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RFE/RL Poland, Belarus, and Ukraine Report Vol. 4, No. 19, 14 May 2002

A Survey of Developments in Poland, Belarus, and Ukraine by the Regional Specialists of RFE/RL's Newsline Team

UKRAINE

THE QUESTION OF JUSTICE. This week the newly elected Verkhovna Rada convenes for its first session. The main issue on the agenda is, of course, the election of parliamentary leaders (speaker, first deputy speaker, and deputy speaker) and the heads of two dozen parliamentary committees. A special group of deputies preparing the new parliament's first session has agreed on a great number of procedural matters but failed to adopt a clear stance on how to distribute parliamentary posts among the six blocs represented in the Verkhovna Rada: For a United Ukraine, Our Ukraine, the Communist Party, the Yuliya Tymoshenko Bloc, the Socialist Party, and the Social Democratic Party.

It is known that the distribution of parliamentary posts will be made in two separate stages (or, as deputies themselves refer to this process, in two "packages"): first, the voting for the three leading positions; second, the voting for the posts of committee heads. It is also known that the leaders of the six parliamentary blocs -- who met together for the first time on 10 May -- that is, more than a month after the election day -- agreed to share parliamentary posts "justly," the "Ukrayinska pravda" website reported. But justice seems to mean different things for different parties.

For a United Ukraine and the Social Democrats (the pro-presidential forces) wants the parliamentary positions to be distributed proportionally to the number of deputies in the parliamentary caucuses, as they were formed after the process of recruiting some of those deputies who ran on an independent ticket in single-mandate constituencies. The other four forces want these positions to be distributed proportionally to the number of seats won by individual blocs only in the nationwide constituency. They argue that the authorities resorted to unfair methods in making For a United Ukraine -- which finished third in the nationwide constituency -- the largest parliamentary caucus, therefore its current composition does not reflect the people's will expressed on 31 March.

From a theoretical point of view, since Our Ukraine, the Communist Party, the Yuliya Tymoshenko Bloc, and the Socialist Party control 226 votes, they may distribute all parliamentary posts solely between themselves, without conceding anything to the pro-Kuchma blocs. But it appears that such a development would be too "unjust" when viewed from any side; therefore, as regards the election of the heads of parliamentary committees, a compromise involving some notion of proportional representation will be adopted by the six blocs.

It is quite a puzzle as to who will get the top three posts in the Verkhovna Rada of the fourth convocation. Three alliances seem to be possible for dealing with this "package" of postelection gains: a) For a United Ukraine, the Social Democrats, and the Communist Party; b) Our Ukraine, the Communist Party, the Yuliya Tymoshenko Bloc, and the Socialist Party; c) For a United Ukraine and Our Ukraine. Thus, the election of the Verkhovna Rada speaker and his/her two deputies will be of paramount importance to further political developments in Ukraine, since it will determine to a considerable extent the distribution of political sympathies and antipathies in the parliament. Communist Party leader Petro Symonenko signaled on 13 May that his comrades may support a speaker from another party. "We will vote for the package that will create the most advantageous prerequisites for productive work of our caucus in the parliament," Symonenko said in what seems to be an overt bargaining proposal directed to both Volodymyr Lytvyn's For a United Ukraine and Viktor Yushchenko's Our Ukraine.

Many Ukrainian commentators tend to agree that a stable, permanent majority based on consistent ideology is not possible in the current Verkhovna Rada, and that there will be many "situational majorities" depending on issues submitted to voting. But the upcoming election of the parliamentary leadership is widely expected to politically structure the current legislature to a greater extent than the preceding one and show the dividing line between the pro-government forces and the opposition more clearly.

It is also expected by commentators that the issue of the government will not be tackled by the Verkhovna Rada earlier than during the autumn legislative session. Current Premier Anatoliy Kinakh gave up his parliamentary mandate and preferred to remain in the government. Thus, Kinakh has several more months to prepare and submit a government program of actions to the parliament -- the task he has not yet fulfilled because of the parliamentary election. President Leonid Kuchma decided that Volodymyr Lytvyn, the chief of the presidential administration, will continue to lead the For a United Ukraine bloc and oversee the ongoing political maneuvering in the Verkhovna Rada. Kinakh's test will come a bit later after lawmakers take all that is up for grabs in the legislature and ask for more elsewhere.

