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Books on Ukraine
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Update No: 318 - (28/06/07)
Looming elections could resolve the crisis
For three months Ukraine has been without a proper government. It has been
rocked by a power struggle between pro-Western President Viktor Yushchenko, who
has pledged to bring the country EU and NATO membership, and Prime Minister
Viktor Yanukovych, who returned to politics last year, after his party won the
majority of seats in parliament forming the ruling coalition. Yushchenko is the
hero of the Orange Revolution of late 2004, a pro-Westerner to his fingertips.
Yakunovich tilts to Russia, or rather has so far, with an intriguing twist
towards the West of late.
Yushchenko and his arch rival Yanukovych agreed on May 27th to hold snap
elections in a bid to end the protracted political crisis. It began after
inconclusive March elections on April 2nd, when President Yushchenko dissolved
Ukraine's parliament, or Rada, and called for new early elections. He accused
his old rival of engineering a creeping coup by coaxing legislators to defect
from other parties to give Mr. Yanukovich the votes he needs to change the
constitution and emasculate his powers.
After a long struggle for power in which Yushchenko fired three judges, Prime
Minister Yanukovich agreed to new elections. The two men left it to parliament
to negotiate a date, and it is going to be September 30th.
Opinion polls suggest the Party of the Regions will get the most votes, as it
did last year, around 40%. Yet Yushchenko's tough action in dissolving
parliament and seizing back power is expected to bring some disillusioned Orange
voters back to the fold, making the contest tight.
Orange Revolution partners trade allegations
But this requires his former Orange Revolution partners to compose their
differences promptly or lose heavily to the Party of the Regions, which is more
united. The three estranged parties that had led the 2004 Orange Revolution
against election fraud had been engaged in difficult talks to reunite, but their
negotiations fell apart in mid-June. They traded allegations of betrayal on June
20th, blaming each other during an open parliament session for the failure to
form a working government after 82 days of coalition talks.
President Viktor Yushchenko's Our Ukraine party initially blamed the collapse on
a disagreement with the Socialists over the parliamentary speaker's job, but
later said the main disagreements were over policy, such as Ukraine's
pro-Western ambitions.
"We had not a single dispute left," countered former Prime Minister
Yulia Tymoshenko, who was slated to return to her former job if the Orange
coalition reformed. "Why then have they started to talk about principles?
... They did not want to create this coalition, they wanted to spoil the
process."
Our Ukraine has said it is time to widen talks to include other parties, which
could pave the way for an awkward alliance with Yushchenko's 2004 presidential
election rival, Viktor Yanukovych, whose pro-Russian Party of Regions won the
most votes in the March election. Tymoshenko's bloc came in second, winning more
than Yushchenko's party and the Socialists combined.
Yanukovych's pro-Russian party said it was ready to hold talks with all the
parties, and Our Ukraine appeared eager to start. The bitter falling-out between
Yushchenko and Tymoshenko last year poisoned relations between their parties,
and many analysts have said Yushchenko sees Yanukovych as a more reliable
partner than Tymoshenko. "Today we have a simple choice: either a coalition
or an election mess," said Our Ukraine's Roman Bezsmertny. "We are for
a coalition."
Yanukovych, whose party dominates in Ukraine's Russian-speaking east and south,
told journalists that the aim should be a coalition that can unite the country.
He added that the party that won the most votes should be able to name the prime
minister, but he did not answer whether he would insist on the job for himself.
Uniting with Yanukovych could prove politically damaging for Yushchenko, whose
party campaigned on the slogan "Independence Square was not in vain,"
a reference to the mass protests they led against Yanukovych's ballot-stuffing
attempt to win the 2004 presidency.
"To form a coalition with the Socialists and Tymoshenko's bloc might mean
that some politician would lose, but to form a coalition with the Party of
Regions would mean that our national interests lose," said Our Ukraine's
Mykola Katerynchuk, signaling a division within the president's party.
Tymoshenko appealed to Yushchenko to intervene. "With a word the president
can stop all the insinuation and all the misunderstanding," she said.
"We won't leave the negotiations. We will try to create this natural
coalition till the end." In a last-minute bid to overcome the differences,
Socialist Party leader Oleksandr Moroz said he would surrender his demand to
become parliamentary speaker. But he added that he would only do this if all
presidential appointees were named in the coalition agreement.
