EBRD to provide up to USD 50 million loan to Ukrainian farms

News / 24 February 2009 | 17:30

Financing of pre- and post-harvest working capital needs of farms majority owned by NCH New Europe Property Fund L.P. (“Fund”) in Ukraine. The Project is aimed to assist the farms in achieving higher efficiency and ultimately better crop yields, Cbonds reported.The Project is expected to enhance the competitiveness of the Ukrainian primary agriculture through the following: significant improvements in the efficiency and productivity of operations of the Fund`s farms on the existing agricultural land and development of cultivation on previously fallow land, introduction of international expertise and modern farming technologies at the Fund’s farms, demonstration of efficiency and technological improvements in agriculture, knowledge transfer to employees and other farms, generation of above average yields, and the application of the Warehouse Receipts System (when operational) by the Fund’s farms. NCH New Europe Property Fund L.P. is a property fund, which is fully invested in a mix of real estate assets and farming companies in Eastern Europe and the former Soviet Union. The Fund owns, via its majority stakes in three Ukrainian joint ventures (the “JVs”), 35 farms and elevator companies in Ukraine. EBRD finance: Up to USD 50 million long-term revolving loan. Total project cost: Working capital needs are estimated to amount to USD 70-100 million.

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Government means to propose amendments to State Budget in May

News / 24 February 2009 | 16:40

The Government means to amend the State Budget for 2009 in May. Prime Minister of Ukraine Yulia Tymoshenko said at a meeting with heads of regional councils, Government portal informed.

“Most likely, as it is envisaged by the Law on Budget, we will have to adjust the budget,” Yulia Tymoshenko noted.   

According to the Prime Minister, the changes will be made “not in a hurry but planned”, taking into consideration all the proposals of the authorities of regional councils.

Besides, the Head of Government said that top-priority bills concerning the regions would be considered – amendments to the Budget Code and the new Law “On local taxes and dues”.

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Party of Regions ready to unite with BYuT under PM Yanukovych

News / 24 February 2009 | 15:50

A coalition of the Party of Regions and BYuT is possible under the condition of forming a new government at the head of Viktor Yanukovych, vice speaker Oleksandr Lavrynovych (Party of Regions) said.

“I consider this union possible, but only if they are ready to give the first place to the interests of the nation and if they are ready to make way for those who can do the job�If Yulia Tymoshenko understands this and declares that her government resigns and that her political force is ready to participate in formation of a new government with the Party of Regions,” he said.

According to Lavrynovych, otherwise early parliamentary elections are inevitable. “If the elections are postponed again, BYuT will have fewer chances to have solid representation in the parliament and to influence the situation,” he believes.

At the same time the vice speaker noted that “under normal conditions of country development” the question regarding the coalition with BYuT would not be urgent.

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No risk of default seen in Eastern Europe: IMF

News / 24 February 2009 | 14:10

There is no risk of a payment default in eastern and central European countries hardest hit by the global financial crisis, a senior International Monetary Fund official said on Monday, Reuters reported. Asked if there was a possibility of a default, IMF European Department Director Marek Belka said: “I don`t think so.” “This is something that happens last. I don`t see the danger of even the fiscally embattled (countries) not being able to make their repayments,” he told an audience at George Washington University`s School of International Affairs. Belka`s views were also shared by Anders Aslund, a senior fellow for Eastern Europe, Russia and Ukraine at the Peterson Institute. Ukraine, one of the countries hardest hit by the global financial crisis was unlikely to default on its external debt obligations, Aslund said. “Defaulting is highly unlikely for Ukraine. Ukraine is likely to weather this financial crisis as it has taken the right steps earlier on,” Aslund said, but cautioned that more economic and social reform was needed. Among the countries that have sought IMF financial aid in recent months, Hungary and Latvia are both European Union members but do not use the euro. Belka, who was Poland`s prime minister from 2004-05, said the European Union should beef up its balance of payments fund to bolster fragile member states and those outside the euro zone. “This is the first line of defense they should do,” Belka said, adding that it was also important to strengthen the supervisory system to identify speculative bubbles. Belka said the European Central Bank should make available swap lines to countries that are preparing to join the euro. Earlier on Monday, EU Monetary Affairs Commissioner Joaquin Almunia said the EU may have to extend its emergency aid to more countries from central and eastern Europe but help might be needed for countries outside the euro area. Some analysts and politicians are speculating that Lithuania and Romania may be next in line for EU and IMF aid, but Almunia refuse to discuss any names. “Right now, there are no other candidates,” he said. Reuters

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Tymoshenko urges authorities to unite efforts to overcome crisis

News / 24 February 2009 | 15:00

Prime Minister of Ukraine Yulia Tymoshenko urges the politicians to unite efforts to overcome the global financial crisis. The Head of Government said today at a meeting with heads of regional councils, Government portal reported.

