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UKRAINE


 

 

In-depth Business Intelligence

Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 49,537 41,380 37,600 55
         
GNI per capita
 US $ 970 770 720 137
Ranking is given out of 208 nations - (data from the World Bank)

Books on Ukraine

REPUBLICAN REFERENCE

Area (sq.km) 
603,700 

Population 
47,732,079

Principal 
ethnic groups 
Ukrainians 72.7%
Russians 22.1%
Jews 0.9%. 

Capital 
Kiev

Currency 
Hryvnya

President 
Viktor Yushchenko




Update No: 299 - (28/11/05)

Yushchenko banks on steel deal
The re-privatisation of Ukraine's largest steel plant provides a much-needed lift for President Viktor Yushchenko in all sorts of ways, at a time when the country is languishing. But the deal will go only so far toward offsetting his steadily sagging popularity and abandonment by many allies from last year's Orange Revolution.
After being swept to power on outrage from rigged elections, a corrupt government and an economy dominated by cabals, Mr. Yushchenko promised Ukrainians a clean break from the past. He vowed a reversal of crooked privatisations and the prosecution of crimes tied to the prior regime, including his own attempted assassination and the murder of a high-profile opposition journalist five years ago.
But Mr. Yushchenko has appeared irresolute about how many privatisations to reverse and how many crimes to investigate. His sinking popularity has highlighted fears that Western-style democratic movements in former Soviet states that bloomed during the past two years are beginning to splinter and fail.
Mr. Yushchenko's former prime minister, whom he fired in a cabinet reshuffle amidst allegations of corruption in October, has emerged as a rival in vital parliamentary elections scheduled for March, forcing Mr. Yushchenko to pursue alliances with pro-Moscow politicians.
The disarray in Ukraine comes amid tensions in the former Soviet state of Georgia, where a revolution two years ago swept another Westward-leaning president, Mikheil Saakashvili, into office. Mr. Saakashvili's popularity also has been sinking; recently he fired his foreign minister, who later warned that the revolution there is at risk of being derailed.
Part of Mr. Yushchenko's problem, analysts say, is that the rhetoric of revolution has been bad for the economy. Earlier this year his cabinet scared off foreign investment in a contentious debate over how many companies they would nationalise to reverse suspect privatisations. Ukraine's economic growth is expected to slow to 2% this year from 12% last year.
The sale of the Kryvorizhstal steel plant ensures the government will remain solvent at least until the March elections, according to Katya Malofeeva, an analyst at Renaissance Capital brokerage in Moscow. Mittal Steel Co. of the Netherlands paid US$4.8 billion for a 93% stake, more than five times the amount paid last year at an outrageous auction whose winners included relatives and associates of former President Leonid Kuchma. Yet, the re-privatisation debate has so damaged the economy that many analysts believe the auction will be the last major sale of Mr. Yushchenko's presidency.
"This was a very successful auction, and a very big vote of confidence from investors in the Ukrainian government," said Ms. Malofeeva. But given the broader upheaval, "we hope that it is the last."
In October, Mr. Yushchenko signalled he wanted to scale back talk about privatisation reviews when he fired his cabinet and replaced his prime minister with a technocrat and former professor, Yuri Yekhanurov. Since then, Mr. Yekhanurov has put criminal probes on the back burner and said he is focusing on getting Ukraine into the World Trade Organization and reviving economic growth.
But Mr. Yushchenko's problems appear to add up to more than flawed economic policy. Though a popular icon during the Orange Revolution, he has been an obtuse and often absentee president, Western diplomats and analysts say.
Meanwhile, some high-profile crimes have been left unsolved. A test case for most Ukrainians has been the murder of opposition journalist Hiorhiy Gongadze, whose headless body was discovered in a forest outside Kiev. Audio tapes smuggled from Mr. Kuchma's office suggest he ordered the killing. So far, Mr. Yushchenko's government has arrested three former police officers who are expected to testify they were taking orders from above, yet nobody responsible for ordering the killing is expected to be arrested anytime soon.
The government also seems to have balked at prosecuting last year's vote fraud. Dozens of low-level officials were arrested, but none of the masterminds. Even Mr. Yushchenko's poisoning during last year's campaign remains unsolved.
Western diplomats say there are practical reasons for stalling the probes: Much of the election tinkering, and even the assassination attempt, could lead to suspects in Russia, a major trade partner and the supplier of the bulk of Ukraine's energy needs. Kiev and Moscow -- which favoured Mr. Yushchenko's political rival -- currently are in talks over winter fuel deliveries.
But Ms. Malofeeva, of Renaissance Capital, says the Kryvorizhstal auction will give Mr. Yushchenko a response to allegations that he hasn't corrected some wrongs of the past. "His opponents are taking the political campaign very seriously," she said. "Now he has to do the same."

