[Ohio UZO News] Ukraine: AP; KP; NYT; EDM (2)

[Deychak, Orest]

Associated Press

Experts say Ukraine's currency plunge just the beginning of tough times
amid global crisis 

By MARIA DANILOVA and YURAS KARMANAU 

Associated Press Writer

24 October 2008

06:49

KIEV, Ukraine (AP) - Construction cranes have stopped swinging and
thousands of steel workers face layoffs as Ukraine braces for a severe
economic downturn.

Lacking the large foreign currency reserves of China and Russia, more
integrated into the world economy than some smaller countries, Ukraine
is being hit harder than other former Soviet states by the global
financial crisis.

"Ukraine has been exposed as the most vulnerable," said Jan Randolph, an
emerging markets analyst at Global Insight.

On Thursday, the Ukrainian currency plunged against the dollar to a
historic low amid a run on banks and a frantic rush to convert savings
into U.S. currency. Ukraine's hryvna plummeted to 6.01 hryvna per U.S
dollar in trading at Ukraine's currency exchange.

Jittery customers lined up to buy dollars at exchange offices across the
capital, some of which ran out of cash. The country was already short on
foreign currency as demand for steel, its main export commodity,
plunged. The Ukrainian currency has lost more than 20 percent since
September.

Four years of robust economic growth left Kiev clogged with shiny
imported automobiles and dotted with upscale fashion outlets. Real
estate prices exceeded those of Rome for a time and the stock market
gained an astonishing 130 percent in 2007.

But today, experts agree, Ukraine is in for tough times.

Falling demand for steel was widening the external trade deficit to a
hefty $12.5 billion so far this year, compared to $5.9 billion last
year. After excessive reliance on foreign credit to feed its vast
consumer boom, which sent Ukrainians rushing to buy mobile phones, cars
and apartments on credit, the economy was hit hard when panicked foreign
investors abandoned emerging markets and European banks slashed lending,
crippled by their own liquidity crunch. Inflation soared to 31 percent
in May, year over year, and cooled to 16 percent in September.

The government spent $2.9 billion buying hryvnas to support the currency
this month alone, bringing its reserves down to $34.2 billion, according
to the central bank. One global rating agency after another has
downgraded Ukraine's creditworthiness.

Today Ukraine is pinning its hopes on a loan of up to $14 billion from
the International Monetary Fund. But unlike Hungary, which has also
turned to the IMF for money, Ukraine does not benefit from European
Union aid.

Plans to receive the much needed loan were threatened by a marathon
political struggle between President Viktor Yushchenko and Prime
Minister Yulia Tymoshenko, as the IMF negotiating team could not be
certain if the next government would stick to the commitments of the
current one.

A standoff over early elections, which Tymoshenko wants to avoid to
retain her job, has further soured the investment climate as Ukrainian
stocks lost more than 70 percent of their value this year.

"This will hurt," said Olena Bilan, a a macroeconomic analyst with
Dragon Capital investment bank. "It will be painful in any case. The
question (is) how painful it will be."

The effects of the financial crisis have been quick to trickle down into
the real economy. Banks have hiked interest rates and slashed lending,
for example, bringing the car boom to an abrupt end.

Output in the construction industry, which is highly dependent on loans,
was down 7.2 percent compared to last year's figures, according to
Dragon Capital. The real estate market has seized up and many real
estate agents have been forced to look for new jobs. Investment banks in
Kiev have also slashed jobs.

Anna Kiptenko, whose firm services cash registers for retail traders,
was promised a $100,000 loan for her business but the bank froze the
money. Now she can't afford to pay for her son's law studies in Kiev.

"The government is assuring us that there is no crisis but I can see
that it is already here," said Kiptenko, 42, as she emerged from an
office of Pravex bank in downtown Kiev.

Experts say the expected IMF loan will save the country from all-out
collapse. "They want to cool the economy in general to avoid a crash
landing," said Randolph.

But a deep economic slowdown appears inevitable.

Ukraine exports steel and cast iron to the Middle East, Europe and
former Soviet Union countries, where they are used in housing
construction, machine and ship building. But production by the country's
metal industry, which represents 6 percent of the GDP and accounts for
40 percent of the country's exports, was down by 30 percent.

