Books on Ukraine
Update No: 286 - (02/11/04)
Election heads for run-off
Ukraine is facing weeks of turmoil and street violence after officials announced
on November 1st that no candidate had gained the 50 per cent necessary to win
the presidency in the first round of elections.
The presidential election is to be decided by a run-off this month after the
first round on October 31st ended in a near draw between the prime minister,
Viktor Yanukovich, who advocates closer ties with Russia, and his West-leaning
challenger, Viktor Yushchenko.
With 94 per cent of the votes tallied on November 1st, the premier and candidate
of the establishment, Mr Yanukovich, led his liberal rival, Mr Yushchenko, by
less than a single percentage point - 40.11 percent to 39.16. Serhiy Kivalov,
Ukraine's top election official, presented like results to parliament on
November 2nd.The run-off is set for November 21st.
The election, the fourth since independence from Soviet rule, will determine
whether Ukraine deepens ties with its former master in Moscow or pursues liberal
reforms that many of its neighbours are developing in the European Union. It is
in effect a choice between East and West.
European monitors sharply criticised the Ukrainian authorities for a range of
electoral abuses that included drawing up improper voting lists and denying the
opposition access to state-run television. After a bitter campaign of political
mud-slinging and recrimination, the monitors said the first round had failed to
meet international standards. Bruce George, head of a 600-strong Organisation
for Security and Cooperation in Europe (OSCE) observer mission said: "It
was a step backwards from 2002 (parliamentary) elections." The OSCE and the
European Union said the poll had fallen short of accepted standards. They
blasted media bias and incomplete lists that led to voters being turned away en
masse from polling stations.
Socialist Oleksander Moroz, third-place finisher whose five per cent support
will be vital in the run-off, also alleged the vote was tainted by bribes and
pressure on election officials.
"It is not clear that Yanukovich won or Yushchenko lost. What is clear is
that society lost," he said. "We do not recognize the count as
announced by the Central Election Commission."
Election Commission head Serhiy Kivalov failed to appear and instead sent his
deputy, who promised to remedy shortcomings.
The European Union also made its criticism, citing unbalanced media coverage and
incomplete voter lists. U.S. State Department spokesman, Adam Ereli, said that
Washington would see how fair the runoff is before deciding whether to follow
through on its threat to withdraw its support for Ukraine's ambitions -- such as
of eventually joining the EU.
Opposition in parliament erupts over poll
Ukraine's opposition on November 2nd accused Prime Minister Viktor Yanukovich
and his allies of wholesale cheating in the first round of the elections,
foreshadowing a bitter run-off battle later this month.
In a rowdy session of parliament, Yanukovich's allies raucously dismissed the
criticism declaring they were confident their candidate would defeat liberal
challenger Viktor Yushchenko in the Nov 21 face-off.
Yushchenko's team unleashed a brutal assault on Yanukovich's camp and election
officials, saying attempts to rig the first round ballot had fooled no one. They
claimed parallel counts showed their candidate the winner.
"Cheating didn't work. The Ukrainian people proved too wise," Yulia
Tymoshenko, former deputy prime minister and a stalwart lieutenant of Yushchenko,
told the chamber.
Gesturing to the prime minister's allies in parliament, all sporting blue and
white campaign scarves, Tymoshenko pledged "a civil mobilization, a
composed battle against the bandits."
"Yanukovich will never be president of Ukraine because Yushchenko became
president in the first round!"
Premier pleased with result
Yanukovich's backers, many from industrial Russian-speaking eastern Ukraine,
responded raucously. "White and blue colours are the colours of hope and
stability," said Valery Konovalyuk. "Victory will be ours."
Yanukovich, who campaigned on Ukraine's strong economic growth, told local
journalists the outcome proved "citizens are once again beginning to trust
in government. Voters support the new strategy and social programme which we are
The outcome could be a defining moment in the post-Soviet development of the
country of 47 million that lies at the hub of Europe and has borders with seven
countries, including Russia and three new European Union members.
"Yushchenko is not only the favourite, he is now a leader for the entire
nation," said Oleksander Zinchenko, his campaign manager. "He won
the first round, but every possible instrument was used to deny him. It's just
stupid. He'll win the run-off."
