Russia quadruples Q1 Brazilian poultry buy


In the first quarter of this year, Russia bought 30,800 tonnes of poultry meat from Brazil, which was more than four times the amount in the same quarter last year. Experts with the Agrarian Market Trends Institute (IKAR) said this was due to the ban Russia slapped on US poultry in March. “However, the active battle to cut shipments of poultry meat from the United States waged under the banner of protecting the domestic producer could lead to unexpected consequences,” IKAR Director General Dmitry Rylko has cautioned. “The increase in Brazilian imports once again proves the truth that setting up roadblocks in front of one exporter does not produce the desired result, as another takes his place,” Rylko said.
He explained that populations with low income and processing industry levels are target markets for American exporters, who mainly supply ground meat and chicken legs and thighs, while Brazil provides whole birds.

Germany’s Rudolf Wild to start making fruit drinks


German company Rudolf Wild, a European beverage market leader, is gearing up to make Capri-Sonne brand fruit drinks in Russia. Peter Poltz, the man responsible for the project, said it would be implemented together with the Russian company Nidan Foods at its plant in the Lyubertsy outside Moscow (the agribusiness Belaya Dacha). The building of the roughly USD 50 million plant is planned for completion this fall, and test production is to start in December.

“Starting at the beginning of next year, the Russian market will be getting only Capri-Sonne that is made in Russia,” Interfax quoted Poltz as saying. The beverages are currently being imported. Poltz said the equipment for making Capri-Sonne, and also concentrates and packaging material, will come from Germany. The new production facilities will have a calculated output capacity of 12,000 0.2-liter drink packets per hour.

Rudolf Wild was founded in 1931. The company has subsidiaries in a number of Eastern European countries, as well as sales offices in Russia, Ukraine, Bulgaria, Romania, the Czech Republic and other countries. The company Nidan-Ekofrukt was set up in 1992 as an importer and distributor of Hungarian juices, later becoming part of the holding Nidan Foods. The latter now has its own plants in Novosibirsk, also packaging its Chempion, Da! and Moya Cemya brand juices at the plants Amtel (Moscow region), Parmalat (Belgorod region) and Sibirskaya Kompaniya (Altai territory).

Russia grain harvest to shrink this year – report


Russia will harvest some 77 million tonnes of grain in 2002 compared to last year’s 85.4 million tonnes, specialists from the Russian Agriculture forecasted after studying grain harvest estimates in different regions of the country, Interfax reported.

Grain production will decline in all federal districts except the Far East, according to information Interfax obtained from the Agriculture Ministry. In particular, the Volga Federal District, which includes major grain-producing areas such as the republics of Tatarstan and Bashkortostan and the Orenburg and Saratov regions, is expected to harvest almost 23 million tonnes of grain (24.7 million tonnes last year). The Southern Federal District is expected to reap 21.2 million tonnes, which is almost three million tonnes less than last year.

Experts from the Agriculture Ministry said they do not believe that the recent heavy flooding in southern Russia would significantly influence this year’s harvest, since they affected no more than 0.1 percent of the land planted with grain crops.

Farms located in those regions have started harvesting their winter crops, and initial results indicate that this year’s grain output is likely to exceed last year’s.

For instance, the Krasnodar territory is harvesting an average of 4.94 tonnes of winter barley per hectare, which is half a tonne more than it did the same period of last year. The figures in the Stavropol territory are also higher than those in 2001, and farmers expect that the damages caused by the floods could be offset by with higher crop yield.

The Rostov region, where fields have been hard-hit by drought, has already harvested about a seventh of its winter crops. Crop yield of grains and legumes amounts to approximately 3.25 tonnes/hectare, which roughly corresponds to the last year’s level. Thirty regional farms have threshed 420,000 tonnes of grain and legume crops, the news agency quoted the Agriculture Ministry as saying. The country as a whole has already harvest grain from almost a million hectares.

Kasyanov calls for banking reform acceleration


Russian Prime Minister Mikhail Kasyanov has emphasised a need to begin reforming the banking sector this year. “Our banking system is crippled and fails to meet the needs of the economy and industry,” Kasyanov told a press conference in Kaluga.
However, the banking sector is a key element in economic modernisation, he said. Ideally, companies should borrow funds from banks and upgrade their production facilities, Interfax quoted him as saying. Furthermore, financial market regulations should be addressed, he said. “When the financial market is discussed in Russia, speculators are meant, however, it is through this market that financing is channelled to industry,” the news agency quoted him as saying. “Time was lost in reforming these spheres and it must be made up for,” he added.

WTO membership position to get cosmetic changes


Russian First Deputy Economic Development and Trade Minister Maxim Medvedkov said his country’s approach to its World Trade Organisation accession talks might change, but the changes will not affect the basic principles underlying the country’s negotiating stance.