Our Ukraine's Petro Poroshenko responded that he thought the proposal was
"positive," but added that the premiership should not go to Tymoshenko
- a suggestion she would never accept. "Now all that's left is for Yulia
Volodymyrivna to give up the ambition to be prime minister."
Putin regrets Ukraine situation, hopes crisis ends soon - extended
Russia's president said on June 22nd that he regrets the current political
crisis in Ukraine and hopes the Ukrainian authorities will resolve the situation
soon. "We hope our main partner in the former USSR and our major economic
and political partner in the world will overcome these problems as soon as
possible," Vladimir Putin said, while opening a meeting with Prime Minister
Yanukovych.
The Russian-Ukrainian interstate commission led by the two countries' presidents
will meet in Russia in August, Ukraine's prime minister said at a bilateral
economic meeting. "We consider today's meeting a preparatory stage for a
session of the Putin-Yushchenko commission to be held in Russia in August,"
Viktor Yanukovych said.
Yanukovych said bilateral cooperation in the defence sector was a priority for
discussion between the two countries. "We have agreed to outline joint
projects and certain programs in third countries," the Ukrainian premier
said. Yanukovych said Ukraine also had concerns over the suspension of joint
monitoring of agricultural firms, which he said "damaged agricultural
producers in both countries."
The Ukrainian official said that efforts aimed at boosting economic cooperation
had been "fruitful," with trade increasing by almost 38% in the first
four months of 2007. In the first ten months of 2006, bilateral trade between
the two countries hit $20 billion, up 19% against the same period last year.
Fuel and energy remains a key sphere for economic cooperation. For Russia
Ukraine is a key country for oil and gas transits to Europe. Russia pumps 15% of
its oil exports and over 80% of gas through Ukraine. Yanukovych said aircraft
building, research centres, hi-tech products, and the space industry were yet to
be addressed.
Yushchenko's Social Initiatives at the National University of "Ostrog
Academy"
Yushchenko knows that he has his work cut out to win public support. He
announced new social initiatives at the National University of Ogrog Academy in
late June.
According to the President, social standards in Ukraine must be revised. He said
Ukraine has every possibility to do so, as its economy has been growing during
the recent seven years and today's GDP is 8% up on last year.
Still, he said referring to the international statistical data, upon the UN
human development scale Ukraine is only 77th. In terms of salaries Ukraine is on
the third place from the end among European countries, just above Moldova and
Albania.
Mr Yushchenko also noted such directions of his social agenda as raising minimal
wages, improving budgetary salaries, supporting teachers, doctors and other
professionals living in rural areas and encouraging university graduates to work
in the villages. At the same time it is necessary to increase financing of the
military, to raise pensions, to increase financial aid to mothers having their
second child to UAH 15,000 and child aid by 50%, to support many-children
families, to improve maintenance of orphaned children and to improve rural
medicine.
The President said his programme could be implemented by the social bloc in the
programme of the future Government; however, he would not like his ideas
"to be perceived as having any political implication," a disingenuous
statement at such a critical moment.
A split nation
This nation of 48 million is split by history and language, and remains
divided over whether to embrace the West or Russia. Ukraine is key to the energy
security of the EU's US$15 trillion economy. Moscow, increasingly authoritarian
at home and assertive with its neighbours, sees Ukraine as vital to its own
security, economic interests and regional influence.
Historically, eastern Ukraine -- Yanukovich's power base -- is closely linked to
Russia, and most people in the region are native Russian speakers. President
Yushchenko is stronger in predominantly Ukrainian-speaking central and western
Ukraine, which tilts toward Western Europe.
The comeback kid
But Yanukovich is likely to prevail. He has undergone one of the most
extreme makeovers in global politics.
Just two years ago, the Russian-backed machine politician was a pariah in the
West after he claimed victory in the 2004 presidential elections, which were
marred by fraud and a brutal poisoning that left his opponent disfigured. Only
the subsequent mass street protests of the so-called Orange Revolution forced
him to accept a rerun of the vote, which he lost.
Today, Yanukovich is locked once more in a struggle for supremacy with the
pro-Western Orange leader who beat him. But this time, the thousands of
protesters occupying Kiev's Independence Square for the past month flew not
orange, but the blue colours of Yanukovich's Party of the Regions, and the red
and hot pink of his allies, the Communists and Socialists. They dispersed only
when Yanukovich defused the crisis by agreeing to hold new elections -- for the
second time in as many years -- after his rival dissolved parliament.
