ACTION UKRAINE REPORT - AUR
An International Newsletter, The Latest, Up-To-Date
In-Depth Ukrainian News, Analysis and Commentary
Ukrainian History, Culture, Arts, Business, Religion,
Sports, Government, and Politics, in Ukraine and Around the World
ACTION UKRAINE REPORT - (AUR) - Number 932
Mr. Morgan Williams, Publisher and Editor, SigmaBleyzer Emerging
Markets Private Equity Investment Group, www.SigmaBleyzer.com
WASHINGTON, D.C., WEDNESDAY, MARCH 18, 2009
INDEX OF ARTICLES ------
Clicking on the title of any article takes you directly to the article.
Return to Index by clicking on Return to Index at the end of each article
1. UKRAINE MACROECONOMIC SITUATION, MARCH 2009
Analytical Report: By Olga Pogarska, Edilberto L. Segura
SigmaBleyzer Emerging Markets Private Equity Investment Group,
The Bleyzer Foundation, Kyiv, Ukraine, Tuesday, March 17, 2009
2. TWO NOTABLE DEVELOPMENTS IN UKRAINE WORTHY OF MENTION - RBS
Timothy Ash, Head of CEEMEA research, RBS EM Strategy Update, Ukraine
Royal Bank of Scotland, London, UK, Tuesday, March 17 2009
3. DR. OLEH SHAMSHUR, UKRAINE'S AMBASSADOR TO THE
U.S., PROPOSED TO BE FOREIGN MINISTER OF UKRAINE
U.S.-Ukraine Business Council (USUBC), Wash, D.C., Tue, Mar 17, 2009
4. "ENGAGING UKRAINE IN 2009"
New Policy Paper by Andres Aslund, Jonathan Elkind and Steven Pifer
From The Brookings Institution, Washington, D.C.
U.S.-Ukraine Business Council, Wash, D.C., Tue, March 17, 2009
5. UKRAINE'S OUTSTANDING OPIC DEBT (TEN YEARS) CONTINUES
TO BE A MAJOR BARRIER TO PRIVATE U.S. BUSINESS INVESTMENT
U.S. Government's Overseas Private Investment Corporation (OPIC)
U.S.-Ukraine Business Council (USUBC), Wash, D.C., Thu, Mar 12, 2009
6. BUSINESS SENSE
World must act to prevent financial meltdown in Ukraine.
Analysis & Commentary: By Jean-Pierre Saltiel, Investment Banker; Board
Member, Yalta European Strategy (YES) supporting Ukraine’s European integration;
Former French Diplomat; President of Rothschild Conseil International, 1999-2004.
Kyiv Post, Kyiv, Ukraine, Thursday, March 12, 2009
7. UKRAINE UNLIKELY TO DEFAULT ON SOVEREIGN DEBT, SAY EXPERTS
Interfax Ukraine, Kyiv, Ukraine, Thursday, March 12, 2009
8. NO "GRAND BARGAIN'
While improved ties with Moscow are desirable.......
Analysis & Commentary: by David J. Kramer, Former Assistant Secretary
of State for Democracy, Human Rights and Labor as well as Deputy Assistant
Secretary of State responsible for Russia, Ukraine, Belarus and Moldova
The Washington Post, Washington, D.C., Fri, Mar 6, 2009; Page A15
9. THE CASE FOR UKRAINE
By Anders Aslund, Senior Fellow, Peterson Institute for International Economics
RealTime Economic Issues Watch, Global Financial Crisis
Washington, D.C., Thursday, February 26th, 2009
10. KYIV MOHYLA FOUNDATION OF AMERICA (KMF)
JOINS U.S. UKRAINE BUSINESS COUNCIL (USUBC)
A not-for-profit educational foundation headquartered in Chicago, Member 103
U.S.-Ukraine Business Council (USUBC), Wash, D.C., Mon, Feb 9, 2009
11. EMERGING-MARKET BONDS ADVANCE IN LONGEST RALLY SINCE 2007
Ukrainian swaps have declined 590 basis points
By Drew Benson and Laura Cochrane, Bloomberg, NY, NY, Tue, Mar 17, 2009
12. OBAMA URGED TO STOP ENCOURAGING UKRAINE AND GEORGIA'S NATO BIDS
Agence France Presse (AFP), Washington, D.C., Monday, March 16, 2009
13. UKRAINE: MORE TROUBLE AHEAD
OP-ED: Andrew Wilson, Senior Policy Fellow, European Council on Foreign Relations
International Herald Tribune, Paris, France, Mon, Mar 2, 2009
14. OVER 2,500 CORPORATE SEIZURES ATTEMPTED IN UKRAINE IN 2008
Interfax-Ukraine, Kyiv, Ukraine, Monday, March 16, 2009
15. MOSCOW HAS GIVEN OUT NEARLY THREE MILLION RUSSIAN PASSPORTS
IN POST-SOVIET STATES TO COMPATRIOTS SINCE 2000, INCLUDING UKRAINE
Paul Goble, Window on Eurasia, Champaigne, Thu, March 5, 2009
16. ALFIYA JUMAYEVA APPOINTED NEW EXECUTIVE DIRECTOR OF AES UKRAINE
AES Ukraine, Kyiv, Ukraine, Wednesday, March 4, 2009
17. SOFTSERVE LISTED IN TOP 10 LEADERS IN EMERGING EUROPEAN
MARKETS BY NEOIT AND GLOBAL SERVICES 2009
SoftServe, Lviv, Ukraine, Monday, March 16, 2009
18. MAGISTERS OPENS NEW OFFICES IN ASTANA, MINSK AND LONDON
Oleg V. Riabokon, Managing Partner, Magisters, Kyiv, Ukraine, Tue, Mar 3, 2009
19. EPAM RANKED AMONG 'TOP 10' GLOBAL IT SERVICES LEADERS FOR THE
SECOND CONSECUTIVE YEAR WITHIN "2009 GLOBAL SERVICES 100"
EPAM Systems, Newtown, PA, Wednesday, March 11, 2009
20. DUNWOODIE TRAVEL BUREAU, LTD, YONKERS, NEW YORK,
JOINS THE U.S.-UKRAINE BUSINESS COUNCIL (USUBC)
U.S.-Ukraine Business Council (USUBC), Wash, D.C., Tue, Feb 24, 2009
21. "E-MAP OF FAMINE IN UKRAINE IN 1932-1933" SOFTWARE DEVELOPED
Softline JSC, Kyiv, Ukraine, Wednesday, 26 November 2008
22. KIEV JOURNAL: A NEW VIEW OF A FAMINE THAT KILLED MILLIONS
By Clifford J. Levy, The New York Times, NY, NY, Sun, Mar 15, 2009
23. RUSSIA: DEADLY '30s FAMINE NOT GENOCIDE
Denies that Ukrainians were targeted for starvation during Stalin era
Steve Gutterman, Writer, Associated Press (AP), Moscow, Russia, Wed, Feb 25, 2009
24. TO COUNTER UKRAINE CHARGES OF GENOCIDE, MOSCOW ADMITS TO MASS MURDER
By Paul Goble, Window on Eurasia, Vienna, Thu, Feb 26, 2009
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1. UKRAINE MACROECONOMIC SITUATION, MARCH 2009
Analytical Report: By Olga Pogarska, Edilberto L. Segura
SigmaBleyzer Emerging Markets Private Equity Investment Group,
The Bleyzer Foundation, Kyiv, Ukraine, Tuesday, March 17, 2009
SUMMARY
[1] In 2008, Ukraine’s economic growth slowed to 2.1% yoy, pointing to a sharp contraction in the last quarter of the year. Real sector performance in January 2009 was also disappointing.
[2] The consolidated budget deficit constituted 1.5% of estimated GDP, about half of the target. Since the 2009 budget was developed based on overly
optimistic macroeconomic parameters and targets a deficit of 3% of GDP, the fiscal stance in 2009 looks quite worrisome.
[3] Consumer inflation accelerated to 22.3% yoy in 2008. Inflation pressures are forecasted to ease in 2009. At the same time, spill-over of exchange rate
depreciation and planned service tariffs adjustments will hamper the speed of disinflation.
[4] Ukraine’s currency lost about 60% of its value with respect to the US Dollar in 2008. Depreciation and a deep economic downturn are challenging
banking sector stability; however, monetary and government authorities are active in addressing banking sector weaknesses.
[5] The current account deficit widened to $11.9 billion or 6.7% of estimated GDP in 2008. December 2008 and January 2009 current account statistics
was encouraging, demonstrating a sharp reduction in imports.
[6] The forecasted rapid deterioration of the financial account makes the balance-of-payments position in 2009 quite vulnerable. However, with the support
from international financial institutions, the situation looks manageable.
[7] During February 2009, two international rating agencies downgraded Ukraine’s sovereign ratings.
ECONOMIC GROWTH
According to preliminary estimates, real GDP grew by 2.1% yoy in 2008, which suggests that the real GDP decline in December was smaller than in the previous month. A similar trend was observed in the industrial sector as its output increased 3.2% month-over-month (mom) in December. On an annual basis, industrial production contracted by 26.6% yoy, slightly up from 28.6% yoy in November.
December’s figure brought the cumulative industrial output decline to 3.1% yoy in 2008. Signs of a growth rebound may be attributed to a sharp Hryvnia devaluation in 4Q 2008, which allowed Ukraine’s exports to reap some competitive gains even in a weak external environment.
However, January’s data confirmed that without strong, well-planned measures to revive economic growth, devaluation alone will not be sufficient. In addition to external weaknesses, real wages declining by about 12% yoy in January 2009, growing unemployment, hryvnia depreciation and credit tightening have caused domestic consumers to reconsider their behavior towards retrenchment of expenditures. The continuing credit squeeze and falling corporate profits are likely to have depressed investment decisions.
Finally, due to a protracted gas dispute with Russia, which resulted in Russia’s gas supply cut-off to Ukraine, a number of industrial enterprises were forced to reduce or stop production as available gas resources were directed to support heating and electricity producers in the first place and alternative energy resources were scarce. As a result, virtually all sectors, both export and domestic market oriented, reported a dramatic downturn, the worst in more than 10 years.
Ukraine’s industrial production sank by 34.1% yoy in January with metallurgy, chemicals, and machine-building being the main sources of the downfall. Production of chemicals plummeted by 49.6% yoy. Output in machine-building has dropped by 58.3% yoy on account of a 64.3% yoy decline in production of transport vehicles. Production of metals and metal posted a 46% yoy decline.
The only industry demonstrating an increase in output was coke and oil-refining. Despite falling demand for coke from the metallurgical industry, low world crude oil prices, strong demand for fuel oil as an alternative to scarce natural gas, and a low statistical base allowed the industry to show a 2.4% growth in output.
Suffering from a credit squeeze, sliding housing prices, and falling private and government investments, construction showed a 57.6% yoy decline in the value of construction works. Closely linked to external trade and industrial sector performance, wholesale trade and cargo transportation turnovers declined by 33.5% yoy and 32.5% yoy respectively. A 7.8% yoy and 5.7% yoy drop in retail sales and passenger transportation reflected falling consumer demand.
In contrast to other sectors, agriculture demonstrated an increase in output by 0.5% yoy in January 2009. At the same time, the growth was achieved mainly thanks to higher poultry and egg production, while production of other agricultural products continued to contract. Given the shortage of domestic supply of agricultural products, more expensive imports, and deterioration of consumer demand, food-processing showed a 14.3% yoy decline in output.
January’s real sector developments, which were below expectations, generated further pessimism regarding Ukraine’s economic outlook in 2009. As the global economy is forecasted to start recovering only in the last quarter of 2009, commodity prices for Ukraine’s major exporting commodities are likely to remain weak throughout the year. Falling real household income and employment will exert a heavy toll on private consumption, while lower corporate profits, tight access to credit and weak investor sentiment reduce capital spending.
Moreover, the economy will face an imported natural gas price increase of about 30% on average during 2009. On a positive note, weak domestic demand, lower energy prices and more expensive imports will help to curb imports. Overall, given the above described scenario and the estimated magnitude of GDP decline in January 2009, we’ve downgraded our baseline GDP forecast and now see real GDP falling by 5% yoy in 2009.
FISCAL POLICY
Rapid deterioration of economic growth since October 2008 caused a sharp worsening of fiscal performance during November-December 2008 and at the beginning of 2009. In November 2008, revenues to the general fund of the state budget were 11% below target. Though the State Treasury reported only a 9.3% under-execution of budget revenues to the general fund in December, the improvement was virtual, as to a significant extent it was achieved thanks to extra revenues not foreseen in the budget law.
In particular, the National Bank of Ukraine transferred to the state budget an extra UAH 3.5 billion ($437.5 million) in December as the difference between its revenues and expenditures. Excluding this amount, December’s revenues to the general fund of the state budget were under-fulfilled by 26%. Cumulatively, state budget revenues were 2.8% above target thanks to over-fulfillment of budget revenues in the first ten months of the year.
In 2008, consolidated budget revenues grew by 35.4% yoy in nominal terms to UAH 297.8 billion ($37.2 billion). The increase was mainly achieved thanks to a 41% yoy increase in tax revenues that reflected robust growth in wages and corporate profits, booming imports and strong exports in the first nine months of the year.
Due to government austerity measures (freezing public sector employees’ nominal wages, cutting expenditures of government agencies, etc.) initiated in November, the consolidated budget posted a deficit of UAH 14.2 billion ($1.8 billion), or about 1.5% of estimated GDP in 2008. The budget gap was just over half the target [1]; however, it exceeded the IMF budget deficit ceiling set at UAH 9.9 billion.
The fiscal stance in 2009 looks quite worrisome. Although the government reported slight over-fulfillment of budget revenues in January by about 1%, it was achieved thanks to non-planned receipts. In particular, the NBU transferred UAH 1 billion to the budget as the difference between its revenues and expenditures. At the same time, this amount should have been paid only at the end of 1Q 2009. Moreover, about UAH 1.9 billion of tax receipts were received as customs clearance for the natural gas imported back in 1Q 2008.
Excluding these proceeds, budget revenues were under-fulfilled by more than 25%. Reliance on one-off budget revenues questions the sustainability of budget revenues in the coming months, thus indicating the need for a downward revision of budget parameters. However, the forthcoming presidential election (scheduled for early 2010) looks like an increasing constraint on the government to maintain fiscal prudence.
Since 2004, the Ukrainian government has followed a pro-cyclical fiscal policy, which was partially attributed to short election cycles in the country. Generous social spending allowed for raising living standards as well as gaining popularity. Despite a notable increase in budget expenditures, the government maintained fiscal deficits at about 1% of GDP thanks to robust growth in tax revenues, which were the result of booming external trade, buoyant consumption growth and some improvement in tax administration.
Loose fiscal policy is partially responsible for the economic difficulties the country is currently facing as the population's growing purchasing power amid limited domestic supply of consumer goods was increasingly satisfied via imports.