The premier dismissed any suggestion of cheating as "an instrument of
political battles" which Ukrainians would ignore.
The protagonists have different visions for Ukraine.
Each candidate has a distinct power base. Yushchenko is popular in nationalist
western Ukraine and in Kiev, while Yanukovich is backed in the Russian-speaking
industrial east and has won the endorsement of Kremlin leader Vladimir Putin.
Yanukovich, darling of elderly and low-income voters after raising pensions and
public sector wages, has put pressure on selected businessmen and set prices for
staples and fuel.
He wants closer integration with Moscow and favours recognition of the Russian
language alongside Ukrainian and a law to allow dual citizenship for 8 million
ethnic Russians -- notions seen by liberals as a threat to statehood.
Ukraine's presidential election campaign has been conducted in a rather
different way from the US one, culminating in a vote two days after the first
round in Ukraine, even if dirty tricks are not exactly absent in American
presidential politics. There were no debates, Viktor Yushchenko, the main
opposition candidate for president (who is leading in the polls), being given
scarcely a mention on state-controlled TV. In August a lorry rammed into the car
he was travelling in. In early October, he disappeared from the campaign trail.
He re-surfaced in a Vienna hospital recovering from what at first was thought to
be food poisoning.
But it is now widely alleged in Ukraine that Yushchenko's food may have been
laced with the deadly drug ricin, once a favourite of KGB assassins, who used it
in the murder of Georgi Markov, a Bulgarian dissident in London in 1978. In most
countries, such charges would seem like paranoia. Not in Ukraine, where the
current prime minister, and Mr Yushchenko's leading rival for president, Viktor
Yanukovich, has been twice convicted for violent crimes, while incumbent
president, Leonid Kuchma, is widely believed to be guilty of having had
investigative journalists probing into the dirty secrets of the regime murdered.
Yushchenko resumed campaigning, but his face was partially paralysed when he
spoke to a huge rally of supporters in Kiev. Photographs taken before and after
show a man aged ten years overnight. His opponents cavalierly dismissed the
affair, with the deputy head of President Leonid Kuchma's administration
suggesting that Yushchenko should hire a food taster and other critics implying
an alcoholic binge took place. The matter is now the subject of a criminal
investigation, but of course by the regime itself, so expect no arrests.
Russia aiding Yanukovich's bid
Kremlin endorsement of favoured Ukrainian candidates and "parties of
power" has been a routine feature of Ukraine's elections since 1994. In
this presidential elections, however, the situation differs from those
precedents in at least two key respects. First, the Kremlin and the incumbent
Ukrainian president have prepared a scenario envisaging the handover of power to
a designated successor, so as to thwart the free and fair election of a
Ukrainian president - in this case Yushchenko. Second, Moscow and its supporters
in Ukraine are capitalizing on frustration with the continuing failure by the EU,
WTO, and NATO to signal clearly that their doors are open to Ukraine. The lack
of such signals has weakened the Western-oriented elements in the governing
establishment and now reduces the chances of Ukraine's pro-Western opposition in
the electoral campaign.
Russian authorities at various levels are aiding Yanukovich's presidential bid.
Indeed, Russia's president is rallying behind Yanukovich, who has open backing
from Russia's ambassador in Kiev, former prime minister Viktor Chernomyrdin, who
is one of the world's richest men. On 8 October in Moscow, the authorities
helped sponsor a congress of ethnic Ukrainian associations in Russia, which
called on Ukrainian citizens residing in Russia to vote for Yanukovich. However,
some influential ethnic Ukrainian societies in Russia boycotted the congress and
afterward issued a statement distancing themselves from it. On 9 October, Yulia
Tymoshenko, one of the main Ukrainian opposition leaders and supporter of
Yushchenko, rebutted corruption accusations levelled against her publicly by
Russia's Main Military Prosecutor's Office. That Office had recently announced
that a Moscow court has issued an arrest warrant against Tymoshenko and asked
Interpol to place her on the international wanted list for declining to answer a
subpoena from Moscow. Bribery charges against her, dating from the 1990s, were
never proven and were part of a corruption scandal in Russia's Defence Ministry
at that time. Tymoshenko told an October 9 electoral rally that the sudden
resurrection of those charges was a purely political move, arranged in Moscow by
Kuchma's presidential administration chief Viktor Medvedchuk to damage the
Ukrainian opposition's campaign.
