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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: 277 - (01/02/04)

The succession problem
Everything in Ukraine is hinging on coming presidential elections in October. The incumbent is deeply unpopular. He was generally expected to be leaving office this year because the constitution forbids a third term. This muted opposition clamour for him to go immediately.
The Supreme Court of Ukraine, however, ruled on December 30th that Kuchma could run for a third five-year term, angering opposition leaders. The court ruled that because Kuchma was first elected in 1994, two years before the constitution was enacted, his first term did not breach the ban on more than two terms and that nothing prevented him from standing for a third term if he wanted to.
This is not really the case. There are plenty of non-constitutional reasons why he can scarcely stand again. Kuchma is largely ignored by the US and UK leaders, as at a Prague NATO meeting in 2001. He is a thoroughly disreputable figure, who rigs elections and harasses the media, even having journalists killed. He was almost impeached in 2002 and only saved by parliament having too many members who, such is the level of corruption in high places would not want to see an opening of a veritable cannery of worms were he then put on trial.
In fact he has had to have abdominal surgery in Germany recently and may want a discreet exit. The Supreme Court ruling gives him bargaining power with the barons who dominate Ukraine's politics. 

High drama in parliament
Earlier in December a bill was rammed through parliament to change the constitution to have the president elected by parliament, not the people. Parliamentary supporters of Kuchma forced a constitutional reform bill through the national assembly despite raucous dissent from opponents who called it an excuse for dictatorship. 
Opposition members charged the rostrum to block the vote on a proposal that would hand parliament the power to elect future Ukrainian presidents. But Speaker Volodymyr Lytvyn stole into a corner surrounded by Kuchma supporters and held an impromptu ballot, which passed the first reading of the bill. 
A total of 276 members raised their hands in favor and broke into cheers as furious opponents clambered over desks and scuffled with pro-Kuchma colleagues trying to halt proceedings. The opposition slammed the vote as illegitimate and a bald attempt by Kuchma to prolong his rule. The president, however, first elected in 1994, says he has no intention of running again next October after completing the constitutional limit of two terms. 
"This is sheer falsification," said Viktor Yushchenko, a former prime minister and Ukraine's most popular politician. "There was not a single legitimate moment in this voting procedure." The whole operation is in fact clearly directed at keeping Yushchenko out. He is an able financial economist, but no political tactician. Even though his party, Our Ukraine, won the last parliamentary elections, it has been marginalized in the Rada by pro-Kuchma elements. The rogues are more devious and cunning than the upright central banker.
If the bill is approved by a two thirds majority in March then there would be a country-wide poll in October for a president with reduced powers and a two-year term. Universal suffrage would be replaced by the election of the president by parliament in 2006. 
There are 450 seats in the parliament so that the March vote should be a close-run thing. A lot of lobbying and bargaining must be going on. This sort of horse-trading is where Kuchma is in his element.
It is assumed by the opposition that Kuchma would plan to manoeuvre an ally or business associate into the job for two years before having another stab at the job himself, elected by his cronies in parliament. 
He seems to be planning a fall-back position in case the bill is not approved on its second reading. That is to opt for his own right hand man in his presidential administration as his successor.

The maverick tycoon
Kuchma's chief of staff is a KGB veteran who made a lot of money in the 1990s 'wild east' capitalism, Viktor Mevdevchuk. The Putin of Ukraine, plus the fortune, he could be relied upon, not just to grant Kuchma an amnesty (any successor would be likely to do that), but to be very discreet too. For he must be deeply implicated in all sorts of hanky-panky himself. Hence his vast fortune
He could also be relied upon to continue as in the past to be utterly unscrupulous and condign in pursuit of his ends and his victory. He would subscribe wholeheartedly to the view that the excellent end justifies the means and he has access to the files that will exist on each minister, and parliamentarian and power broker.
It is difficult to see why anyone would vote for him under a system of universal suffrage, but easy to see why local barons, mayors, district governors and the like should want to curry favour with him by massaging the vote in a required manner. But the election would then be a complete farce, with the victor having no legitimacy.
At all events Ukraine is living through interesting times. We shall soon be seeing developments.

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ARMAMENTS

USA buys Ukrainian tanks with "unique" protection system

The Kharkiv-based Malyshev plant recently manufactured and dispatched to the USA several tanks, some of which are equipped with a new dynamic protection device developed by Ukraine. Negotiations about the purchase of Ukrainian tanks by the American military took over two years. By chance or not, the purchase became known against the background of events in Iraq, where, on 28th August, a shell of unknown origin penetrated the 100-mm armour and took out a 69-tonne American Abrams tank.
A representative of the Ukrainian tank-building industry told Defense Express that four T-80UD tanks were sent to the USA. They have varied fittings and protection systems. In particular, three tanks are equipped with the latest Ukrainian development - a complex of built-in dynamic protection with Nizh [Knife] modules, providing protection from all types of antitank weapons, including the most dangerous ones, composite shots. One tank was sent to the USA "naked", i.e. without the dynamic protection.
The possibility of US acquisition of Ukrainian heavy armoured hardware first became known in March 2000. At that time, after negotiations in Washington between former Ukrainian Defence Minister, Oleksandr Kuzmuk, and the then leadership of the American Department of Defence, the press service of the Ukrainian Defence Ministry announced that [then Secretary of Defence] William Cohen had expressed interest in acquiring several samples of Ukrainian armoured tank equipment. In his turn, Hryhoriy Malyuk, who then headed the Kharkiv-based Malyshev plant, explained that the Americans would buy two or three examples of the expensive hardware in various countries to improve their strike potential. 

