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Events from January 24 to 30, 2004


PACE discussed the Ukrainian issue at its session.

A session of the Parliament Assembly of the Council of Europe on January 28 considered an issue on "the constitutional crisis in Ukraine".

The Parliamentary Assembly, the resolution says, is "seriously concerned" with the latest events in Ukraine, which deal with how the political reform is carried out and the events during the run-up to the presidential elections. The PACE said that the steps of the reform were carried out in contradiction to the Ukrainian constitution (which is not true to reality). The PACE declared that the conducting the reform in parliament contradicted the commitments taken by Ukraine in relation to the Council of Europe and threatened to exclude Ukraine from the PACE.

Commentary. The PACE resolution, pungently criticizing the Ukrainian authorities, in its text part effectively coincided with the latest statements made by the Ukrainian opposition. Therefore, one may think that draft text had actually been written by the Ukrainian opposition.

The resolution was adopted by 46 votes against 13. The overall number of parliamentarians seating in the PACE is 450.

The "Silski Visti" newspaper ("Rural News") was closed down for anti-Semitic publications.

The International Antifascist Committee sued the "Silski Visti" newspaper for anti-Semitic publications. These publications alleged that, in particular, the Jews systematically destroyed the Ukrainian nation, that all Ukrainian television had been "captured" by the Jews, that "Zionist and Social-Nationalist's plans of annihilating the Ukrainian people are very similar".

On January 28 the Shevchenkivsky District Court of Kiev (a court of one of the city districts) issued a ruling to close down the newspaper.

The Ukrainian opposition has already stated that the newspaper has been closed down because it was an opposition newspaper. The latter is really true: the newspaper actively underpins the Socialist Party of Ukraine.

To make the picture complete we will provide some citations from the newspaper:

"Ukrainians should know that Ukraine's information space is entirely in the Jewish hands and that we all consume informational and spiritual products from the Jewish ideological recipes."

"... in order that each pupil know that in 1932-33 millions of Ukrainians were starved to death by a famine organized by the Jews; that in 1937-938 new millions of Ukrainians were annihilated by the NKVD (Secret police) among which 99 percent were Jews and was guided by the Zionist leaders..."

"The Zionist and Social-National plans of destroying the Ukrainian people are very similar. These plans were drawn up not to build an independent state of Israel, but for the sake of a maniacal idea of world domination."

The letters of the newspaper's readers were cited with a warm feeling, for example:

"And indeed there is nothing (at the television channels belonging to the Jews - Kiev Center for Political and Conflict Studies) to look at except arrogant kikes' faces... I am sure that if these were the Ukrainians who would work on TV and if TV belonged to the Ukrainians there would be no such filthiness and one could be able to watch it."

Kuchma and Putin Close "Year Of Russia In Ukraine." Russian President Vladimir Putin visited Kiev on 23-24 January for the official close of the "Year of Russia in Ukraine"-a series of cultural events promoting Russia in Ukraine-where he was received by Ukrainian President Leonid Kuchma. At a gala ceremony on 23 January Kuchma stated that he was pleased with his meetings with Putin and that they were used to "reaffirm the Ukrainian-Russian partnership and good-neighborliness." The same day, the two sides signed agreements on cooperation between steelmakers and nuclear-energy.

Kuchma Decrees "Year Of Poland In Ukraine." Earlier this week, President Kuchma signed a decree furthering organization of "Year of Poland in Ukraine" in 2004. Deputy Prime Minister Dmytro Tabachnyk was talked with working out a plan aimed at deepening the Ukrainian-Polish strategic partnership and strengthening bilateral economic and humanitarian ties.

Comment: Kuchma and his Polish counterpart Aleksander Kwasniewski are expected to open the Year of Poland in Ukraine on 1 April, during Kwasniewski’s planned three-day visit to Ukraine.