Rapidly widening trade and current account deficits made the country particularly vulnerable to adverse external shocks. At the same time, a heavy budget bias towards social spending (current expenditures accounted for more than 85% of total consolidated budget expenditures in 2008) left little scope for non-inflationary fiscal stimuli for the Ukrainian economy during crisis times.
Though the Ukrainian government committed to maintaining a balanced budget in 2009, it came up with a deficit of more than 3% of GDP and revenues developed on a quite optimistic macroeconomic forecast. Given tight global financial conditions, foreign investors’ risk aversion and the severity of the economic downturn in Ukraine, the government hopes to raise the necessary budget deficit financing on the domestic market. However, given the banking sector weaknesses and unattractive yields on domestic securities, the only feasible option to finance the deficit is monetizing it.
In the aftermath of the financial and economic crises during the 1990s, direct NBU financing of government expenditures was forbidden by law. However, 2009 budget innovations allow the government to by-pass this ban. According to Article 84 of the 2009 budget law, the government has obliged the NBU to buy out government securities from commercial bank portfolios within three days of the banks’ request. Direct monetary financing of the budget deficit undermines the central bank's ability to conduct independent monetary policy and raises the risks of losing control over inflation.
The inflationary sources of budget deficit financing rather than the size of the budget deficit target per se were among the main reasons for the IMF program delay in February 2009. At the same time, the program did not foresee the magnitude of the economic downturn observed during November 2008-January 2009.
Hence, the IMF has been considering the relaxation of the program requirements for Ukraine at the request of the government authorities. According to preliminary information, the Fund may agree to have larger fiscal deficit if there are realistic revenues and non-inflationary sources of its financing such as funds from other international institutions (the World Bank, EBRD, etc.) and individual countries. Though the Ukrainian government is actively seeking such financing, the budget is likely to be revised during March-April 2009 to reduce the deficit and revise budget revenues.
MONETARY POLICY
Monthly consumer price inflation accelerated during December 2008-January 2009. The CPI index grew by 2.1% mom and 2.9% mom respectively driven by an upward revision of utility tariffs and spill-over effect of Hryvnia depreciation. The impact of the latter was the most pronounced for price growth on transport vehicles, household appliances and pharmaceuticals as the lion's share of these commodities is imported.
The depreciation of the national currency has also undermined the benefits from the declining world commodity prices. In particular, despite the continuing slide of world crude oil prices, Ukraine’s domestic fuel and gasoline prices grew by 10.2% mom in January 2009. In annual terms, consumer inflation remains unchanged at 22.3% yoy since November 2008.
Thanks to favorable statistical base effect, the NBU measures to smooth the exchange rate adjustment and falling domestic demand are likely induce disinflation in the coming months. At the same time, the speed of this process will be hampered by continuing tariff adjustments to cost-covering levels, monetary financing of the fiscal deficit and raid dollarization of the economy. Thus, consumer inflation is forecasted to stay at around 15% at the end of the year.
Though the Ukrainian currency lost about 60% of its value with respect to the US Dollar in 2008, depreciation pressures still remain rather strong. Foreign trade and current account balances started to improve in December 2008 and January 2009, but the supply of foreign currency to the country was quite modest. On the other hand, a substantial portion of external private debt maturing in 2009 as well as a surge in population demand for foreign currency continued to pressure the exchange rate.
The National Bank of Ukraine was tolerant of foreign exchange depreciation but tried to smooth the process by selling its international reserves. Though it spent about $11 billion in 4Q 2008 and another $3.3 billion in January-February 2009 to prevent a free-fall of the currency, the foreign exchange market remained extremely volatile with the Hryvnia sometimes approaching 9.5 with respect to the US Dollar.
The periods of sharp Hryvnia deprecation tend to be explained by speculative behavior of some market participants. Though we do not reject such an explanation, we believe that the causes of such developments are rooted in the government and monetary authorities’ inability to increase public confidence in the financial crisis resolution measures.
In turn, weak public confidence was the result of the lack of transparency and consistency in the NBU measures to stabilize the market as well as poor coordination between the government and monetary authorities in addressing the crisis. Recently, however, there were some improvements. The NBU has issued a number of resolutions regulating its forex market intervention policy, it started to regularly inform the public about the measures taken to address banking sector weaknesses, raised the quality and expanded the content of BoP and monetary statistics, etc.
The deposit outflow continued in January 2009. A 13% mom growth in corporate Hryvnia deposits and a 3% mom increase in corporate FX deposits may be attributed to the precautionary accumulation of foreign currency to meet foreign debt liabilities as well as the rational strategy to minimize foreign exchange risk in a volatile market. In contrast, households kept withdrawing deposits.
In January 2009, the stock of household deposits declined by UAH 7.9 billion ($1 billion) or 3.6% mom. The NBU’s data suggests that the lion's share of withdrawn deposits were converted into cash foreign currency as net population purchases of cash foreign currency amounted to $585 million.
The ongoing flight of deposits, the liquidity squeeze due to limited NBU refinancing and “sterilization” effect of the NBU’s sale of international reserves, and rising non-performing loans (due to increasing unemployment and Hryvnia depreciation) affected banking system stability. At the same time, the monetary and government authorities are active in addressing the current challenges faced by the banking system.
The NBU has carried out an extensive audit of the largest commercial banks and is currently implementing diagnostics of smaller banks. The majority of banks were asked to provide addition capital and 9 banks have been put under NBU administration. One of the first banks put under temporary NBU administration was stabilized and sold to new shareholders. Together with the government, the NBU has been developing a comprehensive banking sector resolution strategy. Though further stresses in the banking system are likely, these efforts will help to minimize their impact and facilitate recovery.
INTERNATIONAL TRADE AND CAPITAL
Due to weak external demand and low international commodity prices, Ukrainian exports contracted sharply during November-December 2008. On average during these two months, exports of chemicals, metallurgical products, machinery and transport equipment, which together account for about 2/3 of total merchandise exports, fell by about 34% yoy, 40% yoy and 20% yoy respectively.
However, thanks to faster growth of agricultural products exports (particularly, grain) and decent increase in exports of food and mineral products, total exports declined by 16% yoy on average during November-December 2008.
Affected by sharp Hryvnia depreciation and rapidly deteriorating industrial performance, imports have also started to decline since November. In December, imports fell by 27.3% yoy, much faster than exports. As a result, December’s monthly merchandise trade deficit of $0.8 billion was almost twice as low as the average monthly deficit over the first eleven months of the year. At the same time, the cumulative foreign trade deficit continued to widen and reached a record high $18.5 billion. Correspondingly, the current account deficit amounted to $11.9 billion, or 6.7% of estimated full-year GDP.
Moreover, the deepening global economic recession, tight international liquidity and sharp deterioration of Ukraine’s macroeconomic parameters have dried up long-term capital inflows to Ukraine and increased short-term capital outflow from the country. Thus, in 4Q 2008, Ukraine received only $1.2 billion of net FDI inflows, compared to $8.7 billion in the first nine months of the year. Moderate FDI and other capital inflow amid portfolio investments outflow and large external private sector debt repayments resulted in a financial account deficit of $5.7 billion in 4Q 2008.
Though cumulatively the financial account stayed in surplus of about $8.8 billion in 2008, it did not cover the current account gap. As a result, the difference was absorbed through the reduction of the NBU’s gross international reserves and Hryvnia depreciation.
Preliminary balance of payments statistics for January 2009 were encouraging. Though exports fell by 32% yoy, imports contracted by 50% yoy. As a result, Ukraine registered merchandise trade and current account surpluses of about $200 million and $500 million respectively. Such a sharp drop in imports is attributed to weak domestic demand, declining world commodity prices and crude oil prices in particular.
At the same time, due to the gas dispute with Russia, which caused a halt in Russia’s natural gas supply to Ukraine during most of January, Ukraine’s import of mineral resources was abnormally low that month. Though resumed natural gas imports and higher negotiated price for natural gas will cause imports to increase in the coming months, weak domestic demand as well as government measures to curb imports will help to mitigate this impact.
A faster decline in imports than exports will allow Ukraine to cut its foreign trade deficit in 2009 compared to 2008. The current account deficit is forecasted to narrow to about $4 billion or 3.6% of GDP in 2009. Ukraine’s large external debt servicing requirements will continue to pressure the exchange rate. At the same time, with a number of parent banks announcing capital support for Ukrainian subsidiaries, financial support from the IMF and other international financial institutions [2], the net foreign financing gap estimated at about $10 billion looks quite manageable.
OTHER DEVELOPMENTS AFFECTING THE INVESTMENT CLIMATE
During February 2009, both Fitch and Standard and Poor’s downgraded Ukraine’s sovereign ratings from "B+" to "B" and "B/B" to "ССС+/С" respectively and maintained the negative outlook for further rating revisions. The rating downgrade reflected rapidly deteriorating macroeconomic conditions in Ukraine, the fragile banking sector stance, the lack of policy consensus among various authorities and increased risks for successful execution of the IMF program. Moody’s has also put Ukraine’s rating under review, hinting at a likely downgrade.
FOOTNOTES:
[1] According to the Budget Law amended on December 12th, 2008, the targeted budget deficit was raised to UAH 25 billion, or almost 2.6% of GDP.
[2] Although the IMF program was delayed in mid-February, we believe there is high probability that the program will be resumed during March-April
2009.
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UKRAINE, BULGARIA, ROMANIA, & KAZAKHSTAN MACROECONOMIC REPORTS -----
NOTE: To read the entire SigmaBleyzer/The Bleyzer Foundation Ukraine Macroeconomic Situation report for March 2009 in PDF format, including color charts & graphics click on the following link, and click on Ukraine March 2009, http://www.sigmableyzer.com/publications/monthly_reports.
SigmaBleyzer/The Bleyzer Foundation also publishes monthly Macroeconomic Situation reports for Bulgaria, Romania and Kazakhstan. The present and past reports, including those for Ukraine can be found at http://www.sigmableyzer.com/en/page/532. SigmaBleyzer is a member of the U.S.-Ukraine Business Council (USUBC), Washington, D.C.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
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2. TWO NOTABLE DEVELOPMENTS IN UKRAINE WORTHY OF MENTION - RBS
Timothy Ash, Head of CEEMEA research, RBS EM Strategy Update, Ukraine
Royal Bank of Scotland, London, UK, Tuesday, March 17 2009
LONDON, UK - A couple of notable developments in Ukraine worthy of mention:
[1] The state statistical committee of Ukraine posted quite remarkable merchandise trade statistics this morning. The data refers to January and shows a monthly surplus of US$398m. Our database suggests that this is the first monthly surplus recorded since February 2005 and the surplus represented a huge turnaround from the US$964m deficit recorded in January 2008. Exports by dollar value were down by 33% YOY; unsurprising given the collapse in exports/prices of Ukraine’s key exports metals (40% of export volumes).
However, imports were down by 57% YOY (following the 28% YOY decline in December). Clearly import demand has been impacted by: the 50%-odd nominal devaluation of the UAH; the more general deflation in domestic demand as the economy slows; a marked slowing in imports of gas, reflecting the collapse in industrial output and increased energy conservation as prices adjust higher (gas imports are probably running around 30% lower YOY); and the near collapse in the availability of credit which had driven the 30%+ increase in import demand in the prior year.
On a 12m moving average the deficit on merchandise trade is down to US$17.2bn, from a peak of US$19.5bn in November. Assuming that these trends
sustain to year end; i.e. a 30% loss in export revenues and ~ 40% downturn in imports, would cut the trade deficit to US$4-5bn, with the current account recording a significant surplus. Note that the NBU has confirmed that the current account recorded a surplus in January.
In general the above trends are being reflected across the region, as currencies adjust lower and domestic demand slow. This is easing concerns over external financing but pushing the problems further down the real economy, i.e. likely producing rising NPLs, larger bank recapitalisation costs and a bigger hit to public finances.
In Ukraine’s case the merchandise trade data above will help support the improved mood around the credit as the government moves ever closer to
reaching an agreement over the first review under the SBA which will allow the disbursement of the next US$1.84bn credit tranche; Shlapak, President
Yushchenko’s chief economic adviser y/day indicated that the disbursement could happen over the next 3 weeks or so, assuming key legislation (covering
NBU independence, and supporting the bank restructuring process) is approved by parliament.
[2] On the energy front, Naftogaz reported y/day that gas consumption declined by 28% over the first 2 months of 2009 to just 7.5bcm; Ukraine has consumed 70bcm+ in recent years; albeit this could conceivably fall to 50bcm this year, while Ukraine produces around 20 bcm domestically. The company
also indicated last week that it was looking to buy only 33 bcm of gas in 2009 from Russia, compared to the 40 bcm contracted in January, and the 50bcm+ bought in recent years.
Encouragingly, PM Putin indicated last week that Russia was willing to allow Ukraine to reduce gas imports, cutting it some slack on the earlier contracted amount; Putin mentioned that he did not want to exploit a country that faced “default”.
Even at the higher gas import price (average) agreed in January (US$228 per 1,000 cu metres) this would still imply that Ukraine’s gas import bill could
drop from US$9.3bn in 2008 (excluding transit fees) to US$7.5bn, again providing something of a boon from a balance of payments perspective.
Note over the past year the big concern had been that higher energy import costs would serious damage the current account position in 2009; as is, the
reverse is likely to occur.
Ukrainian debt has bounced in recent days, as people appear more comfortable with the prospect for improved relations with the IMF, and cut the
probability of default in 2009. Ukraine’s August FRN was trading with a 60-handle a month or so ago is back up around 82 cents this morning.
Given the short maturity this still appears to offer value in our view. And while we remain negative on the region as a whole (lower growth impacting on
credit quality/FX), we think that at least in Ukraine investors are still being adequately paid for the risk; the risk-reward still seems compelling given our assumption of a relatively low probability of default – despite 1Y Ukraine CDS still being priced around 4,000bps.
NOTE: This material has been prepared by The Royal Bank of Scotland plc (“RBS”) for information purposes only and is not an offer to buy or sell or
a solicitation of an offer to buy or sell any security or instrument or to participate in any particular trading strategy. This material should be regarded as a marketing communication and may have been produced in conjunction with the RBS trading desks that trade as principal in the instruments mentioned herein. THIS MATERIAL IS NOT INVESTMENT RESEARCH AS DEFINED BY THE FINANCIAL SERVICES AUTHORITY.
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3. DR. OLEH SHAMSHUR, UKRAINE'S AMBASSADOR TO THE
U.S., PROPOSED TO BE FOREIGN MINISTER OF UKRAINE
U.S.-Ukraine Business Council (USUBC), Wash, D.C., Tue, Mar 17, 2009
WASHINGTON, D.C. - The U.S.-Ukraine Business Council (USUBC) has spoken with Ambassador Oleh Shamshur this afternoon in Washington and offered him our most sincere congratulations on being proposed by President Viktor Yushchenko to be Foreign Minister of Ukraine. The Ambassador leaves for Ukraine later this afternoon. A possible vote on the nomination could take place later this week.
The President/CEO of a major financial company member of USUBC, with over 16 years of experience in Ukraine, said on hearing about the Ambassador Shamshur nomination, "I think a diplomat with Oleh Shamshur's credentials and experience is exactly what Ukraine needs right now during this incredible global turmoil."
