[18.10.03]

Kuchma visits Libya. On October 11-14 President Leonid Kuchma went to Libya on a state visit. He met with Libyan leader Muammar al-Qadhafi.

A number of contracts were discussed and concluded. In particular, it is planned that Ukraine will construct a road and a railway. Libya will provide 4 oil fields for development by Ukraine.

President Kuchma said that the results of the visit "are much better than expected".

Ukraine, Libya Sign Nine Agreements. President Kuchma signed in Libya nine accords including on cooperation in science and technology, geological research, banking and oil exploration.

Comment: Ukraine deferred widening its relations with Libya until Tripoli settled the TWA bombing case.

Libya Wants Ukraine’s Assistance In Exploration And Extraction Of Oil. Libya has made an offer earlier this week to Ukraine’s state-owned Naftohaz Ukrainy company to conduct geological exploration and extract crude oil from four deposits in Libya.

Naftohaz Ukrainy’s chairman Yuriy Boyko stated that the offer will be studied and decisions and the agreements on exploration and extraction could be concluded next month.

Comment: The details of the Libyan offers are not known. However, the foreign companies that are already operating in Libya under product sharing agreements receive 15-30 percent of the volume of extracted crude oil.

Naftohaz Ukrainy presently mines crude oil and natural gas only in Ukraine, but the company is currently also negotiating on mining crude oil in Uzbekistan and Turkmenistan.

Iran's Speaker of the Islamic Consultative Assembly (parliament) Mehdi Mahdavi-Karubi visited Ukraine on October 15-17. He met with Ukraine's top leaders.

Ukrainian President Fires Ambassador to Poland. President Leonid Kuchma earlier this week has recalled Oleksander Nykonenko from his post as Ukraine’s ambassador to Poland.

Comment: Nykonenko reportedly attacked a Polish policeman last August after he was stopped in Warsaw on suspicion of driving while intoxicated. Poland is Ukraine’s major European ally and the incident was a diplomatic embarassment.

The Opposition Again Disrupts The Work Of the Parliament. The Parliamentary session on 16 October started with a blockade of the parliamentary rostrum by deputies from the opposition Socialist Party, Victor Yuschenko’s "Our Ukraine" bloc and Yulia Timoshenko’s bloc. The opposition demanded that the legislature begin voting on bills proposing parliamentary elections under a fully proportional system. The Communist Party caucus did not take part in blocking the rostrum but its leader Petro Symonenko expressed support for the demand.

After the voting for all bills on the agenda brought no results (not more than 209 votes; whereas to make a decision 226 votes were needed) the opposition said that they would not allow anybody to vote for the budget (October 23) unless the election law is passed before that.

Comment: A similar protest was staged by the opposition earlier this month and in December 2002.

There exists unanimous position that the election law should be changed by going either to the "pure" proportional or to some other system more or less similar to the proportional one. These changes are also provided for by the draft constitutional reform advocated by Kuchma. However, there is no consent as to the details of this bill. Therefore, at this time the odds that the voting will be successful are minimal. On the other hand, the chances are high that in several weeks' time there will be a success in achieving a draft acceptable for most lawmakers.

A disaster in the town of Artemovsk happened on October 10: ammunition depots blew up. Military missiles kept exploding for several hours. Fortunately, nobody was killed. Two persons were wounded.

The 7th congress of the party 'Reforms and Order' incorporated into the 'Our Ukraine' opposition bloc was held on October 11. Again Viktor Pinzenyk was re-elected its leader. The congress addressed its partners in the coalition with an appeal to set up the Common United Democratic Party.

262 delegates out of 292 elected took part in the work of the congress.

Ukrainian Parliamentarians Appeal To Their Russian Counterparts Over Dam Construction. Earlier this week Ukrainian Parliament sent an appeal to the Russian Federal Assembly to intervene and stop the construction of a dam between Russia’s Taman Peninsula and Ukraine’s Tuzla islet in the Kerch Strait.

The construction of the dam in a strait separating Russia's territory from a small Ukrainian island of Tuzla goes on. Ukraine's Ministry of Foreign Affairs believes that a decision to build a dam in the Kerch Strait without coordination with Ukraine is inadmissible in international practice. By October 17 the distance from the dam to the Ukrainian border was less than one kilometer (820 meters; half a mile).

