[Ohio UZO News] Ukraine: NYT editorial; WSJ; EDM; RFE/RL

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The New York Times

EDITORIAL

Three Rivals 

17 October 2008

Late Edition - Final

 

Ukraine's president, Viktor Yushchenko, has called another parliamentary
election -- the third in as many years -- in an attempt to resolve his
never-ending political struggle with his rivals, Yulia Tymoshenko and
Viktor Yanukovich, the current and former prime ministers.

We sympathize with Mr. Yushchenko's vision of anchoring his country in
the West. And if new elections help clear up the political mess, well
and good. The main thing is to make sure these are elections by and for
Ukraine, without meddling from Russia or the West.

Mr. Yushchenko and Ms. Tymoshenko were allies and favorites of Europe
and the United States in the so-called Orange Revolution of 2004.
Thousands of Ukrainians went into the streets to overturn the rigged --
with lots of Russian help -- presidential election of Mr. Yanukovich.

The Orange allies quickly fell out. And Mr. Yanukovich was soon back in
the Parliament -- and, for a spell, Mr. Yushchenko's prime minister. Ms.
Tymoshenko now has that job, much to Mr. Yushchenko's dismay.

While it sounds like a soap opera, the endless wrangling among the three
has become a serious obstacle to Ukraine's hopes for political and
economic reform. Ukraine's geographical division -- and deep-seated
differences of identity and loyalty -- has made it even harder to build
consensus. Mr. Yushchenko is supported by West-leaning Ukrainian
nationalists in the country's west, Mr. Yanukovich by Russia-leaning
eastern Ukrainians and Ms. Tymoshenko is seeking allies and advantage
anywhere she can.

Ukrainians must be allowed to sort out their own problems. Russia's
meddling in the name of a specious sphere of influence is unacceptable.
Countering it with American pressures to join NATO will only stoke
internal divisions, so long as Ukrainians are far from agreed about the
alliance.

The better course at this stage is to encourage Ukraine's hopes of
joining the European Union. Fearful of provoking Russia, the Europeans
resisted American efforts to start moving Ukraine toward NATO
membership. They should not drag their feet on European Union
membership.

All three of Ukraine's rival leaders have declared support for European
Union membership. Letting them know that their country's chances will
increase if they can work together might even help break

 

The Wall Street Journal

Ukraine Discusses Loan With IMF 

Associated Press 

122 words

17 October 2008

A5

 

Ukraine's prime minister said Thursday the International Monetary Fund
is ready to lend the former Soviet republic up to $14 billion to shore
up its financial system but asserted it would only happen if President
Viktor Yushchenko abandons plans for early parliamentary elections.

An IMF delegation arrived Wednesday to provide advice to Ukrainian
authorities and consider extending a loan. Premier Yulia Tymoshenko said
Thursday the Fund was considering loaning Ukraine an amount between $3
billion and $14 billion. The wide range couldn't be immediately
explained.

A spokeswoman at the IMF's Kiev office declined to comment. Talks are
expected to continue well into next week.

 

Eurasia Daily Monitor

October 15, 2008

THE GAS TANGO IN KYIV


With President Viktor Yushchenko's disbanding of the Ukrainian
parliament on October 8 and legal squabbles over new elections, the
continuing Ukrainian-Russian negotiations over 2009 gas supplies for
Ukraine appear to have taken a back seat to the political drama being
acted out in Kyiv.

How these talks will proceed if a new government is formed is anyone's
guess, but time is running out; and not only Ukrainians, but also
Russians and, above all, Europeans, are eager to see a resolution to
these talks, which have become an annual nerve-wracking event shrouded
in mystery and opacity.

The negotiations began on a positive note on October 2, after Ukrainian
Prime Minister Yulia Tymoshenko's meeting with Russian Prime Minister
Vladimir Putin in Moscow.

Initial reports after the meeting indicated that while the price for gas
had not been agreed upon, an outline of a broader agreement apparently
was. This included a three-year pricing scheme that might include
subsidies on Central Asian gas purchased by Russia and then resold to
Ukraine. At the end of this three-year "grace period" Ukraine would
begin to pay world prices. Any such subsidy, however, would not exceed
25 percent according to a Gazprom spokesman (Ukrayinska Pravda, October
8).

Direct commercial dealings between Gazprom and Naftohaz Ukraine without
the use of middlemen companies-a divisive topic in previous
negotiations-was agreed upon as well.

The sides also agreed to allow Gazprom and Naftohaz to explore the
possibilities for joint gas exports from Ukraine to Europe (The Moscow
Times, October 3) In the past Ukraine had been forbidden from
re-exporting Central Asian gas to Europe.

Earlier, the Ukrainian media announced that a company called
KazUkrEnergo had been registered in Zurich, Switzerland. The company
intends to sell Kazakh gas together with Naftohaz and the Kazakh
state-owned KazMunayGaz to European clients (Ekonomichna Hazeta,
September 29).