In February USUBC sponsored two small luncheons for USUBC members with Ambassador Shamshur at the Embassy of Ukraine. The Ambassador has always strongly supported the development of the private business community in Ukraine, U.S. companies investing in Ukraine and has worked very closely with USUBC since being in Washington. USUBC has appreciated the strong support received from Ambassador Oleh Shamshur," according to Morgan Williams, SigmaBleyzer, who serves as USUBC President/CEO.
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UKRAINE AMBASSADOR TO THE UNITED STATES, DR. OLEH
SHAMSHUR, PROPOSED AS FOREIGN MINISTER OF UKRAINE
Reuters, Kiev, Ukraine, Tuesday, Mar 17, 2009
KIEV - President Viktor Yushchenko proposed Ukraine's ambassador to the United States as foreign minister on Tuesday after his predecessor was
sacked in the aftermath of a row with the prime minister.
The president's press service said the candidature of Oleh Shamshur would be submitted to parliament for approval. It was unclear when debate would take
place or whether Shamshur, 53, would win sufficient support in the often fractious chamber.
The job of foreign minister is one of two cabinet posts proposed directly by the president under Ukraine's constitution. A broader cabinet shuffle has
long been expected, with the job of finance minister also vacant. A career diplomat, Shamshur, has also served as deputy minister and head of the ministry's section dealing with the European Union.
As he has been on Washington since 2005, Shamshur has been absent for much of Ukraine's turmoil between Ukraine's pro-Western leadership generally pitting Yushchenko against his estranged ally, Prime Minister Yulia Tymoshenko.
Ukraine's previous foreign minister, Volodymyr Ohryzko, was dismissed by parliament this month after clashing with Tymoshenko. Deputies said he sent
a directive to Ukrainian embassies critical of the prime minister.
Ukraine's foreign policy, based on integrating with the West, is generally not subject to criticism, though the opposition Regions Party, friendlier to
Russia, backs a more moderate, slower approach to closer ties and membership of NATO. Tymoshenko has accused the president for being too strident in his criticism of Russia, particularly in his denunciation of Russia's military incursion
into Georgia last year.
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4. "ENGAGING UKRAINE IN 2009"
New Policy Paper by Andres Aslund, Jonathan Elkind and Steven Pifer
From The Brookings Institution, Washington, D.C.
U.S.-Ukraine Business Council, Wash, D.C., Tue, March 17, 2009
WASHINGTON, D.C. - Attached for your information is "ENGAGING UKRAINE IN 2009," a new Brookings policy paper, number 13, authored by Anders Aslund, Senior Fellow, Peterson Institute for International Economics; Jonathan Elkind, nonresident senior fellow on energy security issues at the Brookings Institution; and Steven Pifer, visiting fellow in the Center on the United States and Europe at Brookings.
On Tuesday, March 17, 2009 The Brookings Institution Center on the United States and Europe (CUSE) hosted experts Steven Pifer, Anders Aslund and Jonathan Elkind for a discussion of their new Brookings policy paper, "Engaging Ukraine in 2009" (see attachment). They also discussed the challenges facing Ukraine and offered recommendations to the Obama administration.
As the global economic crisis deepens, few countries have been hit as hard as Ukraine. Complicating the country’s plight has been a long-running bout of political turmoil, and with the approach of presidential elections later this year, the partisan battles are intensifying, pitting an unpopular president against his own prime minister.
Abroad, Ukraine faces a more assertive Russia, and western European neighbors doubt Ukraine’s ability to follow a European course. How should the United States, which has devoted considerable time, energy and resources to promoting Ukraine’s transformation during the past 17 years, now engage with Kyiv?
The new Brookings policy paper "Engaging Ukraine in 2009" looks at U.S. interests in Ukraine, describes four major challenges currently facing the country, and offers recommendations for U.S. policy (see attachment to this e-mail to read the complete policy paper).
Dr. Anders Aslund and former U.S. Ambassador to Ukraine, Steven Pifer, serve as Senior Advisors to the U.S.-Ukraine Business Council (USUBC), Washington, D.C., and it over 100 members who are active investors in Ukraine, www.usubc.org.
TABLE OF CONTENTS:
Introduction and Summary ..................................................1
U.S. Interests in Ukraine .....................................................3
Four Major Challenges Facing Ukraine in 2009..................5
An Agenda for U.S. Engagement with Ukraine..................11
Endnotes ...........................................................................17
About the Authors..............................................................21
LINK: See attachment to this e-mail and http://www.brookings.edu/.
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U.S.-Ukraine Business Council (USUBC): http://www.usubc.org
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5. UKRAINE'S OUTSTANDING OPIC DEBT (TEN YEARS) CONTINUES
TO BE A MAJOR BARRIER TO PRIVATE U.S. BUSINESS INVESTMENT
U.S. Government's Overseas Private Investment Corporation (OPIC)
U.S.-Ukraine Business Council (USUBC), Wash, D.C., Thu, Mar 12, 2009
WASHINGTON, D.C. - One of the top issues for the U.S.-Ukraine Business Council (USUBC) for the past several years has been the fact that all the outstanding economic and business development programs of the U.S. government's Overseas Private Investment Corporation (OPIC) have been closed for Ukraine (http://www.opic.gov).
OPIC is closed because the government of Ukraine has never developed, approved and implemented a program, during the past ten years, to settle an OPIC political risk insurance claim against Ukraine which began in 1999. The claim came as the result of OPIC paying a political risk insurance claim to a U.S. business that invested in Ukraine in the early 1990's.
Such settlements of claims between government are rather normal in the international community of nations when government backed political risk insurance programs pay out claims. Governments usually settled such claims rather quickly, but this has not happened in the case of Ukraine.
OPIC being closed for Ukraine has stopped and is stopping many U.S. businesses from investing in Ukraine or from expanding their investments in Ukraine. OPIC being closed has thus cost Ukraine hundreds of millions of dollars of badly needed private business investments and thousands upon thousands of jobs.
An article about this important outstanding issue, written by Jim Davis in Kyiv (see article number one below), appeared in the Business Ukraine magazine on February 11, 2008. Such an article, for the most part, could have been written most anytime during the past few years and could be written again today as the issue is still unresolved.
RECENT MEMORANDUM OF UNDERSTANDING DID NOT RESOLVE THE ISSUE
The U.S. government and the government of Ukraine signed a Memorandum of Understanding about this issue in Kyiv on November 10, 2008 (see news releases number two and three below from the Embassy of the U.S. in Kyiv and from the Ministry of Economy of Ukraine). The Memorandum of Understanding (MOU) was a step forward but it just laid a foundation for a future agreement that would actually lay out the details of exactly how, when and for how much the outstanding OPIC claim would be resolved between the two governments. The steps specified in the memorandum have never been fulfilled.
As the news release from the Ministry of Economy of Ukraine said, "The signing of the MOU between the two governments is considered to be the first step in establishing practical mechanisms of dispute settlement with the Overseas Private Investment Corporation." (Item number four below shows a copy of the draft of the MOU).
Many observers thought the MOU signed in November between the two governments actually resolved the issue and that OPIC was then going to open for business in Ukraine very soon. Unfortunately this was not the case. There have been several reports recently at various meetings that OPIC is actually open for business in Ukraine now. Again this is not the case. Work to develop the final agreement has continued but the government of Ukraine has not yet finalized or offered an acceptable agreement. Reports indicate OPIC is willing to settle the claim on rather liberal terms.
"USUBC has been speaking out about this critical issue at meetings, in Washington and Kyiv, with every top Ukrainian and U.S. government official who has some responsibility regarding this major problem. USUBC will continue speak out loudly and often regarding this issue until it is resolved and OPIC is open for business in Ukraine. This is a win-win for the U.S. and Ukraine.
"USUBC urges both governments to move this issue to the top burner. Both countries, now more than ever with the world financial crisis, need to be able to say that OPIC is OPEN FOR BUSINESS IN UKRAINE, " said Morgan Williams, SigmaBleyzer, who serves as President/CEO of the U.S.-Ukraine Business Council (USUBC).
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5-A. UKRAINE'S OUTSTANDING OPIC DEBT: A BARRIER TO FOREIGN INVESTMENT
U.S. Overseas Private Investment Corporation (OPIC)
By Jim Davis, Business Ukraine magazine, Kyiv, Ukraine, Monday, February 11, 2008
Amid all the fanfare that has accompanied the signing of a protocol which will bring Ukraine WTO membership, it is worth noting that a disagreement over a relatively small amount of money has made it impossible for Ukraine to enjoy the benefits of an obscure but extremely important agency of the United States government, the Overseas Private Investment Corporation (OPIC).
Estimates made by well-informed persons involved in the process relating to OPIC would suggest that had the problem could have been resolved when it
first arose in 1999, Ukraine could have gained an absolute minimum of an additional USD 5 - 10 billion in foreign direct investment - and probably a lot more than that.
The issue could have been solved years ago, but it was as is so often the case it is a problem for which no one had primary responsibility on the Ukrainian side.
All those, i.e. the various ministers, who had parts of the responsibility within their jurisdictions failed to understand the overall importance of the issue and therefore guarded their own turf rather than that of the state as a whole.
The end result has been to deny the Ukrainian economy one of the tools that could have been attracting investment into the country ever since, with a potential opportunity cost running into the billions of dollars.
A SIMPLE PROBLEM MADE COMPLEX
The matter involves the non-payment of a state debt incurred by the Ministry of Defence about ten years ago at a time when the needs of various ministries were seriously under-funded and ministers were prone to making deals first and worrying about payment later.
The debt in question was covered by OPIC political risk insurance. OPIC paid the claim to the insured U.S. supplier and looked to Ukraine to ultimately
make good on the original agreement, as was called for in the Ukraine-OPIC agreement.
The amount of the claim, approximately USD 17 million, is quite small when viewed in the light of the overall budget of Ukraine. For the uninitiated, USD 17 million might appear to be a sum that could be dealt with in a simple meeting among ministers of any government.
However, there is no single ministry nor any single minister who has ever been tasked with dealing with the problem in a priority manner, so time and time again the issue has been discussed at seemingly high-level meetings between U.S. ambassadors and embassy staff on one side and various ministers and prime ministers on the other.
The matter is further complicated by the nature of Ukraine's budget process. No government has wanted to debate the debt in parliament so it has never
been made a part of any annual state budget.
With no line item listing of the debt, some other mechanism would need to be found in order to keep a payment from being illegal under the existing
legislation of the state budget act. So far, no creative payment mechanism has been found that would meet the needs of both sides of the disagreement.
The most recent top-level discussions came during a visit to the United States by then-Prime Minister Viktor Yanukovych in late 2006. At the time Yanukovych promised U.S. officials during discussions that the matter would have his personal attention and would be settled in a very short time. However, the Yanukovych government neither paid the amount owed nor requested or agreed to negotiations to adjust the amount owed.
ABOUT OPIC
OPIC is an independent U.S. government agency whose mission is to mobilise and facilitate the participation of U. S. private capital and skills in the
economic and social development of less developed countries and areas, and countries in transition from non-market to market economies.
OPIC assists U.S. companies by providing financing (from large structured finance to small business loans), political risk insurance, and investment funds. OPIC complements the private sector in managing risks associated with foreign direct investment and supports U.S. foreign policy.
Since its establishment in 1971, OPIC programmes have grown and expanded to encompass the support of development in over 150 countries. In 2007, OPIC assisted 70 projects in 38 countries and regions involving a wide range of industries. Of all the projects underway around the world in 2006, 87% or 61 projects involved U.S. small businesses in 35 U.S. states.
Many OPIC projects involve U.S. procurements, but it is also small and medium-sized enterprise (SME) projects in recipient cooperating countries that receive the greatest benefits. For example, in Kazakhstan, OPIC provided debt financing for a USD 1.89 million investment in the Asian Credit Fund (ACF), a non-banking microfinance institution established by
the Mercy Corps.
In Azerbaijan, OPIC provided financing to SOAKredit LLC (SOA), an independent limited liability non-credit organisation. SOA's purpose is to implement an innovative finance programme primarily designed to stimulate local business growth and facilitate Azerbaijan's transition from a demand to a market economy.
In Russia, OPIC is providing financing to ZAO Europlan (Europlan), the leading leaser of equipment and vehicles to SMEs throughout the Russian Federation, to support a planned USD 450 million expansion.
CREATING CONFIDENCE, OFFERING SECURITY
Nadir Shaikh, Chairman of the Board of Citibank Ukraine, explained that SME firms and medium-sized projects are the ones that would benefit most if
Ukraine settles its dispute with OPIC.
Shaikh has been one of the persons most active in promoting a settlement with OPIC and as recently as two weeks ago participated in a meeting with
senior government officials where this matter was discussed.
"We know from experience that the largest foreign firms come here fully prepared to finance their own way into the Ukrainian market. Their investments are based on advice from the most sophisticated sources in their own companies or from professional advisors such as investment banks. It is the smaller foreign investors who need the type of help and risk coverage that OPIC is able to give.
"Making OPIC political risk insurance available would, for example, would give many smaller foreign investors the kind of backing that would first help convince their own boards of the viability of investments in Ukraine, and would also assist them in finding financing for projects here or in their home country.
"In addition, it would help Ukrainian companies to get access to financing that could be provided by such banks as Citibank, based on OPIC risk coverage programmes. Settling the current dispute requires a firm decision and political will on the part of government to find a financing mechanism to pay the current claim. I am optimistic that the efforts of the current government are more likely to find a solution to this problem," Shaikh concluded.
A RELATIVELY TRIFLING DEBT
One of the most interesting elements in the OPIC-Ukraine issue is the flexibility exhibited by OPIC in attempting to settle the claim. On several occasions various Ukrainian governments have been told that while USD 17 million is the amount actually owed, OPIC is willing to engage in negotiations that could lead to a solution that would mean a substantially reduced settlement.
Even with the clearest signals possible from OPIC, no Ukrainian government over the last ten years has been willing or able to find the will to effect a settlement.
The issue has not been filed away in a long forgotten filing cabinet, either. Morgan Williams, president of the U.S.-Ukraine Business Council (USUBC) said that the OPIC issue has been a matter of discussion between the two governments in every meeting that he has attended in Washington or Kyiv in recent years.
"On January 31, while addressing a meeting of the USUBC that included representatives of the American Chamber of Commerce and U.S. embassy officials, Vice-Prime Minister Nemyrya made a point of telling the audience that he was fully aware of the problem and that he expects a solution to be found soon. We sincerely hope that is correct.
"OPIC programmes are being used all over the world to spur development and USUBC thinks that the inability of Ukraine to solve its OPIC problem has
cost the country at least one billion and perhaps several billions of dollars in lost investment opportunities. In effect, a failure to solve the OPIC issue has a negative effect on Ukraine's ability to create jobs and wealth for all of Ukraine's citizens.
