Lesser of two evils

Ukraine continues to struggle with the ongoing debate on where new gas pipelines will be located, causing political leaders to worry about how this debate will affect both internal and external relations. What was once a political and economic problem, the gas issue has spread quickly into other realms of domestic and international affairs. On the one hand, it has serious implications on Ukraine's relationship with Poland, Russia and the European Union. On the other hand, it has come to define internal disagreements between different official bodies within the state.

 

A second pipeline?

On Monday 30 October, Russian President Vladimir Putin shocked Ukraine once again, this time with the new idea of building a second pipeline, through Finnish territory. With this new proposal, the Russian president has literally killed any remaining hopes to preserving the Ukrainian monopoly. Putin also hinted at a second possibility: the proposed pipeline could pass through Finland and possibly bypass not only Ukraine, but Poland as well, sending a clear warning to Warsaw.

Undoubtedly, under such circumstances, Poland will re-think its friendship with Ukraine and instead consider its own involvement and how it will benefit from the project. However, Putin promised that Poland would benefit from the gas transfer to the annual tune of USD one million.

 

Privatisation

In Ukraine, fundamental doubts are connected with the question of whether it would be better to privatise Ukraine's part of the pipeline or offer it instead as a kind of concession: that is, lease the pipeline over a period of time. Prime Minister Victor Yushchenko publically declared his preference for united leasing of the new pipeline. Such an idea found understanding and support from the international powerhouse Shell Gas & Power, which is interested in leasing the Ukrainian pipeline.

Privatisation also has its supporters in national political and economic circles. However, the biggest supporter of the privatisation of the Ukrainian pipeline is Russia. Moreover, Russia will only agree to the privatisation of the Ukrainian pipeline with the condition that it has control (51 percent of shares) in the process. Not surprisingly, there are few Ukrainian politicians who agree with such stipulations.

 

Geopolitical consequences

These long and unsuccessful negotiations and arrangements around the transference of Russian gas to the European Union have provoked the Russian and Ukrainian media to look deeper into the geopolitical consequences of the problem. The Russian newspaper Vremya Novostey presents an interesting view on the situation.

The major round of the geopolitical game will focus on who will gain (through privatisation or concession) control of the majority of shares of the gas-transportation system. Those who will control Ukraine (an owner of the pipeline will have a decisive word in Kiev) will obtain a key to the post-Soviet territories. If American companies take control, it will simultaneously mean the control of Washington over Central Asian and Transcaucasian resources for decades.

Together with this, the US will be able to control the energy supply of Europe because Ukraine, in one way or another, is included in all big energy projects of the next century-through the supply of either Turkmen gas or Caspian oil... If Russia becomes the major shareholder, the West will have to forget about its plans of weakening Russian influence on the post-Soviet territories. (Vremya Novostey)

The position is even more remarkable insofar as Russian interests are concerned. From Ukraine's standpoint, although included in the "global project of the next century," it is not given any chance to have its own voice in the decision-making process. At this point in the gas debate, one has to question whether this will ever be the case.

Meanwhile, Shell Gas & Power have offered an alternative solution to this national problem. In their view, it is not necessary to talk about leasing or privatising the whole pipeline at once. Foreign investors can also be interested in the pipeline if Ukraine decides to split it into three segments—a system of international gas transition, a system of domestic gas supply and as an underground gas storage facility—and then offer it for rent.

 

Return of stolen money

The German government has adopted a decision to audit the flow of money that they pay to former Nazi prisoners from Russia, Belarus, Ukraine and the Czech Republic. Approval of such a step has become necessary after the arrest of Ukrainian deputy and businessman Victor Zherdytsky, who is accused of stealing prisoners' money (See previous news reviews).

If Zherdytsky is convicted he faces up to ten years in prison. This week, the Ukrainian Parliament, by 268 votes to 341, adopted a decision to agree with the instigation of the criminal case against Zherdytsky and his arrest. This decision allows Ukrainian authorities to demand the extradition of the former head of Grado-Bank from Germany.

 

And in other news...

• Three national research institutes (Kyiv International Institute of Sociology, marketing groups SOCIS and Social Monitoring) published the results of their latest sociological surveys almost simultaneously. According to all of them, around 20 percent of respondents would vote for the Communist Party (CPU) if Parliament elections were held today. Valery Khmelko, President of Kyiv International Institute of Sociology, also stressed that the number of the supporters of left ideologies in the country (such as the Communist Party, Socialist Party and Progressive Socialist Party) has seriously increased during the last three years. If in November 1997 only 17.8 percent of respondents were ready to vote for the representatives of left-leaning parties, today more than 26 percent share such an opinion.
• In another research finding, (this time economic research) the Heritage Foundation, a conservative, American think-tank, indicates that Ukraine has dropped 17 slots down in the index measuring economic freedom in the state. Ukraine now rates 133 out of 155 countries in the world according to this index. As the Heritage Foundation points out, "the deterioration reflects the assessments, progressively getting worse, of its trade policy, fiscal burden of government and government intervention in the economy."
• The National Parliament adopted a project of the state budget for the next year in the first reading. Prime Minister Yushchenko and his cabinet now have several days to prepare the document for the second reading scheduled to take place in the middle of November. Next Monday, Yushchenko plans to organise a session of intensive meetings with representatives of parliamentary groups and factions in order to improve the project and to discuss suggestions made by members of Parliament.
• Radio Free Europe, referring to Interfax news on 1 November, reports that the newly appointed US Ambassador to Ukraine, Carlos Pascual, and US Coordinator for Assistance to the Newly Independent States, William Taylor, announced that the US will offer USD 400,000 in grants next year to develop Internet sites for free public use in Ukraine. The grants will be distributed among 12 to 14 winners of a competition to establish Internet access sites at Ukrainian libraries. The money will cover the costs of computer equipment and software, connection to the Internet, as well as expenditures on training and telecommunications.

Natalya Krasnoboka, 3 November 2000

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Sources:

Den', Daily national newspaper
Radio Free Europe/Radio Liberty
Ukrainska Pravda, online independent
daily newspaper
Unian, National News Agency
1+1, National TV
RosBusinessConsulting
Vremya Novostey, Russian daily newspaper
The Ukrainian Observer, Ukrainian online publication