Steel magnate Serhyi Taruta, chairman of the Industrial Union of Donbas,
told the newspaper Kommerstant Ukraine that his company plans to lay off
as many as 20,000 people.

Dragan Capital's Bilan predicted the economy, which grew at an average
7.4 percent over the past four years, will slow to 4.8 percent this
year.

Tymoshenko urged Ukrainians to "tighten their belts" and proposed to
raise taxes for the rich.

Yushchenko, meanwhile, called for the laying off of every fifth state
bureaucrat, promising to start with some in his own office.

Ukraine faces further stress from a likely hike in the cost of its
natural gas, almost all supplied by Russia. That could mean a drastic
increase in utility bills.

"There will be a lot of angry people," said independent financial
analyst Geoffrey Smith.


Kyiv Post

Opinion <http://www.kyivpost.com/opinion> 


Nihilism on high


22 October 

When leaders don't even obey the law, what hope is there for the rule of
law?

It seems like everyone has stepped over laws and the Constitution lately
- the president, the prime minister, judges and parliament deputies.
They employed tactics that makes one wonder whether these politicians
have any understanding of their role in society: to protect the
Constitution, to pass laws, to referee disputes.

The chain of questionable actions started when the president dismissed
the Verkhovna Rada on Oct. 8 and called for a new election on Dec. 7.
The constitution gives the president powers to dismiss the legislature,
but only after a full year since the last early election. Legally, he
would have needed to wait until Nov. 23 to dismiss parliament.

With step two, Prime Minister Yulia Tymoshenko's bloc challenged his
move in a city court. Because early elections are a matter regulated by
the Constitution rather than regular laws, only the special
Constitutional Court has the power to rule on it - in theory. So the
move was obviously designed to delay the process, not stall it. The sad
thing is that Tymoshenko's lawyers would have known its questionable
status, but ignored it to achieve her goal.

In step three, the city court cancelled the early elections rather than
send the case on to a higher court, a move that greatly angered the
president and started a war against the judiciary.

In step four, the president made retroactive changes to his own 2007
decree that appointed the judge who issued the ruling. Such changes in
legal documents are a tactic commonly used by raiders to take over
private companies. This time, it was employed by the president in a
dispute that concerns the whole nation. The president also seems to have
ignored laws on courts and on the status of judges that clearly spell
out the lengthy procedure for dismissal of judges.

In step five, the president dismissed the whole city court on Oct. 13.
Section 23 of article 106 of the Constitution allows the president to
create courts. But their dismissal is a complicated procedure that takes
more than a single day and involves a number of state officials.

In step six, on Oct. 14, the president created two new city courts
instead of the one he dismissed, although there is a legal requirement
that the city of Kyiv should have a single city court.

In step seven, the Kyiv oblast court restored the original city court on
Oct. 15, and in step eight the president's administration appealed this
decision in the court of appeals.

Complicating the matters further, in step nine the president technically
restored the city court he had canceled before, then immediately
dismissed it, creating four courts instead - two city courts and two
appeals courts on Oct. 17.

In step 10, the president's side announced the same day that one of the
new courts upheld the original presidential decree dismissing the Rada.
This is another bit of legal nonsense because there is a procedure for
moving cases between courts that takes more than two weeks to complete
and allows both sides to appeal the move. None of that was observed.

In step 11, the president issued a brand new decree moving early
elections to Dec.14, and making the whole previous process completely
redundant. A day later, on Oct.21, the appeals court postponed the
hearing on the original presidential decree until Oct.24, saying half
the documents were missing from the case. Tymoshenko's allies
immediately accused the president of "stashing them away in his safe." 

This judicial and political soup was spiced with a number of highly
alarming trends.

The executive branch cannot legally dismiss the judicial branch at will.
There is a procedure for it, and it has to be observed by all political
players, including the president - but it was not. There are strong
calls to restart the long-postponed judicial reform, but it's unclear
how it would help in this mess and who would be able to carry it out in
the first place and then implement it, if the country's top officials so
readily ignore laws, apply pressure and intimidate judges.