Kuchma Blasts Council Of Europe Interference. Last week President Kuchma the told the wire service Interfax that he rejects "Our Ukraine" bloc leader Victor Yuschenko’s request to create a special commission in Ukraine to assist the Monitoring Committee of the Parliamentary Assembly of the Council of Europe (PACE) in studying the country’s hotly debated constitutional reform. "We are grateful for advice from more experienced democracies, however, we also know very well the difference between advice and interference in our internal affairs," Kuchma said.

Comment: On 18-20 January two members of PACE visited Ukraine. During their visit PACE monitors met with many top Ukrainian officials and politicians, including Victor Yuschenko. During his meetings with the PACE visitors, Yuschenko told them that he believed that the current monitoring mechanism was "inadequate" and proposed creation of a commission in the PACE, which would function on a permanent basis in Ukraine in a run up to the presidential elections.

Deep Cuts Planned In Ukrainian Army. Georhiy Kryuchkov, the head of the parliamentary National Security and Defense Committee, stated on 27 January that the Ukrainian Army will be reduced by 80,000 men in 2004, from the current level of 355,000. Kryuchkov added that by the end of 2005, the Ukrainian Army will number 200,000. Defense Minister Yevhen Marchuk said on 28 January that personnel reductions in the military will begin after the Parliament passes the relevant bill that has already been submitted to the legislature.

Economic Developments

Ukrainian Deputy Premier Announces GDP Growth in 2003. First Deputy Premier and Finance Minister Mykola Azarov announced last week that Ukraine’s economy expanded 9 percent in 2003. Azarov also cited a 28 percent growth in exports, a decline in official unemployment to 3.6 percent, an increase in the average wage and a significant increase in foreign investment.

Azarov also sought to defuse fears of hike in bread prices. He said that recent restrictions imposed by Russia and Kazakhstan on wheat exports will not influence the grain market in Ukraine.

Comment: GDP growth on 9 percent in 2003 outpaced the government’s 8.5 percent forecast. Russia imposed a tax on its wheat and ry exports amounting to 25 euros per ton on 15 January. There have also been some unconfirmed reports that Kazakhstan has introduced an unofficial ban on wheat exports to Russia and Ukraine.

University of Michigan’s William Davidson Institute Forecasts Strong Growth For Central, Eastern Europe.

EU Accession countries’ growth is projected at two to three times the rate of Western Europe, but no let-up is in sight for those nations’ heavy budget deficits, according to the latest quarterly release of the Davidson Institute Emerging Markets Forecasts (DIEMF). Meantime Russian fortunes will fall in tandem with oil prices, as the impact of price decreases hits harder across the Russian economy than it does in many oil-producing nations. These forecasts are the most frequently-updated economic projections for Central and Eastern Europe and Russia.

Unemployment will remain high in most of the countries included in DIEMF, which could exacerbate government deficits.

The rise of banks and the relatively new phenomena of significant consumer credit are fueling growth meantime. Other major factors in the projected growth include the continuing positive impact of market reforms and heavy integration with the EU, along with Western Europe’s economic recovery. Deficits and other factors may slow the Accession countries’ ability to negotiate early adoption of the Euro.

"High unemployment is both a threat and an opportunity," said DIEMF head and Davidson Institute Executive Director Jan Svejnar. "There is significant under-utilized labor capacity throughout the region. This should be attractive to FDI, which has continued to pick up strength. Without more FDI, however, we will see continued run-ups of heavy budget deficits and strains on countries’ ability to keep up their social safety nets."

The region’s growth is being fueled, in part, by an exceptionally large but smooth transition of labor from old firms to newly created ones.

"In some cases, more than half of labor in these countries has transitioned to new jobs," said Svejnar. "This smooth and successful movement to higher-productivity firms and jobs is an extraordinary achievement and one that should be attractive to foreign investment."

Much of Central and Eastern Europe’s growth is tied to its swift and through movement toward adopting market reforms.

"The success of the tempered market reform experiment has significant implications for other emerging markets, and is a key factor in future growth projections," said Svejnar.

Ukraine is on track for significant growth, the highest rate among the countries measured by DIEMF. Svejanr points out that this growth comes only after significant decline in the 1990s.

