[11.07.03]

Ukrainian President Criticizes Parliamentarians, Argues He Should Have Right To Dissolve Legislature. Parliament achieved an accord on sending to the Constitutional Court of two draft laws on the constitutional reform. President Kuchma said on July 7 that last week’s confrontation between the pro-presidential majority and opposition lawmakers in Parliament rolled on over two drafts of the constitutional reforms, one proposed by the president and the other submitted by a group of the opposition legislators. Parliamentarians split over which of the draft bills should be sent to the Constitutional Court for scrutiny. "The head of state must have the right to dissolve inefficient parliament. This authority itself would urge the lawmakers deputies be more thorough in doing their duties," Kuchma said, adding that he is pondering withdrawing his political-reform bill.

On July 11 the lawmakers arrived at a compromise and by an overwhelming majority of votes (400 out of 450) adopted a resolution whereby the speaker had the right to independently submit draft laws on amendments to the Constitution for consideration by the Constitutional Court. (Earlier this question was not statutory regulated). Parliamentary speaker Volodymyr Lytvyn said that he was ready to submit both draft law in the case there was the consent of its authors.

Commentary: The opposition lawmakers - who fear the changes proposed by the President would be used by him to extend his term in office - faced off the pro-presidential majority in parliament. Today this crisis formally has been overcome and now the Constitutional Courts will have its say. However, it looks likely that the Constitutional Court may refuse to consider the drafts submitted since earlier it explained that such drafts should be submitted by parliament by consensus.

Parliament Did Not Pass a Resolution On the Situation in the Agro-Industrial Complex. Since the rush demand and price jump persisted on July 10 parliament heard the Cabinet of Ministers' information on the situation in the agro-industrial complex and measures to overcome the crisis in agriculture. This information raised an issue on a threat for food security of the state. As urged by the opposition a draft resolution was proposed by which, in particular, the government was suggested to take measures to renew the prices for food products at the level of January 1, 2003 and to introduce a moratorium for rise in prices on food products and house rent until the attainment of the minimal wage subsistence level. (Under Ukrainian conditions this would mean - for indefinite time). The majority assessed it as unrealistic and this draft did not pass. At the same time local authorities take administrative measures to limit the rise of prices.

Commentary: See "Economic Developments"

Ukrainian Peacekeepers To Start Mission In Iraq In September. A Ukrainian brigade of some 1,800 peacekeepers will start its mission in the Polish-administered sector of Iraq on 1 September the Ukrainian Defense Ministry spokesman said early last week. The brigade, as part of the Polish-led international division, will be deployed at a military airfield in Al Kut, the capital of the Wasit province. Wasit’s population is about 800,000 people, most of whom are Shi’a.

Commentary: The Ukrainian peacekeepers will replace 1,200 U.S. Marines who have been in Wasit for three months. Their duties will include patrolling two highways that connect the southern part of the country with Baghdad, escorting humanitarian cargoes and guarding the 120-kilometer border with Iran.

GUUAM Held A Two-Day Summit In Crimea. Delegations from Georgia, Ukraine, Uzbekistan, Azerbaijan and Moldova (GUUAM) gathered on 3 July for a two-day summit in Yalta, Crimea. Two presidents Leonid Kuchma of Ukraine and Georgia’s Eduard Shevarnadze attended, while Azerbaijan was represented by Prime Minister Artur Rasi-Zade, Uzbekistan by former foreign minister and current presidential advisor Abdulasiz Komilov. Ukraine also invited delegations from 19 other countries, including the United States and Russia. Among the key topics discussed were creation of a free-trade zone and expanding a string of already concluded agreements on customs, trade and transport.

President Kuchma Assures United States He Is not Seeking To Prolong Presidency.

After meeting with President Kuchma last Friday, Deputy Assistant Secretary of State Steven Pifer said that the president had told him that he would not delay the next 2004 presidential elections and that he had no intentions to prolong his term in office.

Commentary: Kuchma is aware that Washington closely watches democratic developments in Ukraine and therefore he wants to counter efforts by the opposition to smear his attempts at reforming the political system.

Visiting Russian Defense Official Praises Strategic Partnership With Ukraine. "Russia always considered and continued to consider Ukraine as its strategic partner. We are building our military relations proceeding from this premise," Russian defense minister Sergey Ivanov said upon his arrival in Kiev on June 30. Ivanov met on the same day with President Kuchma. The following day, Ivanov and his new Ukrainian counterpart Yevhen Marchuk signed an accord on the handling of aviation equipment that is being either scrapped under international agreements or repaired at military facilities in both countries. The two also signed an agreement on training Ukrainian air-defense units in Russian military bases.

Commentary: This was Marchuk’s first high level meeting as defense minister.

Marchuk’s replacement to head the National Security and Defense Council has not been named yet, but the announcement is expected any time now. One of possible candidates to that position is the current head of Presidential Administration Viktor Medvedchuk. Knowledgeable political observers note that in view of Medvedchuk considerable political influence, should he get the nod to head the Council, that institution will perform an even more powerful role in Ukrainian politics than it has apparently played in recent weeks in the dismissals of former minister of defense Shkidchenko and ecology minister Shevchuk.

The new post would also provide Medvedchuk with more political visibility and opportunities to speak out on key political issues.

