[Ohio UZO News] Ukraine: WSJ and note; FT; RFE/RL; EDM

[Deychak, Orest]

[The following WSJ article just about sums matters up...  Ukraine's feuding leaders would do well to read-or, re-read -- Taras Shevchenko's poem, I Mertvym, I Zhyvym (My Friendly Epistle: To the dead and living...).  In his poem, he entreats Ukrainians, according to the Encyclopedia of Ukraine, "to realize their national potential, stop serving foreign masters, and become honorable people worthy of their history and heritage, in their own free land." Here's an English translation of excerpts from the poem, although, as with virtually all translations -- no matter how good -- it loses something from the original http://www.infoukes.com/shevchenkomuseum/poetry  OD ] 

The Wall Street Journal

http://online.wsj.com/article/SB123387574604054371.html

World News: Rivalry Deepens Ukraine Economic Woe 

By Alan Cullison 

6 February 2009

A7

KIEV -- Ukraine's prime minister survived a no-confidence vote in parliament, but a deepening economic slump and political bickering spell trouble for the country's Western-leaning leaders.

The move by pro-Russian factions to undermine Prime Minister Yulia Tymoshenko came as she and her onetime ally, President Viktor Yushchenko, have seen their images dented by personal rivalry.

With the approach of presidential elections in the next year, each has turned to blaming the other for a botched response to the economic crisis. Millions of layoffs are expected in Ukraine's heavy industries in the coming months, and unemployment is expected to hit levels unseen since the fall of the Soviet Union.

The disarray threatens Western hopes that this nation -- geographically slightly smaller than the state of Texas -- on Russia's border could become a beachhead for democratic values in the former Soviet Union.

Diplomats say Mr. Yushchenko and Ms. Tymoshenko have all but given up governing, and their rivalry is jeopardizing Ukraine's ability to meet criteria of the International Monetary Fund, which extended to Ukraine a $16.5 billion rescue package last year.

In parliament, Ms. Tymoshenko stuck by her budget's forecast for growth in the economy, despite analyst projections that it could shrink by as much as 10% this year. "It is simply too easy to become reconciled to a fall," she said. "I believe Ukraine is strong, with resources and reserves, and if the proper actions are taken at this difficult time, we can achieve this indicator as planned."

Ukraine has been hit hard by the economic crisis and the collapse in prices of metals and fertilizers, its main exports. Ukraine's industrial production fell by 26% in December from a year earlier and its currency has lost a third of its value since the summer.

Moscow has been using the economic crisis to strengthen its hand in the region, and last month forced Ukraine to agree to sharply higher prices for natural gas after a standoff in which it cut off shipments. The increased cost to Ukraine's gas-hungry industries is expected to pummel the economy further.

Mr. Yushchenko and Ms. Tymoshenko have often feuded since the so-called Orange Revolution that swept them to power in 2004, and the approach of presidential elections has worsened matters.

Mr. Yuschenko's administration has labeled Ms. Tymoshenko a populist and spendthrift who is misleading the country with budgets and promises she can't fulfill.

Ms. Tymoshenko in turn accused the president of spreading "a mix of untruths, panic and hysteria." She has been trying to fire the head of Ukraine's central bank, an appointee of Mr. Yushchenko, accusing him of favoritism and corruption.

The leaders managed to cobble together enough legislation to secure the help of the IMF, but Ukrainian debt trades at default levels amid fears government spending is out of control.

An IMF mission has been in Kiev for the past two weeks to determine whether to release the second tranche of its loan. IMF officials have made no statements on the government's plans.

Mr. Yushchenko's approval ratings have crept to the low single digits in recent months. Ms. Tymoshenko's ratings, though higher, are also softening amid signs voters want new faces.

Former parliament speaker Arseny Yatsenyuk, 34 years old, saw his ratings rise after he was sacked by parliament in November, and has been taking support from both Mr. Yushchenko and Ms. Tymoshenko.

The fracture of the government has also benefited a figure who has been mostly locked out of power in recent years -- Viktor Yanukovych, the pro-Russian candidate in the 2004 vote that sparked the Orange Revolution.

Mr. Yanukovych, who pushed for the no-confidence vote, has predicted that this year marks Ukraine's "last Orange winter."

 

Financial Times

www.ft.com

Russia denies Ukraine gas system move

By Tony Barber in Brussels 

Published: February 4 2009 

Russia yesterday rejected Ukrainian suggestions that its behaviour in last month's European gas crisis indicated that Moscow's long-term aim was to gain control of the Ukrainian gas transit network.