Alarmingly, the dismissal of courts and removal of judges wasn't even a
precedent. Last year the president dismissed a judge in the Pechersk
district court in Kyiv on a whim. Both times he ignored the legal
procedure.

On the other hand, Tymoshenko's deputies, abusing their immunity,
physically blocked three courts for several days to force judges to
speed up rulings. The president reacted by ordering the State Security
Service to keep special guards inside court premises. Both of these
actions can be interpreted as pressure, and the high administrative
court -- one of the victims -- appealed to the prosecutor demanding to
start criminal proceedings against the people involved.

Unless judges are free of fear and pressure, there is no justice. Unless
all branches of power observe law, democracy becomes an oxymoron. Unless
all political players sacrifice their ambition and do their job right,
it doesn't matter how many parliamentary and presidential elections are
held and how often - the country will stay in a mess.

The New York Times

Ukraine: Russian Lease Proposal Denied 

By THE ASSOCIATED PRESS 

24 October 2008

Late Edition - Final

11

 

Ukraine has turned down a Russian proposal to extend the lease for the
naval base used by the Russian Black Sea Fleet. Russia would like the
fleet to remain in the Crimean port of Sevastopol after the lease
expires in 2017. The Kremlin is eager to maintain its strategic foothold
on the Crimean Peninsula, which was ceded to Ukraine in 1954 when both
Russia and Ukraine were part of the Soviet Union. Ukraine's Foreign
Ministry said in a statement on Thursday that a lease extension ''cannot
be a subject of discussion'' and that Russian ships would have to leave
Ukrainian waters in 2017. Russia has indicated that it might wait to
negotiate a new lease when 2017 draws closer in the hope that Ukraine's
pro-Western president, Viktor A. Yushchenko, will be out of power by
then.

Eurasia Daily Monitor

October 23, 2008

MOSCOW SEEKS MORE EXCUSES FOR PROLONGING NAVAL PRESENCE IN SEVASTOPOL


For the first time since the Soviet era, Russia's Black Sea Fleet
undertook an offensive operation in August of this year when it attacked
Georgia, landing Russian ground forces in Abkhazia. The Russian Fleet,
mainly based in Sevastopol, misused Ukraine's territory and abused
Ukraine's neutrality in launching that operation. It did so with
impunity, underscoring the deficit of usable power, political
leadership, and international rule of law in the Black Sea region.

The Russian Fleet now plans to use the prized Ochamchire base on the
Abkhaz coast, which is legally sovereign Georgian territory (Vremya
Novostei, October 21; see EDM, October 22). The Turkish-Russian naval
condominium, which exists de facto in the Black Sea, did not inhibit the
Russian fleet from attacking Georgia.

In late September and the first half of October, ships of Russia's Black
Sea Fleet joined flag-showing exercises by the Russian Navy in the
Mediterranean Sea and visits to Soviet-era base locations there. While
the fleet's overall combat value is very low at present, Russia's
leaders think 10 years ahead in terms of ship-building plans, premised
on oil and gas revenues, for uncontested naval supremacy over
neighboring countries and a possible renewed presence in the
Mediterranean.

The Black Sea Fleet, moreover, seems potentially usable in the Crimea
much as the Russian ground troops proved usable in Abkhazia and
Transnistria, where their presence helped carve out a zone of Russian
control. The Crimea has not become a "hot spot" (conflict zone), as
Ukrainian officials such as State Security Service acting chairman
Valentyn Nalyvaichenko correctly point out (Izvestia, October 22). But
Moscow holds enough cards to hint at a potential conflict, for political
leverage over Kyiv's decisions on the Russian fleet and Kyiv-NATO
relations.

In their cumulative effect, these recent developments have clearly
enhanced the Black Sea Fleet's value in the eyes of Russia's leadership,
lending an added impetus to plans for retention of the Sevastopol base
in the future.

On October 22 Russian Minister of Foreign Affairs Sergei Lavrov
announced that Russia would request Ukraine to prolong the stationing of
Russia's Black Sea Fleet in Sevastopol beyond 2017, when the basing
agreement is due to expire. Lavrov said that Russia would not make its
proposal to Ukraine any time soon but "at some later stage, closer to
2017" (Interfax, October 22).

