NEWS
Klitschko defeats Brewsters on TKO
Jul 09 2007, 13:00
COLOGNE, Germany (AP) – Volodymyr Klitschko fought most of his title bout against Lamon Brewster with a broken left hand, his trainer said.
Klitschko, who defeated Brewster on a technical knockout Saturday, July 7 to defend his IBF and IBO heavyweight titles, suffered a fracture below the middle knuckle of his left hand during the first round, his assistant trainer Jamen Ali Bashir told The Associated Press.
Klitschko iced his hand immediately after the match, and is now wearing a cast from his left hand up past his elbow, Bashir said before boarding an airplane at the Cologne airport.
"It will take eight weeks to heal," Bashir said.
Despite the injury, the Ukrainian dominated the first five rounds, and landed several strong left jabs that largely went unanswered. In the sixth round, two massive left-right combinations rocked the American, and Brewster's trainer Buddy McGirt stopped the fight before the seventh round could start.
Both trainers said afterward that Klitschko would have knocked him out in the seventh round.
The win avenged one of Klitschko's most painful losses. When the two met in 2004, Brewster stopped Klitschko with a fifth-round TKO to win the vacant WBO championship in Las Vegas.
Klitschko dominated that fight early on and knocked down Brewster in the fourth round, but the American was saved by the bell. Two left hooks by Brewster in the fifth turned it around.
On July 7, Brewster was returning after a yearlong absence following a loss to Sergei Liakhovich in April 2006 during which the American suffered a detached retina in his left eye that required surgery. He returned from his layoff to fight Klitschko without even a warmup bout.
Klitschko's record is now 49-3, with 44 knockouts, while Brewster is 33-4 with 29 KOs.

International

Georgia hosts 12-nation NATO-led emergency and rescue exercises
Jul 12 2007, 17:59
TBILISI, Georgia (AP) - NATO-led rescue drills involving the air forces of 12 nations kicked off July 11 in Georgia, which hopes that hosting the maneuvers will improve its chances of joining the Western military alliance.
Several hundred air force personnel from NATO members, including the United States and Germany, and aspiring members, including Georgia and Ukraine, will take part in the 20-day training as part of NATO's Partnership for Peace - a program of cooperation between the alliance and former Soviet militaries.
"We are here to learn from each other," said Col. Kazimierz Dynski, a NATO representative who is directing the exercises, dubbed Cooperative Archer 2007.
Participants will learn to help victims of earthquakes and floods, evacuate people by helicopter and set up a field hospital, said Zaza Gogava, chief of general staff of the Georgian armed forces.
The participants also include Albania, Azerbaijan, Croatia, Hungary, Jordan, Latvia, Moldova and Turkey.
Since he came to power, President Mikhail Saakashvili has vowed to get the small Caucasus nation both NATO and EU membership - plans that have irritated Russia, which has regarded Georgia as being within its sphere of influence.

Brazil issues arrest warrant for Berezovsky on money-laundering charges
Jul 13 2007, 17:08
MOSCOW (AP) - A court in Brazil issued an arrest warrant for Kremlin foe Boris Berezovsky on charges of money laundering, ITAR-Tass reported July 13.
The warrant was issued July 12 by the federal court in Sao Paolo in a case involving the Media Sports Investment group, or MSI, a sponsor of the Corinthians soccer club, the Russian state-owned news agency reported.
A trial in absentia against Berezovsky opened Thursday in Moscow in a separate case. Berezovsky, a fierce critic of President Vladimir Putin who has asylum in Britain, is accused of embezzling millions of dollars from Aeroflot.
Berezovsky said neither he nor his lawyers have had any contact with Brazilian authorities about the reported warrant, which he said was part of a politically motivated Kremlin push against him. He denied any involvement in money-laundering.
"Given the extensive comment in the Russian media and the farce of a 'trial in absentia' in the Russian courts, I have no doubt that the Brazilian story is an extension of the Kremlin's politicized campaign against me," Berezovsky said in a statement.
