[16.07.03]

On July 1 the opposition in Ukrainian parliament demanded immediate debate on the issue of procurement of the population with bread referring to anticipated bad harvest this year and a food panic in the end of June, when all stocks of sugar and buckwheat on the country's markets were sold out. The opposition placed responsibility for these events on the government and "adventure reforms" in the agroindustrial complex of Ukraine. In its statement the opposition criticized "conscientious destruction of the basis of industrialized production in rural areas and orientation at a small-scale commodity sector", etc.

The government assured that the peak of prices had already been passed and that recently the prices started to go down although they did not reach the mid-June level.

The government allocated from its reserves 200,000 tons of sugar to alleviate the stock-jobbing and proposed that parliament consented to increase the country's debt by US$ 200 million to purchase grain for the state reserve.

It is planned that Ukraine temporarily cancel import duties on food grain.

On July 3 an attempt to consider draft amendments to the Constitution in parliament failed since the opposition blocked the dais.

The discussion dealt with transferring the drafts to the Constitutional Court for expertise examination (a mandatory requirement according to the Ukrainian laws). The opposition suspected that the parliamentary majority would send only the presidential draft and would refuse to send an alternative draft elaborated by the parliamentary commission and thus insisted that both drafts be sent there simultaneously. The opposition blocked the dais (a technique which it repeatedly and successfully resorted to) and thus the parliament session on July 3 for all intents and purposes was stymied and the decisions effectively were not made.

The opposition faction Our Ukraine stated that it stood against any amendments to the Constitution before 2006.

Commentary. Experts believe that the faction reckons on victory of its leader Viktor Yushchenko in the 2004 presidential elections and therefore was not interested in changes aimed to restrict the authority of the president of Ukraine. Other opposition factions in principle agree on conducting the reform, but in many cases do not agree with the presidential draft and are in favor of adopting the parliamentary draft.

On July 3-4 Yalta (Crimea, Ukraine) hosted the meeting of the representatives of participating states of the GUUAM. Presidents of Ukraine and Georgia, representatives of Azerbaijan, Moldova and Uzbekistan took part in this meeting. Since initially it was planned that 5 presidents would take part in the meeting the observers speak about the failure of the conference.

U.S. representatives Steven Pifer, Deputy Assistant Secretary for European and Eurasian Affairs at the U.S. State Department, and Carlos Pascual, U.S. ambassador to Ukraine also participated in the conference. U.S. are going to get the "constant observer" in GUUAM.

President of Ukraine Kuchma met with Pifer. The main subject of the talks was the functioning of the GUUAM. They also discussed issues of Ukraine's participation in the stabilization forces in Iraq and the forthcoming constitutional reform.

Vice prime minister of Ukraine Vitaliy Haiduk visited Libya on June 29 - July 2. Libya invited Ukraine to take part in restoration of its economy. In particular, Libya wanted that the number of Ukrainian medical workers working in the country would increase to 8,000 (at present their number is 3,000).

Ukraine intends to deliver to Libya 4 light transport aircraft An-32.

On July 1 Kiev was visited by Tonino Picula, minister of foreign affairs of Croatia.

The Volyn problem in relations between Ukraine and Poland.

Border problems between Ukraine and Poland have deep roots in history and heavily darken relations between the two peoples.

Ukraine over several centuries was part of the Polish State and many Poles are inclined to believe that Ukraine's substantial portion belongs to Poland's "historical territories". In the course of Ukrainian-Polish wars in the 16th and 17th centuries both sides committed horrible atrocities and both nations have old scores.

After the First World War some Ukrainian lands were integrated in the USSR having formed the Ukrainian Soviet Socialist Republic there and some became part of Poland including Halychyna (Galicia) and Volyn.

In both cases the Ukrainians found themselves in a very hard situation, the Ukrainian people suffered heavy losses. The number of victims in the USSR was substantially larger. However, if in the USSR the yoke of oppression in equal measure was distributed among the Russians, Ukrainians and other nations and the Ukrainians were not oppressed as a nation, in a post-war Poland the Ukrainians to a great extent were regarded as people of the second grade. This was the reason why the capture by the Soviet Union of the Polish lands after the deal between Stalin and Hitler in August 1939 was enthusiastically welcomed by the Ukrainian population; the Ukrainians welcomed the Soviet soldiers as liberators. However, very soon many a Ukrainian in the western part were shot or sent to exile by the Soviet regime.

