Books on Ukraine
Update No: 284 - (27/08/04)
Ukraine faces the most serious event in its post-communist
history, presidential elections commencing on October 31st.
There is no doubt that the coming presidential elections in Ukraine are the most
important in its existence. They will decide the future of the country. The West
The US lays down the rules
The United States Senate has unanimously urged the Government of Ukraine to
ensure a democratic, transparent, and fair election process for the presidential
election set for Oct. 31. The resolution also outlines measures Ukrainian
authorities need to take -- consistent with their own laws and international
agreements -- to ensure an election process that enables all of the candidates
to compete on a level playing field.
The measure was sponsored by United States Helsinki Commission Co-Chairman
Senator Ben Nighthorse Campbell (R-Colo.). Helsinki Commission Ranking Member
Senator Christopher J. Dodd (D-Conn.) and Senate Foreign Relations Committee
Ranking Member Senator Joseph R. Biden (D-Del.) were original cosponsors of the
resolution. Other Commission cosponsors were Senators Saxby Chambliss (R-Ga.),
Russell D. Feingold (D-Wis.), and Gordon Smith (R-Ore.).
"The October elections will be vital in determining Ukraine's course for
years to come. This resolution is a concrete expression of the commitment of the
U.S. Senate to the Ukrainian people," said Co-Chairman Campbell.
"Ukraine's elections should be a watershed for the future direction of that
country of great potential. Ukrainian authorities need to radically improve the
election environment if there is to be hope for these elections to meet OSCE
standards. By doing so, they will go a long way in restoring the trust of the
citizens of Ukraine and strengthening Ukraine's independence and
Opposition candidate Viktor Yushchenko remains the leading presidential hopeful
in Ukraine, according to a poll by the Razumkov Ukrainian Centre for Economic
and Political Studies. 27.9 per cent of respondents would vote for Yushchenko of
the Our Ukraine (NU) party, while 21.1 per cent would support current prime
minister Viktor Yanukovych of the Party of Regions (PR). This is a highly
Petro Symonenko of the Communist Party (KPU) is third with 9.8 per cent,
followed by Oleksandr Moroz of the Socialist Party (SPU) with 5.6 per cent.
Nobody in Ukraine one talks to is going to vote for Yanukovych, while everybody
is for Yushchenko. The officialdom in charge of these polls seem to be preparing
for a 'surprise result.' Yanukovych wins after all.
Late last year, Ukrainian lawmakers close to current president Leonid Kuchma
suggested changing the country's electoral law. Their plan called for the
abolition of the presidential election by popular vote, to allow members of the
legislative branch to pick the head of state. The proposal was narrowly defeated
in the Supreme Council in February.
In April, Kuchma tabled Yanukovych as a presidential candidate. Yushchenko is
widely regarded as the best chance for the opposition against Kuchma's
hand-picked successor in the election.
If no candidate garners more than 50 per cent of all cast ballots in the October
election, a run-off would take place on Nov. 14. In a potential second round,
Yushchenko holds a 7.7 per cent lead over Yanukovych.
Rarely can so much have depended upon one electoral result. Yushchenko is well
aware of this. He has stated categorically that he is not prepared to be premier
in a Yanukovych administration, nor would he want Yanukovych as his prime
minister. Something very momentous is in the offing in Ukraine. By November we
will know what it is.
Kuchma tilts to Putin
What Putin and Kuchma like about each other is that they know they are both
rogues. Kuchma has turned sideways in the last few months to curry favour with
Above all he did a somersault in July, reversing a decision made in June. He now
favours the Russian side in the Odessa pipeline dispute. Oil is to flow from
Northern Russia to Odessa and hence to the West, rather than from the Kazak
sector of the Caspian to Odessa and on to Brody in Poland and beyond. Ukraine is
apparently back in the Russian fold, pending the elections.
Ukraine launches tank upgrading programme
The main manufacturer of armoured hardware in Ukraine, the Malyshev Plant (Kharkiv),
has started fulfilling a state order for modernization of the domestic T-64B
tank. A contract has been signed between the Defence Ministry and the plant
setting the start for a huge job - renewing the armoured pool of the Ukrainian
armed forces. Generals, politicians and military experts in the country have
been talking about the need for this for a long time. Implementation of the
project as early as this year will make it possible to hand over 17 upgraded
T-64B tanks to active units of the Ukrainian armed forces. After modernization,
the tank will be named the BM Bulat [damask]. In the event of successful
continuation of the work, in the near future Ukraine will receive an armoured
pool at the level of the world's contemporary armies, Defense-Express web site
In recent years many military ranks have often raised the question of the combat
effectiveness of the country's armed forces and have pointed to the danger of
losing military hardware and weapons if funds are not soon allocated for their
modernization. The previous defence minister, Volodymyr Shkidchenko, noted that
a considerable amount of military hardware and weapons had almost exhausted
their life span. In particular, he said, operational tactical missiles of the
air defence troops had exhausted their technical fitness by 80-90 per cent.