“The main element will remain unchanged: Russia’s membership has to be based on standard terms and give it real economic benefits,” Interfax quoted Medvedkov as saying, after this issue was discussed by the cabinet.

He announced that Prime Minister Mikhail Kasyanov had proposed resuming the discussion of the Russian position in two weeks, when the Economic Development Ministry works out its ideas on possible changes in Russia’s position. “We have in mind cosmetic changes that have to do with specific areas, including agriculture and access to the market of goods and services,” the news agency quoted Medvedkov as telling reporters.

He also said that a package of changes to the country’s negotiating stance planned for submission to the government for confirmation in two weeks is rather large. “We feel an additional stimulus in several directions is needed,” he said.

As to how the accession talks are going, Medvedkov said, “Judging from today’s negotiating situation, we have more pluses.” His ministry, whose representatives are engaged in the WTO accession talks, continues to coordinate its position with Russian business figures, he continued. In August Russian delegates to the talks process will continue their tour of the country’s regions for conferences under the banner ‘WTO and the interests of business,” he added.

Putin endorses revised edition of central bank law


Russian President Vladimir Putin has signed a new version of the Federal Law on the central bank of the Russian Federation (Bank of Russia), a spokesman for the Russian president said. The state Duma passed the law at its third reading on June 27 after overturning a Federation Council veto of June 14. The law treats the chairman and the Board of Directors as the central bank’s governing bodies. Previously, the board of directors was the sole governing body.

The National Banking Council (NBC) will be the central bank’s collegiate body. The NBC will have 12 members, two of them nominated by the Federation Council, three by the State Duma, three by the Russian president and three by the government. The NBC also includes the central bank chair.

The NBC will be responsible, as per the law, for considering the central bank’s annual report, considering the draft of the main aspects of the unified state monetary policy, appointing a chief central bank auditor, appointing an auditor for the central bank’s annual financial reports, and approving, on recommendation of the Board of Directors, book-keeping and reporting regulations for the central bank.

The board will have 12 members, who will be permanent directors and meet at least once per month. The state Duma will elect the board members for a term of four years on the recommendation of the chairman of the central bank in agreement with the Russian president.

The NBC will draft the main aspects of the unified state monetary policy and submit them to the Russian president, government and State Duma. The board will endorse annual financial reports of the central bank, consider the audit of the bank’s annual reports and audit chamber’s report, endorse central bank cost projections, establish forms and amounts of remuneration for the chairman, members of the board, deputy chairmen and other employees of the bank.

The Law states that the central bank will divest its interest in Vneshtorgbank by January 1, 2003. It will reduce its interest in Sberbank and Vneshtorgbank to more than 50 percent plus one voting share in agreement with the government, and to less than 50 percent plus one voting share on the basis of the law.

The central bank will, in agreement with the government, decide on the reduction or transfer of its interest in Russian banks abroad. The law defines the bank’s charter capital as being three billion rubles. Charter capital and other central bank assets are federally-owned and the bank exercises the power to hold, use and dispose of those assets.

The state is not responsible for the obligations of the central bank, and the bank is not responsible for the obligations of the state unless they have undertaken those obligations or unless otherwise stipulated by federal laws.

State budget gets 50 mln lei from privatisation


Compared to the first half of 2001, this year the volume of budgetary revenue has gone up by 11.2 percent (144.2 million lei), Infotag quoted Moldavian Prime Minister Vasily Tarlev as telling a governmental meeting. Minister of Finance Zinaida Greciany indicated that so far the budgetary revenue has come to 90.5 percent of the planned level, whereas a year ago the figure was even lower – 88 percent. By early July the revenue of the consolidated budget reached 94.5 percent (of the planned level); the local budgets – 103.6 percent. The lion share of the budgetary revenue was attained by the Customs Department – 986.4 million, followed by the Chief Tax Inspection, whose contribution came to 413 million lei (44 million below the expected). During the meeting Tarlev expressed concern over the facts of contraband and tax evasion and demanded the appropriate controlling organs to take necessary steps towards its prevention. He also requested that the finance minister and the directors of tax and customs departments submit reports on measures to increase the state budget revenue. In the first half of 2002, proceeds from privatisation to the budget came to 50 million lei. The news agency quoted the Director of privatisation department, Stefan Grebencea, in an interview that the majority of this revenue comes from property sales done through investment tenders in the previous years. According to the current legislation, the buyers are allowed to pay in instalments. From this year privatisation, the state budget received only USD 950,000 paid by the Russian company Salut for controlling interest in JSC Topaz. Grebencea said the lack of dynamism in tender privatisation relates to the inability of the ministries responsible for producing relevant documentation to keep up with the pace. In accordance with the current legislation, the documentation for privatisation should be submitted to the department no later than 30 days before the commencement of sales.

