[12.09.03]

US President Sends Letter To His Ukrainian Countepart. A group of U.S. congressional representatives led by Curt Weldon, a Republican from Pennsylvania, traveled to Kiev last month to celebrate Ukraine’s day of independence. During their visit the delegation met with President Kuchma on 24 August and passed to him a letter from U.S. President George W. Bush. Weldon subsequintly told journalists that in his letter Bush thanked Kuchma and the Ukrainian people for their support in combating global terrorism. For his part, Kuchma reportedly said at the meeting thatUkraine is ready for broader cooperation with the United States in all areas.

Ukraine Has A New Foreign Minister. On 2 September, President Leonid Kuchma dismissed Foreign Minister Anatoliy Zlenko and appointed Konstantyn Hryschenko to that post. Hryschenko who is 49 years old, has served as Ukraine’s ambassador to the United States since January 2000. Prior to that, he was ambassador to the Benelux countries and headed Ukraine’s mission to NATO in Brussels.

Comment: Hryschenko is widely seen as pro-Western and his appointment is another Kuchma’s signal to Washington that he is ready for broader cooperation in all areas. Improving bilateral relations with the US remains Kuchma’s foreign policy priority.

Ukraine Gets New National Security and Defense Chief. Also on 2 September, Kuchma appointed Volodymyr Radchenko as secretary of the National Security and Defense Council, at the same time releasing him from his position as chief of the Ukrainian Security Service (SBU). This post has been vacant since the appointment of Yevhen Marchuk as defense minister in June.

Comment: Radchenko is 54 years old and served as SBU chief twice, from 1995-98 and 2001-03. He also served as the first deputy to the secretary of the National Security and Defense Council from 1999-2001.

Parliament Convenes After Summer Recess. Ukrainian lawmakers gathered in Kiev on 2 September for a new session following their summer recess. They are expected to tackle some 900 bills during the upcoming session, including one on amending the constitution in order to reform the country’s political system.

Comment: The first week the parliamentarians will work in committees, while their plenary sitting is scheduled to begin on 9 September.

Ukrainian President Supports New Constitutional Reform Bill And Potential Election Of President By Parliament. President Leonid Kuchma said last week that he is ready to support proposals that Ukraine’s president be elected by parliament. Earlier, Socialist Party leader Oleksander Moroz disclosed that the Socialists and Communits are discussing a new political-reform draft with the presidential administration. A key element of the draft Moroz said, is the presidential administration’s proposal that the parliament elect the president.

Comment: Former Prime Minister and current presidential hopeful Victor Yuschenko came out against the new constitutional reform bill. He is for maintaining the current strong/imperial presidential system is against greater power sharing arrangement with the parliament.

Kuchma Names New Interior Minister. Late last week, President Kuchma dismissed Interior Minister Yuriy Smirnov and replaced him with Mykola Bilokon, head of presidential administration’s Department for Judiciary Reform.

Comment: Prior to Smirnov’s dismissal, Kuchma has strongly criticized the continuing corruption problems with the interior ministry.

Economic developments

Consortium Considers Building New Gas Pipeline Across Ukraine. The international consortium for developing and managing Ukraine’s gas transportation system is planning to build a new gas pipeline linking Novopskov in Luhansk Oblast with Uzhhorod in Transcarpatia. That plan was discussed last week at a meeting in Kiev of the consortium leadership. The meeting was attended by Russian Deputy Prime Minister Victor Khristenko, Gazprom deputy heads Aleksander Ryazanov and Yuriy Komarov, Ukrainian Deputy Premier Vitaliy Hayduk, and Naftohaz Ukrainy head Yuriy Boyko. After the meeting, Khristenko told journalists that new 1,500-kilometer pipeline will built within two years and will cost $2 to 2.5 billion.

Comment: This consortium was registered in Kiev earlier this year. The pipeline is expected to increase gas deliveries to Europe via Ukraine from the current 110 billion cubic meters to 131 billion cubic meters.

12.09

Political Developments

Antisemitism Used In Western Ukraine In Attacking Social Democratic Party Official. Counterfeit 10 hryvnya bills were distrubuted in Lviv this week with a photograph of Sergey Medvedchuk, the head of the local Tax Administration and the younger brother of the head of Social Democratic Party-united (SDPU-o) and the head of Presidential Administration Victor Medvedchuk. The photo on the counterfeit bill was mounted on a Star of David and described the younger Medvedchuk as the godfather of the Social Democratic Party-of circumcised. Ukrainskaya Pravda cite reported that two national lawmakers in Kiev Yaroslav Kendzer and Oleg Tyagniboka, both members of Victor Yuschenko’s bloc "Our Ukraine," presented a large package of these counterfeit bills to Prime Minister Yanukovich with words that "this is for you Victor Fedorovich, for strenghtening our country’s government." The pair also presented these counterfeit bills to the Speaker of the Parliament.