"For example, in the autumn of 2005 OPIC conceived and was ready to implement a USD 100 million private equity fund programme for Ukraine. I have been told on the back channel by top U.S. government officials in Washington that the total value of OPIC programmes that could be implemented here within a relatively short time might have a total value of as much as USD 500 million."
"However, it is the government of Ukraine that must turn the key to open what is literally a treasure trove of new investment and risk guarantee opportunities. I hope it will make the effort necessary to find the solution needed," Williams concluded.
LINK: http://www.businessukraine.com.ua/ukraine-s-outstanding-opic-debt
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5-B. UKRAINE AND U.S. GOVERNMENT SIGN MEMORANDUM OF UNDERSTANDING
FOR RETURN OF U.S. OVERSEAS PRIVATE INVESTMENT CORPORATION TO UKRAINE
Public Affairs Section, United States Embassy Kyiv, November 12, 2008
KYIV, Ukraine - The U.S. Government and the Government of Ukraine signed a Memorandum of Understanding (MOU) on November 10, 2008. The signing of this MOU lays the foundation for the return of the U.S. Overseas Private Investment Corporation (OPIC) to Ukraine. William Taylor, U.S. Ambassador to Ukraine and Ukraine's Minister of Economy Bohdan Danylyshyn acted as the signing parties of this agreement.
Ambassador Taylor believes the signing of the MOU is an important step toward securing OPIC’s return to Ukraine and an important sign of the faith the United States has in Ukraine and the Ukrainian economy. Once the steps specified in the memorandum are fulfilled, over $500 million of new investments that will be made in Ukraine in the next 12-18 months with OPIC’s help, he says.
Ambassador Taylor underscores that OPIC's return, like the IMF support package and other positive economic news such as the widely unheralded recent passage of a Joint Stock Company Law, is evidence Ukraine can take steps to improve the economic and investment climate if the leadership of the major political forces work together for the good of the country.
OPIC was established as an agency of the U.S. government in 1971. It helps U.S. businesses invest overseas, fosters economic development in new and emerging markets; complements the private sector in managing risks associated with foreign direct investment; and supports U.S. foreign policy. OPIC has been absent from Ukraine for several years over the failure to resolve an insurance claim dating from the 1990s. This MOU paves the way for a resolution of that issue.
The American Chamber of Commerce (AmCham) in Ukraine and the U.S.-Ukraine Business Council (USUBC) welcomed the news. AmCham President Jorge Zukoski said he is pleased that concrete steps are being undertaken to re-establish the operations of OPIC. Mr. Zukoski noted that the MOU signing sends a positive signal to the business community that Ukraine is open for business, and that it will assist in attracting additional strategic investment into the marketplace.
"One of the top priorities of the U.S.-Ukraine Business Council (USUBC) the past few years has been to support the return of OPIC's outstanding business and economic development programs to Ukraine." said Morgan Williams, SigmaBleyzer, who serves as President of USUBC. "USUBC members certainly welcome the signing of the MOU and hope all issues will be resolved quickly so OPIC can once again support U.S. businesses doing business with Ukraine.
LINK: http://kyiv.usembassy.gov/infocentral_eng.html
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Public Affairs Section, United States Embassy Kyiv, 4 Hlybochytska St., Kyiv 04050 Ukraine
(380 44) 490-4026, 490-4090; Fax (380 44) 490-4050; http://kyiv.usembassy.gov/; info@usembassy.kiev.ua
5-C. U.S. GOVERNMENT & UKRAINE GOVERNMENT SIGN OPIC
MEMORANDUM OF UNDERSTANDING, THE FIRST STEP
Signing of the Memorandum of Understanding (MOU) between the Government of Ukraine and the
Government of the United States of America on Overseas Private Investment Corporation activities in Ukraine
Ministry of Economy of Ukraine, Kyiv, Ukraine, Monday, November 10, 2008
KYIV - A Memorandum of Understanding [MOU] between the Government of Ukraine and the Government of the United States of America, which makes an important foundation for Overseas Private Investment Corporation (OPIC) to resume its work in Ukraine, has been signed on November 10, 2008.
On behalf of the Government of Ukraine the Memorandum has been signed by Bohdan Danylyshyn, the Minister of Economy of Ukraine, and on behalf of U.S. Government the MOU has been signed by the Ambassador of the United States of America to Ukraine William Taylor.
CONSIDERED TO BE THE FIRST STEP
The signing of the MOU between the two governments is considered to be the first step in establishing practical mechanisms of dispute settlement with the Overseas Private Investment Corporation. Ukraine has a very strong interest in the further attraction of private American investors that can insure their risks with OPIC, stated the Minister of Economy of Ukraine.
At the same time, Ambassador William Taylor underlined that sighing of the MOU is a very important step for the return of OPIC to Ukraine and an important sign that the United States of America believes in Ukraine and its economy.
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5-D. LATEST AVAILABLE DRAFT OF THE MOU ON NOV 10, 2008
May not be the final copy that was signed.
MEMORANDUM OF UNDERSTANDING
between the Government of Ukraine and the Government of the United States of America
The Government of Ukraine and the Government of the United States of America (hereinafter “the Parties”),
Confirming their intention to cooperate with the aim of developing relations between the two countries in the area of investment;
Desiring to ensure favorable conditions for investment including the principles of equality and mutual benefits and the provisions of the Treaty Between the United States of America and Ukraine Concerning the Encouragement and Reciprocal Protection of Investment, with Annex, and Related Exchange of Letters, signed at Washington March 4, 1994; and
With regard to the situation which has developed in connection with the investment of Alliant Techsystems Inc. to ensure operation of closed- end Joint Stock Company Alliant Kyiv;
Achieved the following understanding:
Section 1
The Parties welcome and admit the importance of the agreements that are envisioned to be concluded between the U.S. Overseas Private Investment Corporation (hereinafter: OPIC) and an economic entity (hereinafter– the Enterprise), selected by the Government of Ukraine with OPIC’s approval, as described in Section 2 of this Memorandum of Understanding, and, in accordance with their respective national laws, intend to facilitate the implementation of these agreements.
Section 2
The Parties take into account the agreements (hereinafter – Agreements) regarding resolution of the situation involving the investments of Alliant Techsystems Inc. into Alliant Kyiv. These Agreements envisage that:
(i) OPIC would transfer to the Enterprise the rights assigned by Alliant Techsystems Inc. to OPIC in connection with the payment made by the latter (hereinafter – the Rights). The transfer of rights would be made in accordance with the legislation of Ukraine.
(ii) The Enterprise, in its turn, would transfer money in favor of OPIC in the amounts and during the time period specified by the Agreements.
The Parties support OPIC’s willingness to consider the full and proper performance by the Enterprise of the payment and due implementation of other obligations under the provisions of the Agreements, as mentioned in the paragraphs (i) and (ii) of this Section as final resolution of the situation that emerged in connection with the investments of Alliant Techsystems Inc. in Alliant Kyiv.
Section 3
The U.S. Government confirms that OPIC will resume support of investment projects implemented in Ukraine by U.S. private investors, upon satisfaction of the conditions outlined in the Agreements for the resumption of such support.
Section 4
The Parties acknowledge that the provisions of this Memorandum of Understanding do not constitute and should not be considered as constituting any admission on behalf of the Ukrainian Side of any commitment, debt, complaint or other claim of any company, including those involved in the resolution of the situation with regard to the investments of the Alliant Techsystems Inc.
Section 5
Each Side will endeavor to resolve any differences regarding the interpretation and/or application of provisions of this Memorandum of Understanding by holding consultations between the Parties.
Section 6
The Memorandum of Understanding enters into force upon signature by authorized representatives of the Parties.
Modifications and additions that are integral part of this Memorandum of Understanding can be incorporated into it upon mutual written consent of the Parties.
Signed in duplicate at Kyiv on November 10, 2008, in the Ukrainian and English languages. Both copies have equal value.
For the Government of Ukraine: For the Government of the United States of America:
Minister of Economy of Ukraine U.S. Ambassador to Ukraine
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LINKS: http://www.mfa.gov.ua/usa/en
http://www.me.gov.ua/control/uk/publish/article?art_id=123973&cat_id=38461
http://www.kmu.gov.ua/control/uk/publish/article;jsessionid=21D3C39E347A8232481
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6. BUSINESS SENSE
World must act to prevent financial meltdown in Ukraine.
ANALYSIS & COMMENTARY: By Jean-Pierre Saltiel, Investment Banker; Board
Member, Yalta European Strategy (YES) supporting Ukraine’s European integration;
Former French Diplomat; President of Rothschild Conseil International, 1999-2004.
Published in the Kyiv Post, Kyiv, Ukraine, Thursday, March 12, 2009
Ukraine is under the threat of a financial meltdown which could lead to an economic collapse.
Unless immediate and drastic actions are undertaken now by the Ukrainian authorities and the international community, the world will witness a major economic, social and geopolitical disruption on the doorstep of the European Union.
Ukraine’s economy deteriorated rapidly last fall. Gross domestic product slumped by over 14 percent in November 2008 compared to November 2007. Ukraine’s currency, the hryvnia, lost more than 40 percent of its value in three months. In January 2009, unemployment figures surged.
For the first time in the last three years, Kyiv streets are free of traffic jams. January industrial output slumped by 34 percent compared to January last year, and GDP was down 20 percent. The International Monetary Fund forecasts 2009 GDP will decrease by 5 percent.
While the macroeconomic situation is depressing, the real danger comes from the collapsing financial system. Banks are confronted with a dual threat. In terms of cash outgoings, they have to fund a massive withdrawal of deposits by the population already amounting to 25 percent of total individual deposits.
In terms of assets, banks have to face 20 percent of non-performing loans in their credit portfolio. The cost of repaying consumer loans and mortgages, 60 percent of which are in dollars, has soared. Daily disposable income for domestic expenses is reduced accordingly.
All this is creating an unprecedented liquidity and solvency problem for the banking sector. Such a situation will soon become unbearable, as banks will be unmanageable without resources and enough solvent customers.
Already nine Ukrainian banks, including Nadra Bank, one of the largest in the country, are under temporary administration introduced by the National Bank of Ukraine because of their imminent risk of bankruptcy. Customers are queuing in front of branches, unable to withdraw their deposits. The situation is worsening rapidly, as this dual threat on the banking system is fueled by the total lack of confidence by the population and investors in the authorities’ ability to withstand the crisis.
The ongoing personal battle between President Victor Yushchenko and Prime Minister Yulia Tymoshenko exacerbated by the forthcoming presidential elections in January 2010, and their incapacity to work together and implement a coherent financial policy, gives little cause for hope.
The National Bank of Ukraine has been publicly accused of ineffectiveness, lack of transparency and corruption in this never-ending power struggle. Figures show a direct correlation between, on the one hand the political struggle, and on the other hand, the massive deposit withdrawal by the population and the collapse in the hryvnia.
In November 2008, the government and central bank secured a $16.5 billion loan from the IMF to fund the balance of payments and bail out the banks under threat. But the IMF refused to pay the second tranche on Feb. 15 due to an unrealistic state budget deficit, but most of all because the Ukrainian authorities were unable to act together.
The IMF justifiably demands coordinated commitment and action from the president, government, the central bank and lawmakers.If no agreement is found with the IMF on the second tranche in the coming weeks, the collapse of the financial system will accelerate dramatically. An agreement with the IMF would provide the banking system with badly-needed oxygen for a few more months, but it would not save the system.
If things go on as they are, given the total lack of trust in the authorities’ capacity to work together before the forthcoming presidential elections, it is unfortunately quite probable that the financial system will melt down before the fall.
Whereas countries throughout the world do their best to face the economic storm and coordinate their efforts to find a way out, Ukraine offers a peculiar and dramatic picture. Its leadership is fighting for command, unable to provide any directions to the boat. Moreover, this internal fight is in itself damaging and sabotaging the boat and jeopardizing the chances for the crew to survive the storm.
The consequences of a financial collapse would be dramatic for Ukraine. It would lead to massive corporate defaults, huge unemployment and poverty, as well as potential massive protests and social upheaval.
The international consequences would be frightening as well. The collapse of the Ukrainian economy would hurt the whole European Union economy, starting, of course, with Poland and Austria, and snowballing to the West. This failure would also question the international community’s capacity to effectively withstand the current international economic crisis.
Is there any hope to avoid the worst? We believe that a scenario like Argentina or Indonesia can still be avoided. But there is very little time left. The responsibility lies primarily in the hands of the Ukrainians themselves, but the international community cannot watch the boat sinking without reacting.
[1] First of all, there must be an international diplomatic initiative to finally put an end to the catastrophic battle between the president and prime minister. A stable political solution must urgently be agreed by the Ukrainian leaders with the international community's help.
[2] Second, the international community must set up a clear procedure to ensure that coherent and effective financial policies are implemented and to prevent any dramatic populist move like forcing the banks to transform their dollar loans into hryvnia loans. The international community must also strictly ensure that the funds provided by the IMF are used properly.
[3] Third, the European countries, and first of all France, Austria, Italy, Hungary and Sweden, must ensure that their banks will retain their presence on the Ukrainian market and properly recapitalize their subsidiaries in Ukraine, regardless of the worsening crisis. Western banks represent 30 percent of the Ukrainian banking sector. If they are properly supported, they may save the system.
[4] Fourth, once the second tranche of the IMF is agreed, the international community must join the initiative of the World Bank to raise $2.5 billion to balance the 2009 state budget deficit. Strong conditions must be attached to this loan in order to finally pass laws on essential structural reforms to modernize the economy.
Exceptional times call for exceptional actions. Ukraine and its 46 million inhabitants are at risk. The European Union and the international community must engage with the Ukrainian leadership in a strong, friendly and persuasive way in order to avoid the worst. It is in the interest of both the Ukrainian people and the rest of the world.
FOOTNOTE: Jean-Pierre Saltiel is an investment banker and board member of the Yalta European Strategy, a non-profit supporting Ukraine’s European integration. It is funded by Ukrainian billionaire Victor Pinchuk, son-in-law to ex-President Leonid Kuchma. Former French diplomat, Saltiel served as president of the Rothschild Conseil International from 1999 through 2004.
LINK: http://www.kyivpost.com:80/business/bus_general/37188/print
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7. UKRAINE UNLIKELY TO DEFAULT ON SOVEREIGN DEBT, SAY EXPERTS
Interfax Ukraine, Kyiv, Ukraine, Thursday, March 12, 2009
LONDON - Ukraine is unlikely to default on its sovereign debt, despite the devaluation of the hryvnia and poor economic indicators, according to experts attending an investment summit held this week in London.
The senior fellow of the Peterson Institute for International Economics Anders Aslund said during the summit that there are no economic reasons for a sovereign debt default of the country, although Ukraine's prospects depend most on the political situation inside the country. Aslund stressed the importance of revising the state budget of Ukraine for 2009 and increasing the level of budget discipline.
However, Ukraine will face in 2009 some debt restructuring and default in the private sector, said the head of emerging-market research at the Royal Bank Scotland, Timothy Ash.
