Books on Ukraine
Update No: 307 - (27/07/06)
Ukraine's future looks less orange than lemon
Everything was meant to change in Ukraine as a result of the Orange Revolution
in the last three months of 2004. We are now confronted with the fact that in
reality it was a Lemon Revolution.
Corruption and cronyism were supposed to give way to transparency and democracy.
"Bandits" were meant to be jailed, dubious privatisations were meant
to be reversed. EU and Nato membership appeared to be within reach.
It has not quite worked out like that - though some important goals were
achieved. Pinpointing the most important gain, "the main achievement of the
Orange Revolution was freedom of speech," says Taras Berezovets, chief
editor of the Ukrainian political website, Polittech.org.
"Another benefit has been freedom of business. Politicians stopped
interfering, and we now have an economic boom, which has continued despite
recent political crises."
A parliamentary election in March, unlike many previous elections, was free and
fair - so much so, that the winner was the man who "lost" the Orange
Revolution, the pro-Russian former prime minister Viktor Yanukovych.
He has now been nominated again for the premiership, which, under constitutional
amendments brought in after the Orange Revolution, would make him the most
powerful man in the country.
The Lemon Revolution
But many of the Revolution's promised changes did not occur. Everything has
Corruption allegations still dog some government ministers. Political parties
resemble business clans, bankrolled by tycoons who often double as members of
parliament. Reports of vote-buying are rife.
Things started to go wrong from the very start.
Any political goals the leaders of the Orange Revolution may have shared were
forgotten during the coalition government headed by Yulia Tymoshenko, which took
office in February 2005, and quickly descended into in-fighting.
Ms Tymoshenko accused Mr Yushchenko's inner circle of corruption. He sacked her,
and accused her of abusing her position to repay debts.
Mr Yushchenko then outraged many of his own supporters by turning to his rival,
Mr Yanukovych, for help in a parliamentary vote to confirm his new prime
During the Revolution it had been Yushchenko and Tymoshenko against Yanukovych.
Suddenly it was Yushchenko and Yanukovych against Tymoshenko, who voted against
Mr Yushchenko's nominee.
In the months since the March election - in which his party came a poor
third - Mr Yushchenko has been faced with a choice of which enemy to form a
coalition with: Ms Tymoshenko or Mr Yanukovych. Ukrainian commentators say he
negotiated with both simultaneously, dragging the talks out for months in an
attempt to extract maximum concessions.
Finally, he struck a deal with Ms Tymoshenko, and with the Socialist Party as a
junior partner, just as in 2005. But within days the Socialists had second
thoughts and opted instead to join a coalition with Mr Yanukovych.
Now Mr Yanukovych has the upper hand, and is inviting Mr Yushchenko's party to
join his coalition.
Mr Yushchenko now has to decide whether to agree, or whether it would be better
for his Our Ukraine party to go into opposition.
A third option, favoured by Ms Tymoshenko, would be for him to dissolve
parliament and call new elections.
"It is a Catch 22 situation," says Taras Kuzio, a senior fellow of the
US body, the German Marshall Fund.
"Yanukovych as prime minister would overshadow Yushchenko. Yushchenko would
be sidelined. And his supporters would desert him in droves, going over to
Tymoshenko. Politically, he would be finished.
"But if he calls fresh elections it could be even worse."
Taras Berezovets of polittech.org agrees that new elections held now would
simply reduce Our Ukraine's share of the vote from 14% in March to 9% or 10%.
What a new Yanukovych government would mean for Ukraine and for the legacy of
the Orange Revolution is an open question.
For example, the "anti-crisis coalition" formed by his Party of
Regions, the Socialist Party and the Communist Party, pledges to continue moving
towards Mr Yushchenko's goal of EU membership and to abide by any result of a
referendum on Nato membership.
"Yanukovych claims he is a new man, and is not going back to the bad old
ways," says Taras Kuzio. "We simply do not know whether he will have
to work within the parameters of the post-Orange system or not."
How long a Yanukovych government would last is also unclear.
The Party of Regions' big business backers do not have much in common with the
Communists, and neither group has much in common with the more
"Orange" members of the Socialist Party, some of whom have already
begun splitting away.
So whatever happens next, Ukraine seems far from a return to political
stability. But it is certain that no single party can command sufficient support
to form a government alone and that in the maelstrom of Ukrainian politics, how
long ANY coalition will hold together is highly speculative. Uncertainty seems
inevitable for the foreseeable future. Although circumstances can change with
great rapidity, nothing in any way concrete is thus far on the horizon.