Among other obsolete types of Ukrainian army hardware, infantry combat vehicles,
armoured personnel carriers and T-64 tanks were named.
In spring this year, attention to the problem was sharpened by Deputy Defence
Minister Valeriy Muntyan. He said that Ukraine's army, because of the worn-out
nature of hardware and weapons, may become combat ineffective as early as 2005.
Every year the combat potential of the armed forces is dropping by 9 per cent.
By the end of 2005, 70-80 per cent of basic types of artillery rocket weapons,
about 50 per cent of fighters and reconnaissance aircraft, 60 per cent of
bombers and 20 per cent of assault aircraft will be unfit for use. Today about
60 per cent of weapons and military hardware has been in use for over 15 years.
According to Muntyan, the overwhelming majority of technically complicated
complexes and models has already exhausted itsuseful life or will end in
2004-06. On the other hand, every 10-14 years there is a doubling of the cost of
the latest weapons and each succeeding year there is a 10 per cent increase in
the cost of upgrading and modernization.
In 2004, of the total sum of the defence budget, 92 per cent was spent on
maintaining the armed forces, and the model of "spending everything on
food" meant that spending on maintenance exceeded the critical 75 per cent
mark, not leaving resources for upgrading and development of the armed forces,
nudging them towards degradation. In his turn, the present defence minister,
Yevhen Marchuk, recently said that over 12 years the Ukrainian army had not
received a single tank, aircraft or helicopter, and its re-equipment with
contemporary hardware was impossible in the next five to seven years.
US$500m 5-yr Eurobond issue
The Ukrainian government adopted a resolution on July 30th that confirms the
terms for an issue of US$500m in 5-year Eurobonds denominated in US dollars, New
Europe reported recently.
The coupon rate is confirmed at 6-month Libor +337.5 basis points. Earnings are
to be paid annually on February 5th and August 5th. On July 29th Ukraine placed
5-year Eurobonds to the tune of US$500m with a floating coupon rate at 6-month
Libor +337.5 basis points, it was reported earlier. The issue's lead manager is
a bank syndicate involving Citigroup, Credit Suisse First Boston and Dresdner
Kharkiv to place over US$50m in Eurobonds
Kharkiv is planning to issue US$50-70m in Eurobonds in 2004, Mayor Vladimir
Shumilkin, said at a press conference on July 30th. He said that the city
planned to place 100m hryvnias this year (about US$18.8m), Interfax News Agency
However, he said that when entering the international debt market it is
expedient to place papers amounting to not less than US$50m. The Kharkiv mayor
said that the municipal administration hopes to attract cheaper resources on the
international market, to be invested in the city's economy. Kyiv places
Eurobonds at 8.0-9.0% per annum and Kharkiv may also attract resources under
similar conditions, or a little worse, given that this is the city's first
attempt, he said.
Shumilkin plans to travel to Germany with a group of specialists to hold talks
on preparations for the Eurobond placement. He said that the city council
earmarked 400,000 hryvnias at its last meeting to pay two rating agencies to
assign the city a rating. The city council should consider the Eurobond
placement in fall 2004. The funds from the placement should be received by the
city budget at the start of 2005. "We would like to receive funds at the
start of next year," he said. He said that the money will be used to
implement a number of projects with short payback periods, and also to finance
social programmes, such as the modernisation of water supply systems, the
heating grid, and to maintain residential buildings and build roads.
Moody's rates Kyivstar's bond issue
Moody's Investors Services assigned a (P)B2 rating to Kyivstar's GSM's
("Kyivstar" or the "company") proposed issuance of
approximately US$285.0m in senior unsecured notes on April 16th, New Europe
Under the proposed transaction, Dresdner Bank AG will issue Loan Participation
Notes (without recourse to Dresdner Bank AG), the proceeds of which will be
loaned on a senior unsecured basis to Kyivstar. This note structure is
substantially identical to the structure of the existing US$160.0m in 12.75%
senior unsecured notes due 2005. The new notes are expected to have a maturity
of up to 5 years, the agency said in a statement. Moody's has also assigned a B2
rating to the company's new US$75.0m in senior secured revolving credit facility
maturing in 2007. The ratings outlook on the new notes and new credit facility
is positive. Concurrently, Moody's has also affirmed all existing ratings to
positive. Affirmed ratings are as follows: B2 senior implied rating; B2
unsecured issuer rating; B2 rating on the company's existing US$160.0m 12.75%
senior unsecured notes due 2005 (funded via loan participation notes issued by
Dresdner Bank AG). Following the completion of the exchange offer and defeasance
of these notes, the instrument rating will be withdrawn.