Such timing, however, would leave almost no room for Russian compliance
with the deadline, in the event that Ukraine turns down Moscow's
proposal. The Fleet's physical relocation from Sevastopol to Russian
territory would be a multi-year process and could be dragged out longer
than necessary by Russia. Starting the discussions with Ukraine "closer
to 2017" would, therefore, ensure the prolongation of the Russian
fleet's presence in Ukraine beyond the deadline, de facto if not de
jure.

The basing agreement, signed in 1997 and valid for a 20-year period, can
be prolonged automatically unless either side terminates it with
one-year advance notice. This procedure puts the onus on the Ukrainian
authorities. Moscow probably hopes that a divided Ukrainian government
and body politic may not be able to reach, sustain, and enforce a
decision to terminate the basing agreement.

Moscow is already laying out the strategy for retaining its naval
presence on Ukraine's territory in the future. The strategy includes
potentially coercive aspects as well as inducements.

On the coercive side, Russian officials including some at the top, are
openly questioning Ukraine's territorial integrity (also inspiring the
Duma to do this), with particular reference to the Crimea and
Sevastopol. The possibility of Moscow using local groups to "raise the
Russian flag" over Sevastopol and the Crimea, if Kyiv no longer accepts
hosting the Russian fleet, lurks distinctly in the background to the
continuing debates on the basing agreement (see EDM, February 14, April
4, 7, 10, 11, May 13, 14, June 18).

On the inducement side, the Russian government proposes to: a) increase
the rent it pays to Ukraine for leasing the Sevastopol base (a paltry
$98 million per year under the 1997 agreements); b) invest Russian funds
for the development of the civilian infrastructure in Sevastopol and the
Crimea, in the local population's interest (evidently an accompaniment
to naval base upgrading, if Ukraine prolongs the basing agreement); c)
place Russian state orders with Ukrainian military-industrial plants in
the Crimea and elsewhere in Ukraine (including the now-idle Ukrainian
shipyards along the seacoast, as well as certain favored plants on the
Ukrainian mainland). Russian Defense Minister Anatoly Serdyukov has held
out this package of incentives twice recently (Interfax, September 23;
Vremya Novostei, October 21).

Serdyukov also supervises (alongside Deputy Prime Minister Sergei
Ivanov) the naval base construction program. That program's Black Sea
dimension focuses on the expansion and modernization of the Novorossiysk
base until 2020. It now seems likely to include re-commissioning and
modernizing the ex-Soviet submarine base at Ochamchire.

The Black Sea Fleet also expects to be reinforced with new ships, some
new and others transferred from other Russian fleets. If those
reinforcements do materialize at Novorossiysk and Ochamchire, the
Kremlin will undoubtedly argue that it has nowhere to move the Feet from
Sevastopol ahead of 2017 and will use that additional excuse for
prolonging its naval presence on Ukrainian territory.


-Vladimir Socor



Eurasia Daily Monitor

October 22, 2008

TYMOSHENKO OPPOSES EARLY ELECTION IN UKRAINE


On October 9 Ukrainian President Viktor Yushchenko disbanded parliament
and scheduled an early parliamentary election for December 7. This was
the result of the breakup of the ruling coalition of Yushchenko's Our
Ukraine-People's Self-Defense bloc (NUNS) and the bloc of Prime Minister
Yulia Tymoshenko (BYT) in September (see EDM, September 8). Efforts to
restore the coalition fell through, and no new coalition emerged. This
legally entitled Yushchenko to disband parliament.

BYT, the only big party opposing an early election, has vowed to use all
means to prevent the vote. It tried to override Yushchenko's election
decree with the help of the courts, and the BYT-dominated government
blocked the allocation of funds to organize the election. As a result,
Yushchenko rescheduled the election for December 14. Given the BYT's
determination, he may have to reschedule it again.