The case in Brazil dates back to 2004, when MSI spent millions of dollars acquiring new players, which raised the interest of Sao Paulo state prosecutors. They wanted to know more about the investment group, its Iranian-born president Kia Joorabchian and the origin of the money he and his unidentified partners injected into the club.
"Who would invest this much money in a soccer team that has been in the red for years?" state prosecutor Jose Reinaldo Guimaraes Carneiro said when he started his investigation in February 2005. "And why?"
Later that year, he said the answers pointed to the Russian tycoon and money laundering.
"There is enough circumstantial evidence indicating that the MSI-Corinthians partnership is being used for the laundering of money, most of which was received from Boris Berezovsky, who is wanted (by Russian authorities) for crimes committed against the Russian financial system," Carneiro said in the summary of a 15-page report released after the investigation.
Warrants for Berezovsky's arrest could soon be issued by other countries as well, the Russian news agency Interfax reported July 13, citing an unidentified source. The source said the countries are "two or three European states."
The Brazilian warrant was the result of close cooperation between the law enforcement agencies of a number of countries, the source said.
The trial against Berezovsky in Moscow was postponed for two weeks so the court-appointed defense attorney could read the voluminous case materials. Berezovsky has ordered his own lawyers not to take part in the trial, which he said was part of a Kremlin effort to draw attention away from the poisoning death of his associate Alexander Litvinenko.

France urges Serbia to restart Kosovo talks, accept new UN resolution
Jul 12 2007, 18:11
BELGRADE, Serbia (AP) - France's foreign minister urged Serbia on July 12 to drop its opposition to the latest Western-backed U.N. draft Kosovo resolution and start new negotiations on the contested province's future status with rival ethnic Albanians.
Bernard Kouchner said he told his Serbian counterpart, Vuk Jeremic, that if no compromise was reached in the eventual talks proposed by the latest U.N. draft, internationally-supervised independence for the separatist Serbian province "remains the only option."
In a bid to win support from veto-wielding Russia, Western nations revised a U.N. resolution to call for four months of intensive negotiations between the Kosovo's ethnic Albanian majority and Serbs without any promise of independence if talks fail.
Russia said July 12 it needed time to study the resolution, a Foreign Ministry official said.
"We have received this document, and we need to study it thoroughly," Foreign Ministry spokesman Andrei Krivtsov said. He said it was unclear when Russia would take a position on the proposal.
But, Serbia swiftly rejected the plan, saying it would only represent a shortcut to granting independence to Kosovo, which officially remains a province of Serbia, but has been under U.N. and NATO administration since a 78-day NATO-led air war that halted a Serb crackdown on ethnic Albanian separatists in 1999.
Kouchner, who was Kosovo's U.N. administrator after the 1999 war, said that French President Nicolas Sarkozy and his Russian counterpart Vladimir Putin had a phone conversation about the new U.N. resolution before he arrived in Belgrade.
"Putin's reaction was not so negative to the new U.N. draft as I have heard here in Serbia," Kouchner said. "Putin thinks that good steps were made" to eliminate some of the Russian concerns about the plan, he added.
Russia had dismissed as unacceptable the previous draft. That version also called for four months of negotiations between the two sides on the province's future status - but it would have authorized an automatic road to independence if there was no agreement, unless the U.N. Security Council decided otherwise.
In April, U.N. envoy Martti Ahtisaari recommended that Kosovo be granted internationally supervised independence - a proposal strongly supported by the province's ethnic Albanians, but vehemently rejected by Serbia and by its traditional ally Russia.
"France is Serbia's friend, and we have a few months ahead to find a solution," Kouchner, whose country initiated the new U.N. resolution, said. "These talks cannot last for years," he said. "If we don't reach an agreement, we have to go back to the Ahtisaari plan."
Jeremic, the Serbian foreign minister, said that "Belgrade has rejected the Ahtisaari plan, and that will not change in the future."