Indeed, the officer she is accused of bribing was acquitted in a trial in Moscow
last year of the very charges that prosecutors now want to question her about.
Coming on the heels of Yushchenko's alleged poisoning, the timing of the move
against Tymoshenko appears to be anything but coincidental. Indeed, the case was
reopened while Yushchenko was hospitalised - thus threatening to decapitate the
opposition with barely a month to go before the presidential election on October
Profile of the clans
According to the most recent opinion polls, however, Ukraine's opposition
has a real chance of winning. The strong-arm tactics would seem to suggest that
the authorities are running scared. Against all odds, Ukraine's opposition
groups have helped forge a civil society and healthy political parties far
beyond anything seen in President Vladimir Putin's Russia. Yanukovich represents
the Donetsk clan, one of several geographically defined oligarchic groups that
compete to dominate Ukrainian business and politics. He has little sway over
either the Kiev clan, led by Viktor Medvedchuk, Kuchma's chief of staff and a
political heavyweight with ambition of his own, or the Dnipropetrovsk clan of
Viktor Pinchuk, Kuchma's son-in-law. But both oligarchs prefer Yanukovich to
Yushchenko, who has vowed to "end corruption" and send
"bandits" to jail.
Yushchenko's promises resonate across Ukraine. Even though the oligarchs control
all but one of the main television stations, he remains popular. Under President
Kuchma, the economy has recently started to boom - thanks partly to Yushchenko's
brief, reformist premiership four years ago - but the oligarchs' grip has grown
tighter. In June, a consortium led by Pinchuk and Rinat Akhmetov, a Donetsk
magnate, bought a state-owned steelworks in an auction allegedly rigged to
specifically exclude foreign bidders offering two or three times as much. The
move was probably more than just another property grab; it also suggests an
effort to forge an inter-clan alliance for the post-Kuchma period. Such an
alliance would make Yushchenko's rule, if he wins, more difficult - and he knows
it. So he is cagey about plans to confront the oligarchs. "I don't exclude
investigations of the clans behind Medvedchuk or Yanukovich, but the rest of
business wants clear rules," he says. By leaving Pinchuk off this list,
Yushchenko may be hinting that he wants a truce with Ukraine's most powerful
magnate should he become president.
ZAZ may invest in Daewoo-FSO
Zaporizhia Car Works (ZAZ) and Kiev-based Ukravto are considering investing in
Poland's Daewoo-FSO auto assembly plant to prevent its bankruptcy, the chairman
of ZAZ's supervisory board and Ukrainian parliamentary deputy, Tariel Vasadze,
said, Interfax News Agency reported.
He said the two countries are actively working to deepen mutual relations.
"We have serious connections with these plants and are receiving components
from Poland to produce Daewoo Lanos cars. ZAZ is assembling the polish plant's
cars and we are not indifferent to the plant's condition. We don't want to see
it go bankrupt," Vasadze said. He said that total Ukrainian funds in
Daewoo-FSO's turnover make up some 80%, or US$20m, Vasadze did not confirm media
reports that ZAZ is prepared to buy assets in Daewoo-FSO, however this will
primarily depend on the subsequent development of production and commercial
relations between the two enterprises.
AVIATION & SPACE
EC, Ukraine to cooperate in project on GNSS creation
The European Commission intends to start negotiations on a cooperation agreement
with Ukraine on the development of a Civil Global Navigation Satellite system (GNSS),
read a press release of the Commission, New Europe reported recently.
According to the press release, on September 2nd the Commission sought Council
approval for its recommendation to start the talks.
"This proposal for a new international cooperation agreement clearly
underlines the success of GALILEO and demonstrates again the wide-spread
interest in the project," stated Loyola de Palacio, Vice President of the
"Ukraine is one of eight countries within the world space community
demonstrating significant technological background on space programmes and
important achievements on GNSS applications, equipment, user segment and
regional technology. The Ukrainian space industry is among the world's leader in
the design and production of launchers and GNSS components," the press
Ukraine confirmed its interest in obtaining associated membership in JV Galileo
Joint Undertaking on supporting GNSS. GALILEO is Europe's satellite radio
navigation programme. It was launched on the initiative of the European
Commission and developed jointly with the European Space Agency (ESA). It will
prepare for the development of a new generation of universal services in areas
such as transport, telecommunications, agriculture and fishery.