Yulia Tymoshenko has denied claims that in the system of global financial crisis Ukraine is in the worst condition, “According to its indices, Ukraine is in the centre of crisis phenomena, as against countries of the world”.

Thus, according to Yulia Tymoshenko, the industrial production rates in January 2009 against December 2008 in Kazakhstan totaled minus 10.4%, Russia – minus 19.9%, Ukraine – minus 16.1%; the processing industry: Kazakhstan – minus 21.6%, Russia – minus 32.7%, Ukraine – minus – 22.4%. Yulia Tymoshenko also noted that among other countries Ukraine is also in the middle according to the inflation processes: in Russia the January 2009 inflation against December 2008 totaled 2.4%, in Belarus – 4.1%, in Ukraine – 2.9%. 

The Prime Minister pointed out, the positive is the fact that when by the end of 2008 the majority of countries faced recession, Ukraine had a positive GDP rate in 2008 – 2.1%.

The Prime Minister is confident that the system of fighting the crisis is hampered by the fact that Ukraine is damped by the political disagreements and unstable events. “I would like that against these challenges we had courage not to hysterically criticize each other, not to rejoice in the lobby that somebody is in power and somebody is in opposition, we should understand that Ukraine will outlive this challenging time only conjointly,” Yulia Tymoshenko stressed.   

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EU urged to boost profile in ex-Soviet republics

Analytics / 24 February 2009 | 14:53

By Robert Wielaard, AP

EU foreign ministers on Monday considered increasing economic and other aid to Ukraine and four other ex-Soviet republics to try to counter Moscow’s continuing influence.

After Russia’s war against Georgia last August and the cutoff of Russian gas to the European Union in January “we see a clear imperative for stepping up our game in the neighborhood,” said EU External Relations Commissioner Benita Ferrero-Waldner.

The EU’s bid for closer ties with Armenia, Azerbaijan, Georgia, Moldova and Ukraine is welcomed by these neighbors but not by Belarus’ authoritarian president, Alexander Lukashenko, who has close ties with Moscow and runs a Soviet-style economy.

The EU hopes it can launch an “eastern partnership” on May 7 with the leaders of all six countries.

“There is still much to do” to get Belarus on board, said Dutch Deputy Foreign Minister Frans Timmermans.

Others said the EU may have to do without Belarus, especially if it recognizes the breakaway Georgian regions of South Ossetia and Abkhazia as independent states.

“We must not be overly optimistic,” said German Foreign Minister Frank-Walter Steinmeier.

The European Commission has drafted a plan offering free trade, economic assistance, regular security and defense consultations and far-reaching economic integration with the EU for each of the eastern neighbors.

In exchange for EU money, expertise, goodwill, visas and economic outreach, the countries must step up progress toward democracy, the rule of law, sound economics and human rights.

The EU executive has budgeted euro1.4 billion ($1.8 billion) for the plan between now and 2013. It added euro600 million ($769 million) after the Russian-Georgian war in August and Russia’s cutoff of natural gas in January.

The proposed partnership does not promise EU membership – something Ukraine, in particular, wants. The plan is expected to be formally approved at a mid-March meeting of the 27 EU leaders.

It came about after French President Nicolas Sarkozy in 2008 pushed for a Mediterranean Union linking the EU to Israel and its Arab neighbors. That was watered down because of objections in Germany and because other countries said it was more crucial to reach out to eastern neighbors.

The eastern partnership plan says the EU must seek a “diversification of energy routes” by enabling the ex-Soviet nations to build new and better-connected pipelines and oil- and gas-storage facilities.