The Ukrainian deputies also warned that they would be prepared to take all the necessary measures to protect Ukraine’s territorial integrity. The Ukrainians reportedly sent a reinforced border-guard unit to Tuzla and installed anti-tank defenses facing the dam construction, which has come to within one kilometer of the island.

President Kuchma referred to Russia's actions as "unfriendly". He reminded that Russia (just as the U.S.) acted as a guarantor of Ukraine's territorial integrity when in 1993 Ukraine renounced its nuclear arsenal which it still possessed after the Soviet Union's demise.

Comment: Russia's goals are not clear. Some experts believe that Russia's objective is to return the island of Tuzla (it was part of Russia in Soviet time, but some 50 years ago it was handed over to Ukraine). However, most experts think that Russia has no intention to trespass the Ukrainian territory, but intends to secure for itself more advantageous positions at the negotiations on the Azov Sea status. Prior to the USSR's breakdown the Azov Sea was the USSR's internal sea and now its shoreline belongs in part to Ukraine and in part to Russia.

The experts also believe that such turn of events stands little chances of success that Ukrainian parliament ratifies the CES Agreement. In general it distinctly improves the situation for the champions of aggravating the relations between the two countries, which though are not numerous in both countries, but still they do exist.

Many believe that Russia’s construction of the dam in Kerch Strait is part of Moscow’s pressure tactics aimed to influence Kiev in the talks on the delimitation of the border in the Azov Sea and Kerch Strait. Apparently Kiev wants to divide the Azov Sea and the Kerch Strait into areas forming national waters of each state, whereas Moscow prefers to leave Azov Sea for "joint use" by Russia and Ukraine.

Ukrainian Foreign Minister Konstantyn Grischenko is scheduled to meet with his Russian counterpart Igor Ivanov on 30 October in Kiev to discuss the sea-border delimitation.

An Iraqi court sentenced (October 13) two seamen, citizens of Ukraine, to seven years of prison sentence and a fine of US$2.4 million each for an alleged attempt to export diesel fuel from Iraq.

Captain of the Navstar-1 tanker Mykola Mazurenko and his mate Ivan Soshchenko were arrested in August this year charged with an attempt of smuggling 3.5 tons of fuel.

The rest of the seamen from the tanker were freed.

Ukrainian economic growth speeds up

The real GDP growth over 9 months of 2003 as compared with the corresponding period of last year was 6.5% and in September 15%. Thus, in the main, the consequences of the GDP's sharp downturn in July this year as a result of catastrophic bad grain harvest (by October 1, 2003 only 15.8 million tons of grain were reaped) have been overcome. As compared with the corresponding period last year grain has been threshed by 57.6% or 21.5 tons less. The average yield of the grain crops was 15.9 centners (1 centner is equal to 220.46 pounds) per hectare compared with 27.8 centners per hectare in 2002.

But the total agricultural results were favorably affected by sugar beet, potatoes and sunflowers harvests (according to tentative data Ukraine in the current year will be the world fist harvester of sunflowers).

However, the main contribution to the faster economic growth has been made by industry, whose growth in January-September of the current year to the 9-month results of the last year was 15.2% (in September 19.2% accordingly). One of the leaders of the industrial growth is engineering (a 9-month growth by 33%).

According to the latest predictions of the government spokesmen the GDP increase in terms of annual results will be at least 6.5%.

As estimated by leading expert of the International Rating Agency Standard and Poor's in Ukraine Helen Hassel in view of the stable foreign demand for Ukrainian metal products (rolled products and tubes) the Ukrainian economic growth will reach at least 6%.

Representatives of the reliable, independent International Center of Long-Term Research (ICLTR), employing both Ukrainian and foreign experts, forecast a 6.5 increase of the GDP this year. According to them inflation at the end of the year will be 6.5%.

Next year, as predicted by the ICLTR the economic growth will slightly decrease and the GDP growth will be 6% (the Government in the draft budget proceeds from a 4.8% growth, but as estimated by most experts this forecast has been substantially understated with the aim of meeting the 2004 budget targets easier.

The GDP growth in Ukraine has been recorded since 2000, while that of industrial production since 1999.