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ENERGY

Ukraine, TNK-BP discuss issues of oil industry 

Ukrainian President, Victor Yushchenko, recently met with the top managers of the international holding TNK-BP to discuss the situation in Ukraine's oil market, development of oil processing industry in Ukraine and its transit capability, the TNK-BP Ukraine press service recently said, Interfax News Agency reported. 
The meeting was attended by chairman of the TNK-BP board of directors, Mikhail Fridman, executive director, German Khan, and President of the TNK-BP Ukraine, Alexander Gorodetsky. During the meeting, both sides discussed coordination of activity from the point of view of stipulating the flow of investments for modernisation of refinery capacities and ensuring long-term stability of the Ukrainian oil product market. They agreed to step up a dialogue with regard to protection of domestic oil producers.

Naftogaz Ukrainy receives 3m Euro credit

Naftogaz Ukrainy Ukrainian National Oil and Gas Company plans to attract a credit line from Credit Suisse First Boston amounting to 3m Euro, New Europe reported.
"In the near future this month or at the start of next month. I will sign another credit line for 3bn Euro with Credit Suisse First Boston on October 1st," Ukrainian First Deputy Fuel and Energy Minister and also CEO of Naftogaz Ukrainy, Oleksiy Ivchenko, said. He said that earlier Naftogaz Ukrainy attracted a credit line of 2bn Euro from Deutsche Bank and 2.5bn Euro for 5 years, with the possibility of extending it to 7-9 years, at 8% per year from France's Societe Generale. Regarding the proposed credit line, Ivchenko said, "I am doing this consciously, and will continue to do so. This makes it possible to put creditor banks in competition. This does not mean that I will take all this money and spend it."

Ruhrgas interested in Ukraine gas transport 

Ukrainian Prime Minister, Yury Yekhanurov, has discussed possible investment in the gas sector with representatives from the German business community, the government press service said in a statement, New Europe reported.
During the meeting representatives from E.ON Ruhrgas AG said that the company is interested in stepping up cooperation with Ukraine, particularly for the transportation of gas through the republic, and also in the production and storage of gas.
"Ukraine should hold on to its position as a powerful transit country," company executive Hilmar Enke said. 
He said that Ruhrgas is also ready to take part in modernizing the Ukrainian gas system and implementing joint projects with Ukrainian gas companies.

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EUROBONDS

Kiev places US$250-mln in 10-year Eurobonds at 7.98% 

Kiev has placed US$250-million in 10-year Eurobonds at an annual rate of 7.98 per cent, Kiev Mayor Oleksandr Omelchenko said at a meeting with union leaders. "We received confirmation at 9:00 p.m. last night of a 10-year discount loan for US$250 million at an annual 7.98 percent," he said. Citigroup and Credit Suisse First Boston are the lead managers of the loan. Most of the loan will be used to finance the construction of the Podolsk pedestrian bridge and US$30 million will be used to build a second cardiological centre, New Europe reported.

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FOREIGN TRADE

South Korea, Ukraine to triple volume of trade

The trade between South Korea and Ukraine will triple the amount of annual bilateral trade to US$3bn by 2010, South Korean officials said on October 20th, New Europe reported recently. 
The agreement was reached at a meeting between South Korean Prime Minister Lee Hae-chan and his Ukrainian counterpart Yuri Yekhanurov. The bilateral trade volume reached US$1.07bn in 2004. During the one-hour talks the 2 sides decided to allow South Korean travellers to visit Ukraine for 90 days without a visa as part of measures to streamline visa-issuing procedures. They also agreed to extend the term of validity of multiple visas from the current one year to 5, exempt visa processing fees and waive visas for diplomats, on a mutual basis. Both sides shared opinions on the need to settle the dispute over North Korea's nuclear weapons program for the world peace and stability and cooperate to set up a permanent peace regime on the Korean Peninsula. Lee expressed thanks for Ukraine's support for Seoul's efforts toward the peaceful settlement to the nuclear disarmament issue. After the talks, South Korea's Vice Foreign Minister Yu Myung-hwan and Ukraine's Minister of Transportation and Communication Viktor Bondar and Economy Minister Arseny Yatseniuk signed an agreement on maritime cooperation, economic aid and technical cooperation.