The majority of NUNS and the PRU, as well as two smaller parties
represented in parliament-the Lytvyn Bloc and the Communists-welcomed
Yushchenko's decision to call an election (Ukrainska Pravda, October 8).
Tymoshenko, however, rejected it. "I am sure that there will be no early
election, because this country does not need it," she said. Tymoshenko
argued that a snap election would prevent parliament from quickly
passing the state budget for 2009, which would not be good amid the
financial crisis. Her opponents, however, claim that she fears she will
lose the post of prime minister if an election is held (Ukraina TV,
October 10).

Electoral sympathies have hardly changed since the September 2007 early
election, as a result of which Tymoshenko became prime minister. Her
coalition with Yushchenko, however, had only one seat more in parliament
than needed for a simple majority, so even a small change in voter
preferences may have serious consequences. "If the PRU receives 2 to 3
percent more than last year and the BYT receives 2 to 3 percent less,
the PRU should be able to set up a coalition with Lytvyn's Bloc and the
Communists," said Volodymyr Fesenko of the Kyiv-based Penta think tank
(www.for-ua.com, October 9).

Tymoshenko should not score less than in 2007, as the popularity of her
bloc has not diminished; what is more, she has acquired new allies who
defected from Yushchenko's camp. Interior Minister Yury Lutsenko's
People's Self-Defense (NS), which has been the junior partner of
Yushchenko's Our Ukraine (NU) NUNS, will not join Yushchenko again.
Lutsenko has urged "all democrats" to unite with the BYT
(Interfax-Ukraine, October 10). What is more, the NU itself is falling
apart. The leaders of several small parties comprising the NU, including
the People's Movement (Rukh), the Christian-Democratic Union, and the
European Party, backed Tymoshenko in her opposition to the early
election (Ukrainska Pravda, October 9).

Yushchenko's team may have a hard time campaigning. There is no unity
even among Yushchenko's faithful allies-Our Ukraine People's Union
(NSNU), of which Yushchenko is honorary chairman, and United Center
(ETs), which is close to the head of his office, Viktor Baloha. NSNU
head Vyacheslav Kyrylenko ruled out a bloc with ETs, saying that ETs had
no particular ideology (Ukrainska Pravda, October 12).

The PRU also has serious problems. It is torn by internal differences. A
recent expulsion of National Security and Defense Council Secretary
Raisa Bohatyryova from the PRU prompted rumors of an imminent split in
the party. The PRU shows no unity even on the key issue of the language.
Many people in eastern Ukraine vote for the PRU only because it promises
to raise the status of their native Russian language. Borys Kolesnykov,
one of the PRU leaders, recently suggested that the PRU should not
insist on giving Russian the status of a second official language
(Interfax-Ukraine, October 11). PRU head Viktor Yanukovych, however,
pledged to do his utmost to upgrade the status of Russian (Ukrainska
Pravda, October 13).

The BYT appealed against Yushchenko's election decree, and a regional
court in Kyiv overrode the decree on October 10. Yushchenko fired the
judge and disbanded the court, arguing that only the Constitutional
Court could rule on national election matters. The BYT accused
Yushchenko of exceeding his authority (UNIAN, October 11). Ukrainian
Supreme Court Chairman Vasyl Onopenko, a long-time ally of Tymoshenko,
expressed his disagreement with Yushchenko's actions (Ukrainska Pravda,
October 14). BYT members physically blockaded several courts in Kyiv in
order to prevent them from passing a verdict on the election in favor of
Yushchenko (Channel 5, October 13-14). Also, Tymoshenko's ministers
refused to finance the election from the state budget (Channel 5,
October 14).

In this situation, the Central Electoral Commission failed to start
timely preparations for the vote. The BYT's actions forced Yushchenko to
suspend his dissolution decree in order to allow parliament to amend the
state budget to provide for funds for the election. At the same time,
Yushchenko rescheduled the election for December 14. When parliament
reconvened on October 21, BYT deputies physically blocked the rostrum,
preventing a vote on election financing (Channel 5, October 21).
Yushchenko may have to postpone the election again, so it may coincide
with the Christmas holidays. If that happens, fewer than 50 percent of
voters may turn up to cast their ballots, so the election might be
invalidated, which may be exactly what Tymoshenko wants.

-Pavel Korduban

 

 

 

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