This year's negotiations involve a number of disparate factors:

The key issue is the price Central Asian gas producers will charge
Gazprom for their product, which is then resold to Ukraine. Earlier in
2008 Turkmenistan announced that it intended to charge "world prices"
for its gas in 2009. Kazakhstan and Uzbekistan announced that they
intended to follow suit. The price, however, has still not been
announced. The internet website Ukrayinska Pravda quoted Naftohaz
chairman Oleh Dubyna on October 2 as saying that he expected the gas
price for Ukraine in 2009 to be in the vicinity of $250 to $300 per
1,000 cubic meters. Ukraine imports almost 50 billion cubic meters of
gas annually. The current average price for Russian gas sold to European
buyers is over $500 per 1,000 cubic meters.

How much Central Asian gas does Russia need to sell to European
customers, and at what price, in order to avoid shortfalls in Russia? In
2007 and 2008 Russia apparently needed 10 billion cubic meters (bcm) to
make up for falling gas production. These 10 bcm were sold to European
consumers by a questionable middleman, RosUkrEnergo (RUE), which has
often been accused by Ukrainian Prime Minister Yulia Tymoshenko as
having links to Russian organized crime.

Unexpectedly, on October 7 Anatoliy Podmyshalsky, the director of
Gazprom Zbut Ukrayina, a company created in 2008 to market gas in
Ukraine, told the newspaper Kommersant Ukrayina that Gazprom was
considering proposing to the Ukrainian side that it buy Russian gas and
that Central Asian gas be sold to Europe. "Only in this way can Ukraine
buy gas at below market prices," the paper wrote.

In return for selling discounted Russian gas, Gazprom would purchase
Ukrainian domestic gas distribution companies.

It is difficult to say with certainty what the price of Russian gas will
be in 2009 given that gas prices are linked to world oil prices which
have decreased significantly in the later part of 2008. The usual period
for gas prices to catch up with oil prices is about one year.

During the Tymoshenko-Putin meeting, Putin suggested that gas supplies
could be influenced by political instability in Kyiv and the alleged
Ukrainian arms sales to Georgia during the August war.

This was said only in reference to the Tymoshenko-Yushchenko falling
out. When Putin stated that if a new government were to come to power in
Ukraine, however, they could declare the gas agreement null and void.
This was clearly a reference to Ukraine's arming Georgia and not a
marginal comment and could be seen as a form of political-economic
pressure on Ukraine to toe the Russian line on South Ossetia and
Abkhazia.

The results of the 2009 gas price negotiations will have implications
not only for the profitability of Ukrainian enterprises but for European
energy security and, down the line, for such critical issues as 2009
food crops in Africa and Asia, which buy Ukrainian fertilizer, the
production of which uses huge amounts of gas.

If snap parliamentary elections do take place and result in a government
top-heavy with members from Tymoshenko's BYuT Bloc and Party of the
Regions, the gas negotiations will in all likelihood not be greatly
affected.

--Roman Kupchinsky


Radio Free Europe/Radio Liberty

October 16, 2008 

In Ukraine, Impact Of Global Crisis Beginning To Sting 

by Maryana Drach, Iryna Shtogrin 

KYIV -- Political uncertainty is nothing new for Ukrainians. But
financial uncertainty is something different -- and deeply unwelcome. 

As the effects of the global financial crisis take hold around the
world, money flows have become a source of extreme anxiety in Ukraine.
On the streets of the capital, many residents expressed worry about the
fate of their savings. 

"I went to Privatbank to withdraw money from my active account, which
I'm supposed to be able to use any time," says one man. "They told me to
go away; they didn't give me anything. I'm still fighting about it.
Tomorrow I'm going to go and file a lawsuit."

"I have doubts," says another. "This is one of those situations where
money is controlling people, rather than people controlling their
money." 

Others were more sanguine. "I trust the banks. The interest rates
haven't gone down and our bank is working normally," says one woman,
adding, as an afterthought: "When my deposit comes in December, I can
take the money out and put it someplace else." 

'Strict, But Correct'

Officials at Ukraine's central bank are all too aware of the risks of
public jitters. 

Citing a "psychological factor," the National Bank of Ukraine (NBU) this
week decided to impose limits on lending, foreign-currency trade, and
early withdrawals of certain deposits. 

The decision, taken October 13, came after National Bank depositors --
unnerved by mounting inflation and a weakening currency -- withdrew more
than $1.3 billion from their accounts in just under two weeks. It's
hoped the steps will prevent a full-scale run on the bank by panicking
citizens. 

The NBU was also forced to provide a $1 billion stabilization loan to
the country's sixth-largest bank, Prominvestbank, which failed after
panicked depositors in the eastern region of Donetsk rushed to withdraw
their money. 

Vyacheslav Yutkin, who serves as chairman of the board of the Ukrainian
branch of Russia's Sberbank, says the NBU's measures were appropriate
but too slow in coming. 

"The methods of the Ukrainian National Bank are strict, but correct.
It's an important and necessary preventive measure," Yutkin says. "If
the National Bank had reacted two weeks earlier, banks would have had
the chance to hold on to at least $1.5 billion in accounts, and the
current liquidity crisis wouldn't be so bad. But it took a long time for
them to make a decision, and that made the crisis even worse." 