To date the technology is only available through the US GPS system and Russia's
GLONASS system, both of which are financed and controlled by military
Naftohaz eyes Gazprom deal
Ukrainian national joint stock company Naftohaz Ukrainy and Russian gas giant
Gazprom are to sign a long-term agreement in the near future to transport
additional volumes of Russian gas through Ukraine in 2005-2010, Naftohaz Ukrainy
CEO, Yury Boiko, said recently, Interfax News Agency reported.
He said that this will make it possible for the International Consortium for the
Management and Development of the Ukrainian Gas Transport System to ensure,
during its initial stage of operations, the utilisation of the existing
Ivantsevychy-Dolina and Torzhok-Dolina pipelines, which have been practically
idle since the Yamal-Europe pipeline through Belarus started operating. Boiko
said that as part of the investment phase if its activity, which has already
started, the consortium will build the Bogoradchany-Uzhgorod pipeline section,
which will be the first section of the Novopskov-Uzhgorod trunk pipeline.
"This will make it possible to increase the capacity of the Ukrainian gas
pipeline system to the West by 8bn cubic metres per year in the near
future," he said. Boiko said that Naftohaz Ukrainy is already able to
increase supplies to Russian gas to Central Europe by 30-35bn cubic metres.
Naftohaz initials PSA with NOC
Naftohaz Ukrainy and Libya's National Oil Company (NOC) initialled a production
sharing agreement (PSA) recently, the Ukrainian company said in a press release,
New Europe reported.
Naftohaz Ukrainy CEO, Yury Boiko, and NOC Director, Abdullah Salem Ali-Badri,
are to sign the PSA agreement. The oil produced by Naftohaz Ukrainy in Libya
will be used to set up a national oil reserve in Ukraine. Naftohaz Ukrainy
investment in developing the field may amount to about US$50m in 2005. The sides
agreed and confirmed a Naftohaz investment programme for the development of four
oil and gas blocks in Libya, selected based on geological information received
from the Libyan side. Earlier head of the Naftohaz Ukrainy office in Libya,
Vladimir Zadorozhny, was quoted as saying that Naftohaz Ukrainy plans to start
production at four fields in Libya in 2004. The sides signed a memorandum for
cooperation in the oil and gas sphere on October 14th, 2003. At the end of
October, after an analysis of the geological information, Naftohaz Ukrainy
decided on its priorities and started preparing an investment programme. NOC
controls over half of the oil industry in the country.
Ukrtransnafta pumps Russian oil through Odessa-Brody
Ukrainian pipeline operator Ukrtransnafta has finished filling the Odessa-Brody
pipeline with technical oil and has begun pumping the first consignment of
Russian oil to Odessa. It was expected that the first tanker would be loaded
with 90,000 tonnes of oil at the Yuzhny terminal, Deputy Director General of
Ukrtransnafta, Vladimir Vasilyuk, said at the pipeline launching ceremony on
September 11th. It is expected that 2.25m tonnes of oil will be pumped to Odessa
in the fourth quarter of 2004, Interfax News Agency reported.
Ukrtransnafta and TNK-BP signed a contract in July 2004 to deliver 9m tonnes of
oil through the Odessa-Brody pipeline to the Yuzhny sea terminal within 3 years.
They also signed 4 supplements to the contract, which enable Ukrtransnafta to
receive up to US$108m in loans to buy 425,000 tonnes of oil to fill the pipeline
and as a guarantee against financial risk. The contract was signed on condition
of 100% advance payment for oil transportation and fines for the refusal to
transport the specified amount of oil.
Ukrtransnafta started filling the Odessa-Brody pipeline from its 52nd km on
August 1st. The first 52km of the pipeline were filled with Urals oil at the end
of 2002, which enabled the Yuzhny oil terminal to start transshipment of Russian
oil supplied by Dnipr trunk pipelines. The first section of the Odessa-Brody oil
transport system, which was planned from the start to be used to pump Caspian
oil from Odessa, was launched in May 2002. The pipeline is 674km long.