Moody’s downgrades ratings


International rating agency Moody’s has downgraded Moldova’s mid and long-term foreign currency issuer rating by three levels, from Caa1 to Ca, the rating for the national currency has been downgraded to Caa2. The Moldavian government is holding talks on restructuring remaining Eurobond payments amounting to USD 75 million, which Moody’s qualifies as default. The general economic and financial situation in the country is difficult, agency experts said, adding that the country is experiencing difficulties in paying its foreign debt on time. The Ca rating is the second to lowest rating on the Moody’s scale.

IMF to resume lending


The board of directors at the International Monetary Fund decided on July 15 to resume lending to Moldova, which it suspended at the beginning of 2001. Interfax quoted a source at the IMF’s office in Chisinau as saying the decision to resume the poverty reduction and growth facility (PRGF) was made because the Moldavian government has fulfilled a number of conditions. These include the approval of a new Civil Code and the announcement of an international tender for a 51 percent stake in national telecommunications operator Moldtelecom. The next loan tranche of USD 12 million to USD 24 million is to be disbursed soon.

Bimacom as wireless operator


The Moldova-Malta venture Bimacom will become this summer the third wireless operator on the Moldavian communication market. The new service for mobiles will be available in one or one and a half months. Bimacom manager Alexandru Batt said the company would complete the paper work and sign an agreement with Globalstar, a US company that operates a satellite system for mobiles, within two weeks. Batt said Bimacom’s service will be more expensive than the services offered by GSM operators Voxtel and Moldcell. At the beginning, the company will serve corporate clients. Some 200 companies in Moldova have announced intention to connect to the satellite system services.

State debt shrinks by nearly 1 billion hryvnias


Since the start of this year, Ukraine’s state debt decreased by 958 million hryvnias to 73.7 billion hryvnias on May 31, Finance Minister Ihor Yushko reported at a parliament session. He noted that over the first six months of 2002, budget expenditures offsetting the main debt (interest-free debt reimbursement) totalled 2.45 billion hryvnias, while 1.33 billion hryvnias was used for servicing domestic debt and 1.21 billion hryvnias was use in foreign debt payments. The minister stressed that expenditures servicing the country’s main debt in the first half of the year amounted to 390 million (13.7 percent) less than projected by the budget timetable. In the first half of 2002, state debt expenditures (interest payments) totalled 1.4 billion hryvnias, with 320 million hryvnias going towards domestic debt and 1.10 billion hryvnias for foreign debt. These expenses come to 476 million hryvnias (25 percent) less than projected by the budget timetable and 461 million hryvnias less than the sum allocated for these goals in the first half of last year. Thus, about 900 million hryvnias was saved on payments related to servicing and reimbursing the state debt in the first half of the year. This was achieved primarily thanks to optimising debt servicing and reducing costs.

WB to draft agriculture support programme


The World Bank team in charge of drafting a support project for Ukrainian agriculture started work on July 15. It aims at specifying the time span of the project and the amount to be lent to the country. By early reports, the bank may appropriate USD 250 million for the project. The team will probably stay in Ukraine until July 28. At the first stage of the project, the World Bank may open a line of credit for development of farms and other enterprises operating in rural areas.

Ukraine posts 4.3% GDP surplus


Ukraine posted a GDP surplus worth 4.3 percent in the first half of 2002 and 6.7 percent last month against June 2001, Prime Minister Anatoly Kinakh told a meeting. Industrial production grew 5.8 percent in the first half of 2002, 7.5 percent in June with 1.8 percent deflation over the period. “Performance over the period indicates that we have a real chance to meet all the macroeconomic and macro-financial targets set out in an economic and social development plan and other documents for this year,” Interfax quoted Kinakh as saying. Meanwhile, Deputy chief of the Finance Ministry’s macroeconomic projection department Vadim Pyshcheyko forecast at a press conference that inflation in the country in 2002 would range from 3-6.5 percent, depending on whether public services were hiked, especially rent and utilities. He predicted that if old tariffs applied, consumer prices would rise 3-3.5 percent, but if some tariffs were raised, inflation would be up 6-6.5 percent. Pyshcheyko explained that this concerned hiking tariffs on public services since no growth in industry tariffs was planned.

Trade surplus climbs 8%


Ukraine’s foreign trade surplus grew 8.2 percent to USD 474 million in the first five months of 2002, from USD 438 million in the same period last year, Prime Minister Anatoly Kinakh said. The trade turnover was up 2.6 percent year-on-year to USD 12.966 billion in the five months, he added. Ukraine has managed to offset negative trends in trade relations with Russia by increasing exports to Europe and other regions of the world “where our products are competitive,” Kinakh said. “We have managed to reduce the negative impact of unresolved issues that concern unequal conditions for Ukrainian foreign trade in relation to the Russian Federation” by boosting exports to other markets, he said. The Economics Ministry expects Ukraine to maintain a trade surplus this year of more than USD 0.5 billion. Ukraine’s trade surplus narrowed 2.3 percent in 2001 to USD 2.886 billion. The country’s foreign trade turnover grew 10.7 percent to USD 36.733 billion.