"RFE/RL Poland, Belarus, and Ukraine Report" is prepared by Jan Maksymiuk on the basis of a variety of sources including reporting by "RFE/RL Newsline" and RFE/RL's broadcast services. It is distributed every Tuesday.

MOSCOW HOSTS EURASIAN ECONOMIC COMMUNITY SUMMIT. The presidents of Russia, Belarus, Kazakhstan, Kyrgyzstan, and Tajikistan, the five member states of the Eurasian Economic Community (EES) formalized a year ago on the basis of the CIS Customs Union, met in Moscow on 13 May, Russian media reported. Also present was Moldovan President Vladimir Voronin, whose country was granted observer status in the EES, which it has applied to join. Ukraine also applied for, and will be granted, observer status in the EES, "Vremya-MN" reported. Kazakhstan's President Nursultan Nazarbaev, who was confirmed for a further term as EES chairman, singled out as the community's most pressing problems coordinating their respective trade policies once all five states have become members of the World Trade Organization and agreeing to suspend antidumping sanctions in trade between EES member states. It is not clear how many of the 10 documents that EES Secretary-General Grigorii Rapota told Interfax on 8 May were included in the agenda for discussion were actually signed. LF

END NOTE: THE QUESTION OF JUSTICE IN UKRAINIAN PARLIAMENT xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

UKRAINE'S NEW PARLIAMENT STARTS WORK. The newly elected Verkhovna Rada of the fourth convocation opened its first session on 14 May, UNIAN reported. The Central Electoral Commission registered 447 deputies elected on 31 March and ordered repeat elections in three single-mandate constituencies to take place on 14 July. JM

UKRAINIAN DEFENSE MINISTRY DENIES ALLEGATIONS OF ARMS SALES TO BOSNIA. Defense Ministry spokesman Kostyantyn Khivrenko on 13 May denied that Ukrainian peacekeepers in Bosnia sold weapons to Bosnian Muslims in 1994, Interfax and New Channel Television reported. A Dutch military expert told RFE/RL's Ukrainian Service earlier the same day that Ukraine was the biggest illegal-weapons supplier to the Balkans after Greece and Turkey. The expert said German and Dutch security services have information that Ukraine closely cooperated with Iran in illegal arms supplies to the Balkans. According to the expert, Iranian aircraft took off in Teheran, stopped in Ukraine to load weapons, and then flew onward to airfields near Zagreb. The expert also alleged that the Ukrainian peacekeeping battalion, prior to leaving Bosnia, sold its armored personnel carriers and other weapons to Bosnians. Meanwhile, former Ukrainian Deputy Defense Minister Oleksandr Stetsenko, who is the current chief of armament of Ukraine's armed forces, told journalists on 13 May that Ukraine did not grant permission to any Iranian aircraft to enter its airspace in 1994. JM

FAMOUS UKRAINIAN SOCCER COACH DIES. Valeriy Lobanovskyy died in Zaporizhzhya on 13 May at the age of 63, following surgery after a brain hemorrhage, Ukrainian and world media reported. The Dynamo Kyiv soccer team coached by Lobanovskyy won the European Cup Winners' Cup in 1974 and 1986. Lobanovskyy also coached the national soccer teams of the Soviet Union, Kuwait, and Ukraine. JM

...EXPECTS UKRAINE TO TAKE 'WISE' STANCE ON MILITARY CEMETERY. Foreign Minister Cimoszewicz told journalists on 13 May that Poland is waiting for Ukraine's "wise" position regarding the opening of the Polish Eaglets military cemetery in Lviv, PAP reported. The presidents of Poland and Ukraine, Aleksander Kwasniewski and Leonid Kuchma, are scheduled to open the cemetery on 21 May. The renovated necropolis, which houses Polish soldiers and volunteers who died in fighting against Ukrainians in 1918-19, has been a contentious issue in Polish-Ukrainian relations for several years. Ukrainian Foreign Minister Anatoliy Zlenko said last week that the opening will take place on 21 May but added that some questions concerning the appearance of the cemetery have not yet been coordinated with the Lviv city authorities. JM