Comment: It is still not certain who is behind this antisemitic act, but the actions of the two lawmakers from "Our Ukraine" bloc suggests that some in former Prime Minister Victor Yushenko’s bloc do not disagree with such repugnant methods. For his own part, Victor Yuschenko has not censored his two political comrades for their actions nor has he made any statements condemning this antisemitic act.

Project of constitutional reform support now more than 290 lawmakers. They signed the project. In Verkhovna Rada there are 450 lawmakers.

Ukrainian Cabinet Submits 2004 Budget Draft To Parliament. The Parliament has registered a 2004 budget draft on 10 September. The document projects budget revenues at 58.2 billion hryvnyas ($10.9 billion) and a deficit of 2.37 billion hryvnyas.

Comment: the government expects that the GDP will grow by 4.8 percent, while anticipating the annual inflation rate to be 6 percent.

Deputy Speaker of Ukrainian Parliament Is Thrown Out Of Party. The Political Bureau of the Social Democratic Party-united (SDPU-o) on 10 September expelled deputy parliamentary speaker Oleksandr Zinchenko from the SDPU-o.

Comment: Zinchenko’s troubles with SDPU-o’s leadership and his final expulsion from the party stems from his propensity to flout party disciplline. The main question was: Zinchenko refused to support the project of political reform, which is supported by parliament majority & President Kuchma.

Ukraine, U.S. Sign Memorundum ON USAID Program In 2003. Ukrainian Economy Minister Valeriy Khoroshkovsky and Christopher Crowley, director of the U.S. Agency for International Development (USAID) regional Mission for Ukraine, Moldova, and Belarus, signed an intergovernmental memorundum in Kiev on 8 September. The memorundum call for $150 million to be spent in Ukraine under a USAID program in 2003.

Comment: The money is slated to finance projects implemented jointly with Ukrainian organizations to step up the country’s economic development, reforms in the banking sector, and preparations for accession to the World Trade Oraganization.

Ukraine, Estonia Sign Defense-Cooperation Agreement. Ukrainian Defense Minister Yevhen Marchuk and his estonian counterpart Margus Hanson, signed an eight-article agreement on defense cooperation between their ministries in Tallinn on 8 September. The cooperation will focus primarily on legal counselling and exchange of experience in defense-force reforms, NATO membership, and international peacekeeping missions. Marchuk said that Ukraine wants to join NATO and is planning to reduce its armed forces and bring their structure into line with NATO standards.

Comment: During Marchuk’s three day visit to Estonia, he also plans to meet with other top Estonian political and military leaders and is scheduled to visit the Baltic Defense College in Tartu.

Ukraine Gets New Secret Service Chief. President Kuchma on 4 September appointed Ihor Smishko to head the Security Service of Ukraine (SBU). Smishko, 48 years old, served as first deputy secretary of the National Security and Defense Council prior to his appointment. He replaced Volodymyr radchenko, who was moved to head the National Security and Defense council.

Comment: Smishko’s appointment is a departure for Ukraine’s secret service in that its new chief is neither a product of SBU nor its Soviet predecessor the KGB. Instead, Smishko had a distinguished military career, which included a stint as a military attache in Washington from 1992-95. He speaks fluent English.

Economic Development

Ukrainian Government Plans Big Grain Imports. Deputy Prime Minister for Agriculture Ivan Kyrylenko told the Parliament on 9 September that Ukraine imported 7500,000 tons of wheat and 230,000 tons of rye this year. He added, that as crop of with this year is poor, the government deems it necessary to import an additional 2 million tons of grain by the end of the year. Kyrylenko urged lawmakers to allow the government to cancel value-added tax payments for grain importers until next August and continue waving customs duties for wheat and rye imports until June 2004.

Comment: in 2001 and 2002 Ukraine had ample crops, but 2003 year was a catastrophic one, primarily - in wheat.

Ukraine Offers Odessa-Brody Pipeline To Foreign Partners. Ukrtransnafta has invited authorities and companies from Russia, Kazakhstan, Azerbaijan, and Uzbekistan to provide 380,000-420,000 tons of technological oil next month for the Odessa-Brody pipeline. The purpose of the decision reportedly is to bring the pipeline into immediate use in order to avert the threat of damage to the pipeline this autumn and winter.

Comment: Earlier this year Russia has urged Ukraine to use the Odessa-Brody pipeline in the "reverse mode" that is, for pumping russian oil from brody to Odessa. Kiev has not yet made a decision on this issue.

Ukraine To Get $40 Million From world Bank To Upgrade Tax Collection. First Deputy Prime Minister Mykola Azarov and World Bank Director for Belarus, Moldova and Ukraine Luca Barbone signed and accord in Kiev on 4 September under which Ukraine will obtain a credit of $40 million for a 10-year program to modernize its Tax Service.

Comment: The program will help make the work of the Tax Service more transparent, and tax regulations simpler and clearer.