Putin: Moscow, Kiev should join efforts in WTO


Russia and Ukraine should coordinate their steps in joining the World Trade Organisation, Russian President Vladimir Putin said at a meeting at the Foreign Ministry. Russia should also coordinate its decisions with Ukraine on cooperation within the Eurasian Economic Community, the Kremlin leader said, commenting on a report by Russian Ambassador to Ukraine Viktor Chernomyrdin.
“If Ukraine enters the WTO and significantly gives up its positions, then Ukrainian goods unwanted in the WTO will flood into Russia, and then we would have to build a firm customs border,” he said. Commenting on Chernomyrdin’s speech, Putin praised his activity. He noted that “the fervour of the Russian ambassador” sometimes leads to some “extravagancy” in his actions, but he highly appreciated Chernomyrdin’s position on defending Russian interests, including economic ones.

Kiev scientists get licence to operate reactor


The Ukrainian Nuclear Regulation Committee has issued a licence to operate an experimental reactor to the scientific centre Nuclear Research Institute located in Kiev and belonging to the Ukrainian National Academy of Sciences. The licence will be valid until the end of 2005, the committee said. The reactor has been operating since 1998 under a provisional licence. Since September 2001, the Nuclear Research Institute has taken a number of measures to comply with requirements to the reactor made by the nuclear regulating agency. In particular, it put into operation a system of physical protection, a computer system of stocktaking of nuclear materials, an automatic fire-alarm system, and an emergency power supply system. The reactor is used for doing research in nuclear and radiation physics, radiation metal studies, the production of radio-isotopes, and radiation biology. The Ukrainian Academy of Sciences built this reactor 40 years ago. Its operation was suspended from 1993 to 1998.

Russia may lend funds for construction of reactors


Russia may lend money to finance the completion of the construction of power unit 2 in the Khmelnytskyy and power unit 4 in the Rivne nuclear power stations, provided that the European Bank for Reconstruction and Development is involved in this, Gennady Nefyodov of the Russian Atomic Power Ministry has said.

Ukraine has been holding talks to receive a credit for the completion of the units with both the EBRD and with Russia. “Even if the completion of construction is carried out by the EBRD, a place will be found for participation by Russian organisations for a corresponding amount (on a return basis),” Interfax quoted him as saying.

Ukraine has not made a final decision on this matter, Nefyodov said. “Talks are fairly active, but political will is needed,” he added. A list of Russian equipment worth USD 44 million to be used in the construction has not been agreed upon, Nefyodov said. No specific hardware is mentioned in the crediting agreement, he said. “We will supply what Ukrainian enterprises do not make,” the news agency quoted him as saying. Certain kinds of equipment are made only in Russia, and Russian stations obtain certain products in Ukraine, Nefyodov added. Ukrainian First Deputy Prime Minister Oleh Dubyna and Russian Deputy Prime Minister Viktor Khristenko signed an agreement in June under which Ukraine will receive USD 44 million as a technical credit, repayable in six years with a three-year grace period.

According to an announcement from Ukraine’s nuclear energy company Energoatom, the uncertainty over nuclear energy bills is delaying the talks. The completion of the Rivne and Khmelnytskyy plants was restarted in 1998. At the moment Energoatom is financing the construction from its own funds. In the first half a total of 170.5 million hryvnias was spent on these projects.

Still, Ukraine plans to continue talks with the EBRD on loans needed to bring the construction of the reactors to completion. The bank announced in October 2001 that it is ready to grant Ukraine a credit for these projects of USD 215 million.

From 1991-2001, the European Union provided Ukraine with 100 million Euros in grants as part of the TACIS programme to maintain and improve nuclear safety, Mykola Shteinberg, deputy state secretary of the Ukrainian Fuel and Energy Ministry, told a conference marking the tenth anniversary of the TACIS programme for nuclear safety. He said that over a decade, Ukraine implemented 67 TACIS projects and received equipment worth 32 million Euros.

The EU provided financing for nuclear safety measures totalling 720 million Euros in the Commonwealth of Independent States. The EU also finances a project aimed at improving the safety of the Shelter facility that was built over the fourth power generating unit at the Chernobyl nuclear power station, as well as projects to increase safety at the country’s South Ukrainian, Khmelnitskyi and Rivne nuclear power plants.