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CREDIT RATINGS

S&P affirms Kiev B rating

Standard & Poor's Ratings Services recently confirmed its B issuer credit rating on the City of Kiev, the capital and financial centre of Ukraine (B/Positive/B), following a review. The outlook is stable S&P said in a news release.
"The rating on Kiev is based on the economic and financial benefits resulting from its position as the capital and largest city of Ukraine, improved liquidity, and growing debt management experience," said Standard & Poor's Public Finance credit analyst, Boris Kopeykin.
"The ratings are constrained by Kiev's limited fiscal flexibility due to the central government's control of major revenues, and evolving inter-budgetary relations. The city also needs to improve management sophistication and transparency," he said. The rating on the city also reflects significant infrastructure financing needs, growing debt, and high exposure to foreign currency risks. The stable outlook reflects Standard & Poor's expectation that the city's growing economy and personal wealth levels will compensate for potential losses due to the expected decrease in personal income tax from 2004.
The outlook also incorporates Standard & Poor's expectations that the city will maintain political stability and continuity of financial policies, and will increase its operational and financial transparency. Standard & Poor's will monitor Kiev's debt issuance plans.
The debt burden is manageable at this rating level, but debt growth combined with foreign exchange risks is a concern. 

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ENERGY

Ukraine, Russia sign fuel energy protocol for 2004

Ukrainian Energy Minister, Serhy Yermilov, and Russian Energy Minister, Igor Yusufov, recently signed a protocol for 2004 to an agreement between the governments of both countries on cooperation to develop the fuel and energy complex. Interfax News Agency reported the Russian Energy Ministry as saying in a press release that the sides agreed conditions for supplies of Russian fuel and energy resources to Ukraine, and also transit through Ukrainian territory of natural gas, oil and electricity. 
The Russian side will include oil resources for supply to Ukrainian refineries in its crude balance for 2004 and oil will be paid for at contract prices between companies and in line with the laws of both states.

Gas production and transit surge in January-November 2003

Ukrainian gas-extracting enterprises increased production 3.8 percent year-on-year in January-November to 17.798 billion cubic metres, while 6.6 percent more gas transited the country (117.5 billion cubic metres). The Ukrainian Fuel and Energy Ministry said that November extraction increased 3.3 percent year-on-year to 1.638 million cubic metres, New Europe reported.
The country's main gas producers are Ukrgazvydobuvannya (a subsidiary of the national stock company Naftogaz Ukrainy) and the state stock outfit Chernomornaftogaz (wholly owned by Naftogaz Ukrainy). Ukraine's gas transportation system operator is Ukrtransgaz, another Naftogaz Ukrainy subsidiary that holds the monopoly on gas transiting from Russia to Europe.

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PRIVATISATION

Ukraine meets 2003 privatization target

This year the State Property Fund [SPF] of Ukraine has not only for the first time ever met the privatization revenue target set in the 2003 state budget, but even exceeded it by 0.15 per cent, Segodnya has reported. This was achieved even without privatizing the telecom monopoly Ukrtelekom, which has once again been postponed.
SPF head, Mykhaylo Chechetov, has reported that since the beginning of 2003 the sale of state property has fetched approximately 2.2bn hryvnyas, of which the general fund of the state budget has received 2.006bn. Another 10m-15m hryvnyas are to reach state coffers by the end of the year. In addition, state property rental has brought in 149.2m hryvnyas, or almost 7 per cent more than planned. Talking to journalists, Chechetov painted a bright future: in 2004 the privatization target will be exceeded even earlier and by a greater amount, while the progress already made and a list of companies prepared for sale will help to meet the 2005 target.
However, the privatization chief expressed concern at the deep penetration of foreign capital into the Ukrainian economy, citing oil refining as an example. "If Russian capital is just as successful in entering the power industry and the oil and gas sector, this may lead to national economic interests being damaged to a degree," he said. He said that, if special curbs are put in place, a facility can be put out to tender for Ukrainian residents only, without the right to resell it. "The depth of foreign penetration is the water-line of the state's national security. It should be marked at the level of strategic industries," the SPF chairman said.

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TELECOMMUNICATIONS

Cukorova Group may invest US$400m in DCC

A Turkish telecommunications company has announced plans to invest US$400m in a Ukrainian mobile telephone firm. The Cukorova Group will use the funds to participate in a joint venture with Donetsk Cellular Communications (DCC) as the Ukrainian partner, Interfax News Agency has reported.
The Curkorova Group is headed by Mehemet Emin Karamekhet, who is also the chairman of the board of the Turkish mobile phone operator, Turkcell. DCC is a minor provider of the telecommunications services in Ukraine's eastern industrial regions using the US-standard D-EMPS system. The new joint venture will become the third company offering European-standard GSM 900 service on the Ukrainian market.
Ukraine's GSM 900 mobile phone market at present has some 5.6 million users, or roughly one in every nine Ukrainians. Mobile phone usage is increasing by some 30 per cent annually due to falling costs to customers and a strong Ukrainian economy.
Ukrainian Prime Minister Viktor Yanukovih, a former governor of the politically-powerful Donetsk region, told reports in Kiev that the terms of the TsCSU join venture would give the Turkish side a controlling 51 per cent of shares in the outfit. Turkcell already has similar agreements for joint ventures providing cell phone coverage in the former Soviet republics of Azerbaijan, Georgia, Kazakstan and Moldova. Turkcell's gross income for the first nine months of 2003 was some US$1.8bn.
Cukorova Group is a major Turkish investment house with assets according to company statements worth some US$20bn.

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