[Ohio UZO News] Ukraine: NYT; FT; KP(2); WoE; State Department

[Deychak, Orest]

New York Times

April 30, 2009

Russia and Ukraine Settle Natural Gas Dispute 

By ANDREW E. KRAMER

MOSCOW - Gazprom, the Russian natural gas monopoly, will waive a $2 billion fine it could have imposed on Ukraine for purchasing less gas than required by contract, the Russian prime minister, Vladimir V. Putin, said Wednesday.

The announcement, after a meeting with Mr. Putin's Ukrainian counterpart, Yulia V. Tymoshenko, seemed to resolve the latest disagreement over the terms of Russian natural gas supplies to Ukraine.

At issue was a contract signed in January that obliged Ukraine to purchase more gas than the country's rapidly declining economy required.

Representatives of the two countries also discussed a role for Russia in operating the pipelines that cross Ukraine and carry about 80 percent of the Russian natural gas exported to Europe. While not formally linked, the two matters were discussed at the same meeting.

Ukraine has resisted any Russian role in the pipeline operations, and the Ukrainian government recently angered Russia by signing an agreement with the European Union to help maintain the system.

On Wednesday, though, Ms. Tymoshenko said Ukraine would welcome a role for Russian companies, too, Agence France-Presse reported.

"We have invited Russia as one of the main partners to modernize the Ukrainian gas transportation system," Ms. Tymoshenko said. "I think that such modernization can be conducted jointly." 

Mr. Putin reiterated a Russian position that the pipeline network should be operated by an international consortium that would include Russian, Ukrainian and Western European partners, though there was no indication Ukraine had agreed to this more sweeping suggestion.

"I still don't understand what can give rise to any doubts here," Mr. Putin said of his proposal, according to the Russian news agency Interfax. "This is completely in tune with the interests of all potential participants."

Ukraine's rapidly contracting economy is now consuming far less natural gas than was anticipated as recently as January, when Ms. Tymoshenko negotiated a supply contract with Mr. Putin, ending a gas shutoff that left parts of Europe without heat.

Demand from industrial customers in Ukraine, for example, was down 50 percent in the first three months of this year compared with last year, according to Naftogaz, the Ukrainian state energy company. 

The Financial Times

Gazprom waives Ukraine gas fines

By Roman Olearchyk in Kiev 

Published: April 29 2009 16:15 

Gazprom, Russia's state-controlled energy giant, has agreed to waive hefty fines upon Ukraine, which purchased only a third of planned natural gas supplies so far this year after its recession-battered economy shrank sharply.

"I would like to thank [Russia] for its understanding. Today, we are taking as much [gas] as we can afford during the crisis," Yulia Tymoshenko, the Ukrainian prime minister, said at the beginning of talks with Vladimir Putin, her Russian counterpart.

The agreement was brokered on Wednesday between the two increasingly-friendly leaders. 

Not all details of their negotiations have been made public. But analysts said both sides were eager to avert a repeat of a tense January energy standoff which cut gas supplies to Europe. It also comes as both countries seek to revive pragmatic relations and to reboot their economies, each struggling amid a deep global recession.

Kiev, which has consumed more than 60bn cubic meters of gas in recent years, is one of Gazprom's largest customers. Its pipeline system is Gazprom's main export route to Europe.

The January standoff ended after Kiev agreed to move towards market prices for gas, and as both sides agreed to remove a controversial middleman company that had supplied Ukraine in previous years.

Kiev originally agreed to import 40bn cu m of gas this year. But with its economy in freefall, it has in the first quarter of 2009 сonsumed only a third of contracted volumes. Earlier this year, Mr Putin said his country would not rush to fine Kiev in retaliation, despite a contract clause envisioning fines.

Ms Tymoshenko, who has worked hard to revive Kiev's notoriously troubled ties with Russia, said on Wednesday that Russia had agreed not to fine Kiev this year at all for importing less gas.

"Let us put behind the times of confrontation between us," Ms Tymoshenko said. At her side, Mr Putin said he has taken note of recent "positive trends" in relations and bilateral trade between both former Soviet republics.

In return for Moscow's leniency, Russian officials said Kiev also agreed to include Gazprom, along with the European Union, in plans to modernise and possibly manage Ukraine's vast gas pipeline network. Moscow has sharply opposed a March agreement in which Kiev and Brussels unilaterally adopted a framework plan to modernise the pipeline.

Moscow and Kiev also pledged to renew co-operation in their Soviet-built and intertwined aviation and space technology sectors.

Сash-strapped Ukraine is also seeking Moscow's support to purchase large volumes of gas during the summer period for underground stockpiles, which is needed to fill peak winter demand.

Ms Tymoshenko said Ukraine, which joined the World Trade Organisation last year, would support Russia's membership aspirations.

Kyiv Post

www.kyivpost.com

 


Akhmetov's Metinvest acquires West Virginia's United Coal, deal valued at $800 million to $1 billion


April 30, 2009

Metinvest, the steel conglomerate controlled by Ukraine's richest man, billionaire Rinat Akhmetov, said on Thursday it had acquired United Coal Company, a coking coal producer based in West Virginia in a deal estimated to be worth at least $800m.

The value of the deal was not announced. But in a note to investors, Kyiv-based investment bank Dragon Capital estimated that Metinvest paid between $800 million and $1 billion for UCC, which accounts for 4 percent of coking coal output in the U.S. 

Dragon said the acquisition will help Metinvest cut down on consumption of natural gas in the steel production cycle, using coking and thermal coal instead. Metinvest is one of Ukraine's largest steel groups in terms of production, and Ukraine's most vertically-integrated. In addition to owning steel mills in Ukraine, Italy and the UK, the group also owns ore and coal mines.


Akhmetov owns a majority stake in Metinvest. Smart Group, owned by Russian businessman Vadim Novinsky along with partners, holds a minority stake in Metinvest. 


Kyiv Post


Op-Ed


Nation takes decisive steps to bring economy out of crisis


April 23, 2009

Anders Aslund says that Ukraine's political leaders have taken the right steps by reducing deficit spending, allowing the hryvnia to float and restructuring the ailing bank sector.

Ukraine has undertaken an impressive turnaround in economic policy. Few countries have been more misunderstood than Ukraine, which has been particularly hurt by the global financial crisis. 

In the wake of the Lehman Brothers bankruptcy, international finance froze throughout the world. Ukraine suffered from an underlying problem -- its high dependence on steel exports, whose prices and demand collapsed in fall 2008. In the first half of 2008, steel accounted for no less than 42 percent of Ukraine's exports. This year all of Ukraine's exports are likely to drop by almost 50 percent, but imports even more, so the current account deficit will become insignificant.

Ukraine's Central Bank made one serious policy mistake. It insisted on maintaining a fixed peg of the hryvnia to the U.S. dollar. Because of the apparent safety and obvious profitability, foreign banks transferred short-term, speculative funds to Ukraine, which expanded the domestic money supply as the exchange rate was fixed and boosted inflation similar to what happened in Russia but worse. 

In 2007, Ukraine's money supply surged by 51 percent and inflation peaked at 31 percent in May 2008. The speculative currency inflow widened the current account deficit to 7 percent of gross domestic product in 2008. This was not tenable, although Ukraine's budget deficit was minimal and its public foreign debt was only 12 percent of GDP in 2007.

What ultimately scared foreign investors was Ukraine's open political feuding. International investors are a strange anti-democratic lot who get worried by open arguments between politicians. They prefer strict authoritarian regimes like in China, Azerbaijan and Kazakhstan.

By Oct. 1, the Ukrainian economy suddenly halted. Steel production, mining and construction plummeted by about 50 percent in no time. The largest harvest ever could not salvage the economy. Astoundingly, industrial production contracted by more than 30 percent in the first quarter of 2009 over the same time one year earlier, and GDP probably plunged by 20 percent in this period. In addition, the stock market dropped by 90 percent from its peak last year.

Fortunately, the Ukrainian government acknowledged its crisis in early October and asked for help from the International Monetary Fund. Within four weeks, Ukraine concluded a deal with the IMF -- a large, strong two-year standby agreement with $16.4 billion of credits.

The IMF program was standard with three key demands: a nearly balanced budget, a floating exchange rate and bank restructuring. Ukraine has delivered. After some hesitation, the country's Central Bank let the exchange rate float. Although it depreciated by about 50 percent, it has since stabilized, giving Ukraine a new cost competitiveness. 

Together with the international financial institutions, the Central Bank has examined all of Ukraine's banks and quantified their bad debt. Compared to the West, Ukraine's share of toxic debt is small. 

Seventeen Western banks have committed themselves to recapitalizing their subsidiaries in Ukraine with $2 billion this year. In addition, it is estimated that two-thirds of the country's refinancing needs this year will be met. Most of this is done by European banks. So far, not a single foreign bank has withdrawn from Ukraine. Their prospects are just too attractive. Similarly, the three big Russian banks --VEB, VTB and Sberbank -- have increased their activity in Ukraine despite the crisis. 

The Ukrainian authorities have taken seven private Ukrainian-owned banks under administration, and they have mobilized $2.6 billion for their recapitalization from the World Bank, the European Bank for Reconstruction and Development and the European Investment Bank. All of them understand Ukraine's financial dilemma. The IMF assesses the total need for recapitalization of no more than $5 billion.

Yet the Ukrainian government had problems receiving its second tranche of the IMF loan because GDP declined much more than expected, and thus state revenues. The IMF assessed the budget deficit would be untenable at 6 percent of GDP, even leaving a possible public bank recapitalization of 4.5 percent of GDP aside.

The Ukrainian parliament agreed to increase excise taxes on alcohol, tobacco and diesel, and the prime minister decreed further revenue measures to reduce the budget deficit by 2 percent of GDP. With substantial financing from various international financial institutions, the IMF mission considered that the shortfall was almost covered and recommended a second enlarged tranche.

At the same time, the Ukrainian government has made a break with nontransparent gas-trading arrangements through the gas agreement with Russia on Jan. 19 and the agreement on the gas transit system with the European Union on March 23. These two decisions might belong to Ukraine's most fortuitous reforms. Fortunately, it joined the World Trade Organization in May last year, securing reasonable market access.

On April 1, the Ukrainian parliament voted by an overwhelming majority to hold the next presidential election on Oct. 25, which will help the country to clarify the political situation. The fundamental political problem, however, lies in the confusing constitutional compromise of December 2004, which was one of the most significant results of the Orange Revolution. Now all major parties demand a transition to a purely parliamentary system that would make it impossible for a president to block all decisions. They also call for open-party lists to make it impossible for wealthy businesspeople to purchase seats in parliament.

Ukraine has not faced the level of social unrest that other countries have experienced, despite the serious blows to its economy. During television talk shows, both the government and opposition speak their minds freely, and the people hear their arguments until they are satisfied -- or bored. 

Thanks to early and resolute anti-crisis actions, international reserves remain reassuring at $25 billion, or eight months of imports. Industrial production increased in both February and March over the preceding month, suggesting that Ukraine might already have turned the corner (although GDP will probably still decrease by 8 percent to 10 percent this year). Even the bond and stock markets have soared in the last month.

Ukraine has shown exemplary crisis management thanks to a few Ukrainian top officials --notably Prime Minister Yulia Tymoshenko -- and a good job by the international financial institutions.

Anders Aslund, economic adviser to the Ukrainian government from 1994 to 1997, is a senior fellow at the Peterson Institute for International Economics and author of "How Ukraine Became a Market Economy and Democracy."

Window on Eurasia: Merchandising of Chernobyl Decried

 

Paul Goble

 

            Vienna, April 28 - Twenty-three years ago, the worst nuclear power plant disaster in history occurred at Chernobyl, a disaster that devastated the region, forced Mikhail Gorbachev to launch his glasnost program, and continues to claim pre-mature deaths among those exposed to the massive release of radiation. 

            And this year, as on every April 26th since that time, the victims, their families and activists of various kinds paused to take part in memorial services and demonstrations in the three countries most affected, Belarus, Ukraine, and the Russian Federation, and to bemoan the fact that while many people around the world recall the accident, they are forgetting its victims.

            But in what is likely to strike many as an equally disturbing development, some people are now trying to profit from that disaster by organizing tours to the Chernobyl zone, from which radioactive contamination has driven the population, and by including references to the 1986 disaster in video games.

            In an interview posted online today, Aleksandr Sirota, the head of the Internet-based Pripyat.com Center, said that in the pursuit of profit, tour firms in Ukraine are now offering to take people into the "zone" without any knowledge of the rules governing such visits or the risks that visitors still face there (www.ia-centr.ru/publications/4542/).

            "In certain cases," he added, "such 'businessmen' ... simply disappear after they have collected money from those who want to go there." But such activities have the effect of detracting attention from the fact that "the Chernobyl zone is not an amusement park" and that those who are thinking about going there need to ask themselves why they are doing it.

            Such operators are not the only people who are seeking to profit from the disaster. As the interviewer pointed out, "the very popular computer game 'Stalker'" has part of the action take place in the Chernobyl zone, something that likely is offensive to many of the victims of the nuclear accident.

            Sirota, for his part, was ambivalent about that.  On the one hand, he clearly indicated that he understands why some might be upset by that reminder of a tragedy in their pasts.  But on the other, he asked, "what can be the harm from this game?"  Almost all computer games "are based on real or imagined events."

            And there is at least one positive result from such games: "A large number of young people find out about the town of Pripyat and Chernobyl precisely from 'Stalker.'"  If they did not play that game, it is entirely possible, Sirota said, that they would not know anything about the accident at all.

            The activist, who lived through the disaster as a 10-year-old child, said that at the time, the forced evacuation of the population seemed "like an attractive game, only with real military helicopters flying lower over the roofs of the houses, ... with an unending line of buses carrying us and all the residents of the town 'for three days' into the unknown."

            "We did not know or understand then," Sirota said, "that we were leaving out town forever."

            Sirota said he made his first return to his native Pripyat only eight years later, and it was at that time that he "finally understand" when, by making this "unique jump into the past, into childhood," he came to recognize that as a result of the Chernobyl accident, there could be no going back not only anytime soon but ever. 