Pieces Of The Puzzle

Some officials are still offering an upbeat assessment of the economic
climate. Economy Minister Bohdan Danylyshyn on October 15 noted
Ukraine's 2008 GDP growth stayed steady at 7 percent through September,
and still remains strong despite "some decline" in certain sectors. 

Other authorities have expressed confidence that Ukraine will escape the
worst of the damage brought on by the global financial crisis because
the country's still-developing stock exchange is less vulnerable to the
vagaries of market fluctuations. 

It is difficult to gloss over other indicators, however. Inflation
peaked in May at 31 percent -- putting Ukraine higher than any other
country except Zimbabwe and Venezuela -- before dropping to a less
alarming 16 percent in September. The value of the local currency, the
hryvnya, last week sank by 20 percent, forcing the NBU to intervene and
sell dollars at an artificially low rate.

With such figures in mind, many economy-watchers acknowledge Ukraine
will not be able to avoid the long-term effects of the crisis. 

This will be particularly true if a global economic and construction
slowdown shrink the global market for commodities like steel, which is
Ukraine's top export and responsible for 40 percent of its hard-currency
earnings. Many steel mills have already slowed or stopped production
because of a drop in worldwide demand. 

A global recession would also have a dramatic impact on remittances for
Ukraine's large migrant workforce. Ukraine is second only to Russia in
remittances in Central and Eastern Europe, sending home nearly $8.5
million a year -- an estimated 8 percent of the country's GDP. 

Wild Card

Then there is the critical factor of the price Ukraine will pay for
Russian gas in 2009. 

Ukraine currently pays just $180 per 1,000 cubic meters. But Russia has
repeatedly said it wants former Soviet states to switch to market
prices, and has pointedly noted its fees for Western European markets
exceeded $500 in October. 

A sudden hike in Ukraine's gas prices could have a devastating effect on
the country's financial reserves -- although not everyone is worried. 

"We shouldn't forget that Ukraine has almost $40 billion in reserves;
that's more than enough," says Oleksandr Suhonyako, the head of the
Association of Ukrainian Banks, a grouping of the country's major
commercial banks and credit institutions. "But the financial crisis
isn't going to be over soon, and it just keeps growing every day. I
think it's not a matter of a month, but half a year, or even more. In
order the meet the problems of the future, we need to start thinking
about international loans now." 

Prime Minister Yulia Tymoshenko, speaking at a news conference on
October 14, avoided answering a question of whether Ukraine was seeking
help from the International Monetary Fund (IMF). 

Such a move would be interpreted by many as a sign that Ukraine's
economy was in deep trouble. Instead, Tymoshenko -- perhaps looking
ahead to a presidential bid in 2010 -- stressed that the government was
doing "everything possible and impossible" to minimize the impact of the
global crisis on Ukraine. 

But an NBU official said on October 15 that Ukraine might seek support
from an IMF credit program. Hungary, Serbia, and Iceland have already
said they will approach the IMF for help gaining access to credit and
defending their currencies investors' risk aversion. 

Finance Minister Viktor Pynzenyk has begun meeting with members of an
IMF expert mission that arrived on October 15, and the two sides
"discussed the situation concerning the world financial crises and the
challenges facing Ukraine's financial system," Reuters reported. 

The statement added that both sides agreed to produce "recommendations
for Ukraine vital for the operation of the banking sector and
macroeconomic stability for Ukraine, based on the experts' assessment
and taking account of the experience of other European countries."

Reuters reported that the IMF's Kyiv office made no comment on the
mission, adding that it was expected to remain in Ukraine for at least a
week. It cited estimates of the potential IMF largesse to Ukraine at $3
billion-$5 billion.

Speaking to reporters after a cabinet session on October 16, Reuters
quoted Tymoshenko as saying that "we have information" that the IMF "is
ready to examine special credits from $3 billion-$14 billion to
stabilize the financial system," but that it would be contingent on
Ukraine calling off early elections announced last week by President
Viktor Yushchenko.

No Rapid Reaction?

Accordingly, it's the government's own internal struggles that may prove
one of the greatest liabilities as the country fights against impending
economic woes. 

Ukraine in December is facing its third set of parliamentary elections
in as many years, a result of intractable squabbling between Tymoshenko
and Yushchenko. The pair's Orange Revolution partnership in 2004 quickly
devolved into an intense political rivalry that has mired Ukraine in a
protracted political standoff and may continue until 2010, when the two
are expected to face off for president.

Yutkin says Ukraine has grown accustomed to political uncertainty, and
that the ongoing political drama will not have a noticeably adverse
affect on economic conditions. 

"I think politics are having only minimal influence in this situation,"
he says. "The economic system in Ukraine adapted a long time ago to the
conditions of political instability and inflation. Higher prices and
political upheaval aren't the main factors causing panic among bank
depositors." 

The World Bank, however, warned this week that policymakers in Eastern
Europe and Central Asia "need to be prepared to respond quickly to the
rapidly changing international financial environment." Some worry that
Ukraine's constant cycle of elections and political infighting mean
little, if any, decision making will be done in the interim.

 

 

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