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UKRAINE'S RIVNE NUCLEAR PLANT CUTS PRODUCTION (14 MAY) Operators at a nuclear reactor at Ukraine's Rivne power plant reduced the reactor's output by half after a malfunction in its lubricating system, "The Kiev Times" reported. The malfunction occurred on 13 May in the bearings of the plant's No. 2 nuclear reactor, prompting an increase in its fuel temperature and a shutdown of one of the reactor's turbogenerators, a representative of the State Nuclear Company Energoatom said. The defect was repaired early on 14 May. No radiation leaks were reported. On 14 May, reactor No. 1 of the Zaporizhzhia nuclear power plant was shut down for planned repairs until 19 July, Energoatom announced. Reactors at Ukraine's four nuclear power stations are frequently shut down for both scheduled and unscheduled repairs. (IAM)


Ukrainian authorities have taken measures to combat money laundering aimed at getting the country off an international blacklist, "Den" newspaper reported. The paper cites an anonymous source asserting that Ukraine has emerged from difficult elections in which money from the shadow economy influenced the campaign. "Ukraine is planning to get off the list of countries which, according to the Financial Action Task Force on Money Laundering (FATF), are not stopping the laundering of dirty money," the source said. A June session of the FATF will review Ukraine's inclusion on the blacklist, which also includes Russia and 16 other countries. Steps have been taken in this direction in the past month. On 4 April, commercial banks forwarded to the Ukrainian National Bank (NBU) a list of client accounts in which documentation looked suspicious. Authorities will focus on legal flaws in the accounts, since entities are in some cases using lost documents and the passports of dead citizens. Meanwhile, the NBU closed a popular loophole through which Ukrainians could transfer their money out of the country on Visa Travel Money cards. Now the limit for transferring funds on a card is the equivalent of $5,000. The NBU requested a list of customers who periodically transfer large sums, which includes banking operations valued at 50,000 euros (about $46,000) or more and cash transactions of 10,000 euros ($9,200) or more.

The Tax Administration is also fighting shadow capital. Tax authorities reportedly suspended the licenses of 1,300 commercial entities in the first quarter of 2002. Some 299 money-laundering crimes were detected in the lending and financial system in the same period. Some 276 criminal cases involving suspected money laundering were opened. The Slovyanskyy, Andriyivskyy, and Koral-Bank banks are still under investigation. The State Tax Administration Investigation Department's chairman, Svyatoslav Piskun, said he is confident that Ukraine will submit a list of measures against money laundering to the FATF by the end of May. According to Piskun, Ukraine had a chance of being removed from the blacklist at the FATF's last forum in London.

Such financial information, which is collected from banks, has the potential to become a serious political weapon. According to the Tax Revenue Ministry, one-quarter of all money laundering takes place in the fuel-and-energy sector, which has powerful support in the new parliament. Strong measures to combat money laundering in Ukraine thus face a difficult time gaining legislative support. (IAM)

CIS ECONOMIC GROWTH REACHES 4.5 PERCENT (16 MAY) According to the International Monetary Fund (IMF), economic growth within the Commonwealth of Independent States (CIS) this year will reach 4.5 percent and is expected to increase even further in 2003. Excluding Russia, CIS gross-domestic-product (GDP) growth will reach 4.7 percent this year, whereas a decline is predicted for 2003. The IMF's 2002 growth forecasts throughout the region are as follows: Georgia, 3.5-4.0 percent; Armenia, 6.0 percent; Azerbaijan, 8.5 percent; Kazakhstan, 7.0 percent; Kyrgyzstan, 4.5 percent; Moldova, 4.8-5.0 percent; Ukraine, 5.0 percent; Belarus, 1.5 percent; Tajikistan, 6.0 percent; and Uzbekistan, 2.2 percent. Consumer prices in the CIS should increase by 13.4 percent in 2002 and 10.5 percent in 2003, "Caspian Business Report" reported, citing the IMF predictions. (JMR)

UKRAINE MEDIA TYCOON TO MANAGE STS (14 MAY) A co-owner of 1+1, Ukraine's largest private television company, Oleksandr Rodnyanskyy took over as general director of STS television, Russia's fourth-largest broadcaster, on 14 May. Broadcasters ORT, NTV, and TV-6 had courted Rodnyanskyy. He will be granted carte blanche at STS on 16 May. "I will take responsibility for the company, and I am ready to answer for its success," Rodnyanskyy said. The shareholders reportedly have pledged $100 million to Rodnyanskyy over the next three to four years for the future development of the company. STS will purchase an expensive Western game show, a package of Russian soap operas and movies, and nonpolitical information programs for the season starting in September, Rodnyanskyy said. According to "Vedomosti," he will not quit his job at 1+1, which he has headed since 1995. Alfa Group has 25 percent plus one share in STS, and American Story First Communications controls the rest. Former STS General Director Roman Petrenko, who brought the company into profit and led it to its current ratings, has a disagreement with Alfa Group. (IAM)