Plans include building a new protective structure above the Shelter facility. As part of converting the Shelter facility into an environmentally safe facility, a governmental interdepartmental commission recommended using the project titled “Arch,” which had been lobbied by EBRD experts.
The Shelter facility project, which receives financing from donor-countries, is estimated at USD 758 million, with USD 50 million to be provided by Ukraine. The Chernobyl nuclear power station was shut down on November 15, 2000. In April 2001 the plant was withdrawn from the control of the Energoatom national nuclear producing company, and now houses a state special-purpose enterprise, whose main task is to put the plant out of operation and convert the Shelter facility into an environmentally safe system.

Iraq seeks technologies in exchange for oil…


Iraq needs Ukrainian technologies and hardware, while Ukraine needs Iraqi oil, Interfax quoted Iraqi charge d’affaires in Ukraine Hisham Ibragim as saying on July 15. These would involve peaceful technologies enabling Iraq to rebuild oil wells and infrastructure that were constructed some time ago with Soviet aid, he said. The Iraqi leaders know that Ukraine wants stronger bilateral ties, Ibragim said. This was evident at the second meeting of the Ukrainian-Iraqi cooperation commission held at the deputy prime ministerial meeting in Kiev earlier in the month, he said. The first such meeting was held in Baghdad in May 2001. The two nations signed a bilateral protocol in cooperation in various fields, in particular in trade, finance, oil production and refining, construction, communications and culture. Ibragim hopes the implementation of the protocol will start as early as this year. Turnover of goods between the two countries was USD 300 million last year, the Iraqi Embassy reports.

…says it will work with Ukraine despite US pressure


Iraqi charge d’affaires in Ukraine Hisham Ibragim said Baghdad intends to develop cooperation with Ukraine, in spite of the pressure the US is using to frustrate these relations. “We will not give in to the pressure from the US, and will continue working with Ukraine,” Ibragim told a news conference. Western mass media earlier reported that Ukraine allegedly supplied arms to Iraq, thus violating the sanctions imposed after the Gulf War in 1991. Ukrainian officials have flatly denied these accusations. In addition, the diplomat has denied accusations against Iraq stating that Iraq is looking to buy arms and technologies for producing weapons of mass destruction, in particular from Ukraine. “These rumours are groundless propaganda of the US, which is aimed at eventually changing the regime in Iraq, bypassing UN resolutions, which constitutes interference in the internal affairs of Iraq,” the diplomat said.

Kiev toughens control over defence exports


The Ukrainian government has stepped up control over the export and further re-export of defence products, as well as intermediaries. The Cabinet of Ministers’ resolution of July 11 amends a resolution of December 8, 1997, on governmental control over international deals involving products that can be used for military purposes. Similar to the earlier procedure, Gosexportcontrol authorizes enterprises to export defence-related services and technologies.

Ukrainians favour defence and security agencies


Of all state power bodies, the people of Ukraine support most the army (25.7 percent) and the security services (19 percent), Interfax reported, citing a poll conducted by Ukraine’s Razumkov Centre for Economic and Political Research in 24 regions of Ukraine, the Crimea and Kiev on June 17-25. 2,006 respondents aged over 18 were polled. Citizens claimed support for local self-governance bodies (13.3 pct), regional and district state administration bodies (10.3 pct each), the police and the prosecutor’s office agencies (11.5 pct each). The respondents give the least support to courts and the president (9.2 pct each), the government (7.7 pct) and people’s deputies (5.6 pct).

Ukraine to harvest 35 mln tn grain in 2002


The grain harvest in Ukraine this year will be no less than 35 million tonnes, Ukrainian Agriculture Minister Serhiy Rizhuk has said. This forecast is based on the latest information about the harvest campaign obtained from the regions, he noted. Earlier, the Agriculture Ministry projected the grain harvest in 2002 at 33-35 million tonnes. In 2001, the grain harvest was 39.7 million tonnes, a 63 percent increase from the previous year.

Government approves new anti-hijacking measures


The Ukrainian government has allowed forces on combat duty and air defence units of the armed forces to use weapons and military hardware to prevent and stop the hijacking of aircraft by terrorists. In this case, weapons and military hardware may be used after warning shots by fighters or combat helicopters that are on duty with air defence units of the Ukrainian Armed Forces.
This has been outlined in a decree issued by the Ukrainian cabinet on July 11. This decree introduces amendments to the provision on the guidelines regulating the use of weapons, military hardware and special means for state border protection and Ukraine’s exclusive (marine) economic zone (government decree No. 789 of June 2, 1998).

Russia, Ukraine to end Black Sea fleet agreements


Before the end of this year, Moscow and Kiev are expected to conclude 15 agreements on Russia’s Black Sea Fleet based in the Crimea, Russia’s First Deputy Minister for Industry, Science and Technology Alexander Brindikov told journalists in Moscow on July 15.

“Before September 1, the parties must conclude four agreements: on the establishment of a corps of liaison officers, on the replacement of armaments and equipment, on the provision of hydrographic and navigation equipment, and on cooperation between the Russian Black Sea Fleet and the Ukrainian Navy,” Interfax quoted him as saying.

