NEW UKRAINIAN PRIME MINISTER LAUNCHES STATE AUDITS, SAVINGS PAYOUTS

Having barely formed her Cabinet of Ministers, Prime Minister Yulia Tymoshenko got down to business. She resumed several campaigns that she had launched when she was prime minister in 2005 but were dismissed by her successors as too “populist.” In addition to starting to reshape the energy market, she also began to compensate Ukrainians for savings lost amid the 1991 Soviet Union dissolution.

“I want us to start getting used to politicians fulfilling obligations taken during elections,” Tymoshenko told ICTV. She promised a lot in the run-up to the September 2007 election which swept her back to the prime minister’s chair. If she fails to deliver on her promises – such as fighting corruption, removing intermediaries from the gas trade with Russia, increasing wages and pensions, and reimbursing Soviet-era savings – the presidential election campaign of 2009 will be lost for her before it starts.

Meeting the new head of the Naftohaz Ukrainy national oil and gas company, Oleh Dubyna, on January 2, Tymoshenko pledged to save Naftohaz from bankruptcy. She appointed her long-time right-hand man, First Deputy Prime Minister Oleksandr Turchynov, to chair a commission to check Naftohaz’s activities in 2006-2007. Naftohaz operated at a loss during the period. It accumulated a multi-billion dollar debt and failed to come up with a timely financial report for 2006, so it is teetering on the brink of default. Tymoshenko said that the Ukrainian state would guarantee Naftohaz’s debts, after which Fitch upgraded Naftohaz’s senior unsecured rating from “B+” to “BB–.”

By checking Naftohaz, Tymoshenko will not only improve the company’s performance, but the move also shows that Naftohaz’s interests, as well as national interests, were damaged by her predecessors’ reliance on one intermediary in gas trade with Russia. Tymoshenko insists that RosUkrEnergo, a Swiss-registered joint-venture between Gazprom and Ukrainian businessman Dmytro Firtash, should cease to be the monopoly supplier of natural gas to Ukraine. However, her opponents warn that changing the existing scheme may result in higher gas prices for Ukraine.

On January 8, Tymoshenko ordered a comprehensive audit of the coal industry. “I want miners, their families, and the whole society to learn about every instance of abuse in the coal sector,” she said. Ukraine’s coal mines have been among the main sources of wealth for Tymoshenko’s arch-rivals from the Party of Regions (PRU), whose stronghold is Donbas, Ukraine’s main mining region.

On January 9, Tymoshenko announced that the “Contraband, Stop!” campaign would be re-launched. In 2005 Tymoshenko had lowered import duties on goods like fruit and mobile phones, simultaneously purging the ranks of the customs service. Among other things, the campaign targeted smuggling across the border with Moldova’s breakaway Transnistria region. “Contraband, Stop!” was shelved under Tymoshenko’s successors.

The re-privatization campaign may also be re-launched. It scared many potential investors and was arguably one of the main reasons behind Tymoshenko’s dismissal by President Viktor Yushchenko in September 2005. On January 10, the Supreme Court threw out an appeal against an earlier court ruling that invalidated the privatization of the Luhansk locomotive plant in 2007. Both Tymoshenko and Yushchenko believe that the

plant’s sale to a Russian company was not transparent.

On January 12, Tymoshenko said that Nikopol Ferroalloys Plant (NFZ) should be re-nationalized. NFZ was sold in 2003 to Viktor Pinchuk, the son-in-law of the then-President Leonid Kuchma. Tymoshenko pledged to return NFZ to the state in 2005, but although courts invalidated the deal in 2005-2006, court rulings have been ignored.

On January 9, Tymoshenko also launched an ambitious campaign to repay lost Soviet-era savings. Neither of the former Soviet republics has managed to reimburse them. This is a serious test for Tymoshenko’s ability to muster popular support. Her presidential election chances will depend to a great extent on the success of this particular campaign, as millions of unfortunate depositors are involved.

The campaign’s beginning has not been very successful, which may undermine popular trust in Tymoshenko. First, the state budget provides for only a fraction of the sum that is to be repaid. The rest should come from privatization proceedings in 2008-2009, whose volume is hard to predict. Second, Tymoshenko equated the Ukrainian hryvnya to the Soviet ruble, which was considerably stronger, so depositors will receive much less than actually was lost. Third, only 1,000 hryvnyas ($200) will be compensated in cash per depositor, irrespective of the actual size of the deposit. Fourth, the campaign has been poorly organized. The elderly have to spend hours in lines, and they are poorly informed about the procedures. One old man died of a heart attack outside a bank in Zaporizhya, and one elderly lady had her leg broken in a stampede at a bank in Cherkasy.

Tymoshenko’s rivals seized the opportunity to expose the campaign’s weaknesses. The PRU press service accused Tymoshenko of “seeking publicity at any cost.” “People are being fooled, receiving just 1,000 hryvnyas for the lost deposits,” the Party of Free Democrats said in a statement.

(UNIAN, January 2, 11; Itar-Tass, January 8, 11; ICTV, Ukrainski novyny, January 9; AP, January 11; Interfax-Ukraine, January 11, 12)