Comment: The DIEMF is produced quarterly by the University of Michigan’s William Davidson Institute. The Institute has significant expertise in emerging markets, with a network of economists and other researchers throughout the world and continuing on-the-ground business and government assistance experience in emerging markets.

The issue on the use of the Odessa-Brody oil pipeline will be resolved soon

On January 30 Ukraine's Cabinet of Ministers should make a conclusive decision on operating the Odessa-Brody oil pipeline.

However, as before the likelihood that the decision will not be taken or it will not be conclusive is still high. The struggle of lobbyist groups as to the direction of using the pipeline, still going on among the Ukrainian leadership, is an evidence of it. The representatives of these groupings quite differently assess the report submitted by the U.S. Energy Solution Company on the conclusions of economic expediency of different variants of using the oil pipeline.

Minister of Fuel and Power Serhiy Yermilov believes that the report makes a conclusion on the expediency of using the obverse (forward) direction, that is on the transportation of the Caspian oil from Odessa to Brody, and then further on (in the short-tem projections until the completion of the oil pipeline construction to the Polish ports of Plock and Gdańsk) - by train to Poland.

However, this statement on the same day was denied by the representatives of the public joint-stock company "UkrTransNafta", which traditionally stands out in support of the reverse use of the oil pipeline.

According to them, the U.S. expert company advises Ukraine's Cabinet of Ministers to accept, on an interim basis, a proposal of the Russian-British Company TNK-BP (Tyumen Oil Company - British Petroleum) for the operation of the Odessa-Brody Pipeline in the reverse mode.

In thc conclusions made by Energy Solution Ukraine's Government is advised to draw its attention to the expediency in the future to transport the Caspian oil through the pipeline. However, due to oil shortage in the nearest three years and the absence of the Brody-Plock branch line it is advisable to use the oil pipeline in the reverse mode for transportation of Russian oil for a term of three years.

The spokesmen of the U.S. and a number of European countries repeatedly spoke against the use of the oil pipeline in the reverse mode. Former U.S. ambassador Carlos Pascual and present U.S. ambassador John Herbst were very active interfering in resolving this issue supporting the obverse mode in using the Odessa - Brody oil pipeline.

But one should take into account that this issue has not only political, but an economic aspect as well. The oil pipeline in which Ukraine invested almost USD500 million is idling for two years. So far there has not been any real proposals with economic underpinning for using the pipeline in transporting the Caspian oil to Europe.

Therefore, it should be understood that the decision either on the reverse or obverse mode of operating the pipeline will be taken minding economic expediency rather than political wishes. If this does not happen on January 30 still the issue is to be resolved in the nearest future.

Current Commentary

Events from June 6 to June 12, 2004 - [17.06.2004]

Events from May 30 to June 5, 2004 - [07.06.2004]

Events from May 21 to 28, 2004 - [05.06.2004]

Events from May 14 to 20, 2004 - [25.05.2004]

Events from May 8 to 13, 2004 - [24.05.2004]

Events from May 1 to May 7, 2004 - [11.05.2004]

Events from April 24 to 30, 2004 - [02.05.2004]

Events from April 18 to 23, 2004 - [23.04.2004]

Events from April 1 to 8, 2004 - [08.04.2004]

Events from March 19 to March 26, 2004 - [29.03.2004]

Weekly briefing on key developments in Ukraine - [18.03.2004]

Events from February 1 to 6, 2004 - [08.02.2004]

Events from January 24 to 30, 2004 - [02.02.2004]

Events from January 15 to 23, 2004 - [24.01.2004]

Events from January 5 to January 15, 2004 - [21.01.2004]

Events from December 20, 2003 to January 1, 2004 - [21.01.2004]

Events from December 16 to December 20, 2003 - [25.12.2003]

Events from December 8 to December 15, 2003 - [15.12.2003]

Events from December 1 to December 5, 2003 - [06.12.2003]

Events from November 22 to December 1, 2003 - [02.12.2003]

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