Any mention of the Russian gas company Itera and reactions are immediate and predictable. But one question persists after the various opinions on Itera have been exhausted: Who is Igor Makarov, really? Makarov's amazing and unlikely ascent from Soviet athlete to president of Russia's second-largest natural-gas company provides Russia-watchers with a case study in what Western business journalists call that country's "opaque" corporate culture. Itera, with its worldwide network of affiliates and huge gas reserves, has almost overnight become one of the most influential companies in the former Soviet bloc. Makarov's obscure trading firm developed rapidly from gas sales to gas production through its special relationship with Gazprom. Itera, as both partner and competitor to that natural-gas behemoth, has used its growth and success to wield political clout in the Kremlin and across the entire former Soviet Union. Itera's headquarters in Moscow stand in the shadow of Gazprom's, which are only three blocks away. The buildings nearly mirror one another in appearance. Many wonder how deep the similarities and interconnections are between these companies, with relatives and friends seemingly linked incestuously. Today, Itera has more reserves than Texaco and sells more gas than Algeria, "The Wall Street Journal" reported on 24 October 2001.

However, Makarov has built Itera into much more than a world-class gas-trading company. In the 10 years since its creation in 1992, Itera has diversified from a natural-gas "blue fuel" distributor to a conglomerate of more than 130 companies organized around the globe. In 1994, Itera entered the former Soviet gas market by selling gas from Turkmenistan. In 1998, Itera entered the gas-production business with activities in Yamalo-Nenets Autonomous Okrug, according to a company backgrounder. While diversifying into metal, construction, chemical, minerals, packaging, real estate, and insurance, 80 percent of Itera's business remains in gas sales, production, and transportation. The reach of these various enterprises throughout the former Soviet Union and beyond is a virtual roadmap of post-Soviet power and influence. Itera has become an icon for the intersection of business and political influence.

Makarov has led Itera from a minor trading and barter company to a gas-production powerhouse. The group has rapidly grown in value and influence since its humble origins. In 2000, Itera's turnover totaled $3 billion with 8,000 employees and business interests in 24 countries around the world. Itera has continued to grow and prosper, and its ability to affect political life in the "near abroad" is pronounced and a concern for many. Itera is the only gas supplier to Georgia, for instance, and many believe that such a position translates into undue political influence.

There is media speculation that the mysterious company and its founder are under growing Russian and international scrutiny. Makarov has been accused of colluding with Gazprom's former management team to enrich himself and the Gazprom leadership at the expense of both the Russian state, which holds a 38 percent stake in Gazprom, and the natural-gas giant's minority shareholders. For his part, Makarov has steadfastly denied such claims and appears to be well positioned to survive the departure of his former Gazprom partners, many of whom have been replaced since last year. Makarov's career highlights the questionable nature of Russian business practices and underscores how little is known about some of the country's key economic and political figures.

Makarov, by all accounts gregarious and outgoing, nevertheless remains something of a mystery, suggesting that he has a talent for staying out of the limelight. Biographical information on the Itera chief is scanty -- and sometimes contradictory. Most accounts, for instance, state that Makarov was born in Ashgabat, the capital of Turkmenistan, in April 1962. The official Makarov biography (on Itera's corporate website, gives Ashgabat as his birthplace, and Makarov himself told "Trud" (4 August 1999) that he was born and raised in Turkmenistan. In May of last year, however, while Makarov was busy lobbying Belarusian authorities over gas sales to state-owned enterprises, "Kommersant" on 30 May claimed it was "well-known" that the former Soviet cycling star was a "compatriot" of Belarusian President Alyaksandr Lukashenka. The paper even quoted Makarov as saying he intended to "invest" in his "native Belarus." According to promotional materials from Itera, the company had already been involved in Belarus since 1998. Itera Pet is a facility located in Minsk that produces up to 350 million plastic bottles per year.

A bare-bones Makarov biography raises more questions than it answers about the man some journalists claim now rivals his mentor, former Gazprom chief Rem Vyakhirev -- whose photograph hangs on the wall of Makarov's Moscow office.