The head of Ukraine's parliamentary committee for finance and banking activity, Mykola Azarov (from the Regions Party opposition faction), said that " state default for Ukraine is absolutely impossible," although Ukraine's economy is under extremely high pressure, caused, in particular, by the state policy to stimulate consumption.
"Our traditional [major] industries are on a steep downward slope, and one can see no end of it so far… The state budget has turned into a creditor of the Pension Fund," he said. According to Azarov, from January-February 2009, state budget revenues were only 8% of the annual plan.
He called for the channeling of funds attracted by Ukraine from the International Monetary Fund to the support of the country's banking system, and not for "mending holes in the budget."
FOOTNOTE: The following members of the U.S.-Ukraine Business Council (USUBC), Washington, D.C., were registered for the Adam Smith Conferences 5th Annual Ukrainian Economic Summit meeting held in London, UK this week: Asters, Baker & McKenzie, Chadbourne & Parke, ContourGlobal, DLA Piper, First International Resources, Horizon Capital, IMTC-MEI, Kraft Foods, Magisters, Salans, Shell, Squire Sanders & Dempsey, TNK-BP, U.S.-Ukraine Foundation, Vanco and Vasil Kisil & Partners. USUBC was represented by President/CEO Morgan Williams.
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8. NO "GRAND BARGAIN'
While improved ties with Moscow are desirable.......
ANALYSIS & COMMENTARY: by David J. Kramer, Former Assistant Secretary
of State for Democracy, Human Rights and Labor as well as Deputy Assistant
Secretary of State responsible for Russia, Ukraine, Belarus and Moldova
Published by The Washington Post, Washington, D.C., Fri, Mar 6, 2009; Page A15
Russian officials should like what they are seeing from the Obama administration: President Obama has exchanged public comments and personal letters with President Dmitry Medvedev. Vice President Biden declared last month that we ought to press the "reset button" on U.S.-Russian relations.
In her meeting today with Foreign Minister Sergei Lavrov, Secretary of State Hillary Clinton is expected to continue ratcheting down tensions. But while improved ties with Moscow are desirable, the Obama team should rein in expectations and avoid the "grand bargain" that some in the United States and Europe have recommended.
The "bargain" is simple: In exchange for Russian cooperation on containing the Iranian nuclear threat and other strategic issues, the United States would, to varying degrees, scale back its relations with Russia's neighbors, pause on missile defense plans and stay quiet about Russia's deteriorating human rights situation.
For the United States to hush up about the crackdown would have been unthinkable before Clinton's disappointing suggestion in China last month that we should not allow human rights problems to "interfere" with more important matters. If they are smart, the Russians will seek a similar arrangement.
TELL UKRAINE WE HAVE RETURNED TO A "RUSSIA FIRST" POLICY?
Many questions are raised by such a trade-off: What price would secure Russian cooperation on Iran? Who exactly is going to tell Ukraine or Georgia that we have returned to a "Russia first" policy? Does anyone believe that saying nothing about Kremlin crackdowns on domestic opponents would keep Moscow on board? And what if all this isn't enough? Moscow is likely to keep raising the fee for its cooperation -- in effect, extorting the United States.
For years, Bush administration policy toward Russia revolved around efforts to work with Moscow wherever possible but to push back whenever necessary, especially after the invasion of Georgia. Our Russia policy was far from perfect the past eight years, but the chief problems lie in Moscow, and improved relations are unlikely until they are sorted out.
Moscow sees its surroundings in revisionist, zero-sum terms. Russia has tried to maintain a "sphere of influence" along its borders, regardless of neighboring states' desires to lean westward. Moscow is threatened by Ukrainian and Georgian ties with NATO, even though NATO's eastward growth has been a source of stability over the past decade.
Russia views multiple pipeline routes from Central Asia and the Caucasus as a risk to its monopolistic hold on regional energy resources. It has supported secessionist movements in Georgia and Moldova, and it even wants to establish military bases in the separatist regions of Abkhazia and South Ossetia, both of which it has recognized.
And Moscow's role in Kyrgyzstan's decision to close a key U.S. air base last month raises questions about what sort of cooperation Russia's leaders would offer on Afghanistan. Moscow's thinking must change if the principal source of friction between Russia and the West and Russia and its neighbors is to disappear.
Just after Obama's election victory, Medvedev threatened to install short-range missiles near Poland if the United States continued with a missile defense system that the Bush administration advanced to counter an Iranian nuclear threat.
Russia cannot accept that Poland and the Czech Republic are independent states -- much less members of NATO and the European Union -- that are cooperating with the United States on a missile system focused on Iran. Nor can it accept that they are not a threat to Russia's own (massive) nuclear capability.
The United States and Russia should be working together to counter Iran. It is in neither country's interest for Iran to become a nuclear state. Yet despite eventually agreeing to watered-down U.N. resolutions on Iran, Russia has sold Tehran anti-missile systems and threatens to sell the mullahs more advanced weaponry. In February a Russian deputy foreign minister rejected the idea that Moscow would get "tougher" with Tehran. And this week Medvedev rejected any missile defense-Iran deal.
Russia's deteriorating economy and domestic discord are spooking Kremlin authorities, as was clear from Moscow's decision to send special forces to shut down protests in Vladivostok in December because local authorities weren't trusted to maintain control. Murders of journalists and human rights activists continue with no accountability and amid a growing sense of fear. Cracking down is the only approach Russian leaders seem to know.
Any "grand bargain" the United States makes with Russia would be viewed in Moscow as a sign of U.S. desperation. A major American shift in missile defense policy absent a real retreat by Iran would be seen as a sign of weakness and would undercut friendly governments in Warsaw and Prague.
Yes, the United States should work with Russia on issues including Iran, North Korea, counterterrorism, arms control and Afghanistan. But both sides must show interest in cooperation; above all, we must not bargain away our relations with Russia's neighbors or our own values.
FOOTNOTE: The writer, David J. Kramer, was assistant secretary of state for democracy, human rights and labor as well as deputy assistant secretary of state responsible for Russia, Ukraine, Belarus and Moldova in the George W. Bush administration.
LINK: http://www.washingtonpost.com/wp-dyn/content/article/2009/03/05/AR2009030502825.html
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9. THE CASE FOR UKRAINE
By Anders Aslund, Senior Fellow, Peterson Institute for International Economics
RealTime Economic Issues Watch, Global Financial Crisis
Washington, D.C., Thursday, February 26th, 2009
Pessimists believe that Ukraine is on the verge of default. Fortunately, such a calamity is unlikely, but Ukraine badly needs more international financial support to handle a tremendous external shock.
A year ago, Ukraine’s economy was in sound health after eight years of an average annual economic growth of 7.6 percent. Ukraine has maintained a minimal budget deficit, and its public debt was as small as 12 percent of GDP in 2007.
Ukraine’s mistake, however, was to keep its exchange rate pegged to the US dollar, which encouraged speculative short-term capital inflows, driving up inflation to 31 percent last May and the current account deficit to 6.7 percent of GDP last year.
These flaws were not major, but Ukraine became a prime victim of the freezing of international financial markets after the Lehman Brothers bankruptcy. Without credit, most construction just stopped. Steel is Ukraine’s main export product, accounting for over 40 percent of exports, and both prices and volume of sales plummeted by half.
The blow to the Ukrainian economy has been horrendous. In January, industrial production fell by no less than 34 percent over January 2008, and GDP is estimated to have plunged by 20 percent. Steel production, mining and construction have fallen by half.
In current dollars, Ukraine’s GDP is likely to plummet by 40 percent this year. Exports are likely to drop by half, and imports even more, reducing the current account deficit to an insignificant level. Millions of workers are being laid off, and the stock market has contracted by 90 percent.
No other country has been hit as hard as Ukraine, and it needs all the support it can get to mitigate the social shock. The Ukrainian government reacted swiftly, asking the International Monetary Fund for support last October. Within four weeks, Ukraine and the IMF had agreed on a large, strong two-year standby agreement with $16.4 billion of IMF credits.
The IMF had three key demands: A balanced budget, a floating exchange rate, and bank restructuring. Ukraine has delivered. It has done more on bank restructuring than most Western countries. After some hesitation, the National Bank of Ukraine let the exchange rate float. It has depreciated by about 50 percent and stabilized, endowing Ukraine with new cost competitiveness. The Ukrainian government has maintained the budget close to balance in spite of collapsing state revenues. Inflation has fallen to 22 percent.
The international financial institutions recognize Ukraine’s dilemma and the government’s heroic achievements. The World Bank, the European Bank for Reconstruction and Development, and the European Investment Bank have contributed some $3 billion in new funds.
Their support is sufficient to avert default. Ukraine still has $28 billion in reserves, which reassuringly corresponds to eight months of imports. The only reason for talk about default is the loud, public acrimony between President Viktor Yushchenko and Prime Minister Yuliya Tymoshenko, who accuse each other of treason and corruption.
But we should not complain about open democracy. Apart from the Baltic countries, Ukraine is the only bona fide democracy with free media in the former Soviet Union, and it is committed to Euro-Atlantic integration. Such a country needs support when in peril.
Amazingly, Ukraine has so far seen minimal social unrest, but unemployment is bound to skyrocket, especially in the East with its steelworks and mines. Naturally, the Ukrainian government is anxious to reinforce its social safety net and insists on a budget deficit of a moderate 3 percent of GDP.
The IMF understands the government’s predicament, but it cannot approve a budget deficit of more than 1 percent of GDP without additional financing. The finance gap in this year’s balance of payment amounts to $5 billion, quite a moderate amount.
Seventeen international banks have just given their vote of confidence in Ukraine’s economic policy, by making commitments to invest $2 billion of their own capital in their Ukrainian subsidiaries. Western governments should follow the example of their hard-tested banks.
The European Union has a vital interest in saving its banks that are heavily invested in Ukraine, and for the United States, Ukraine is of major geopolitical importance. The United States and the European Union should stand up and deliver. Ukraine has long been a loyal friend of the West. Now the time has come for the West to prove its friendship toward Ukraine.
NOTE: RealTime Economic Issues Watch: A website forum in which senior fellows of the Peterson Institute for International Economics discuss and debate their responses to global economic and financial developments as they occur each day and offer insights that others might overlook.
Global Financial Crisis: Views on the current crisis in global financial markets, their impact on the real economy and the public policy choices confronting the United States and other countries.
FOOTNOTE: Anders Aslund has served for several years as a Senior Advisor to the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.usubc.org.
LINK: http://www.petersoninstitute.org/realtime/?p=507
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10. KYIV MOHYLA FOUNDATION OF AMERICA (KMF)
JOINS U.S. UKRAINE BUSINESS COUNCIL (USUBC)
A not-for-profit educational foundation headquartered in Chicago, Member 103
U.S.-Ukraine Business Council (USUBC), Wash, D.C., Mon, Feb 9, 2009
WASHINGTON, D.C. - The Kyiv Mohyla Foundation of America (KMF), Chicago, Illinois, has been approved for USUBC membership, according to the USUBC executive committee, in an announcement on behalf of the entire USUBC membership. KMF is the third new member for 2009 and USUBC member number 103.
The Kyiv Mohyla Foundation of America (KMF) is a nonprofit, non-governmental organization established in the USA to support and assist the National University of Kyiv Mohyla Academy and institutions of higher learning in Ukraine to reach excellence in education, innovative research, personal and the intellectual growth of its students and faculty in a democratic academic environment that will facilitate and further Ukraine’s democratic reform, with a focus on the rule of law and sustained economic growth within the global community of nations.
The Kyiv Mohyla Foundation supports the Kyiv Mohyla Academy's objectives and fosters programs through other universities and organizations.
Marta Farion, President of the Kyiv Mohyla Foundation (KMF) of America, a Chicago attorney and leader in the Ukrainian American community in Chicago, served in the past as chairperson of the Kyiv Committee of the Chicago Sister Cities International Program and is currently an executive committee member of Chicago’s dynamic international relations program which includes 28 cities throughout the world. Marta Farion has served as president of KMF for the past four years.
Ambassador William G. Miller (former US Ambassador to Ukraine now with the Woodrow Wilson International Center for Scholars in Washington) and Ambassador Borys I. Tarasiuk (Former Minister of Foreign Affairs of Ukraine and presently a member of the Parliament), serve as Co-Chairmen of the Kyiv Mohyla Foundation of America (KMF) board of directors.
PARTICIPATION OF INDIVIDUALS, CORPORATIONS AND FOUNDATIONS
Alongside its pursuit of individual and corporate sponsors, KMF is undertaking program-funding proposals to U.S. and various international foundations and other institutions interested in post-Soviet Ukraine initiatives.
The continuing interest and financial participation of individuals, corporations and foundations will play a decisive role in determining and supporting the education and training of a new generation of young Ukrainians, who will ultimately decide the significant questions that are so important to this part of the world, and engage them in the process of forming a civil society within a social and political system that will benefit their own country within the global community.
ELECTRONIC LIBRARY PROGRAM
KMF has been leading an effort to launch a large electronic library support program in Ukraine and has received initial funding from USAID. The major new and exciting program was launched recently in Kyiv (see news release below.) For further information about the Kyiv Mohyla Foundation of America (KMF) check their website: www.kmfoundation.com.
"USUBC is very pleased to have the Kyiv Mohyla Foundation of America (KMF) as a new member" said Morgan Williams, with the SigmaBleyzer Emerging Markets Private Equity Investment Group, www.SigmaBleyzer.com, who serves as president of USUBC. "USUBC has grown very rapidly during the past 25 months and now has a membership base which allows USUBC to provide its members such as the Kyiv Mohyla Foundation of America (KMF) with a full-time operation and a significantly expanded program of work," according to President Williams.
LAST TWENTY-SIX NEW USUBC MEMBERS:
The last twenty-six new USUBC members have now included: 3M Ukraine; AeroSvit Ukrainian Airlines; Aitken Berlin LLP/ASIA; AnaCom, Inc; Asters law firm; CEC Government Relations; ContourGlobal Ukraine; Doheny Global Group; Edelman; Foyil Securities; IBM Ukraine; Kyiv Mohyla Foundation of America (KMF); KPMG Ukraine; Mars Ukraine; Microsoft; Pratt & Whitney - Paton; R & J Trading International; RZB Finance (Raiffeisen Group); SE Raelin/Cajo, Inc.; SoftServe, Inc.; Solid Team LLC; The Washington Group (TWG); Ukraine International Airlines (UIA); Vasil Kisil & Partners law firm; Winner Imports Ukraine (Ford, Jaguar, Land Rover, Volvo, Porsche) and Zurich Surety, Credit, & Political Risk.
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11. EMERGING-MARKET BONDS ADVANCE IN LONGEST RALLY SINCE 2007
Ukrainian swaps have declined 590 basis points
By Drew Benson and Laura Cochrane, Bloomberg, NY, NY, Tue, March 17, 2009
LONDON/BUENOS AIRES - Emerging-market bonds rose for a seventh day, the longest winning streak in more than four months, as an unexpected rebound in U.S. homebuilding boosted investors’ appetite for riskier assets.