With backing from a billionaire metals baron and political coaching from US Sen.
Bob Dole's former campaign strategist, Yanukovich was re-elected as prime
minister last year. He has positioned himself as a champion of rule of law and
democratic values, a visitor to Washington, Brussels and Davos, as well as
Moscow.
Yanukovich's comeback is further evidence -- on top of the Gaza Strip, Iraq and
Kyrgyzstan -- that the free elections encouraged by the U.S. do not guarantee
winners who favour US goals, or even Western-style democracy. Ukraine is adding
a fresh twist to the lesson, as Yanukovich adopts the language and institutions
of democracy to shed the anti-Western and antidemocratic image that cost him the
election 2½ years ago.
Gone is Yanukovich's bouffant hairdo, a favourite of Soviet apparatchiks. So too
are the Russian advisers and televised meetings with President Vladimir Putin
that characterized his 2004 election campaign, though the Russian lower house of
parliament, or Duma, has issued two statements supporting him in the current
power struggle. He says he wants to be the Ukrainian leader who starts
membership talks with the European Union. He even polished his Ukrainian, which
he now speaks in public instead of his first language, Russian.
"Time changes people, even Viktor Feodorovich Yanukovich," said Mr.
Yushchenko, who is 53, three years younger than his opponent, in an interview.
"But the test is in his decisions and actions," he added, accusing
Yanukovich of trying to "usurp" power.
How far his makeover goes has implications far beyond Ukraine.
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BONDS
Odessa to place debut Eurobond issue in June
Odessa, the third largest city in Ukraine, plans to issue a debut Eurobond issue
amounting to 335 million hryvnias (about US$66 million) at the end of June,
Gennady Nechaevsky, head of the securities department at the Odessa City
Council, said at a press conference on May 30th, Interfax News Agency reported.
"All the Finance Ministry permissions have been received and talks are
underway with interested banking structures. I would like to believe that by the
end of June we will have international borrowing. The restrictions put in place
by the finance ministry are that the interest rate should not exceed 9.5 per
cent, the amount should be up to 335 million hryvnias in a first category
currency and the tenor - up to five years," he said. The Eurobonds are to
be issued in euros or dollars. "Everything will depend on the interest rate
and on the conditions. At the moment it could be either Euro or dollars,"
he said.
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ENERGY
Ukrtransnafta oil transit via pipelines increases 29%
Ukrainian gas transport monopoly, Ukrtransnafta, increased oil transit via
pipelines on Ukrainian territory by 29.1 per cent to 17.337 million tonnes in
January-May 2007 compared to the same period of 2006, the company said in a
press release, New Europe reported.
Ukrtransnafta increased oil transit 19.8 per cent to 22.317 million tonnes in
the first five months of 2007 compared to January-May 2006. Transportation
through the Druzhba pipeline system amounted to 11.014 million tonnes, and
through the Pridneprovsky pipelines - 11.303 million tonnes. The company
transported 4.98 million tonnes of oil to Ukrainian refineries in January-May.
Naftogaz, Marathon to prospect for oil, gas
Ukraine's Naftogaz and Marathon International Petroleum have signed a deal on
joint prospecting in the northwest Dnipr-Donets basin. The companies will spend
three years assessing the investment potential of a 30,000-square kilometre area
and identifying potential hydrocarbons sections, Naftogaz CEO, Evhen Bakulin,
said at the signing ceremony, New Europe reported.
The property contains a forecast 200 billion cubic metres gas, 46 million tonnes
of condensate and 130 million tonnes of oil, Bakulin said. He said the companies
would prospect new viable areas, which Naftogaz has not yet been able to work at
due to complex geology. "Signing this agreement with one of the world
petroleum industry leaders will enable us to bolster our resource potential in
the next few years," Bakulin said.
Boyko sees more gas transit from Caspian pipeline
The construction of a Caspian pipeline could increase annual natural gas transit
through Ukraine by 20-30 billion cubic metres, Ukrainian Fuel and Energy
Minister, Yuriy Boyko, in an interview on May 21st, Profile weekly.
"The construction of a Caspian pipeline and increased gas output in
Turkmenistan will bring an extra 20-30 billion cubic metres up to the Ukrainian
border. That would bring up the issue of the Novopskov-Uzhgorod pipeline and
lead to an increase in annual gas transit through our territory by 20-30 billion
cubic metres," he said.
The gas transportation network of Ukraine "is running at nearly top
capacity, 120 billion cubic metres per year, which amounts to 80 per cent of
Russian gas exports," he said.
The construction of the Bogorodchany-Uzhgorod trunk pipeline, a strand of the
Novopskov-Uzhgorod pipeline, will be beneficial to Ukraine and Russia, Boyko
said. "This project will supply gas to two idle pipelines (Torzhok-Dolina
and Ivatsevichi-Dolina) in Ukraine, while Russia will boost its gas export
potential by an annual 19 billion cubic metres, with minimum investment and
within a very short period," he said.
Natural gas transit to Europe via Ukraine dropped 6.4 per cent to 113.7 billion
cubic metres in 2006 because of the abnormally warm weather. Gas transit to CIS
countries dropped by 1.3 per cent to 14.7 billion cubic metres over the same
period.
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FOOD & DRINK
PepsiCo to buy 80% of top juice manufacturer
The US-headquartered soft drink giant PepsiCo announced plans to take over
Ukraine's largest juice manufacturer, the Interfax News Agency reported on June
7th.
PepsiCo will pay US$542 million for an 80 per cent stake in the Mykolaev-based
Sandora company, a beverage manufacturer controlling close to half of Ukraine's
soft drink market.
PepsiCo has an option of buying the remaining 20 per cent of Sandora in
November, according to the report. PepsiCo's worldwide opponent CocaCola has
manufactured drinks in Ukraine side the late 1990s. The Sandora purchase by
PepsiCo, once complete, will become the largest ever single-shot foreign
investment in Ukraine's food and drink industry.
Sandora will reportedly receive assistance in management from the international
trading firm PepsiAmericas, and marketing assistance from PepsiCo itself.
Sandora fruit drinks are among the country's best-known and most
widely-distributed brands, with packets of Sandora fruit juice widely available
even the smallest stores, in Ukraine's poorest and remote villages.
The company operates four processing plants, two in the Mykolaev region, one in
the Kherson region, and one in the Crimean region - all provinces considered in
Ukraine to be particularly sunny, and good for growing fruit.
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FOREIGN LOANS
EBRD providing Furshet with US$90m loan
The European Bank for Reconstruction and Development (EBRD) is providing a US$90
million long-term loan to Ukraine's Furshet, the owner of a supermarket chain,
for development in Ukraine and in Moldova, Interfax News Agency reported.
The company will also use the resources to refinance short-term and long-term
debt, Aton Usov, press secretary for the EBRD representation in Kiev, told
Interfax. The EBRD board of directors approved the loan on May 14th.
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MINERALS & METALS
Metinvest holding to borrow US$1.5bn
The Metinvest holding, which combines the mining and metals assets of Ukraine's
System Capital Management (SCM), plans to borrow US$1.5 billion, Metinvest
financial director, Sergei Novikov, said at a press conference on June 6th.
"We will soon complete the signing of contracts with a number of
banks," he said, adding that secured loans would make up two-thirds of this
amount, New Europe reported.
The loans will be used primarily to refinance earlier high-interest bank loans,
he said. Previously loans were raised at 11-12 per cent annual interest, but now
the company can borrow at seven per cent.
Metinvest's net debt now stands at US$800-850 million, and the company could
raise US$ seven-eight billion of credit financing if it wanted to, Novikov said,
adding that the company could also carry out an initial public offering if it
did not have sufficient resources for development. "Whether or not there
will be an IPO is up to shareholders, but we must be prepared for this," he
said. Metinvest Holding general director Igor Syry said that the company has
invested US$1.3 billion in its enterprises in the past two years.
Istil Ukraine steel plant sees losses grow 20% in Q1
The Istil Ukraine mini steel mill posted a pre-tax loss of 23.2 million hryvnias
in the first quarter of 2007, up from a loss of 19.31 million hryvnias in the
same period last year, Interfax reported. The plant's production grew 95 per
cent year-on-year to 563.52 million hryvnias, a source said, Interfax News
Agency reported.
Net revenue rose 92 per cent to 554.78 billion hryvnias, with revenue from
exports jumping 110 per cent to 454.4 million hryvnias. The plant's operating
margin increased to a negative 0.38 percent in the quarter from a negative 5.5
per cent in the first quarter of 2006. The company's receivables increased 32
per cent to 380.32 million hryvnias, while payables jumped 68 per cent to 319.07
million hryvnias.
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