S&P raises Ukrainian ratings
Standard & Poor's Ratings Services said recently it raised its long-term
sovereign credit rating on Ukraine to B+ from B, reflecting improved external
liquidity and economic prospects, New Europe reported.
At the same time, the rating agency said in a press release, that it affirmed
its B short-term rating on Ukraine. The outlook is stable.
"The upgrade is supported by the country's continued improvement in
external liquidity and government debt levels, together with its recent robust
economic performance and its growth potential," said Standard & Poor's
credit analyst, Helena Hessel.
The IMF's approval of its 12-month Stand-By arrangement for Ukraine, following
almost two years of discussion, is also an important factor supporting the
upgrade, the press release read. The National Bank of Ukraine's foreign exchange
reserves increased to almost US$9bn by the end of June 2004, up from less than
US$7bn at calendar year-end 2003. As a result, estimated gross external
financing requirements (current account balance plus amortisation of long-term
debt and short-term debt) to reserves should decline to 142% at year-end 2004,
down from 176% at year-end 2003, with further improvement expected in 2005.
Macroeconomic stability and the economy's incipient reforms have supported
better investment opportunities and improved export potential. This has
strengthened the economic base and led to significantly stronger-than-expected
economic growth in 2003 (9.4%) and so far in 2004.
"Although political uncertainty connected with the upcoming October 2004
presidential elections has not lessened and remains significant, the
strengthened external liquidity and economic structure and lower government debt
burden counterbalance the political risk to a greater extent than in 2003,"
"We expect that the election will not lead to worsening relations with the
international community and obstruct access to external financing," Hessel
said. "Further improvement in creditworthiness is predicated on significant
improvement in the political situation," she added.
Ukrainian pipeline filled with Russian process oil
An operation to pump the first shipment of Russian process oil worth 25,000
tonnes into the Odessa-Brody pipeline began on August 1st, ITAR-TASS News Agency
A public relations officer of the Ukrainian Ukrtransnafta oil company said that
the filling started from the 52nd kilometre of the pipeline. At least 250,000
tonnes of process oil will be pumped into the Odessa-Brody pipeline in August.
Ukrtransnafta signed an agreement for attracting a US$108m credit to purchase
425,000 tonnes of process oil. Ukrtransnafta earlier signed a contract with the
Russian-British TNK-BP oil company for buying process oil to fill the Brody-
Yuzhnyy [oil terminal in Odessa] oil pipeline. Under the agreement the oil is to
be transported for three years. The Odessa-Brody pipeline will carry up to 9m
tonnes of oil every year.
Kuchma inks IBRD Internet loan deal
Ukrainian President, Leonid Kuchma, has signed an agreement for a US$5m
International Bank for Reconstruction and Development (IBRD) loan for an
Internet programme. The loan is to be extended for 20 years and includes a
five-year grace period. The Verkhovna Rada (parliament) had ratified the deal on
July 1st. The funds will be used for the "Ukraine - Development via the
Internet" programme. This is aimed at designing and implementing working
models for electronic state procurement and electronic documentation for
increasing the efficiency and transparency of government activities. Plans also
call for the creation of the legal and regulatory environment needed to ensure
favourable conditions for electronic business, New Europe has reported.
World Bank, Ukraine agree state statistics loan
Ukraine and the World Bank signed a US$32m loan agreement on July 15th for a
project for developing the state statistics system for monitoring socioeconomic
transformation in Ukraine. Finance Minister, Mykola Azarov, said at a conference
that the project goals are creating a statistical system corresponding to
international standards and the introduction of cutting-edge technology for
collecting and analysing statistical data, Interfax News Agency reported.
The World Bank board of directors confirmed the loan for the 5 year statistics
programme back in March. The overall project price tag is US$38m, and the
Ukrainian government will make up the rest. The credit is extended for the World
Bank standard 20 years with a 5-year grace period.
Ukraine is looking to improve technical outfitting at the State Statistics
Committee's structural subdivisions, increase the quality and timeliness of
statistical data and train Committee personnel. Azarov and World Bank Director
for Ukraine, Belarus and Moldova, Luca Barbone, signed the loan agreement, which
still requires ratification by the Ukrainian parliament.
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