Bond prices gained, sending the extra yield investors demand to own developing nations’ bonds instead of U.S. Treasuries nine basis points lower to 6.3 percentage points, according to JPMorgan Chase & Co.’s EMBI+ Index. The index is down 56 basis points since March 6.
“The bigger price driver has been equity markets,” said Enrique Alvarez, head of Latin America fixed-income research at IDEAglobal Inc. in New York. Latin American debt has lagged behind other emerging market bonds, he added.
He expects Brazil and Mexico to lead a “catch-up” rally “as long as the U.S. is able to maintain equity gains and demonstrate a little more stability -- and more importantly have this piecemeal approach to building positive elements for the U.S. economy.”
U.S. stocks rose, erasing more than half the loss in the Standard & Poor’s 500 Index since President Barack Obama took office, on an unexpected rebound in housing starts and speculation that the Federal Reserve will outline plans to bolster the economy.
Emerging economies have been among the hardest hit by the financial crisis as western banks cut off credit, making it harder to repay foreign debt after borrowing costs doubled in the past year. The International Monetary Fund has allocated $55 million to developing economies to stave off default.
‘Wrapped Up’
Group of 20 finance ministers pledged last weekend to at least double the IMF’s bailout pool to $500 billion as the economic crisis forces more countries to seek support. Since then, credit-default swaps tied to Turkey have dropped 94 basis points, Ukrainian swaps have declined 590 basis points, Russian swaps by 120 and Kazakhstan by 218, Commerzbank AG data show.
Emerging market debt opened stronger in Europe today as “some of the panic from a month ago” eased, said Charles Robertson, head of emerging-markets research and chief economist at ING Groep NV in London, said today in a phone interview. “This is wrapped up with recovery in U.S. and global markets and the rally will last as long as that.”
The extra yield investors demand to own Ukraine’s international bonds dropped 172 basis points to 27.35 percentage points today, according to JPMorgan data. The spread on Argentine debt slid 31 basis points to 17.84 percentage points as a congressional commission was to take up President Cristina Fernandez de Kirchner’s plan to advance midterm congressional elections by four months to June 28.
Stock Gains
The MSCI Emerging Markets Index of stocks rose for a sixth straight day, climbing 0.5 percent to 542.24 as of 3:50 p.m. in New York. Credit-default swaps, contracts conceived to protect bondholders against default, pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. A basis point equals $1,000 on a swap that protects $10 million of debt from default.
To contact the reporters on this story: Laura Cochrane in London at lcochrane3@bloomberg.net, Drew Benson in Buenos Aires at abenson9@bloomberg.net. LINK: http://www.bloomberg.com:80/apps/news?pid=20601086&sid=abMV00xqDIwQ&refer=news.
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12. OBAMA URGED TO STOP ENCOURAGING UKRAINE AND GEORGIA'S NATO BIDS
Agence France Presse (AFP), Washington, D.C., Monday, March 16, 2009
WASHINGTON - President Barack Obama should stop encouraging Georgia and Ukraine's bids to join NATO in order to improve relations with Moscow, a bipartisan commission recommended in a report Monday.
Led by former U.S. senators Gary Hart, a Democrat, and Chuck Hagel, a Republican, the commission made 19 recommendations, taking aim at NATO's eastward expansion, a sore point in US relations with Moscow during the previous administration.
"Accept that neither Ukraine nor Georgia is ready for NATO membership and work closely with US allies to develop options other than NATO membership to demonstrate a commitment to their sovereignty," it said.
"A special relationship with NATO short of membership could serve the same function as membership, and would be a useful way to ensure that those Ukrainians and Georgians seeking to join NATO do not become discouraged," it said.
While arguing that it was necessary to resist Russian efforts to re-establish the sphere of influence of the former Soviet Union, the report urged the administration to "take a new look at missile-defense deployments in Poland and the Czech Republic." It called for "a genuine effort to develop a cooperative approach to the shared threat from Iranian or other missiles."
On economic matters, the report recommends that Washington facilitate Russia's admission to the World Trade Organization, and quickly revoke the Jackson-Vanik amendment, a Cold War measure that has placed limits on trade with Russia since 1974.
The report was presented to Obama's national security adviser, Jim Jones, and the Vice President Joe Biden, Hagel said at a news conference. Hagel and Hart were received last week by Russian President Dmitri Medvedev.
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13. UKRAINE: MORE TROUBLE AHEAD
OP-ED: Andrew Wilson, Senior Policy Fellow, European Council on Foreign Relations
International Herald Tribune, Paris, France, Monday, March 2, 2009
What is up with Ukraine? As if the January gas dispute with Russia was not bad enough, the country is lurching from one crisis to another. Political infighting is endless. The Russian ambassador, former Prime Minister Viktor Chernomyrdin, provoked a diplomatic storm by saying Ukraine's leaders were "at each other like dogs."
Prime Minister Yulia Tymoshenko and President Viktor Yushchenko have accused each other of treason - in the president's case, ordering the diplomatic service to spread the calumny abroad. There is talk of emergency rule, of new elections, of impeachment and criminal cases planned against either side.
Meanwhile, the economy is a mess. The annualized rate for the decline of industrial output in January was a staggering 34.1 percent. With the collapse in world steel prices, the country's steel production is down 46 percent - and steel used to make up 40 percent of Ukrainian exports. Overall GDP may fall by as much as 12 percent in 2009.
The currency has slumped by over 40 percent against the dollar; the stock market is down over 80 percent. The finance minister resigned in January; an emergency IMF loan of $16.4 billion agreed to in October is now in danger.
Parliament has twice censured Volodymyr Stelmakh, the chairman of the National Bank, for both incompetence and alleged corruption, but is unable to remove him so long as the president extends his protection.
There are mutterings of default. Ukraine's foreign exchange reserves are down from $38.1 billion to $28.8 billion: Government and government-secured debt is manageable, but the corporate sector is thought to owe over $40 billion. Unlike Russia, where the oligarchs have fought over handouts, Ukraine does not have the funds for too many bailouts. Several major corporate bankruptcies are likely this year, especially in the steel sector.
So is there a way out of this mess? Few are sanguine. Germany's foreign minister, Frank-Walter Steinmeier, has publicly expressed his exasperation at the "complete deadlock" in Ukraine, saying "we haven't got an answer to everything." A recent report by the former U.S. ambassador, Steven Pifer, for the Council on Foreign Relations asserts that the "best case" scenario for 2009 "is that Ukraine muddles through without serious crisis."
The simple truth is that Ukrainian politics is a brutal contact sport. Sometimes Ukrainian politicians need to fight - and fight hard. And much of their ceaseless struggle is constructive. As part of the deal to end the gas crisis, Tymoshenko froze out the controversial company RosUkrEnergo, which has earned mammoth profits for its unclear role in aiding gas transit. But this was only the first bout. Tymoshenko is now locked in a bitter battle with the company's main Ukrainian owner, Dmytro Firtash.
Tymoshenko agreed that RosUkrEnergo's debt to Gazprom would be paid by its rival Naftohaz Ukrainy, with advance transit payments from Gazprom. So in effect RosUkrEnergo now owes Naftohaz money. The customs and security services have been dragged into a fight over who owns 11 billion cubic meters of gas in storage that Natfohaz has claimed from RosUkrEnergo. The disputed gas is worth $1.7 billion.
Firtash, who supports both the president and the opposition Party of Regions, allegedly responded by demanding a parliamentary vote of no-confidence against the government, which fell 22 votes short. As a result, the Party of Regions, which is traditionally financed by steel barons, is split, and Tymoshenko is constitutionally safe from further censure until next autumn.
She has also alleged that Firtash, along with other disillusioned businessmen, is sponsoring Ukraine's fastest-rising politician, the former parliamentary speaker Arseniy Yatsenyuk, and his new organization "Front for Change."
Yatsenyuk will only reach the minimum age to stand for president - 35 - in May. But one recent poll showed him closing fast on 11.8 percent, compared to 24.2 percent for the Party of Regions leader, Viktor Yanukovych, and 15.3 percent for Tymoshenko. Yushchenko scored 3 percent.
The shake-out among the Ukrainian oligarchs is a reason to hope that the years of deadlock since the Orange Revolution may be finally broken. Previous crises have led to bursts of reform. A "big bang" of simultaneous presidential and parliamentary elections, plus a referendum on constitutional reform, could reboot the political system.
Or reformers could rely on Tymoshenko overcoming her past predilection for populism. But she will have to fight hard to get back in front in the polls. Ukraine can expect more trouble to come.
LINK: http://www.iht.com/articles/2009/03/02/opinion/edwilson.php
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14. OVER 2,500 CORPORATE SEIZURES ATTEMPTED IN UKRAINE IN 2008
Interfax-Ukraine, Kyiv, Ukraine, Monday, March 16, 2009
KYIV - Ukraine saw a big jump in the number of illegal corporate seizures in 2008, with over 2,500 corporate raider attacks reported over the year, the
director of the Anti-raider League of Entrepreneurs, Andriy Semydidko, said at a press conference at Interfax-Ukraine on Monday. "Illegal corporate
seizure in Ukraine has become a real threat to the economic stability of the country," he said.
According to Semydidko, a large range of activities are used in carrying out the seizures: pressuring single shareholders, bribing managers and officials, creating artificial debts, falsifying the statutory and other documents, and the forcible takeover of facilities with the support of law enforcement groups and private security firms.
According to his data, illegal corporate seizures affected meat-processing and bread-baking companies, farming products processing complexes, and
companies from other sectors of the food industry. The administration and production facilities of the Vesna joint bread-baking company were subject to forcible takeover, he said.
Among the high profile cases in 2008 Semydidko named the conflict over with the appointment of Andriy Portnov as a head of State Property Fund of
Ukraine, the attempt by the former head of Yuzhny Sea Trade Port to retain his office by force, an information attack on Privatbank, and the attempt of a third party to gain control of a majority stake in Kvazar company.
According to the director of Anti-raider League of Entrepreneurs, illegal corporate seizures are occurring not only in the economic sector today, but also in politics of Ukraine. "Raiders" have started to use their techniques to get into power. Specialists experienced in corporate conflicts play a leading role in the development and implementation of these schemes. He claimed that MP Andriy Portnov (BYT) has such experience and might be a key
figure in future conflicts.
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Ukraine Macroeconomic Report From SigmaBleyzer:
http://www.sigmableyzer.com/index.php?action=publications
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15. MOSCOW HAS GIVEN OUT NEARLY THREE MILLION RUSSIAN PASSPORTS
IN POST-SOVIET STATES TO COMPATRIOTS SINCE 2000, INCLUDING UKRAINE
Paul Goble, Window on Eurasia, Champaigne, Thu, March 5, 2009
CHAMPAIGNE-The Russian government has distributed 2.9 million Russian passports to residents of the post-Soviet states, an action some view as interference in the affairs of these countries because there are few bilateral agreements on this and because Moscow has invoked the presence of its citizens there as a reason for Russian involvement.
The Novy Region news agency this week, citing an article in “La Presse Canadienne,” said that since 2000, reported that the Russian government has given approximately 2.9 million Russian passports to Russian “compatriots” in Georgia, Moldova, Estonia and Ukraine for what Moscow says are “humanitarian” purposes (www.nr2.ru/pmr/222553.html).
As the Canadian paper points out, Moscow has already used the existence of these groups as justification for its intervention in Georgia, as a means of weakening Ukraine and Moldova and as a way of putting pressure on Estonia in order to “show the West that these countries are in [Moscow’s] sphere of influence.”
And although there are reports this week that the Russian government has stopped handing out Russian passports in South Ossetia, possibly to undercut suggestions that Moscow plans to annex that breakaway republic, the Russian authorities are in fact increasing the distribution of such passports elsewhere.
During the first ten months of 2008, for example, the Russian embassy in Tallinn distributed 3700 such passports, twice more than during the same period a year earlier, and a marked change for Moscow’s policies of only a few years ago when it sought to exploit the presence of people there without any citizenship against Estonia.
And the Russian authorities are handing out passports to an increasing number of people in Crimea. About 200,000 residents of that peninsula now have dual citizenship, and one American expert quoted by the Canadian newspaper suggested that Russia hopes to pursue the same strategy in Ukraine’s Crimea that it followed in Abkhazia and South Ossetia.
Many in the West see Russia’s actions as understandable given the continuing presence of significant ethnic Russian populations in these countries after 1991, but such attitudes, which Moscow has done everything to exploit, reflect ignorance of a fundamental principle of international law:
The UN Universal Declaration of Human Rights states that everyone is entitled to citizenship, a point Moscow frequently and effectively cites, but it carefully does not say that everyone is entitled to the citizenship of any particular state or that anyone has the right to dual citizenship in the absence of a bilateral agreement between the two countries involved.
By failing to insist that the Russian powers that be live up to the requirements of international law in this area, Western governments are not only undermining the independence and sovereignty of countries they have recognized but also encouraging those in Moscow who increasingly appear to believe that they can violate other provisions of international law as well.
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16. ALFIYA JUMAYEVA APPOINTED NEW EXECUTIVE DIRECTOR OF AES UKRAINE
AES Ukraine, Kyiv, Ukraine, Wednesday, March 4, 2009
KYIV - Alfiya Jumayeva was appointed the Executive Director of AES in Ukraine on March 1. She will coordinate the work of the energy distribution companies "A.E.S. Kyivoblenergo" and "A.E.S. Rivneenergo".
Alfiya Jumayeva started her career at AES in 1996 as a translator and as an assistant to the General Director of a Kazakhstan company AES Ekibastus. During several years of work with this company Alfiya Jumayeva headed the companies Energy Sales group. In 2000, Alfiya was promoted to be the Head of Commercial Service for an AES distribution company in Argentina.
In 2002-2003 Alfiya started to work in Ukraine for the first time. As Executive Director of the "A.E.S. Kyivoblenergo" she ran its commercial internal audit service, analytical department, metrology group, cost decreasing group, and expense optimization group.
In 2003 Alfiya went back to Kazakhstan from Ukraine and was appointed Executive Director of the AES Manicure-Vest Mining Company. One year later she became General Director of the company. She soon headed a group of AES regulating companies in Kazakhstan and was in charge of strategic development and goal achievement.
Steven Walsh, the former Director of AES Ukraine, will manage AES assets in the Middle East.
LINK: http://www.aes-ukraine.com/news/5622.html;
FOOTNOTE: AES is a member of the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.usubc.org.
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17. SOFTSERVE LISTED IN TOP 10 LEADERS IN EMERGING
EUROPEAN MARKETS BY NEOIT AND GLOBAL SERVICES 2009
SoftServe, Lviv, Ukraine, Monday, March 16, 2009
LVIV - SoftServe is proud to announce the distinction of being included into the 2009 Global Services 100, a study recognizing excellence among global IT and BPO service providers. neoIT and Global Services named SoftServe to the number 7 spot in the Top 10 Leaders: Emerging Eastern European Markets category.
Taras Kytsmey, President, SoftServe, Inc., said, “We are pleased to be identified among the top 10 leaders in the emerging Eastern European markets by this exclusive survey. This achievement serves as an acknowledgement of SoftServe’s continuous growth, outstanding customer experiences and the technology that helps our clients achieve strategic goals.”