Ukraine and Poland Make a Step Toward Historical Reconciliation. On July 10 parliaments of Ukraine and Poland made a joint statement in connection with the 60th anniversary of tragic events in Volyn (a western region in Ukraine). In 1943 Ukrainian Resurgent Army killed some 100,000 (according to the Polish data) of Poles residing there. In reciprocate actions carried out by the Poles the death toll among the Ukrainians was 20,000. The statement of two parliaments expressed sorrow in connection with these tragic events, marked the losses of the two nations and contained an appeal for reconciliation. On July 11 presidents of the two countries Leonid Kuchma and Alexander Kwaśniewski made analogous statements at the mourning ceremony in one of the villages in Volyn.

The adoption of this statement caused broad discussion in Ukrainian parliament. Many lawmakers noted asymmetry of the statement (the Polish side looked as if it suffered more) and proposed relevant changes. A number of lawmakers from the Yulya Tymoshenko bloc and Viktor Yushchenko's faction Our Ukraine in principle were against the statement since Ukraine had nothing to repent of before the Poles. Yulya Tymoshenko herself was very outspoken in her speech to defend the Ukrainian Resurgent Army's actions..

Commentary: In resolving this issue the nationalistic forces in Ukraine once again found themselves in an ambiguous situation. On the one hand, they constantly declare a European option for Ukraine as a counterweight for orientation at Russia and counting on the West's backing, which they in deed often receive. On the other hand, ideology professed by them is far from European values and often takes the countenance of overt xenophobia.

Ukraine by Level of Human Potential Development Ranks 75th In the World. In the annual report on human development prepared on the commission by the UN Development Program Ukraine by the level of human potential holds the 75th place in the world among 175 countries surveyed. This rating was made by independent experts and is based on national statistical data on human longevity, the education level, the use of cutting-edge technologies and a real income per capita of population. The report broke down all the countries into three groups: having a high, medium and low level of human potential development. Ukraine, as most of the former USSR republics, was included into the second group. Ukraine's position since 2002 rose by 5 points (earlier it ranked 80th).

Commentary: Ukraine's rating is low, first of all, due to low human life-span and the minimal level of incomes per capita of population.

Economic Developments

Ukrainian Cabinet Wants $200 Million Loan To Buy Grain. Deputy premier and finance minister Mykola Azarov requested on 3 July that Parliament allow the Cabinet to borrow $200 million abroad for replenishing state grain reserves. He held it that the current situation in foreign financial markets was extremely favorable and that the money could be borrowed at 7 percent interest rate for 10 years and purchase grain for state reserves. He said that at this time Ukraine needed to increase its grain reserves.

Commentary: Ukraine has seen a consumer rush for grain products and considerable hikes on food prices in recent weeks apparently in anticipation of poor harvest this year.

Ukraine President Seeks To End Tax Evasion, Approves Flat Income Tax of 13 Percent Adopted By Parliament. President Kuchma earlier this week has signed a flat income tax bill aimed at ending the country’s endemic tax evasion problem. The bill was passed by the parliament in May replacing the country’s progressive tax system with a 13 percent tax applicable to all citizens regardless of income. Under the progressive tax system, Ukrainians pay 10 percent to 40 percent depending on their income level.

Commentary: The government anticipates that after the new law takes effect on January 1, 2004, budget revenues from personal income taxes will exceed those from corporate taxpayers by coaxing chronic tax-dodgers out of the shadows.

Russian tax collections increased significantly after the country adopted a similar system two years ago.

Last month, the World Bank approved the first of two proposed loans totaling US$ 114 million to help Ukraine upgrade its tax system and end tax evasion.

"Food Crisis" in Ukraine - What Is The Real Situation?

On last days of June Ukraine saw a rush for some food stuffs, bread, flour, grains, and sugar. The poorer part of the population became panic-stricken, the network of grocery shops had difficulty in meeting the dramatic rise of demand, food lines, forgotten for a long time in Ukraine, appeared again.

This made some experts, journalists, foreign ones inclusive, etc. speak about as near as the threat of hunger in Ukraine.

These events have a certain logic basis: for the next year a serious bad harvest of cereals is anticipated in Ukraine. This bad harvest is caused, first of all, by anomalously unfavorable weather conditions (according to some data, the worst over the last 100 years).

Nevertheless, forecasts of the food crisis, hunger, etc. has not had any serious basis.

The present situation means minor variations in the market's ups and downs, which was aggravated by the internal political situation in Ukraine, the aspirations of the opposition to maximally dramatize the events.

In reality the so-called crisis lasted for less than three weeks and early in July, as a result of commodity interventions made in the market across the whole territory of Ukraine, the prices on foodstuffs in high demand started to drop.

No dramatic rise in food products took place, over the first half of the current year their total rise accounted for 6.4%, the rise of prices for bread - 3.5%, those for sugar - 1.7% (for comparison: in 2000 when V.Yushchenko's government was in authority similar indicators reached respectively 19.4%, 57.0%, 64.5%). And no panic at that, Yushchenko's government was active in publicizing its achievements. Today these people speak about the forthcoming catastrophe).

The so-called food crisis is, first of all, a political phenomenon, artificial dramatization of a rather ordinary episode in an economic life.

Ukraine possesses four-month stocks of grain from the old harvest and besides new crops are already harvested.

Over the last weeks weather conditions improved, which made it possible to raise forecasts of a new harvest to more than 30 million tons, which is quite enough to glut market.

Import duties for food grain have been exempted (it is characteristic that this measure was not supported by the opposition).

Next year Ukraine will import food grain, but still will remain to be a large exporter of fodder grain. Since the occurrence of extreme weather conditions in 2003, in the foreseeable future, is unlikely, there are reasons to predict fast recovery of Ukraine's positions at the international grain market in the nearest years.