At the same time Vladimir Chizhov, Russia's ambassador to the European Union, floated the idea that Gazprom, Russia's state-owned gas monopoly, might form a consortium with Ukrainian and EU partners to oversee Russian gas deliveries to Europe.

Mr Chizhov was speaking to reporters ahead of talks in Moscow on Friday between Vladimir Putin, Russia's prime minister, and José Manuel Barroso, the European Commission president.

Nine other EU commissioners will attend the discussions, the first such face-to-face talks since Russia cut off Europe's gas supplies through Ukraine in early January after a dispute over the contract governing Gaz-prom's deliveries to the Ukrainian domestic market.

Viktor Yushchenko, Ukraine's president, told the Financial Times last week that Russia's goals in the crisis had been to discredit Ukraine as a gas transit partner and "to get political and commercial control of the Ukrainian gas system".

Asked about this allegation, Mr Chizhov declared: "I would say that's rubbish. The fact that the Ukrainian pipeline network was neglected ever since the collapse of the Soviet Union is recognised by everybody.

"The fact that its technical status is not up to standard is recognised by everybody. The fact that money supposed to be spent on maintenance from transit fees was spent on something else is recognised by everybody."

Mr Yushchenko, visiting Brussels last week, appealed for EU help in upgrading Ukraine's gas transit network. EU officials said he had received a sympathetic response, partly because he soothed EU concerns by promising to honour a Russian-Ukrainian accord that ended the gas crisis, even though it is likely to put Ukraine's finances under strain.

Under the accord, the role of RosUkrEnergo, a Swiss-registered intermediary that has controlled the Russian-Ukrainian gas trade since 2006, would apparently be eliminated to ensure transparency and prevent corruption.

Mr Chizhov suggested new arrangements might be set up. "I understand that Gazprom might be interested in having a Russian-Ukrainian-EU consortium to manage the network. But that's for the parties to agree."

A similar idea has come from Dmytro Firtash, a Ukrainian businessman who controls 45 per cent of Ros-UkrEnergo.

Last month's crisis has reinforced the EU's determination to diversify its suppliers and supply routes, since Russia accounts for about a quarter of EU gas imports, most of which flow through Ukraine.


However, Mr Chizhov said the EU-supported Nabucco project, a 3,300km pipeline intended to carry gas from the Caspian Sea and central Asia through Turkey to Europe, had drawbacks. 


Radio Free Europe/Radio Liberty

http://www.rferl.org/section/Ukraine/164.html

February 05, 2009 


Alcohol Abuse A Leading Cause Of Death For Ukrainian Men 


KYIV -- Every year more than 40,000 Ukrainians die because of alcoholism, the cause of death for nearly one-third of Ukrainian males each year, according to the Ukrainian Health Council and the World Health Organization.

Ukrainian doctors treat some 700,000 alcohol-dependent patients.

Dr. Tetyana Shmihirovska, who runs a private clinic in the western Ukrainian city of Lvov, told RFE/RL's Ukrainian Service that villagers are most at risk because nearly all households make their own alcohol, which often leads to poisoning. 


 


Eurasia Daily Monitor

http://www.jamestown.org/programs/edm/ <http://www.jamestown.org/programs/edm/> 

February 6, 2009 - Volume 6, Issue 25

Who Owns the Gas in Ukraine's Underground Reservoirs?

The gas dispute that left half of Europe without gas in early January was officially settled by accords signed by Gazprom and Naftohaz Ukrainy in Moscow on January 19 and 20. The clash, however, is apparently not over. Ukrainian businessman Dmytro Firtash, who owns the RosUkrEnergo gas trading company jointly with Gazprom, has said that he is suing Naftohaz in the Stockholm arbitration court over 11 billion cubic meters of gas stored in Ukraine's underground reservoirs (Inter TV, February 1). Firtash maintains that the gas belongs to RosUkrEnergo, but Ukrainian Prime Minister Yulia Tymoshenko insists that Gazprom passed the ownership rights to Naftohaz. Consumers in the European Union may suffer again.

Tymoshenko and Russian Prime Minister Vladimir Putin agreed to cut RosUkrEnergo out of the gas trade between Russia and Ukraine. They also agreed to solve the problem of RosUkrEnergo's $1.7 billion debt to Gazprom through a complicated deal in which Gazprom paid Naftohaz in advance for gas transit to Europe in 2009 and Naftohaz paid RosUkrEnergo's debt to Gazprom from that money, so RosUkrEnergo in fact became Naftohaz's debtor (Vedomosti, January 22). The problem is that RosUkrEnergo and Ukrainian Prime Minister Yulia Tymoshenko interpreted the settlement scheme differently.