“The 2009 Global Services 100 honors global companies that demonstrate leadership, innovation and outstanding performance in information technology outsourcing (ITO) and business process outsourcing (BPO). The Global Services 100 holds the distinction of being the only objective awards program of its kind in the Services GlobalizationSM industry,” said Sumeet Salwan, Director, neoIT.
Companies were scored and ranked based on how these organizations compared to the competition in the relevant areas of evaluation. The study particularly tuned into the needs of buyers of business and technology services. The survey enables buyers to confidently short-list leaders in twelve key service delivery areas and global destinations.
ABOUT GLOBAL SERVICES:
Global Services is a media platform with a portfolio that includes a magazine, website, events, newsletter and customized solutions. The audience consists of corporate professionals engaged in the sourcing and management of business and technology services. Global Services is owned by CyberMedia (India) Limited. www.globalservicesmedia.com
ABOUT NEOIT:
neoIT is a management consulting firm that helps leading corporations improve and grow their business by capitalizing on services globalizationSM. Through a blend of strategic advisory services and hands-on execution support, neoIT provides advice and management expertise on the globalization of Information Technology (IT) and Business Process Outsourcing (BPO) services. For more information, visit www.neoIT.com.
ABOUT SOFTSERVE, INC.
SoftServe, Inc. is a leading multinational software development and consulting company that helps global organizations to enhance their customer's competitiveness by providing the technology and processes that achieve strategic results.
With the European headquarters in Lviv, Ukraine and the U.S. headquarters in Fort Myers, Florida, SoftServe development facilities are located throughout the Ukraine. Since 1993, SoftServe Inc. has been delivering a superior level of technical skills and project leadership to over a hundred companies worldwide. SoftServe's state of the art infrastructure, ISO- and CMMI-certified processes, and an unrivaled talent base ensure that the company will continuously exceed expectations in even the most complex of projects.
For more information, please visit the company’s site at http://www.softservecom.com/.
FOOTNOTE: SoftServe is a member of the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.usubc.org.
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18. MAGISTERS OPENS NEW OFFICES IN ASTANA, MINSK AND LONDON
Oleg V. Riabokon, Managing Partner, Magisters, Kyiv, Ukraine, Tue, Mar 3, 2009
KYIV - Magisters has established full-service offices in Minsk and Astana, and opened a representative office in London. The expansion into Belarus and Kazakhstan and representation in London is a logical step for Magisters as we aim to provide seamless service to our clients.
Magisters merged with BelJurBureau, a well-established international law firm in Belarus. Partners Dennis Turovets and Anna Rusetskaya lead the Magisters team in Minsk. We are now ready to support clients in banking & finance, dispute resolution, intellectual property, M&A and corporate, real estate & construction, regulation and tax law in the Belarus jurisdiction.
Magisters Kazakhstan office is led by Partner Marta Khomyak. The legal team in Astana initially offers services in the sectors of infrastructure, PPP, corporate and M&A, real estate, arbitration and white collar crime. The Astana office will also serve as a hub for our clients in the Central Asia region.
Our newly-opened representative office in London brings Magisters physically closer to our international clients and provides a gateway for them to access our legal services in the CIS. Likewise, our CIS-based clients will find it more convenient to access overseas business opportunities via the Magisters London hub.
Our global team of 130 lawyers and 13 partners remains committed to delivering consistently high value to our clients and looks forward to further developing our relationship with you. Please visit our website www.magisters.com for more information.
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19. EPAM RANKED AMONG 'TOP 10' GLOBAL IT SERVICES LEADERS FOR
THE SECOND CONSECUTIVE YEAR WITHIN "2009 GLOBAL SERVICES 100"
EPAM confirms its #1 position in Central and Eastern Europe among IT service vendors by being the
only company with development centers across the region selected into the most prestigious category
of the leading global 100 innovative service providers — "Top 10 Best Performers: IT Services"
EPAM Systems, Newtown, PA, Wednesday, March 11, 2009
NEWTOWN, PA - EPAM Systems, Inc., the leading software engineering and IT Outsourcing (ITO) provider with delivery centers in Central and Eastern Europe (CEE), has been ranked the world's 7th top IT services provider in the key "Top 10 Best Performers: IT Services" category featured in the "2009 Global Services 100" rating.
This ranking, which is "the industry standard for identifying leading companies from around the world that are making an impact in the field of global services", is compiled based on the results of the 2009 Global Services Study, conducted by Global Services and neoIT.
EPAM is the only IT services provider with development centers across Central and Eastern Europe included in the "Top 10 Best Performers: IT Services" category, the most prestigious subset of this annual Top 100 rating, sharing the honor with such established ITO vendors as CSC, TCS, Infosys, and Wipro, among others. This award recognizes EPAM's 2008 business achievements and confirms its position not only as a market leader in the CEE region, but as a global IT services leader as well.
Further recognizing EPAM and one of its leading Service Practices, this year's list ranks EPAM at #2 globally in the "Top 10 Best Performers: Outsourced Product Development" category. For more than 10 years, over 50 software product and technology companies, ranging from start-ups to the top global brands (including three out of top 10 from the "Software 500" list) have been leveraging EPAM's skills and experience to deliver hundreds of successful product releases to the market, on time and within budget.
EPAM's longstanding investments to organically grow and develop its engineering force, as well as its success in attracting and retaining some of the best proven talent available in the region, was recognized once again as EPAM is also included in the "Leaders: Human Capital Development" and "Leaders: Emerging Eastern European Markets" categories.
"Ranking by Global Services 100 in 2009 among the 'Top 10 Best Performers: IT services', as well as in three other 'Top 10' lists, is yet another validation of EPAM’s continuous improvements and the growing level of recognition among clients, partners, and industry experts. We are proud that our 16 years of experience in delivering quality software engineering services and complex mission critical solutions, by leveraging the exceptional talent of software professionals from Central and Eastern Europe and the most advanced tools, processes, methodologies, as well as innovative value-based engagement models, earned us the reputation we do have today," noted Arkadiy Dobkin, President and CEO of EPAM Systems.
About Global Services
Global Services, a media platform by CyberMedia, facilitates the global service delivery for customers and service providers of IT and business-process outsourcing services, and provides cost-effective marketing solutions to the service providers in this industry. A multishore team spanning the U.S.A. and India drives the Global Services brand. The Global Services brand is an integrated media platform that includes the website www.globalservicesmedia.com and global seminars.
About CyberMedia
CyberMedia, now in its 26th year, is South Asia's first and largest specialty media house, with fifteen publications (including Dataquest, DQ Channels and DQ Week, PCQuest, Voice&Data, Global Services and DARE) in the infotech, telecom, consumer electronics, biotech, and entrepreneurship areas, and is a media value chain including Internet (www.ciol.com), events and television. The group's media services include market research (IDC India), job board (CyberMedia Dice), content management, multimedia, and media education.
CyberMedia also publishes BioSpectrum Asia from Singapore and Global Services from the U.S.A., the first Indian magazine titles to be published from outside the country for a global audience.
About EPAM Systems
Established in 1993, EPAM Systems, Inc. is the leading global software engineering and IT consulting provider with delivery centersthroughout Central and Eastern Europe (CEE). Headquartered in the United States and serving clients worldwide, EPAM provides software development and IT related services through its more than 4,500 professionals deployed across client delivery centers in Russia, Belarus, Hungary, Ukraine, Kazakhstan, and Armenia.
EPAM's core competencies include complex software product engineering for leading global software and technology vendors, as well as development, testing, maintenance, and support of mission critical business applications and vertically oriented IT consulting services for global Fortune 2000 corporations.
EPAM is ranked among the top companies in IAOP's "The 2008 Global Outsourcing 100" and in "2007 Top 50 Best Managed Outsourcing Vendors" by Brown-Wilson Group's Black Book of Outsourcing. Global Services Magazine recognized EPAM in its "2008 Global Services 100" list as No.1 company in the "Emerging European Markets" and included EPAM into the global Top 10 "Best Performing IT Services Providers". For further information contact: press@epam.com. Website: www.epam.com.
FOOTNOTE: EPAM Systems is a member of the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.usubc.org.
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20. DUNWOODIE TRAVEL BUREAU, LTD, YONKERS, NEW YORK,
JOINS THE U.S.-UKRAINE BUSINESS COUNCIL (USUBC)
U.S.-Ukraine Business Council (USUBC), Washington, D.C., Tue, Feb 24, 2009
WASHINGTON, D.C. -The Dunwoodie Travel Bureau, Ltd, Yonkers, New York, has been approved as a member of the U.S.-Ukraine Business Council (USUBC), the USUBC Executive Committee announced today, on behalf of the entire USUBC membership of over 100 companies and organizations. Dunwoodie Travel Bureau Ltd. has been in travel business over 40 years and specializes in Ukraine travel.
Lesia Kozicky, owner/head travel agent for Dunwoodie, has been with the business for over 20 years and has been providing excellent travel services to USUBC for the past two years. Dunwoodie Travel Bureau was founded in the late 1960’s by her father-in-law, Walter Kozicky.
WALTER KOZICKY
Walter Kozicky was born in Western Ukraine and like thousands of other Ukrainian refugees after the second world war, made his way to New York City with hope and a dream to start a new life. He learned about real estate and insurance business and ultimately the travel business. Mr. Kozicky still assists at the bureau part-time ever since taking on the position of President and CEO at the SUMA Yonkers Federal Credit Union (www.sumafcu.org) in Yonkers, NY, which he also helped found in 1964.
SUMA is the transliterated acronym for their sponsoring organization - the Ukrainian-American Youth Association. The SUMA Federal Credit Union currently has five locations, two in Yonkers, NY, one in Spring Valley, NY; Stamford, CT and New Haven, CT.
DUNWOODIE TRAVEL BUREAU SERVICES
Travel to Ukraine and its neighboring countries often requires special planning and attention to detail. Taking into consideration time and travel schedule connections that begin at the airlines, subsequent coordination is available for hotel reservations, pick-up service from airports, river cruises (Dnipro River cruise), group and private English speaking tours of different cities, including religious and organization tours; railroad tickets, visa services to bordering countries.
All employees are of Ukrainian heritage and speak Ukrainian, Russian and Polish as well as English. Many employees not only have travelled to Ukraine and other parts of Europe but also have lived there, and can provide their clients with valuable insight on various cultural aspects and social etiquette.
Dunwoodie Travel can assist you in planning your next vacation whether it be Ukraine, Europe, the Caribbean, Mexico, Hawaii, cruise, tour, honeymoon, family vacation, adventure travel or ski vacation.
LESIA KOZICKY: OWNER/TRAVEL AGENT
Lesia Kozicky assumed ownership in the early 1990’s and upgraded the technical side of the business. Owner/Travel Agent Lesia Kozicky can be contacted at Dunwoodie@vacation.com, 914 969 4200 or 800 550 4334, Fax 914 969 2108. More information about the Dunwoodie Travel Bureau can be found at www.dunwoodietravel.com.
"USUBC is very pleased to have the Dunwoodie Travel Bureau, Ltd as a new member" said Morgan Williams, Director, Government Affairs, Washington Office, SigmaBleyzer Emerging Markets Private Equity Investment Group, www.SigmaBleyzer.com, who serves as President/CEO of the U.S.-Ukraine Business Council (USUBC). "We appreciate the professional travel services provided to USUBC by Lesia Kozicky these past two year."
"USUBC has increased its membership four times over the past 26 months and now has a membership base of over 100 companies and organizations which allows USUBC to provide its members such as Dunwoodie's Travel Bureau with a full-time operation and a significantly expanded program of work," according to Iryna Teluk, USUBC Membership Director.
LAST TWENTY-FIVE NEW USUBC MEMBERS:
The last group of new USUBC members have included: 3M Ukraine; ACGO Corporation; AeroSvit Ukrainian Airlines; Aitken Berlin LLP/ASIA; AnaCom, Inc; Asters law firm; CEC Government Relations; ContourGlobal Ukraine; Defense Technology, Inc.; Doheny Global Group; Edelman; Foyil Securities; IBM Ukraine; KPMG Ukraine; Kyiv Mohyla Foundation of America (KMF); Mars Ukraine; Microsoft; Pratt & Whitney - Paton; R & J Trading International; RZB Finance (Raiffeisen Group); SE Raelin/Cajo , Inc.; SoftServe, Inc.; Solid Team LLC; The Washington Group (TWG); Ukraine International Airlines (UIA); Vasil Kisil & Partners law firm; Winner Imports Ukraine (Ford, Jaguar, Land Rover, Volvo, Porsche), Zurich Surety, Credit, & Political Risk and Dunwoodie Travel Bureau, Ltd.
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21. "E-MAP OF FAMINE IN UKRAINE IN 1932-1933" SOFTWARE DEVELOPED
Softline JSC, Kyiv, Ukraine, Wednesday, 26 November 2008
KYIV - Softline JSC has created software named "E-Map of Famine in Ukraine in 1932-1933". This software was ordered by Ukrainian Institute of National Memory.
The map has been introduced during the presentation of the National Book of Memory (with the participation of the President of Ukraine). The purpose of the system is to create software tools for formation, accumulation, storage and visualization of e-map data.
This software provides the ability to visualize information on the electronic map on which modern regions borders and borders in 1933 are outlined. The program allows to search for a settlement visually (through the navigation on the map) and hierarchically (through regions list), the map is immediately positioned to display the selected region, district (map shows districts as well) and settlement.
"E-Map of Famine in Ukraine in 1932-1933" provides the historical information, data about population nowadays, population according to the census of 1926, 1934, 1939 years, the number of deaths from famine, the list of deaths from famine, the memories of witnesses, copies of documents. The system secures the users’ opportunity to supplement information.
Software developed by Softline JSC is implemented in the Ukrainian Institute of National Memory and will soon be available to the public for review and feedback.
LINK: http://www.softline.kiev.ua/control/en/publish/article?art_id=186569&cat_id=41323
FOOTNOTE: Softline JSC is a member of the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.usubc.org.
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22. KIEV JOURNAL: A NEW VIEW OF A FAMINE THAT KILLED MILLIONS
By Clifford J. Levy, The New York Times, New York, NY, Sun, Mar 15, 2009
KIEV, Ukraine — A quarter century ago, a Ukrainian historian named Stanislav Kulchytsky was told by his Soviet overlords to concoct an insidious cover-up. His orders: to depict the famine that killed millions of Ukrainians in the early 1930s as unavoidable, like a natural disaster. Absolve the Communist Party of blame. Uphold the legacy of Stalin.
Professor Kulchytsky, though, would not go along.
The other day, as he stood before a new memorial to the victims of the famine, he recalled his decision as one turning point in a movement lasting decades to unearth the truth about that period. And the memorial itself, shaped like a towering candle with a golden eternal flame, seemed to him in some sense a culmination of this effort.
“It is a sign of our respect for the past,” Professor Kulchytsky said. “Because everyone was silent about the famine for many years. And when it became possible to talk about it, nothing was said. Three generations on.”