THE QUESTION OF JUSTICE IN UKRAINIAN PARLIAMENT

Ukraine's newly elected Verkhovna Rada convenes for its first session on 14 May. The main issue on the agenda is, of course, the election of parliamentary leaders (speaker, first deputy speaker, and deputy speaker) and the heads of two dozen parliamentary committees. A special group of deputies preparing the new parliament's first session has agreed on a great number of procedural matters but failed to adopt a clear stance on how to distribute parliamentary posts among the six blocs represented in the Verkhovna Rada: For a United Ukraine, Our Ukraine, the Communist Party, the Yuliya Tymoshenko Bloc, the Socialist Party, and the Social Democratic Party.

For a United Ukraine and the Social Democrats (the pro-presidential forces) want the parliamentary positions to be distributed proportionally to the number of deputies in the parliamentary caucuses, as they were formed after the process of recruiting some of those deputies who run on an independent ticket in single-mandate constituencies. The other four forces want these positions to be distributed proportionally to the number of seats won by individual blocs only in the nationwide constituency. They argue that the authorities resorted to unfair methods in making For a United Ukraine -- which finished third in the nationwide constituency -- the largest parliamentary caucus, therefore its current composition does not reflect the people's will expressed on 31 March.

From a theoretical point of view, since Our Ukraine, the Communist Party, the Yuliya Tymoshenko Bloc, and the Socialist Party reportedly control 226 votes, they may distribute all parliamentary posts solely between themselves, without conceding anything to the pro-Kuchma blocs. But it appears that such a development would be too "unjust" when viewed from any side; therefore, as regards the election of the heads of parliamentary committees, a compromise involving some notion of proportional representation will be adopted by the six blocs.

Commentators also expect that the issue of the government will not be tackled by the Verkhovna Rada earlier than during the autumn legislative session. Current Premier Anatoliy Kinakh gave up his parliamentary mandate and preferred to remain in the government. Thus, Kinakh has several more months to prepare and submit a government program of actions to the parliament -- a task he has not yet fulfilled because of the parliamentary election. President Leonid Kuchma decided that Lytvyn, the chief of the presidential administration, will continue to lead the For a United Ukraine bloc and oversee the ongoing political maneuvering in the Verkhovna Rada. Kinakh's test will come a bit later after lawmakers take all that is up for grabs in the legislature and ask for more elsewhere.

UKRAINIAN UNEMPLOYMENT FALLS (2 MAY)
Unemployment in Ukraine fell in the month of April to 3.9 percent, compared to 4.2 percent in April 2001. Ukrainian Labor Minister Ivan Sakhan told Interfax-Ukraine that, according to International Labor Organization data, the level of unemployment in Ukraine went down from 11.7 percent to 11.1 percent in 2001. The minister explained that many unemployed Ukrainians do not register with employment services, which results in the two different figures. (JMR)

RELATIONSHIP WITH RUHRGAS PRODUCING DIVIDENDS FOR GAZPROM

President Putin's 10 April trip to Germany and his appointment in May 2001 of a loyalist from St. Petersburg, Aleksei Miller, as the chairman of Gazprom, have produced confidence and dividends. According to RIA-Novosti on 7 May, Ruhrgas, the German natural-gas giant, is interested in increasing its package of shares in Gazprom, Russia's natural-gas giant. German news reported on 22 December 1998 that Ruhrgas AG purchased shares in the Russian gas monopoly and will pay more than a billion marks for 2.5 percent of Gazprom shares. Ruhrgas is Gazprom's largest client. An agreement was reached whereby Gazprom will continue to supply Ruhrgas with 12.78 billion euros ($11.65 billion) worth of gas until the year 2020.