By 1940 three forces regarded the lands of Halychyna and Volyn as their own: (a) Poland - on the basis that these areas had belonged to Poland before its "division" in 1772, 1792 and 1795) and also between the years 1921 and 1939; (b) the Soviet Union - since these areas were integrated in the USSR in 1939, while Volyn, in addition, was part of Russia between 1795 and 1917; (c) participants of the Ukrainian national movement - since they regarded these lands as their own ethnic lands, which had to become part of an independent Ukrainian state.

However, in the meantime the territory was occupied by Hitler's Germany, which to some extent wooed both the Poles and the Ukrainians. Those who opposed the German regime went to forest. Polish guerilla fighters acted there (AK, Army Krajowa), Ukrainian guerilla fighters (UPA, Ukrainian Resurgent Army) and Soviet resistance fighters. These gorilla fighters waged the war not only against the Germans, but they fought each other as well. The worst thing was the fact that they destroyed not so much themselves (which could be justified in some way under conditions of war) as they killed civil population: the Ukrainians killed the Polish population, and the Poles killed the Ukrainian population.

In this case in the region of Kholmshchyna (the present-day Poland, where the Poles were in majority, some ten thousand Ukrainians (estimates) were killed and comparatively few Poles were killed; at the same time in Volyn some 80,000 Poles and comparatively few Ukrainians were killed.

After the war Poland which was part of the Soviet bloc could not raise an issue of Volyn victims. However, after 1989 when the communist rule in Poland was over the Poles again started to raise the issue of these victims.

The Ukrainian side on one hand would like that the Poles condemn the crimes committed against the Ukrainians. In part these wished were met when Poland's President Kwasniewski condemned cruelties committed during deportation of Ukrainians to the former German lands - the so-called "Wisla operation".

The discussion on Volyn's victims aggravated this year in connection with the 60th anniversary of the tragedy. The Ukrainian nationalists insist that since the UPA fighters defended their land they acted justly and there is nothing for Ukraine to apologize.

On the other hand, the representatives of the Ukrainian centrist forces including the social-democrats believe that in any case Ukraine has to admit its moral responsibility for the murder of peaceful population, but not legal responsibility since the UPA fighters did not represent the Ukrainian state. An article which set out this viewpoint written by leader of the SDPU(u) party Viktor Medvedchuk was published in the Polish press.

Early in June a leading Ukrainian TV channel showed a 4-part movie "Volyn. The Sign of Sorrow", which in great detail told about this tragedy and misfortunes suffered by both the Poles and the Ukrainians.

As expected in July 11 Presidents of Poland Kwasniewski and Kuchma of Ukraine will meet in Volyn in order to make a joint reconciliatory statement.

Relations with the IMF

In the course of an IMF mission, which worked in Kiev from June 18 to July 1, the Fund experts attained mutual understanding with the Ukrainian government on issues of economic policy for the second half of 2003 and for 2004.

The IMF mission and the Ukrainian government discussed the issue of how to make sustainable favorable tendencies in Ukraine's economy which manifest themselves in high pace of economic growth, low inflation and stable positions of the budget and the balance of payments. A special attention was paid to the issues of taxes, exemption of privileges and privilege regimes with respect to different taxes.

In the follow-up of the results of the visit the IMF Board of Directors late in August this year will consider the endorsement for Ukraine of a program of an "early-warning" stand-by program for 15 months within whose framework the country may use funds in the amount equal to SDR (Special Drawing Rights) 514.5 million.

Ukraine over the time of its financial cooperation with the IMF (since 1994) obtained SDR in the amount of 3.01 billion.

At present despite a serious harvest failure in grains the country's financial position is sufficiently strong and there is no critical necessity in obtaining a new IMF credit (the previous four-year program of extended fund facility (EFF) in the amount of SDR 1.92 billion was over in September 2002, which did not affect much the situation in Ukraine).

At present the country's state budget is fulfilled by 100%, the international reserves of the National Bank grow fast. In June only the gold and currency reserves increased by USD 821 million or by 15.4% having amounted by July 1 to USD 6,171 million. Since the beginning of the year the reserves' increment has been USD 1771.2 million..

The National Bank has improved the forecast for the growth of foreign exchange reserves in 2003 from USD 6.2 billion to USD 6.5-7 billion.

Nevertheless, the IMF crediting for Ukraine is very important in that it should provide a positive signal for foreign investors. The Ukrainian government counts on the increased inflow of foreign investments to the country.