The concrete memorial was dedicated last November, the 75th anniversary of the famine, in a park in Kiev, on a hillside overlooking the Dnieper River in the shadow of the onion domes of a revered Orthodox Christian monastery. More than 100 feet tall, the memorial will eventually house a small museum that will offer testimony from survivors, as well as information about the Ukrainian villages that suffered.
In the Soviet Union, the authorities all but banned discussion of the famine, but by the 1980s the United States and other countries were pressing their own inquiries, often at the urging of Ukrainian immigrants.
In response, Communist officials embarked on a propaganda drive to play down the famine and show that the deaths were caused by unforeseen food shortages or drought. Professor Kulchytsky said he had been given the task of gathering research but concluded that the famine had been man-made.
“I became convinced that everything was not as I once thought,” he said.
He refused to falsify his findings and instead released them publicly, escaping punishment only because glasnost had begun under the Soviet leader Mikhail S. Gorbachev.
The famine is known in Ukrainian as the Holodomor — literally, death or killing by starvation — and the campaign to give it recognition has played a significant role in the Ukrainian quest to shape a national identity in the post-Soviet era. It has also further strained relations with the Kremlin, another of the festering disputes left by the breakup of the Soviet Union in 1991.
The pro-Western government in Kiev, which came to power after the Orange Revolution of 2004, calls the famine a genocide that Stalin ordered because he wanted to decimate the Ukrainian citizenry and snuff out aspirations for independence from Moscow.
The archives make plain that no other conclusion is possible, said Professor Kulchytsky, who is deputy director of the Institute of Ukrainian History in Kiev.
Professor Kulchytsky is 72, though he looks younger, as if he has somehow withstood the draining effect of so much research into the horrors of that time.
“It is difficult to bear,” he acknowledged. “The documents about cannibalism are especially difficult to read.”
Professor Kulchytsky said it was undeniable that people all over the Soviet Union died from hunger in 1932 and 1933 as the Communists waged war on the peasantry to create farming collectives. But he contended that in Ukraine the authorities went much further, essentially quarantining and starving many villages.
“If in other regions, people were hungry and died from famine, then here people were killed by hunger,” Professor Kulchytsky said. “That is the absolute difference.”
In recent years, Ukraine’s president, Viktor A. Yushchenko, has regularly spoken out about the famine, and has even sought to make denying it a crime. Ukraine has asked other countries to recognize the famine as genocide and to establish memorials. One is being built in Washington.
In Kiev, the memorial has started to become a pilgrimage site.
“Of course, it is needed,” said Hrigory Mikhailenko, 75, a construction executive from central Ukraine who stopped by during a business trip. “So many people died. Four members of my family. It’s very important to note what happened. That is why Russia is pressuring us.”
Russia has spurned the memorial. Instead of attending its dedication, Russia’s president, Dmitri A. Medvedev, sent a letter to Mr. Yushchenko accusing him of using the famine to discredit Russia.
“We do not condone the repression carried out by the Stalinist regime against the entire Soviet people,” Mr. Medvedev wrote. “But to say that it was aimed at the destruction of Ukrainians means going against the facts and trying to give a nationalist subtext to a common tragedy.”
Last month, Russian historians and archivists sought to bolster the Kremlin’s case, issuing a DVD and a book of historical documents that they said demonstrated that the famine was not directed at Ukraine. Many of the documents were translated into English, underscoring how the two countries are waging their fight on an international stage.
Professor Kulchytsky said the Kremlin feared that if it conceded the truth, Russia, considered the successor to the Soviet Union, could face claims for reparations. Still, he said he would not ignore misstatements by the Ukrainian side, either.
For example, President Yushchenko has said that as many as 10 million Ukrainians died, while Professor Kulchytsky believes that the figure is 3.5 million.
Nor is the professor enamored with the design of the memorial, saying that he would have preferred some of the other proposals. But he said there was no doubt that the country had to be reminded of its history.
“I know many people, including famous people — smart, intellectual people — whose relatives, grandparents, died in the famine, and they speak out harshly against focusing on Holodomor,” Professor Kulchytsky said. “They consider it not a part of the present. But how can we be quiet about what occurred? Our people were the victims of a great crime.”
PHOTOGRAPH: Joseph Sywenkyj for The New York Times, A memorial to the famine, right, opposite a revered cathedral, was dedicated last November in Kiev. A museum is planned there.
LINK: http://www.nytimes.com/2009/03/16/world/europe/16kiev.html
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23. RUSSIA: DEADLY '30s FAMINE NOT GENOCIDE
Denies that Ukrainians were targeted for starvation during Stalin era
Steve Gutterman, Writer, Associated Press (AP), Moscow, Russia, Wed, Feb 25, 2009
MOSCOW - Russia issued a DVD and a thick book of historical documents on Wednesday to dispute claims that the Ukrainian famine of the 1930s amounted to genocide.
Russian archivists and historians pressed the Kremlin's case that the Stalin-era famine — which killed millions of people — was a common tragedy across Soviet farmlands, countering efforts by Ukraine's pro-Western president to convince the world that Ukrainians were targeted for starvation.
"Not a single document exists that even indirectly shows that the strategy and tactics chosen for Ukraine differed from those applied to other regions, not to mention tactics or strategy with the aim of genocide," said Vladimir Kozlov, head of Russia's Federal Archive Agency.
He said the famine was a direct result of Josef Stalin's brutal collectivization campaign and the widespread confiscation of grain that was exported to secure equipment needed for the Soviet dictator's frenetic industrialization drive.
Kozlov said the policy was class-based, targeting the kulaks — wealthy farmers seen as enemies of Communism — and was implemented virtually identically across the Soviet Union. "There were no national or ethnic undertones," he told a news conference at the headquarters of state news agency RIA-Novosti.
UKRAINE: HUNGER USED AS TOOL
Ukrainian President Viktor Yushchenko contends the famine was aimed at rooting out Ukrainian nationalism. "Hunger was selected as a tool to subdue the Ukrainian people," he said at a November ceremony marking the anniversary of what Ukrainians consider the onset of the 1932-1933 famine.
Ukrainian lawmakers and a U.S. commission have labeled the famine an act of genocide, and Yushchenko has pushed for more governments and international bodies to follow suit. However, neither the United Nations nor the European Union has done so.
The heated dispute over the past comes amid a mounting tug-of-war over the future of Ukraine, whose European aspirations and tight historical ties to Russia make for a potentially volatile mix.
Yushchenko is pushing for NATO membership, a prospect Russia has said it will do its utmost to prevent. Russian officials have cast the genocide claim as part of an effort by Yushchenko to discredit Russia in he eyes of Ukrainians and the West.
WESTERN FABLE
Months before his death last summer, the renowned writer and Soviet dissident Alexander Solzhenitsyn dismissed the genocide claim as a "fable" that could only fool the West.
On Wednesday, Alexander Dyukov, director of Historical Memory, a Moscow-based foundation that helped organize Wednesday's news conference, said: "It is aimed, among other things, at inciting ethnic hate, at tearing Ukraine away from Russia."
Journalists were given an English-language DVD and a 500-page book reproducing documents — some of them recently declassified — that are to be included in a three-volume study of the famine in the U.S.S.R. from 1929 to 1934.
They include letters portraying the dire situation at the time in what is now Russia and in other ex-Soviet republics and orders — some with Stalin's stamped signature in red ink — denying pleas for a letup in grain procurement quotas. Other documents suggest officials in Ukraine misled Moscow about the extent of hunger there.
The famine's death toll is disputed, but it is widely believed that it killed between 3 million and 7 million people in Ukraine. Yushchenko has said as many as 10 million Ukrainians died, while Russian historian Valery Tishkov said more conservative estimates of 3.5 million deaths in Ukraine and 3.5 million in Russia are likely about twice the true toll.
AP Photograph – The head of the Russian Federal State Archives agency Vladimir Kozlov holds up a book entitled, 'Famine …
LINK: http://www.msnbc.msn.com/id/29391949/; LINK: http://news.yahoo.com/s/ap/20090225/ap_on_re_eu/eu_russia_great_famine
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24. TO COUNTER UKRAINE CHARGES OF GENOCIDE,
MOSCOW ADMITS TO MASS MURDER
By Paul Goble, Window on Eurasia, Vienna, Thu, Feb 26, 2009
VIENNA - In order to counter Kyiv’s insistence that Stalin carried out a genocide in Ukraine in the 1930s, an insistence that is at the core of the definition of the Ukrainian nation, Moscow has released new documents suggesting that the Soviet dictator engaged in a criminal campaign of mass murder cross the entire Soviet Union.
Yesterday, Vladimir Kozlov, the head of Russia’s Federal Archives Agency, told a Moscow press conference that the famine in Ukraine and elsewhere in the USSR was “the result of [Stalin’s] criminal policy” but that “of course, no one planned any famine” or singled out any ethnic group as its victim
www.rian.ru/society/20090225/163170651.html.
Instead, he said, “the famine was the result of the errors and miscalculations of the political course of the leadership of the country in the course of the realization of collectivization.” And he insisted that he and his researchers had not found “a single document” showing that Stalin planned “a terror famine” in Ukraine.
Instead, Kozlov said, “absolutely all documents testify that the chief enemy of Soviet power at that time was an enemy defined not on the basis of ethnicity but on the basis of class,” in this case the peasantry which Stalin wanted to force to join collective farms throughout whatever means he could.
Kozlov’s comments came as he presented a new collective of documents, entitled “The Famine in the USSR,” and a DVD which contained a selection of those documents and others, which he said will total some 6,000 items, to be published in three volumes that are to be published this year.
The Russian archivist and others in Moscow said they were convinced of two things,
[1] first, that these documents undercut all Ukrainian claims to the contrary and,
[2] second, that the evidence these documents provide about the much broader but class rather than ethnic based crimes of the Soviet regime are not a
problem for the contemporary regime.
But despite t his self-confidence, it is almost certainly the case that they are wrong. On the one hand, the extent of regime violence that these documents show is likely to energize rather than demobilize Ukrainian views about the way in which Stalin attacked the core of their nation nearly 80 years ago.
And on the other, the evidence the Moscow archivists provide is likely to lead others, including Kazakhs, Belarusians and many ethnic Russians to see that their communities too were the victims of mass murder, an act of violence that at least some of these groups are certain to view as directed against their nationhood and thus to see as genocidal whatever Moscow says.
Because that seems so likely, the arguments advanced yesterday by Valery Tishkov, an academician who heads the Institute of Ethnology and serves in the Russian Social Chamber, that the Ukrainian arguments will collapse, almost certainly will prove to be without any sustainable foundation.
And the reason for that conclusion is that Russians, Ukrainians and indeed the rest of the world are almost certain to be struck by one of the fundamental weaknesses of the position that Kozlov and Tishkov advance: Somehow they appear to believe that everyone will accept their notion that mass murder is somehow not as serious a problem as genocide.
That such an argument may convince some is beyond question, given the political use to which deaths in the past are often put, but that it will convince all is highly improbable. Indeed, when a regime kills as many people as Stalin’s did, most people of good will, including many Russians, will question Moscow’s latest effort to politicize history in this way.
Indeed, it is virtually certain not only that this latest compilation by Russian authors will not dissuade Ukrainians from their view that their nation was a victim of the Soviet system but also will lead many others, including ethnic Russians, to dismiss Moscow’s current efforts to restore the image of Stalin as a wise and effective manager.
Consequently, this latest Russian effort to downplay the human tragedy of collectivization will have at least three effects, none of which Moscow will want.
[1] First, it will lead many to see that Ukrainians, as one Russian put it, “deserve respect” for focusing on this tragedy
(www.vedomosti.ru/newspaper/article.shtml?2009/02/16/181822)
[2] Second, it will call attention to the ways in which Moscow is manipulating history for its own purposes even more than the Ukrainians are. After
all, despite the enormous number of documents put forward, there will inevitably remain questions about what documents were NOT published.
[3] And third, this Russian effort will call attention to something that many would prefer not to confront: Mass murder is wrong whether conducted
in the name of ethnic cleansing, the class struggle or anything else. The dead and their memory call out for a human response very different than the
political one Moscow offered yesterday.
LINK: http://windowoneurasia.blogspot.com/2009/02/window-on-eurasia-to-counter-ukraine.html
FOOTNOTE: Paul Goble is a longtime specialist on ethnic and religious questions in Eurasia. Most recently, he was director of research and publications at the Azerbaijan Diplomatic Academy. Earlier, he served as vice dean for the social sciences and humanities at Audentes University in Tallinn and a senior research associate at the EuroCollege of the University of Tartu in Estonia. While there, he launched the “Window on Eurasia” series. Prior to joining the faculty there in 2004, he served in various capacities in the U.S. State Department, the Central Intelligence Agency and the International Broadcasting Bureau as well as at the Voice of America and Radio Free Europe/Radio Liberty and at the Carnegie Endowment for International Peace.
He writes frequently on ethnic and religious issues and has edited five volumes on ethnicity and religion in the former Soviet space. Trained at Miami University in Ohio and the University of Chicago, he has been decorated by the governments of Estonia, Latvia and Lithuania for his work in promoting Baltic independence and the withdrawal of Russian forces from those formerly occupied lands. Mr. Goble can be contacted directly at paul.goble@gmail.com.
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13. BUYUKRAINE.ORG website, http://www.BuyUkraine.org.
14. DAAR FOUNDATION Houston, Texas, Kyiv, Ukraine. http://www.DaarFoundation.org/home.htm.
15. ArtUkraine.com; www.ArtUkraine.com, to purchase Ukrainian magazines, books, etc. write to ArtUkraine@voliacable.com.
16. DUNWOODIE TRAVEL BUREAU, Specializing in Ukraine travel, Alesia Kozicky, Owner/Travel Agent, http://www.DunwoodieTravel.com;
Dunwoodie@vacation.com
17. bne, businessneweurope, Berlin, Ben Aris, Editor-In-Chief. http://www.businessneweurope.eu; editor@businessneweurope.eu
18. UKRAINE ANALYST, Dr. Taras Kuzio, Editor http://www.TarasKuzio.net; tkuzio@rogers.com
19. LAND OF DILEMMAS, Would You Risk Your Life To Save Your Enemy? Documentary by Olha Onyshko & Sarah Farhat, www.LandOfDilemmas.org.
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PUBLISHER AND EDITOR - AUR
Mr. E. Morgan Williams, Director, Government Affairs
Washington Office, SigmaBleyzer, The Bleyzer Foundation
Emerging Markets Private Equity Investment Group;
President, U.S.-Ukraine Business Council (USUBC)
1701 K Street, NW, Suite 903, Washington, D.C. 20006
Tel: 202 437 4707; Fax 202 223 1224
mwilliams@SigmaBleyzer.com; www.SigmaBleyzer.com
mwilliams@usubc.org; www.usubc.org
Needed: 'Vice Presidents in Charge of Revolution'
To move the power & spirit of the 'Orange Revolution' forward
Power Corrupts & Absolute Power Corrupts Absolutely.
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