FOREIGN ECONOMIC COOPERATION
Derkach urges stronger Ukraine-Canada economic ties
Ukraine's Economics and European Integration Minister, Mykola Derkach,
recently expressed the need for intensifying the efforts of Ukraine and Canada
within the framework of the intergovernmental commission for economic
cooperation. He made this statement during a meeting with Senior Vice President
of the Canadian International Development Agency, Ric Cameron, Interfax News
Canada put off the fifth joint meeting of the intergovernmental commission until
the first half of 2005 because of the formation of Canada's new government.
Derkach gave over to Cameron the strategy for drawing international technical
aid in 2004-2007 drafted by the economics ministry with the assistance of over
30 executive power bodies and donors. This document must be taken into account
when the Canadian government prepares a new strategy of assistance for
2006-2010, the press service said.
Derkach expressed gratitude for the assistance Canada gives Ukraine on a
bilateral and multilateral basis, as well as for timely expert support in
Ukraine's joining the World Trade Organisation. In their turn, the
representatives of Canada assured that bilateral cooperation would continue, and
it will be more effective on condition of fair and transparent presidential
election in Ukraine. In the first half of 2004, Ukraine-Canada trade turnover
grew 25 per cent to reach US$62m, the economics ministry said.
Kiev, Tel Aviv to cooperate in high-tech sector
Ukrainian and Israeli businessmen have expressed interest in cooperation in the
field of high technologies, New Europe reported recently.
They said this during a meeting of Ukrainian Premier, Viktor Yanukovich, with
Israeli businessmen led by Nathan Scharansky, minister for Jerusalem and the
diaspora, which took place in Jerusalem.
It was pointed out at the meeting that the current trade turnover between the
two countries is too low. In this connection, Yanukovich said tha the foreign
ministry and Ukraine's business missions would be instructed to boost their
The parties reached agreement on creating a Ukraine-Israel business council to
boost business ties. This initiative came from Ukraine. A relevant memorandum is
being drafted, and will be signed in the near future.
FOREIGN ECONOMIC RELATIONS
Ukraine, Lithuania discuss bilateral trade
Ukrainian Foreign Minister, Kostiantyn Hryschenko, and Lithuanian Foreign
Minister, Antanas Valenis, have discussed economic cooperation between the two
countries and Lithuania's experience of join the European Union, Hryschenko said
at a press conference following his meeting with the Lithuanian minister on
September 17th. He noted that Lithuania and Ukraine are continuing a now urgent
dialogue on economic cooperation. The Ukrainian minister said that in the first
half of this year, trade turnover between Ukraine and Lithuania totalled
US$460m, Interfax News agency reported.
"Thus, we could hit a billion by the year's end. For the countries like
Ukraine and Lithuania this is a rather high result, which shows that accession
to the EU does not create insurmountable obstacles to the development of real
trade between a country interested in Ukraine's economic potential, and Ukraine,
which is not an EU member," Hryschenko said. He also said it is
particularly important to Ukraine that a group of countries had appeared within
the EU, including Lithuania, which believe that relations with Ukraine are very
important. In turn, Valenis said they had discussed trilateral cooperation
between Poland, Ukraine and Lithuania.
EBRD plans loan for steel mill
The European Bank for Reconstruction and Development (EBRD) will decide in the
near future whether to lend the ISTIL steel mill in Ukraine US$35m to bolster
working capital and capital expenditures, New Europe reported.
The EBRD said it would finance part of ISTIL's capital expenditures and working
capital increase. The US$35m credit would represent 24% of the total project
financing costs, which are US$114m, the EBRD said. The EBRD loan would consist
of two components: a revolving loan of US$25m to support ISTIL's growing working
capital needs; and a term loan of US$10m for capital investments. The revolving
loan is the renewal of a US$25m financing to ISTIL approved by the EBRD in
September 2001. The EBRD issued the US$25m in October 2001 under guarantee from
Britain's ISTIL Group, ISTIL Group Inc of the United States and MetalsRussia
Our analysts and
editorial staff have many years experience in analysing and reporting
events in these nations. This knowledge is available in the form of
geopolitical and/or economic country reports on any individual or grouping
of countries. Such reports may be bespoke to the specification of clients
or by access to one of our existing specialised reports.
For further information email: