[01.08.03]

President Kuchma on July 31 signed a decree on the redeployment of the Ukrainian decontamination battalion from Kuwait, where it has been deployed since April this year, to Iraq. Its 448 servicemen will be incorporated into the unit of Ukrainian peacekeepers in Iraq.

Leszek Miller, head of Polish government, visited Kiev on July 30-31. An agreement on the travel regime for citizens of both countries was signed. One of the topics of the negotiations was the issue of the Odessa-Brody pipeline. This is a controversial subject since Russia seeks to use this pipeline in the opposite (reverse) direction. The Ukrainian leadership cannot agree with the Russian position, but at the same time doesn’t want an open conflict, since it may adversely affect the chances of a presidential candidate supported by the authorities during the 2004 presidential elections. Therefore President Kuchma kept himself aloof from participation in the negotiations and delegated his authority to head of the government Viktor Yanukovich in order to conclude the agreement with Europe.

The other topic of the negotiations was concerted actions of the Ukrainian and the Polish detachments of peacekeepers in Iraq. Yanukovich and Miller visited a plant in Donetsk manufacturing the surveillance radar systems Kolchuga.

There was also some information that Malaysia considers a possibility of purchasing a few such radar system from Ukraine.

New Ukraine's minister of defense Yevhen Marchuk discussed with President Kuchma his proposals concerning a reform in military structures. As experts believe these changes should bring the Ukrainian army closer to NATO standards.

Among other things it is planned to replace most (up to 80%) of military executives by civilians (as is known redundancy of the generals is one of the drawbacks of the Ukrainian army).

President Kuchma awarded outgoing U.S. ambassador to Ukraine Carlos Pascual with a "For Services" medal, 2nd degree.

On July 29 President Kuchma upon the government recommendation fired three heads of regional administration (regional executives). One of them was replaced by Volodymyr Yatsuba, who until recently had been a minister of the Cabinet of Ministers. Anatoliy Tolstoukhov, who before that headed the parliamentary majority, now holds this position.

A formal reason for firing these officials were miscalculations in forming the policy of procuring the regions with bread. The observers believe that these reshuffling is related to the approaching election campaign of 2004. They also assume that the transfers of Yatsuba and Tolstoukhov testify to "a short bench of odd players" for the government and a shortage of candidatures for key positions.

On July 31 and August 1 Prime Minister Viktor Yanukovich visited Russian and Kazakhstan, where he conducted negotiations on grain purchases. The harvest of the current year is estimated at the level of approximately 28 million tons, which is much less than last year although there is no serious threat.

Privatization and political struggle in Ukraine

The privatization process in Ukraine took and takes place in rather complicated situations, often acquiring overt semi-criminal, criminal and corrupted forms. This undoubted fact often stands in the way of seeing its positive results, which independent researchers began to record starting from the late 1990's.

Starting from 2000 the relationship between privatization and economic ascendancy that took place became obvious (8-10% rise annually), where most privatized areas and sectors of economy have been steadily in the lead.

Assessing the privatization results one has to take into account the fact that it took and takes place in conditions of active political resistance. As a matter of fact during the 1990's privatization opponents dominated in parliament. Privatization itself became possible only due to the position of the president and executive power.

The Communists and Socialists failed to block privatization completely, but they succeeded in bringing about substantial and extremely negative influence on the formation of the privatization legislation framework. Necessary laws either were not adopted or were adopted in a form, which had very little in common with what had been planned by the developers or were not passed at all.

As a result colossal shortcomings of the legislative framework became one of the most important reasons of a contradictory and semi-criminal nature of privatization.

Although the privatization process has not desisted, it, as before, is extremely adversely affected by the political situation.

On July 14 one of the largest factions of Ukrainian parliament - Our Ukraine - and its leader Viktor Yushchenko, came out in support of a moratorium on privatization of especially important strategic companies.

This position was motivated by a low level of the population's credibility given to the acting authorities and abuses made by them in the course of privatization. In this situation it would be clear if the Our Ukraine faction, which enjoys an image of a liberal and pro-Western bloc (and actively supported by outgoing U.S. ambassador Carlos Pascual) would advocate the society's greater control over this process. But instead it demanded complete stop on privatization.

One should explain such a position by a context of the internal political struggle.

Continuation of privatization, in particular, privatization of power companies, which are strategic objects, is a mandatory condition for resumption of normal cooperation of Ukraine with the World Bank and the IMF, for obtaining new credits from them. U.S. ex-ambassador to Ukraine Carlos Pascual underscored the necessity of the fastest privatization in his farewell address.

The moratorium on privatization of strategic objects makes impossible the meeting by Ukraine of conditions set by the World Bank and the IMF and hence obtaining new credits from them. This, no doubt, will complicate Ukraine's international position, will negatively affect its investment climate and reduce budget revenues. But all this substantially raises Viktor Yushchenko's chance of being elected president of Ukraine in 2004. Therefore he is ready to knock a bloc with the Communists and Socialists on the issue of terminating privatization.

It is not the first time that V. Yushchenko resorts to such kind of a political struggle. There was a time when his supporters together with the Communists stymied the passing of the law on protection of private property, which took account of the U.S. requirements to fight pirate production of laser compact disks in Ukraine. Thus the opposition provoked the introduction of U.S. economic sanctions against Ukraine, which still have been in effect to date.

A similar situation repeated itself when Our Ukraine frustrated the voting on the law of money laundering, which led to introduction of FATF sanctions against Ukraine.

Thus privatization in Ukraine still remain a "hostage" of domestic political processes. Nevertheless, it is obvious that its main political goal has been achieved - its scope is such that now it is impossible to return to the Soviet-type economy. With every year economic return from privatization is growing too.