The Ukrainian government decided that Naftohaz became the owner of the gas that RosUkrEnergo had accumulated in the huge underground storage facilities in western Ukraine. By Tymoshenko's interpretation, Naftohaz bought the 11 billion cubic meters of gas stored by RosUkrEnergo for $1.7 billion, which equals $154 per 1,000 cubic meters, much lower than the $360 price that Gazprom is charging Ukraine in the first quarter of 2009. Ukraine should therefore be using gas from the reservoirs for the time being rather than buying expensive Russian gas. Tymoshenko forecast that the average cost of gas for Ukraine would be $228, based not only on the expectation that Russian gas would become cheaper due to a drop in the world oil price but also calculating that most of the gas used in the first quarter of 2009 would cost Ukraine $154 rather than $360 (Zerkalo Nedeli, January 31).

Firtash refused, however, to let Naftohaz take the cheap gas from the reservoirs. Ukrainian Customs Service chief Valery Khoroshkovsky said that he would treat the gas in question as the property of RosUkrEnergo in accordance with the customs declarations (Inter TV, January 24). Khoroshkovsky explained later that the accord between Gazprom and Naftohaz on RosUkrEnergo's debt settlement had been signed only by a representative of Gazprom but not by a representative of Firtash, which is a legal requirement of Switzerland, the country where RosUkrEnergo is registered. This, according to Khoroshkovsky, meant that Naftohaz's earlier obligation to pump this gas to RosUkrEnergo's customers in Europe remained in force (Ukrainska Pravda, January 27).

Gazprom tried to distance itself from the dispute, leaving it to Naftohaz to persuade RosUkrEnergo to pay the $1.7 billion debt (Ukrainski Novyny, January 30). Tymoshenko accused Khoroshkovsky of being part of Firtash's team (Khoroshkovsky is indeed a partner of Firtash in several mass-media projects, including Inter TV), and she dismissed him from the Customs Service on January 28. On the same day Ukrainian President Viktor Yushchenko, confirming his reputation as Tymoshenko's bitter rival, appointed Khoroshkovsky as first deputy chief of the Security Service (SBU). The SBU immediately instructed the Customs Service to prevent the government from confiscating RosUkrEnergo's gas (Kommersant Ukraine, January 29). Speaking in his new capacity, Khoroshkovsky warned that if the government took the disputed gas, it would violate several laws on property and investment protection (Inter TV, January 30).

The new leadership of the Customs Service, appointed by Tymoshenko, apparently ignored the SBU's warning, as Tymoshenko announced that her government had given the go-ahead to start pumping RosUkrEnergo's gas from the reservoirs (UNIAN, January 31). Firtash insists that the gas in question is destined for consumers in the EU. RosUkrEnergo was cut out of the market in Ukraine, but it is still bound by contracts to supply gas to Poland, Hungary, and Romania in 2009. Firtash warned that those countries would not receive the gas that Tymoshenko ordered to be taken for Ukrainian domestic needs (Inter TV, February 1).

RosUkrEnergo already has problems with its clients in the EU. Polish Petroleum and Gas Mining (PGNiG) was considering suing RosUkrEnergo over the company's failure to fulfill its obligations. RIA-Novosti quoted a PGNiG spokesperson as saying on February 2 that Poland expected to receive 14 million cubic meters of gas a day under its contracts with RosUkrEnergo but was receiving only 7 million.

If Firtash manages to prove that the disputed gas does not belong to Naftohaz and if RosUkrEnergo's disgruntled clients turn to Ukraine for it, Naftohaz may be in serious trouble. It is unlikely to receive any more international loans to keep it afloat, not only because of the global financial crisis but also because Naftohaz is considered untrustworthy as it even has trouble making payments on earlier loans. Naftohaz can hardly expect Ukraine's cash-strapped industry or households to pay more for gas, nor will it receive much money from the Ukrainian state budget, which is already running a huge deficit if a recently published report to the cabinet by Finance Minister Viktor Pynzenyk is to be believed (Ekonomichna Pravda, January 27).

--Pavel Korduban

 

The Russian-Central European Gas Conflict Continues

While the Ukrainian-Russian gas conflict appears to have been resolved, its fallout is still reverberating throughout Central Europe. In Poland, RosUkrEnergo (RUE), the Swiss based middleman that was dropped from the Ukrainian-Russian-Central Asian gas trade on January 20, has failed to meet its contractual obligations to supply the Polish oil and gas distribution company Polskie Gornictwo Naftowe i Gazownictwo (PGNiG) with 7 million cubic meters of gas per day. The Polish business daily Puls Biznesu reported on January 29 that PGNiG was considering suing RUE for breach of contract.

