditions will be open and fair," he added. Vladimir Tsukrov, head of Arcelor's Moscow office, said the European steel giant intended to make a joint bid in the tender with Severstal. "Our companies have a good strategic partnership which began with the SeverGal project to produce galvanised sheet, and we would like tot take this further," Tsukrov said. "The move is consistent with the company's growth strategy in Eastern Europe," he said.
A Severstal source said the alliance was prepared to invest up to US$1bn in the acquisition and development of Krivorozhstal. Mikhail Chechetov said the property fund might call a tender for 90% of the shares in Krivorozhstal as early as May. He said the starting price could be between 3-4bn hryvnias. Krivorozhstal controls up to a fifth of the Ukrainian steel market. It is capable of turning out more than 6m tonnes of rolled steel products, about 7m tonnes of crude steel and 7.8m tonnes of pig iron a year.
Its charter capital is 3.86bn hryvnias. Severstal, one of Russia's top three steel producers, had revenues of more than 81.7bn rubles in 2003. Arcelor had consolidated revenues of €26bn in 2003.

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NUCLEAR ENERGY

Ukraine plans another nuclear reactor by 2012

Ukraine is planning to complete in 2010-2012 the third power unit at the Khmelnytskyy nuclear power plant with an increased nuclear safety level, Ukrainian Fuel and Energy Minister, Serhiy Tulub, said, Interfax-Ukraine News Agency reported.
"This will be a new generation reactor with a self-protection system and increased nuclear safety. Its capacity will be no less that 1,000 MW. It will have several passive safety systems and a possibility to adjust its output level," the ministry's web site said, quoting Tulub.
The Enerhoatom company has started a programme to continue using nuclear reactors after their original service life, which will free funds to develop the nuclear energy sector, the minister said.
"Ukraine's nuclear sector in the third millennium will develop and become a powerful innovative impetus for all companies and services of the nuclear energy industry, and support Ukraine's security. We have learnt the Chernobyl lesson, which says: work safely, secure and openly for society's sake, even in an extremely difficult situation."
Currently, 13 light-water reactors are working at Ukraine's four nuclear power plants. Their cumulative capacity totals 11,875 MW. Enerhoatom is planning to complete and launch two 1,000 MW reactors at the Khmelnytskyy and Rivne nuclear power plants [by the end of this year].

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TELECOMMUNICATIONS

Kyivstar GSM boosts net profit

Kyivstar GSM, a mobile phone services operator in Ukraine, posted net profit to US GAAP of US$100.76m in 2003, up 59%, the company reported on its web site recently. 
Pre-tax profit grew 61% to US$153.31m and earnings before interest, taxes, depreciation and amortisation (EBITDA) climbed 55.7% to US$223.67m. Sales earnings increased 50% to US$374m. Average monthly revenue per user (ARPU) was US$14 in the fourth quarter of 2003 compared with US$12 in the fourth quarter of 2002. Kyivstar GSM upped its subscriber base by more than 60% to over three million. Telenor of Norway owns 56.5% of the company and Storm, which is controlled by Russia's Alfa Group, owns the other 43.5%.

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TOURISM

Tourism grows in 2003

The Deputy Chairman of Kiev city state administration, Mykhaylo Pozhyvanov, said that 193,200 foreign tourists visited Ukraine in 2003, which is 26% higher than in 2002, New Europe reported recently. 
According to statistics, people from 138 countries visited Ukraine in 2003 (up from 128 countries in 2002). More than 305,000 citizens of Kiev are believed to have travelled to Ukrainian regions. Kiev-based travel agencies served 134,100 tourists, with museum excursions more than 2.5m. The tourist industry paid 49.1m hryvnias in taxes to Kiev's city budget in 2003. Tourist businesses in Kiev themselves generated 28.7m in profits for 2003 (20.3m hryvnias in 2002). Profits from the foreign currency exchange in 2003 amounted to US$12.8m, which is 34% higher than in 2002.

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