To facilitate the conclusion of these agreements, co-Chairmen of the Ukrainian-Russian sub-commission for the functioning of the Russian Black Sea Fleet and on its presence in Ukraine, Russian Minister for Industry and Science Ilya Klebanov and Ukrainian Deputy Prime Minister Vasyl Rohovyy were expected to meet in Moscow on July 15.

Brindikov said that Russia and Ukraine have different approaches, but there are no insurmountable problems.

32% duty on import of Russian cars for 4 months


Ukraine is to impose a 32 percent duty on the import of Russian cars for four months, Interfax quoted a source in the Russian Economic Development Ministry as saying. There is no official information of this decision or on the date that the duty will be introduced, the source added. “Ukraine’s actions are astonishing,” he said.

“The consultations we have carried out so far show that there are no economic reasons behind such actions, moreover the production of this type of automobile in Russia is virtually non-existent.” Ukrainian authorities will in this way punish their own consumers, the source said.

Russia may respond with measures if the government commission on protective measures in foreign trade and customs-tariff policy receives an official request from Russian carmakers. An unofficial request has already been made because Russian carmakers believe the government subsidises auto production in Ukraine.

Ukraine’s actions would “contradict the free trade agreement with Russia, which envisages such measures but only after the corresponding procedures and proof of the loss to the Ukrainian economy, which so far has not happened. Russia exports up to 70,000 cars a year to Ukraine.

US backs Ukraine’s efforts for economic reform, growth


US Treasury Secretary Paul O’Neill said his country backs Ukraine’s efforts toward economic reforms and welcomes the economic growth evident over the last few years. O’Neill said at a meeting with Ukrainian President Leonid Kuchma in Kiev that the position of the United States is to maintain partnership with Ukraine.

He supported a decision made by Ukraine, Russia and Germany to create an international consortium that would operate the Ukrainian gas pipeline. This is a good step towards deriving cash revenues, he noted. During the meeting, Kuchma addressed the issue of pumping methane out of coal mines. The American side pledged help apply higher safety programmes in the coal industry.

O’Neill also said that the United States could secure market economy status for Ukraine more quickly if the American companies working there requested it. If these companies lodged a request to grant market economy status to Ukraine with the US Commerce Department, this would significantly speed up the adoption of a positive decision on this issue, O’Neill told a news conference. There have been similar examples of the desire to receive the status in other countries, he added.

However, if American firms believe that they are misinterpreted, particularly concerning the added value tax issue, they will obviously not address such a letter, he said.

As an example, the secretary cited the American company Cargill that, he said, has some problems with its economic activity in Ukraine. He did not elaborate on the nature of these snags, and instead said that they are part of unfair measures toward the import of goods to Ukraine by this company. At the same time, the secretary said that his department supported granting Ukraine market economy status as soon as possible.
Meanwhile, Ukrainian Prime Minister Anatoly Kinakh told O’Neill Ukraine regards its integration in the economic and political European and world systems as a part of irreversible market and democratic reforms. “The Ukrainian government should above all deepen structural market reforms, form a contemporary market infrastructure for the national economy, give more rights to proprietors and investors and upgrade the financial and banking systems,” Interfax quoted Kinakh as saying.

Closer strategic ties with the US must contribute to the solution of these tasks, he added. O’Neill replied by saying that these are the very issues that he would like to address in a conversation with the Ukrainian premier.

Coinciding views indicate that the sides think along the same lines, he added. Trade turnover between Ukraine and the United States over the first five months dropped by USD 72.6 million to USD 446.8 million. Ukrainian export to the US over the same period was worth USD 195 million (minus 9.2 percent), and the balance of trade for Ukraine was a negative USD 56.7 million. Statistics show that direct American investments in the Ukrainian economy totalled USD 763 million as of April 1.

Lithuania to dispose of pesticides from Soviet era


The Lithuanian Environment Ministry has announced an international tender for the disposal of a huge amount of pesticides left over from the Soviet era. The ministry released a report saying that 150 tonnes of pesticides are to be moved out of the Taurage province in the country’s west to be destroyed by December 20. There are about 2,000 tonnes of pesticides to be destroyed in Lithuania. Getting rid of them will cost the country about 6-10 million litas. Old pesticides had piled up in Lithuania before 1991 and now this inheritance from Soviet collective and state farms is stored in 150 depots. Of the 2,000 tonnes of pesticides in Lithuania, 197 tonnes are forbidden for use. A special danger stems from pesticides of an unknown nature. Their improper storage could result not only in a polluted environment, but also in fires. The ministry said it regrets that a large part of the pesticides in Lithuania (1,343 tonnes) are unknown chemical agents. This means the contest winner will have to start by identifying them first. According to a pesticide disposal programme in Lithuania, this problem must be solved within 2002-2005, but national funds would hardly be enough to make the program work and for this reason foreign aid should be requested. The ministry reports that the Dutch government has promised to finance the disposal of 40 tonnes of pesticides in Lithuania.