"Belgrade wants the status of Kosovo be solved as soon as possible, but that has to be solved only through a compromise," Jeremic said. "Unfortunately, the Ahtisaari plan is not a product of a compromise"
Jeremic said on July 11 that no new Security Council resolution or a set timeframe for the talks was needed to restart the negotiations. He said Serbia wanted to stick to a U.N. resolution passed in 1999 which states that Kosovo is formally a part of Serbia.
Russia has repeatedly emphasized that it will not support an outcome opposed by its ally Serbia. 

Nation

Middle class gaining greater visibility
by Maria Aksyonova, Kyiv Post Staff Writer
Jul 11 2007, 21:58
While a middle class has visibly emerged in Ukraine in the last several years, it currently accounts for only a small part of Ukrainian society, and is still a far cry from being a girder of the nation’s economy, as in other more developed countries.
A recent study shows that while the middle class in Ukraine currently accounts for less than one-tenth of the country’s population of around 47 million, more than a third of Ukrainians subjectively feel themselves to belong to the middle class.
The Kyiv-based market, consumer and sociological research and consulting organization Gorshenin Institute of Management Issues (KIMIG), which conducted the survey among 2,000 respondents in the second half of April, found that 8.9 percent of Ukrainians actually belong to the middle class.
By contrast, the middle class in most European countries on average accounts for 50-70 percent of the population.
Of the respondents polled by KIMIG, 33.6 percent, or more than one-third said they saw themselves as middle class.
The poll’s margin of error was 2.2 percent. The criteria used in the survey to determine respondents’ socio-economic status included personal income, educational level and aspects of their consumer behavior.
According to the director of the Razumkov Center for Economic and Political Studies’ sociological department, Andriy Bychenko, the percentage of those who consider themselves middle class depends on the criteria used to describe that class.
“In the Western understanding, Ukraine does not have middle class at all, since all of the conditions [for the existence of that class] have not been met. This is due primarily to financial factors. A middle class has a genuinely middle level of income, which is supposed to allow them certain privileges,” Bychenko said.
“In Ukraine, income that can be considered mid-level is still unable to afford European standards of living and the consumer behavior that corresponds to that.”
The Razumkov Center conducted its own research on Ukraine’s middle class in 2004 and reports that since then, the number of Ukrainians who consider themselves middle class has grown from 40 percent of the population in 2004 to 54 percent today.
According to the KIMIG poll, 8.7 percent of respondents estimated their incomes at between $400-1,000 a month, 2 percent at $1,000-2,000, and 0.7 percent at more than $2,000 a month.
Nearly 21 percent of respondents said they earned incomes of $200-400 a month, 34 percent (the highest percentage of those polled) said they made $100-200 a month, and nearly 31 percent (the second highest percentage) said they earned less than $100 a month.
State figures show that the official monthly salary in Ukraine grew by around 28 percent in 2006 year-on-year, with the average salary standing at just over $200 one year ago last summer.
In the first quarter of this year, salaries in the financial sector were among the highest, averaging more than $500 a month. The lowest salaries were found in the agriculture and health services sectors, with an average of around $120-160 a month.
The capital Kyiv boasted the best-paid labor force in the country in the first quarter, with average salaries of nearly $400 a month. Following Kyiv were the highly industrialized Donetsk and Dnipropetrovsk regions, where average monthly salaries stood at about $220-250 per month. The lowest average monthly salary, a little more than $150, was in western Ukraine’s Ternopil Region, where high-paying jobs are scarce.
Independent dependents
Bychenko said that due to its small size, Ukraine’s middle class does not perform the role of economic stabilizer as the middle class does in more mature economies. He said that a real middle class was very important for a country’s economy, since it influences that economy and its growth directly through tax payments and commercial consumption.
He added that in the West, these two factors were economically determinative, meaning that while the middle class is independent, the state depends on the middle class.
“In Ukraine, we can observe the opposite situation: The state is economically independent from the middle class, which, due to its small size and low consumer activity, does not have any influence on the country’s economy,” Bychenko said.
He added that when the middle class comprises the majority within a society, many members of that class possess high professional qualifications, making their country more economically competitive in the world.
