UKRAINIAN PREMIER VISITS GEORGIA. Viktor Yushchenko and Georgian State Minister Gia Arsenishvili signed four bilateral cooperation agreements in Tbilisi on 4 August, Caucasus Press reported. Yushchenko also met with parliament speaker Zurab Zhvania and with President Eduard Shevardnadze, and announced that Kyiv will donate 50,000 tons of grain to Georgia. During his talks with Zhvania, Yushchenko proposed that the GUUAM members states (Georgia, Azerbaijan, Ukraine, Uzbekistan, and Moldova) create a free trade zone. He further complained that it is not economical for Ukraine to import oil from Georgia as the transit tariffs imposed by the latter raise the price too high. In his weekly radio broadcast on 7 August, Shevardnadze characterized Ukraine as occupying "a special place" among the states Georgia considers its friends. LF

End Note: UKRAINIAN OFFICIAL NOT DISAPPOINTED BY WASHINGTON VISIT
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UKRAINIAN DELEGATION GETS NO PROMISE OF IMF LOAN RESUMPTION. A governmental delegation led by Deputy Premier Yuriy Yekhanurov has returned from Washington without a promise from the IMF that the fund will resume its $2.6 billion loan program to Ukraine, the "Eastern Economist Daily" reported on 7 August. Yekhanurov has made no statements since his return. Before his Washington trip, Yekhanurov said he expected the IMF's acknowledgment that Kyiv "is implementing economic reforms on schedule." Ukrainian government officials maintain that the country can do without international financial assistance this year, but independent observers assert that Kyiv will need foreign funds to purchase fuel and energy resources to avoid shortages during the winter. (For more on this topic, see today's "End Note.") JM

UKRAINE REPORTS 11.7 PERCENT INDUSTRIAL GROWTH. The State Statistics Committee reported on 4 August that Ukraine's industrial production grew by 11.7 percent in the first seven months of this year compared with the same period last year. In another report on what seems to be an economic recovery after years of decline and stagnation, the State Committee for Industrial Policy said Ukraine's industrial exports in January-June increased by 22 percent compared with the same period in 1999. JM

KUCHMA ASKS PUTIN TO RETURN UKRAINIAN CHURCH FRESCOS, MOSAICS. Ukrainian President Leonid Kuchma has sent a letter to his Russian counterpart, Vladimir Putin, asking the latter to help return to Ukraine fragments of mosaics and frescos from the Mykhaylivskiy Golden Domed Cathedral in Kyiv, Interfax reported on 4 August. Those fragments were shipped to Germany during World War II and later transferred to Russia. "This friendly gesture could be highly appreciated by our contemporaries, and it would produce a positive political resonance," the agency quoted Kuchma as saying in the letter. JM

Ukrainian Official Not Disappointed By Washington Visit

The head of a senior delegation from Ukraine says he is not disappointed in the meetings he held last week in Washington with officials of the U.S. government, the World Bank, and the International Monetary Fund (IMF).

The delegation was in the U.S. capital from 31 July to 4 August and was led by First Deputy Prime Minister Yuri Yekhanurov. It also included Finance Minister Ihor Mityukov and Volodymyr Stelmakh, chairman of the National Bank of Ukraine.

The Ukrainians met on 1 August with Johannes Linn, the World Bank's vice president for Europe and Central Asia. A World Bank spokeswoman says the meeting focused on the bank's country-assistance strategy for fiscal years 2001 through 2003, aimed at promoting improved governance and the reform of Ukraine's financial institutions.

On 2 August, the delegation met at the White House with Leon Fuerth, the national security adviser to Vice President Al Gore. They also met with Edwin Truman, the assistant secretary of the Treasury for International Affairs. The Ukrainians also met with Alan Larson, the deputy assistant secretary of state for international finance and development.

The next day, the delegation had its most important meeting--with Horst Koehler, the managing director of the IMF. Ukraine badly needs foreign capital--whether in the form of loans or business investment--and is suffering from the suspension of a $2.2 billion IMF loan program.

The loan package was suspended last autumn after only about $580 million had been disbursed to Ukraine. The IMF said it had learned that the National Bank of Ukraine (NBU) had been using accounting practices that made its foreign currency reserves appear to be greater than they actually were.

The fund said the irregularities induced it to make disbursements that it otherwise would have withheld. And the IMF has made it clear that the loan disbursements will not resume until it is satisfied with the pace of reform in Ukraine's banking and other industries, and in the privatization of Soviet-era enterprises.

On 4 August, Yekhanurov said he believed he was able to demonstrate to Koehler that Ukraine is making significant progress in these reforms. He spoke at a news conference in the Ukrainian Embassy in Washington.

"During the negotiations with the IMF, we managed to settle our differences with the fund regarding the steps we are taking. And we believe that the discipline which we introduced in the government policy helped us to get good results."

Despite his optimistic demeanor, Yekhanurov stressed his country's need for foreign cash, particularly loans, if it is to meet its current obligations. And he offered an incentive to those states--and international lending institutions--that might be able to offer assistance: "If even a small amount of foreign financing were available for us, the rate of reform would increase."

The State Department's Larson pointed out that there is little foreign investment in Ukraine. But he says Kyiv could attract the interest of more businesses by modernizing its legal code--for instance, to ensure that business contracts are upheld.

"This is a big country, potentially rich, a country that I think, with the right policies, could hope to attract billions of dollars of foreign investment per year."

According to Larson, corruption is another impediment to foreign investment. He says that traditionally, it is consumers who decide the direction of their country's economy.

But the State Department official points out that Ukraine's economy is still controlled by government officials. This makes these officials susceptible to what he called "inappropriate forms of influence"--a diplomatic term for bribery.

Still, Larson says, the administration of U.S. President Bill Clinton has decided not to turn its back on Ukraine. He notes that Clinton and Vice President Gore, as well as Secretary of State Madeleine Albright, have all visited Kyiv this year. Therefore, Larson notes, the administration's approach to the Ukrainian government is positive, not negative.

"What we really are focusing on in the months ahead is encouraging them to get into a good relationship with those international economic institutions like the IMF and the World Bank that are in a position to provide both technical and material support for Ukraine's transformation and transition to a market economy."

But Larson stressed that Ukraine has much to do in order to ensure a bright future.

"There is a very important future [in U.S.-Ukraine relations] and they [Ukrainians] have a very important role to play in the world. But they're facing some very significant challenges, and I think...we and they have a stake in seeing them address these challenges as squarely [directly] as possible and as quickly as possible."

Yekhanurov told reporters on 4 August that Ukraine is doing just that. And he said he is not disappointed that he is returning to Kyiv without a promise from the IMF that the loan program would resume soon.

"I treat the results of this visit as not out of the ordinary. We understood that one visit would not produce decisions."

But he also returned to Kyiv without an expression of optimism from the U.S. government.

A BRIDGE TOO FAR TO CRIMEA? Moscow Mayor Yurii Luzhkov on 30 July signed an agreement with Crimean authorities to build a six-kilometer-long rail and car bridge over the Kerch straight separating the Ukrainian peninsula from Russia, RIA-Novosti reported. Such a bridge would cost more than $1 billion, but Luzhkov is pushing the idea as part of his long-standing campaign in support of Russian nationalist claims to Crimea. Joseph Stalin built the first bridge over this strait in 1945, but it was quickly smashed by floating debris and never rebuilt.