Kredobank national scale ratings assigned
Standard & Poor's Ratings Services said recently it assigned its B/C
counterparty credit ratings to Ukraine-based JSC Kredobank. At the same time, it
assigned its uaBBB Ukraine national scale rating to the bank. The outlook is
stable. "The ratings on Kredobank reflect its low capitalisation and
profitability, modest domestic market position, and above-average credit
risk," said Standard & Poor's credit analyst Annette Ess, New Europe
In addition, the bank operates in the unstable political and macroeconomic
environment in Ukraine (foreign currency, BB-/Stable/B; local currency,
BB/Stable/B). Supporting rating factors are its good franchise in Western
Ukraine, focused organic domestic retail growth strategy, which is being
implemented by an experienced management team, support from its strategic
shareholder Powszechna Kasa Oszczednosci Bank Polski (S.A.) (PKO; BBBpi), and
good corporate governance. Standard & Poor's said in a press release the
bank will be able to successfully implement its domestic retail growth strategy
supported by its shareholders' experience and capital contributions, and
maintain control over credit and market risks, as reflected by the stable
outlook. Higher creditworthiness will depend on a longer track record of support
and increased integration with PKO, marked improvements in capitalisation and
profitability, and a decrease in lending concentrations as a percentage of
MINERALS & METALS
Mittal Steel Kryvy Rih raises prices 2.5-5.8%
Mittal Steel Kryvy Rih, Ukraine's biggest steelmaker, on July 1st raised
factory-gate prices for its products by an average of 2.5 per cent to 5.8 per
cent from a month earlier, the company announced, citing changes in prices for
inputs and energy, Interfax News Agency reported.
The company said that despite the price increases it is continuing to pursue a
marketing programme aimed at boosting sales of finished product on the domestic
market. The level of sales on the domestic market has been growing constantly in
recent months thanks to a favourable market situation.
Mittal Steel Kryvy Rih, formerly known as Kryvorizhstal, raised prices by US$25
per tonne on June 1st for all its steel products with the exception of rods,
prices for which were raised on July 1st, by US$18-US$48 per tonne (including
VAT) depending on diameter.
Mittal Steel Kryvy Rih, which has about a 20 per cent share of the Ukrainian
steel market, ships up to 50,000 tonnes of rods to the domestic market per month
and produces a total of about 72,000 tonnes. Overall monthly output is 620,000
tonnes, of which 120,000-130,000 tonnes are sold domestically.
The company exported to 80 countries in the first half of 2006, including
Algeria, Syria, Libya, Jordan, Italy, India and Pakistan. Asked whether
Ukrainian metalware plants would respond by increasing imports of rods,
particularly from Russia, Boiko said this issue has not been discussed yet.
A representative of a metals trading firm said Mittal Steel Kryvy Rih had
invited 15 metal traders, including Comex, Leman and Metall Holding, to a
meeting in Kiev on July 13th to discuss shipments of metal products. The talks
are expected to continue on July 14th at the steel works.
But the representative voiced doubts that the meeting would bring results, and
said it was an attempt to divide market participants.
An official at the Industrial Policy Ministry, which consistently advocates the
need for expanding domestic consumption of steel products and a policy of
restraining prices, said Mittal Steel Kryvy Rih had not invited the ministry to
Turkmen gas agreement no longer valid
Turkmenistan considers the agreement on delivering gas to Ukraine in 2006 to be
no longer valid, a statement by the Turkmen Foreign Ministry read. A Ukrainian
delegation headed by Ukrainian Fuel and Energy Minister, Ivan Plachkov, held
talks at the Turkmen Oil, Gas and Mineral Resources Ministry on June 29-30, New
"The delivery of Turkmen natural gas to Ukraine was discussed. The parties
agreed that after the agreement on delivering Turkmen natural gas to Ukraine had
been signed in 2006, Russia's Gazprom did not give a licence to transit the gas,
saying that the pipeline in Uzbekistan, Kazakstan and Russia which is used to
deliver gas to Ukraine has the capacity of some 150 million cubic metres of gas
per day. Assuming these conditions, the agreement expired and Turkmenistan
considers it outdated," the statement read. "Turkmenistan proposed
that Ukraine sign a contract on gas deliveries to Ukraine for the fourth quarter
at a price of US$100 per 1,000 cubic metres of gas. It was also proposed that
Ukraine urgently acquire a licence to transit the volume of gas to be provided
by the contract across Russia," the statement read.
Naftogaz transits 62.28 bcm of gas in H1
Ukrainian national oil and gas company, Naftogaz, ensured the transit of 62.28
billion cubic metres of gas in the first half of 2006, including 57.09 billion
cubic metres to European countries. The company exceeded its target by 139
million cubic metres, or 0.2 per cent, and was 752 million cubic metres or 1.3
per cent above target for gas transit to Europe, Naftogaz reported.
The company also implemented its commitment before the trader RosUkrEnergo A.G.
(Switzerland) to withdraw gas from underground storage facilities and transit it
to Europe. In the first four months of 2006, Naftogaz withdrew over one billion
cubic metres of gas from underground storage facilities and transferred it to
IBRD to provide US$154.5m to Ukreximbank
Ukraine's State Export and Import Bank (Ukreximbank) is planning to raise
US$154.5 million from the International Bank of Reconstruction and Development,
part of the World Bank, under a government guarantee to implement a programme to
support export enterprises, the Ukrainian Finance Ministry said in a statement
posted on its website.
A Ukrainian delegation including finance ministry representatives will hold
talks with the IBRD from June 26-30 on a guarantee agreement to implement a
second project to develop exports, the statement says. The first project was
implemented in 1997-2004. "A loan of US$154.5 million will be raised to
implement the second part of the export project," the statement says.
"Ukreximbank will take out the loan and also implement the project. The
Ukrainian government will guarantee the loan," the statement read.