Oracle strengthens its presence in Lithuania


Oracle, the global producer of computer databases and business software, is opening an office in Vilnius to exploit opportunities available in Lithuania, considered the fastest growing market in the Baltic countries. “At present, we see Lithuania as the fastest growing and the market with the most potential in the Baltic countries,” Verslo Zinios quoted Ants Urvak, Oracle director for the Baltic countries, as saying. The new Oracle office in Vilnius was registered as a branch office of Oracle East Central Europe in March of this year. The business paper quoted Kari Uskelin, sales director of the local branch office, as saying that Oracle is currently looking at one hundred potential customers in Lithuania separate to its current foothold in the energy, telecommunications and financial sectors and its ambitions in the manufacturing and public sectors as well. It is understood that Oracle will continue to cooperate with Informacines Technologijos, the Vilnius-based company that has represented Oracle since 1992. Informacines Technologijos will retain all existing rights, including licence distribution.

Slave labour compensations


Lithuanian authorities have expressed concern over the drawn-out disbursement of compensations to Lithuanians whom the Nazi regime used as slave labour in Germany. “Most people might not live long enough to receive the compensations because they are scheduled to be paid by the end of 2003,” Interfax quoted the head of the Lithuanian Centre for Genocide and Resistance Studies as saying. Although more than 20,000 Lithuanians are entitled to compensation, only about 500 people received them in the first half of the year, the director said. Vilnius wants to bypass the Russian foundation Understanding and Reconciliation in processing the documents and receiving the payments. Although the money is wired directly from Berlin, the Russian foundation will continue to process the papers, she said. In the meantime, Austria acts without mediators, and almost all entitled Lithuanians have received compensation from them, she added.

Antiterrorism coalition support


US Assistant Secretary of State for European and Eurasian Affairs Elizabeth Jones told President Valdas Adamkus in Vilnius on July 15 that Lithuania is making a contribution to the fight against international terrorism and good progress in preparing for possible NATO membership, RFE/RL reported. Responding to a question by Adamkus as to why the US Commerce Department has not yet granted Lithuania the status of a country with a functioning market economy, Jones said granting such status is a long process involving both the US government and the opinion of foreign investors.

Government set to sign Mazheikiu Nafta deal


The Lithuanian government will sign a deal selling Mazheikiu Nafta, an oil refinery operated by US Williams International, according to a Financial Times report. Russian oil major YUKOS will take charge of 27 percent of Mazheikiu.
The deal is important for Russia’s second largest oil company, which has ambitious plans to supply the expanding European Union with oil. But it is a strategic landmark for Lithuania, which recruited Williams in 1999 hoping that a US company would lessen the Baltic state’s Soviet-era dependence on Russia.
“From the beginning we had a clear strategy that we needed to have our energy system independent from the Russian system,” the paper quoted Andrius Kubilius, a former prime minister who backed the original Williams deal, as saying. “There was a decisionto have someone from the West to lead the company,” he added. But Williams presided over large losses at Mazheikiu, a result of disrupted oil supplies and costly modernisation to meet EU standards, the management said.
YUKOS will guarantee crude flows for 10 years in addition to paying USD 75 million in cash and USD 75 million in loans for its stake in Mazheikiu, the only oil refinery in the Baltic states. The Russian oil company is buying into Mazheikiu on terms almost identical to those offered to Williams, although the US group keeps management control. The government will retain 40 percent of the company.
YUKOS and Williams have agreed to give each other first option to buy in the event that either partner wants to sell its Mazheikiu stake, although both sides insist that theirs is a long-term investment.

Comliet gearing up to expand in telecom market


Comliet, a subsidiary of the fixed-line telephone operator Lietuvos Telekomas, plans to further penetrate the telecoms markets of neighbouring countries, Verslo Zinios reported. However, the business daily quoted Comliet Managing Director Eimantas Satas as saying the company would only invest in countries sporting viable business opportunities citing Belarus, Poland and Russia’s Kaliningrad region as potential countries currently being eyed for investment.

Comliet and Merko Ehitus, one of the largest construction companies in the Baltic region, has already acquired a controlling 100 percent share holding in the Estonian telecoms company Telegrupp.

Under the terms of the deal, Comliet is to hold 55 percent of the shares while Merko Ehitus will own a 45 percent stake, according to a statement issued by Lietuvos Telekomas following the conclusion of the deal.

Furthermore, Comliet has recently signed an agreement to acquire a majority stake in the Latvian company Datu Tikli SIA in a deal that allows the Lithuanian company to expand its operations in Latvia. “Acquisition of Telegrupp shares will enable us to offer our services to Estonian customers, too,” said Tapio Paarma, CEO of Lietuvos Telekomas and chairman of Comliet’s management board.