According to Kommersant on January 28, RUE failed to meet deliveries because on January 20 Naftohaz Ukrainy bought RUE's $1.7 billion debt from Gazprom and then took possession of 11 billion cubic meters (bcm) of RUE's gas in Ukrainian underground storage facilities, effectively preventing the export of this gas to RUE's clients.

Poland imports 76 percent of its annual consumption of 14 bcm of gas, and 90 percent of this comes from Russia and Central Asia. In 2006 PGNiG signed a three-year contract with RUE to buy 2.3 bcm of Central Asian gas per year. The remaining 6.2 bcm was contracted for with Gazprom Export, a 100 percent subsidiary of Gazprom headed by Gazprom Deputy CEO Alexander Medvedev.

Medvedev, however, is also a member of the RUE coordinating committee, along with two other Gazprom Deputy CEO's who jointly represent Gazprom's 50 percent ownership of the company.

The mystery of this arrangement is why Gazprom created the scheme allowing Gazprom Export to compete with RUE in sales to Poland and other markets? Why did it allow two private Ukrainian entrepreneurs, Dmytro Firtash and Ivan Fursin, to make hundreds of millions of dollars for a number of years, thus depriving Gazprom of substantial profits and the Russian budget of cash?

Polish Prime Minister Donald Tusk was quoted by UNIAN on January 28 as saying that he intended to raise this matter with Russian Prime Minister Vladimir Putin at the World Economic Forum in Davos, Switzerland.

Tusk apparently is concerned by Gazprom's demand that Poland lower its transit fee for Russian gas going to Europe via the Yamal-Europe pipeline as compensation to Gazprom for delivering the 7 million cubic meters a day that RUE could no longer provide.

The conflict over RUE and gas supplies to Poland from Russia did not begin in 2009, however. On August 9, 2006, the Polish daily Rzeczpospolita reported that PGNiG was on the verge of dropping its contract with RUE over a dispute involving new Gazprom demands--some would call it blackmail. Gazprom was apparently insisting that if Poland wanted to continue receiving cheap gas (most likely of Central Asian origin), it would have to give Gazprom access to the management of the Polish section of the Yamal-Europe pipeline as well as the right to operate in the Polish domestic market.

The Russian portion of the pipeline is owned and operated by Gazprom. The Belarusian section is owned by Gazprom and operated by Beltransgaz, the Belarus state-owned pipeline company which is 25 percent owned by Gazprom. The Polish section is owned and operated by EuRoPol Gaz S.A., a joint venture of Polish PGNiG and Russia's Gazprom (each with 48 percent of the shares) and Polish Gas-Trading S.A. (4 percent).

RUE was apparently being used by the Kremlin to pressure the Poles into accepting Russian gas hegemony, and this tactic has now been resurrected by Putin and Dmitry Medvedev.

Although RosUkrEnergo was excluded from the Gazprom-Naftohaz scheme, it still has a number of active contracts with other European countries, including Romania and Hungary. In Hungary RUE has been deeply involved in selling gas to Emfesz, a company established by Firtash in 2003 when he was secretly heading Eural Trans Gas, the predecessor of RUE. Emfesz operates on the Hungarian domestic market and is currently the second largest gas importer in Hungary, supplying 3 bcm annually (www.emfesz.hu).

If Emfesz can no longer obtain gas from RUE, Hungary will stand to lose billions of dollars and the current government of Ferenc Gyurcsany, which has dogmatically supported Russia's gas strategy, will have to explain why it supported Firtash's fly-by-night scheme. Were bribes distributed to members of the Gyurcsany government by Russian and pro-Russian companies to allow Emfesz to remain in business or was permission freely given? Interestingly enough, in 2005 the EU Commission stated that the "independent character of Emfesz was questionable" (EU Regulation No. 138/2004). This was apparently ignored by the Hungarian government in its rush to please the Kremlin.

RUE is also under contract to supply 1.5 bcm of gas to Romania (Kommersant, January 28). Will it be able to meet this commitment or will Gazprom be faced with a slew of new law suits for nonperformance?

The consequences of RUE's shady role are becoming more evident daily. Vladimir Putin put together a crooked scheme; and together with Dmitry Medvedev, Alexei Miller, Leonid Kuchma, Dmytro Firtash, Semen Mogilevich, and scores of others, he has defrauded the Russian and Ukrainian people and denied them the services they deserve from their elected officials.

--Roman Kupchinsky

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