            That experience prompted him to become an activist, and he has made a number of visits to the exclusion zone since that time, noting the disappearance of most people and their replacement by wild pigs and other animals that are somehow able to survive in what is still a dangerously radioactive area.

            There are a few people left in the zone, mostly older people who were unable to come to terms with the places to which they were evacuated. There aren't so many of these people, Sirota said, with only 34 in the village of Teremtsy and a total of about 270 for the exclusion zone as a whole.

            Sirota gave his interview both to attract attention to the center he heads and a new book his organization has just published about the disaster.  The center was established was set up in 2006 in order to press the Ukrainian government to turn Pripyat into a museum city. But up to now, he said, the idea is "nothing more than a beautiful metaphor."

The book on "The Pripyat Syndrome," has been in the works for 15years, Sirota said. It describes the lives and in many cases deaths of the residents of Pripyat. It was released on the anniversary of the accident two days ago.  And the activist said that he very much hopes that "it will find its reader."

As to the future of Pripyat itself, Sirota said there are only two possibilities. "The first and the simplest is to leave everything as it is, to await its destruction and then forgetfulness.  The second, more difficult and expensive, is to preserve this city as a reminder that no one is ensured against the repetition of such a nightmare wherever he may live. 

 

 

U.S. Department of State

Foreign Operations Appropriated Assistance: Ukraine 

(for full report, including graphs and charts, see: http://www.state.gov/p/eur/rls/fs/109722.htm <http://www.state.gov/p/eur/rls/fs/109722.htm> )

 

Bureau of European and Eurasian Affairs

Fact Sheet

January 20, 2009

 

 Foreign Operations Appropriated Assistance*
Fiscal Year (FY) 2007: $96.51 Million (M) ($80.00M FSA, $16.51M Other)
Estimated FY 2008: $83.41M ($72.41M FSA, $11.00M Other)

Assistance Goals: The United States strives to promote the transformation of Ukraine into a free-market, democratic society. U.S. Government (USG) assistance encourages the reforms needed for Ukraine to integrate into Euro-Atlantic institutions. 

Areas of Focus (Foreign Operations Appropriated Assistance):

Peace and Security (PS): FY 2007: $38.79M; Est. FY 2008: $33.43M

*	Support the transformation of the Ukrainian military into a modern, professional, contract-based force by 2011 that can train, equip, sustain, and deploy NATO-interoperable forces in multinational operations. 
*	Align Ukrainian law enforcement training and practices with EU standards. 
*	Reform the judicial system to fully integrate Ukraine within the Euro-Atlantic community. 
*	Combat trafficking in persons (TIP), help victims transition back into society.

Governing Justly and Democratically (GJD): FY 2007: $22.57M; Est. FY 2008: $19.64M

*	Encourage the development of sustainable independent media outlets. 
*	Increase effectiveness and inclusiveness of Ukraine's legislature and parties. 
*	Support NGOs' ability to increase civic participation, advocate for public interests, and perform oversight of government activities. 

Investing in People (IIP): FY 2007: $15.99M; Est. FY 2008: $11.57M

*	Help promote Ukraine's long-term stability by addressing the concerns of HIV/AIDS, tuberculosis (TB), avian flu, and maternal-child health care. 
*	Increase public access to high-quality primary and reproductive health care.

Economic Growth (EG): FY 2007: $22.36M; Est. FY 2008: $15.82M

*	Foster an economic, legal, and regulatory environment for businesses to thrive. 
*	Build capacity of municipalities to manage budgets and attract investments and jobs. 
*	Support Ukraine after its accession to the World Trade Organization (WTO) in meeting the international standards required by membership.

Humanitarian Assistance (HA): FY 2007: $1.20M; Est. FY 2008: $1.20M

*	In FY 2007 provided donated goods valued at $22.5M to vulnerable groups. 

Recent Successes: 

*	Helped Ukraine to reduce trade barriers and harmonize with international economic standards, allowing Ukraine to join the WTO on May 16, 2008. 
*	Upgraded facilities in hospitals and orphanages in the Crimea and Eastern Ukraine to reach out to the most vulnerable populations. 
*	Attracted more than $200,000 from local sources, created 117 new businesses, provided 352 new jobs and four agricultural cooperatives through a public-private partnership program. 
*	Trained over 1,430 journalists and nearly 1100 civil society organizations to increase the voice of civil society in a democratic Ukraine. 
*	Through public education initiatives and a March 2007 government anti-TIP program, 78% of Ukrainians now understand the dangers of TIP. 

*Division J of the Fiscal Year (FY) 2008 Omnibus Appropriations Act: Department of State Foreign Operations and Related Programs Appropriations Act, 2008 

 

 

 

 

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