Comliet, the largest subsidiary of Lietuvos Telekomas, is one of the leading companies engaged in construction and maintenance of telecoms networks in Lithuania.

Gazprom, Dujotekana submit bid in Lietuvos dujos tender


Russian natural gas monopoly Gazprom and Dujotekana, the biggest importer of gas to Lithuania, on July 16 submitted a bid to take part in the tender for a 34 percent stake in Lithuanian gas company Lietuvos dujos. BNS quoted Dujotekana head Raimundas Paliukas as saying he and Gazprom deputy chief executive for sales Vladimir Obukhov submitted the bid to Lithuania’s State Property Fund.

The deadline for applications to take part in the first round of the tender was July 16. The tender is open to companies acting in a consortium, but the main member of the consortium must acquire at least 25 percent of Lietuvos dujos shares. The potential investor will have to supply gas to Lithuania for at least 10 years meeting 70 percent of the country’s gas needs, and provide an acceptable plan for setting gas prices. A supply agreement must be signed with Lietuvos dujos before the deal is finalised.

The sale is to be completed by the end of this year. After the sale of the 34 percent stake the Lithuanian government will remain with 24.36 percent of Lietuvos dujos shares. The property fund was expected to announce the names of the companies that had submitted bids on July 16.
The German consortium of Ruhrgas and E.On Energie earlier bought a 34 percent stake in Lietuvos dujos for 116 million litas. It is investing another 70 million litas in the gas company by buying a new share issue.

Dujotekana, which is more than half owned by Gazprom (the remainder is owned by the Industrial Finance Corporation of Western Lithuania), last December signed an 11-year contract with the Russian company to supply gas to Lithuania. Dujotekana plans to import 1.2 billion cubic meters (bcm) of gas to Lithuania this year. The country’s annual needs total 2.6 billion cubic metres.

Lietuvos dujos has charter capital of 340.9 million litas, of which the Lithuanian government had controlled 92.36 percent. The company closed 2001 with a net profit of 13.0 million litas, and posted a pre-tax profit of 31.8 million litas for the first quarter of 2002.

Group buys 79% Klementi stake from Finnish PTA


A consortium has bought a controlling 79.08 percent stake in Estonia’s largest women’s clothes maker Klementi from bankrupt Finnish firm PTA Group for eight million kroons, reported on July 16. The group, which is made up of Estonian risk capital firm Alta Capital, London-based Bonfield Asset Management, Klementi’s CEO Madis Vooras and local businessman Sven Mansberg, has also acquired the rights to use the international trademarks PTA, Avenue, MalliMari, MasterCoat, ClubLine and Piretta. The news agency quoted Klementi, which reported a loss of 4.6 million kroons in the first quarter, as saying the acquisition would help boost exports to Scandinavia.

Res Publica proposes easier citizenship for Russians


In an effort to convince Russian residents in Estonia to naturalise, the Res Publica party has proposed that non-citizens who have been living in the Baltic country since August 1991 be allowed Estonian citizenship if they complete civics courses, RFE/RL reported. The current Estonian-language examinations that are required to demonstrate sufficient fluency for citizenship would be abolished. Chairman Rein Taagepera said that expectations 10 years ago that foreigners who did not receive citizenship would leave Estonia have not been realised and today no one believes they will be.

Court rules ban on electoral alliances unconstitutional


The Supreme Court has declared unconstitutional the prohibition of election alliances for the local-council elections on October 20 that was passed by the parliament in March. The opposition Pro Patria Union and Moderates as well as President Arnold Ruutel expressed their support for calling a special parliamentary session late July or early August to amend the local-elections law, as the formal registration of candidates for the elections are scheduled for August 21 to September 10. Justice Minister Mart Rask noted that the court did not rule that the ban on election alliances was illegal, but that it was established too soon before the local elections.

Reiljan urges restricting land sales to foreigners


The Estonian People’s Union plans to collect signatures in support of prohibiting the sale of agricultural and forested land to foreigners until 2012, Eesti Paevaleht quoted Chairman Villu Reiljan in an interview. Estonian land is undervalued in comparison to that of European Union countries, and that Estonia should follow Poland’s and Hungary’s example in EU accession negotiations and seek a transition period in the free movement of capital chapter, he said. Reiljan’s proposal was severely criticised by other political parties, which called it a pre-election campaign manoeuvre. The parliament passed the law allowing the sale of land to nonresident physical and legal persons in 1996, when Andres Varik, one of the leaders of the People’s Union, was agriculture minister, Eesti Paevaleht reported. European Integration Bureau head Henrik Hololei noted that Estonia closed the free movement of capital chapter in May 2000, and said reopening the chapter now would be extremely harmful to Estonia. SG