On June 15 Prime Minister Anatoly Kinakh held his first press conference as head of the government for Ukrainian and foreign journalists in Kyiv. His meeting with Russian Ambassador Viktor Chernomyrdin shortly before seemed to sum up the first round of Ukrainian-Russian negotiations in Saint Petersburg. It became obvious from his answer to the very first question (as, incidentally, from Mr. Kinakh’s statements in Petersburg also) that it is, to put it mildly, simplistic to claim that Viktor Yushchenko has been replaced by a “pro-Russian politician.” It will be recalled that, while on a visit to St. Petersburg, the Ukrainian premier showed quite a tough attitude toward the problems of Ukrainian-Russian trade and economic cooperation.
One of these was imposition by Russia of such a procedure of VAT collection from “the country of commodity-flow destination” that leaves the value of the so-called Russian critical imports in Ukraine unchanged but boosts that of Ukrainian exports to Russia by 20%. This makes Ukraine keenly interested in the fastest possible formation of a CIS free trade area, which the Russian side so far shuns. The government of Ukraine will have to resort to economic countermeasures against Russian goods if the Russian side takes a “non-constructive stand” on the minimization of negative consequences for the export of Ukrainian goods to the Russian Federation after the new mechanism of VAT imposition is introduced on July 1, Mr. Kinakh said. As he says, Ukraine will be take countermeasures to defend “more staunchly” its own economic interests.
Answering The Day’s question if the Russian side might fulfill its wish to recover the past years’ Ukrainian gas debts by taking possession of Naftohaz Ukrayiny eurobonds, Mr. Kinakh emphasized that the government was not considering privatization of the oil and gas complex as payment of debts incurred in previous years and that it would “never agree to a debt settlement at the expense of the property of strategic enterprises and industries.” In his opinion, to solve the debt problem, Ukraine together with Russia and Europe must find economic and investment mechanisms to raise the reliability and competitiveness of the Ukrainian gas transport system. The government, the premier said, will never opt for “violating” national interests and Constitutional or legislative provisions in what relates to the operation and privatization of “the gas transport system, our national property.”
Commenting to The Day on the governmental measures to curb the hidden privatization of state property, including Zaporizhstal Steel Mill, the premier began from afar. He analyzed Ukraine’s state budget and identified three sore points responsible for possible inadequate revenues. According to Mr. Kinakh, these are the “historic” law on canceling “kartoteka 2” (a system under which cash coming into the bank accounts of firms that have tax or wage arrears is automatically taken over for payment of those arrears. As a result, firms shun transactions through banks — Ed.), which put an end to a “feudal situation” in the economy but simultaneously allowed enterprises to defer payment of sizable budgetary arrears; problems in the relationship with international financial organizations; as well as the privatization process (as he put it, this year’s plan to privatize a UAH 5.9 billion in property has been fulfilled by a mere 67% in the past five months).
Moreover, the premier made an important statement that he saw no reason why “fiscal methods of privatizing strategic facilities” should continue, when the main goal is to attract and then “eat” budgetary funds. Mr. Kinakh announced the government would work (starting with the next year’s budget) on changing the ideology of strategic facilities privatization, channeling funds into innovation development, structural reforms, boosting the enterprises’ competitiveness, and creating conditions for business.
Touching on the problems of hidden privatization (in the electric energy sector and other strategic industries), the premier said the government would take a tough line to rectify the situation. He admitted that still the government is aware of the Zaporizhstal situation (“we are working on this: First Vice Premier Oleh Dubyna went there just the other day, and I don’t think we will allow this to happen at such a strategic facility as Zaporizhstal”). The premier promised that all civil servants involved in these processes would suffer a punishment commensurate with the damage they have inflicted on the state. “I will personally keep this under control,” the head of government said.
Quotation of The Day
Prime Minister Anatoly KINAKH:
“The government I head will pursue a pro-Ukrainian policy. We must forget such things as a pro- Russian, pro-American, or pro- Western foreign economic policy. Over our ten years of independence, many in Ukraine have forgotten that the main function of our state is to be a democracy based on transparent competition.”