The EU wants to see a gas pipeline from the Caucasus fully skirting Russia. Russia is pushing for deals under which Turkmenistan and Kazakhstan will ship their Caspian Sea gas through Russia.

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Tomenko: Yushchenko did nt let to cancel elite pensions

News / 24 February 2009 | 13:20

Mykola Tomenko stated that Yulia Tymoshenko, Prime Minister of Ukraine, and he as a Vice Prime Minister in charge of humanitarian and social matters had initiated elimination of elite pensions in Ukraine four years ago. Pursuant to the submitted Bill, the highest possible pension shall not exceed 10 minimum pensions.  

However, more than 50 MPs, including representatives of the Party of Regions, the Communist Party of Ukraine, the People´s Movement of Ukraine and other political forces appealed to the Constitutional Court in 2005 with a request, which said that “the regulations limit and reduce the rate of pensions of certain groups of Ukrainian population, which results in the contraction of content and scope of the right for pension provision”.  

“At present, when the President´s team has finally understood that elite pensions should be eliminated, it can be rapidly realized. However, according to Tomenko, we lost four years due to the failure of the President´s team to uphold the idea in 2005”. 

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Crisis in Kiev tests patience of Berlin and Moscow

News / 24 February 2009 | 12:30

Frank-Walter Steinmeier, Germany’s foreign minister, is not normally a man lost for words. In an interview with the FT last week he talked fluently on how to cope with the global economic crisis and on relations with Russia.

On one subject, however, he was temporarily silenced: what to do about the crisis in Ukraine, correspondent Quentin Peel of The Financial Times writes.

“We haven’t got an answer to everything,” he said with a grin.

Ever since the collapse of the Soviet Union, Ukraine has been a high priority for German foreign policy. Russia has never come to terms with the idea of the country being independent – Vladimir Putin, then Russian president, said as much when he attended last year’s Nato summit in Bucharest. It is a vital conduit for 80 per cent of Europe’s natural gas supplies from Russia, as last month’s total shutdown of the transit pipes demonstrated.

Berlin wants stability in Ukraine, to avoid creating the grounds for any unnecessary conflict with Moscow. Russia wants a compliant government in Kiev that does not talk about joining Nato and does not control the transit routes for Russia’s gas supplies to Europe.

Mr Steinmeier’s concern, however, is that instead there is “complete deadlock” in the Ukrainian political process with the stand-off between the president, Viktor Yushchenko, and the premier, Julia Tymoshenko. It undermines attempts to draft a recovery programme in the face of a collapse in gross domestic product – down 20 per cent in the 12 months to January.

“On the one hand it makes them incapable of acting, and on the other the preparation for elections is not happening,” he said.

“We have supported Ukraine at the IMF [which agreed a two-year standby credit last year of $16.4bn], and we supported them at the [European Bank for Reconstruction and Development]. Whether we can do more, I do not know.”

Yet more is almost certainly needed. For a start, the gas deal negotiated with Russia in January could well fall apart in a matter of months, if not weeks.

Naftogaz, the Ukrainian state gas monopoly that is responsible for paying Gazprom, the Russian supplier, is in effect bankrupt. It is forced to sell gas to Ukrainian consumers at a huge markdown and loses about $2bn (�1.5bn, £1.4bn) a year, a sum that has to be met with government subsidies.

Anders Aslund, former adviser to the Ukrainian government, is more sanguine than Mr Steinmeier. He argues that Ukraine simply has “the most open democratic discussion that you hear anywhere, apart from Britain and India”. He also believes that the economy has already hit bottom. But another $5bn is needed – beyond the funds from the IMF, World Bank, European institutions and commercial banks – to plug its financing gap.

“It is very small money,” he says, “but the consequences of not giving it are horrendous. It is important that you should have funds available that can be used for fire brigade exercises.”

Mr Steinmeier is unhappy about any such idea. “If you say Yes to Ukraine, what do we do in Moldova or in Georgia? Where does it begin, and where will it end? Can you restrict it to Ukraine?” he asks.

Russia, on the other hand, has said yes in principle to helping out. But what strings will be attached? Not the sort of budget discipline Berlin would demand. Mr Putin – and Gazprom – have made little secret that they want to end up in control of all the gas pipelines and storage facilities in Ukraine. Then there would be no need for any more disputes about gas prices in the middle of winter.

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