The relationship between the two gas monopolies has steadily improved with the appointment of Miller as chief executive of Gazprom. Miller was invited in June 2001 to attend the 75th-anniversary party of Ruhrgas in Essen soon after his appointment. According to "Pravda" on 22 June, then-Vice Chairman of the Executive Board of Ruhrgas Burckhard Bergmann, who is also a member of the Gazprom board of directors, said Ruhrgas's senior management planned to get a closer look at the new Gazprom CEO during his visit. Bergmann has since become Ruhrgas's chairman of the Executive Board. The article said, "Ruhrgas AG [is] Germany's leading privately owned gas-pipeline operator buying gas both at home and abroad, with 35 percent imported from Russia. The rest is imported from Norway [26 percent], the Netherlands [16 percent], and Denmark and the U.K. [6 percent combined]. The remaining 17 percent is bought from German gas-extracting companies.

Ruhrgas currently owns 4 percent of Gazprom shares, of which 1.5 percent is in American Depositary Receipts and 2.5 percent in local shares. Of the local shares, 0.5 percent belong to Gerosgaz, a joint venture between Gazexport and Ruhrgas.

On 7 May, Bergmann gave a positive assessment of the new Gazprom management team. He described Gazprom as "more orderly and transparent" and is encouraged by Gazprom's efforts to return the company's assets, according to RIA Novosti.

These positive managerial changes have factored heavily into the Rurhgas's decision to purchase more shares. This will be costly, however, since Gazprom shares have almost doubled in price from a year ago. According to Brunswick Direct, Gazprom is presently burdened by a huge debt caused by large numbers of nonpaying customers. Gazprom has announced job cuts and restructuring to control expenditures and to increase profitability, efficiency, and transparency.

This month, Gazprom ($22.556 billion) replaced Yukos ($21.958 billion) as the number-one-ranked company in Russia in terms of market capitalization, according to skrin.ru.

Gazprom, Russia's largest company, is a vertically integrated gas company controlling 70 percent of Russia's gas reserves and 94 percent of Russian natural-gas production. Gazprom also controls 100 percent of the domestic, Russian, gas-supply pipeline network. It is the largest gas company in the world, accounting for almost 25 percent of world gas production and controls 23.5 percent of the world's proven reserves. The company supplies natural gas to 25 countries in Europe and the former Soviet Union. It has strategic partnerships with Royal Dutch/Shell, ENI, and Ruhrgas. Gazprom also has an alliance agreement with LUKoil, Russia's largest oil company, according to Brunswick Direct on 8 May 2002.

The German Council on Foreign Relations published a paper on 8 May titled "EU view on Putin's Foreign Policy." "Good news [is] coming from Russia. Vladimir Putin has stopped the financial downfall of his country, filled the state budget with petrodollars and presides over a steady growth of his national economy. He has installed a government of liberal-minded professionals, revamped the tax system and plans to fully legalize private ownership. The framework for the market is set -- what Russia needs next are foreign investments," the report read.

Germany's Ruhrgas appears to be ready to do just that: to invest in Gazprom. With Russian natural-gas transits accounting for a significant portion of the Russian government's revenues each year, projects such as the Slovakian government's Slovensky Plynarensky Priemysel (SPP) tender to privatize the Slovak gas-utility and pipeline operator can provide additional distribution options for Gazprom and its partners. The only bid received by the 28 February deadline was a three-way consortium formed by Russia's Gazprom, Germany's Ruhrgas, and Gaz de France. Ruhrgas and Gaz de France would split the $2.7 billion cost, according to Reuters on 18 March. Such an investment would provide Gazprom an opportunity both to expand its business in Slovakia and further consolidate its position in the European gas market. RFE/RL reported on 21 March that increased supplies of Russian gas to Europe would be in line with the European Union's goal of doubling energy imports from Russia over the next 20 years. It would also provide an export route to Europe that would avoid Ukraine. This, along with expanding Ruhrgas cooperation and investments will no doubt attract the attention of Western security analysts who have long feared increased European dependency on Russian natural gas as a potential threat to NATO. This formula of German and French capital investing in pipelines to deliver Russian gas to Europe may be visited again with a new plan to complete the costly Russian Arctic Yamal pipeline.

There is little doubt that the involvement of major Western companies can have a positive impact on improving corporate governance of the leading Russian companies. However, the geopolitical implications of European investment into the Russian energy sector will have significant implications, not only for the neighboring former Soviet and eastern bloc states, but also for NATO. (PMJ)