Makarov most likely grew up in Soviet Turkmenistan, where he graduated from Turkmen State University in 1983, followed by two years of compulsory army service. Makarov was by all accounts a star athlete: As a member of the Soviet cycling team, he won numerous Soviet and international competitions. In 1985, following his marriage to a woman from Kazan, Makarov worked as a teacher at Kazan State University from 1986-89. Little is known about his family life, and it is not clear what courses Makarov taught.

Sometime during this period, Makarov became a businessman. Makarov told "Trud" on 4 August 1999 that he set up a "clothing- and souvenir-production facility" in Kazan in 1987 before going into "food processing and petroleum products." "Sovershenno sekretno" (No. 6, 2000) called Makarov an "activist in the cooperative movement" of the perestroika period, which would conform to his stated business activities in Kazan.

According to Itera's website, the company was established in 1992. However, the company has yet to reveal a complete list of its shareholders either for the company or its subsidiaries and affiliates. The "Itera Group" now reportedly numbers some 130 firms. The company's nontransparent nature persists despite claims by company officials that the firm intends to go public by listing itself on a major Western stock exchange. Any such decision would require Itera to reveal a great deal more information than has emerged so far (see "Kompaniya" 30 April 2001).

According to Makarov, Itera entered the gas business by accident: In 1994, Makarov's firm was delivering food to Turkmenistan in exchange for petroleum products, which Itera would in turn sell. At one point, his Turkmen trading partners offered him gas instead of petroleum to settle their accounts. And that, Makarov told "Trud," "is how we got into the gas market."

From there, Itera began selling gas to Russia, Armenia, Belarus, Georgia, Lithuania, Moldova, Ukraine, and Estonia, becoming the chief supplier of natural gas for many former Soviet states. Utilizing Makarov's relations with Gazprom, Itera moved into gas production. By 2000, Itera was second only to Gazprom (which reportedly holds the largest natural-gas reserves in the world) in Russian gas production and was the largest independent natural-gas company in the Commonwealth of Independent States. Itera controls the fourth-largest holding of gas reserves in the world, according to "Business Week" on 2 April 2001.

Some sources claim Makarov is an American citizen (see "Komsomolskaya pravda" 15 April 2000), and several Itera companies are registered in Jacksonville, Florida ("Jacksonville Times Union" 21 April 2001). Thus, some observers say Makarov has been cultivating ties with U.S. officials for some time ("Sovershenno sekretno" No. 4, 1999). Some speculate that he used such ties to help secure a controversial $868,000 grant from the United States Trade and Development Agency (USTDA) that is now on hold. That grant is intended for a feasibility study for developing gas fields in Russia. The USTDA's decision came long after minority shareholders in Gazprom had began raising questions about the propriety of Itera's business practices ("The New York Times," 27 March 2002). Nevertheless, Itera's flagship holding company, Itera Group NV, is registered in the Netherlands Antilles.

Itera may be many things. But at this point, it is hard to envisage Itera being listed on a U.S. stock market with all its accompanying disclosure requirements and expectations of transparency. (PMJ)

UKRAINIAN PARLIAMENT RESUMES VOTING ON LEADERSHIP. Four parliamentary caucuses -- Our Ukraine, the Communist Party, the Socialist Party, and the Yuliya Tymoshenko bloc -- submitted two "packages" of parliamentary leaders for voting on 23 May, UNIAN reported. The first "package" proposed Adam Martynyuk (Communist Party) for speaker and Roman Bezsmertnyy (Our Ukraine) and Yuliya Tymoshenko as deputy speakers. This set of candidates was supported only by 149 deputies, well short of the 226 votes required for approval. The second "package" proposed Bezsmertnyy for speaker and Martynyuk and Stanislav Nikolayenko (Socialist Party) as deputy speakers. The "Ukrayinska pravda" website reported that Our Ukraine leader Viktor Yushchenko withdrew the second "package" and asked the parliament to postpone voting on its leadership until 24 May. JM

UKRAINE'S EX-SECURITY CHIEF DENIES ROLE IN ARMS DEAL WITH IRAQ. Leonid Derkach, the former chief of the Security Service, denied on 22 May that he was involved in the illegal sale of radar systems to Iraq, AP reported. Former presidential bodyguard Mykola Melnychenko said at a briefing organized by RFE/RL in Washington on 21 May that he has audio recordings confirming that Derkach had contacts with the Iraqi and Iranian governments. Melnychenko also claimed that Derkach reported to President Leonid Kuchma about a successful sale of Kolchuga antiaircraft systems to Iraq. Meanwhile, U.S. Ambassador to Ukraine Carlos Pascual said in Kharkiv on 23 May that Washington has no proof that "an illegal transfer of weapons from Ukraine to Iraq has taken place," UNIAN reported. JM