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MINERALS & METALS

Mittal grabs Ukraine steel mill for US$4.7 billion 

Mittal Steel recently bought a controlling stake in a giant Ukrainian steel mill, setting a new record high price for a privatisation in the former Soviet republic, Deutsche Presse-Agentur (dpa) reported.
The Netherlands-headquartered consortium's winning bid for the Krivorizhstal steel works was equivalent to US$4.74 billion. Once the takeover is completed, Mittal will become by far the largest single foreign investor in Ukraine.
"This single sale is worth 20 per cent more than all of the income of all of the state privatisations, in all of Ukraine's history," said Ukrainian President Viktor Yuschenko, in press comments. 
"This is proof that Ukraine can conduct a fair and open privatisation," he added. Two Ukrainian industrial conglomerates - the French-Ukrainian Smart Group and the Donetsk-based Industrial Group - also participated in the bidding. It was the first time any Ukrainian state company had gone on the block on live television. 
The German branch of Mittal Steel, Mittal Steel Germany GmbH, submitted the winning bid. Mittal will obtain a 93 per cent share in the mill. Starting offers were equivalent to US$2 billion. The price increased to US$3.4 billion halfway through some forty minutes of energetic bidding. The seriousness of Mittal's intention to acquire the plant was clear early on in the auction, with CEO Lakshmi Mittal on hand at the bidding, and repeatedly taking the initiative to top counter-offers. 
Industrial Group, an alliance between French Arcelor and Ukrainian industrial tycoon Rinat Akhmetov, fell out of the competition first. 
The pure-Ukrainian Smart Group consortium lasted longer until defeated by Mittal's winning bid. Mittal is the world's largest steel company, followed by Arcelor. Senior members of Yushchenko's administration, and even his recently-sacked former Prime Minister Julia Timoshenko, were present in a State Property Fund (SPF) auction room packed with media and dignitaries. 
"We have proved Ukraine can be a place for honest business, and not tycoon insiders," a jubilant Timoshenko told reporters afterwards. "This sale gives Krivorizhstal back to the people." Ukrainian Communist leader Petro Symonenko called the auction "a crime ... theft of the jewel of Ukrainian metallurgy by capitalists". 
Krivorizhstal with 7.1 million tonnes of annual production accounts for 20 percent of Ukraine's steel output. Ukraine is the seventh- largest steel exporter in the world. 
Yushchenko's reform government had made the sale of Krivorizhstal a flagship project for the administration's effort to increase foreign investment. The sale is however unlikely by itself to repair fully Ukraine's battered reputation as a place where privatisations are fixed in favour of government insiders, and frequently challenged in court by losing bidders. 
The government's decision to go ahead with the auction came in the face of a parliament resolution earlier in October placing the sell- off on hold, pending a legislative review. It is unclear whether the Ukrainian executive branch may override parliament in such a case. 
Another possible challenge to the Mittal acquisition could come from a still in progress suit over the failed sale of Krivorizhstal to a group of Ukrainian investors last year. 
The Yushchenko administration earlier this year cancelled the 2004 transfer on grounds the previous government sold off the steel mill at an artificially low price. Lower courts upheld the government move, but the case is on appeal, with a decision expected in coming months.

Ukraine ups iron ore exports 3.9% in 9 mths 

Ukraine increased iron ore exports 3.9 per cent year-on-year to 14.24 million tonnes in January-September. Rudprom, the Russian agency that collates statistics about FSU iron ore producers, said that Ukraine exported 7.02 million tonnes of pellets, up 24.2 per cent, but 2.45 million tonnes of concentrate, down 18.7 per cent, and 4.65 million tonnes of sintering ore, 4.9 per cent less, Interfax News Agency reported.
The bulk of the exports were to countries outside the CIS. Ukraine exported 1.75 million tonnes of pellets and 113,000 tonnes of concentrate to Russia in the eight months. Ukrainian iron ore production grew 3.4 per cent to 50.74 million tonnes in the period.

Ukraine reduces steel roll output 1% in 10 months 

Ukraine's steel industry produced tentatively 26.49 million tonnes of finished roll in January-October, 1 per cent less than in the same period of last year, the Industrial Policy Ministry said, Interfax News Agency reported.
Crude steel production fell 2 per cent to 31.79 million tonnes and pig iron production was also down 2 per cent, to 25.35 million tonnes, the ministry said. But steel pipe production jumped 13 per cent to 1.91 million tonnes, the ministry said. Scrap metal supplies to steel mills fell 8 per cent to 5.22 million tonnes in the ten months. Iron ore concentrate production rose, by 4 per cent to 43.84 million tonnes. Sinter production was up 1 percent to 39.22 million tonnes, pellet production grew 7 per cent to 14.54 million tonnes and crude ore production grew 4 per cent to 56.66 million tonnes.

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