KIMIG head Kost Bondarenko said the main reason behind the large disparity between Ukraine’s middle class and the rest of the population is the poor financial standing of most of the country’s intellectuals, who share characteristics of the middle class but cannot be considered among its number.
“The point is that in Europe, most professions traditionally associated with intellectuals, such as physicians, teachers and engineers, are very well paid and thus form the middle class,” Bondarenko explained. 
“In Ukraine, these occupations are still mostly state-funded, which is a synonym for being poor. Consequently these people are budget-dependent, with their salaries often being below subsistence levels,” he added.
“In fact, in Ukraine, about 14 million people are paid by the state and about 17 million are pensioners, which altogether accounts for more than half of Ukraine’s population.”
New class, new behavior
As in more developed market-economy countries, the rise of Ukraine’s middle class is reflected in increasing consumer spending and consumption, savings, and bank loans for household items, automobiles, apartments and private homes, and business development.
Bondarenko said, however, that as consumers, Ukraine’s middle class is still obliged to spend the lion’s share of their incomes on food and other living essentials. Most Ukrainians currently spend up to 90 percent of their incomes on food. According to Bondarenko, a Ukrainian making $1,000 a month typically spends around half of that amount on rent and the rest on food.
He said that in contrast to a genuine middle class, Ukraine’s middle class is still limited in its purchasing power and cannot spend as much money as middle classes elsewhere do on high-quality goods, vacations, and insurance. 
“As a result, it turns out that although they are middle class in their ideology, these people [the Ukrainian middle class] still cannot be considered fully middle class.”
Because the middle class in Ukraine is still in its early stages of development, it hasn’t developed sociological patterns of behavior that would anchor it to a set of traditional values, among them, political values and voting patterns, such as those developed among the middle classes of other European countries.
According to KIMIG’s research, that’s why it is still too early to refer to Ukraine’s middle class as a separate social category. Ukraine’s middle class is less politically active than its European counterparts, although it tends to express greater interest in political issues than other stratums of Ukrainian society.
According to Bondarenko, Ukraine’s middle class predominantly supports the pro-Russian Party of Regions, with about 38 percent of the country’s middle class favoring that party. More than 20 percent give their support to Byut, led by fiery oppositionist Yulia Tymoshenko, while nearly 7 percent support the pro-presidential Our Ukraine.
A June 2007 poll of political preferences conducted nationwide by the Razumkov Center showed nearly similar results, indicating that of those Ukrainians planning to vote in the upcoming early parliamentary elections Sept. 30, a little more than 37 percent plan to vote for the Party of Regions, more than 21 percent plan to vote for Byut, and 8.5 percent will cast their votes for Our Ukraine.
According to Bychenko, these combined results indicate that the political preferences of Ukraine’s middle class do not differ from those of Ukraine’s population on the whole.
Some foreign observers say Ukraine’s middle class has definitely started to take shape and forecast good prospects for its further development.
“I can say for sure that Ukraine has a middle class now,” said Slovenian ambassador to Ukraine Primoz Seligo.
“I arrived here three years ago and have witnessed lots of changes in this respect. I am convinced that the only thing needed for [the middle class] to become well-structured and numerous is time and it will definitely meet European standards,” said Seligo.
According to Seligo, Slovenia’s middle class is about 80 percent of that country’s population, one of the highest indicators for the middle class in Europe.
“The middle class in Ukraine is coming to realize that it should not wait for somebody to do something for them, but they increasingly understand that they should take action themselves,” said the Netherlands ambassador Ron Keller, who has also spent the last three years in Ukraine.
“This can only be done effectively if people organize themselves into NGOs or political parties,” Keller said, adding that it would take time for Ukraine’s middle class to organize itself to influence decision-making “from the bottom up.”
Keller said that the middle class in the Netherlands is around 60-80 percent of the population and accounts for the bulk of employment and wealth creation in that nation.
“They [the Netherlands middle class] are heavily organized and active in many NGOs, from labor unions, branch organizations, to environmental lobby groups, and so on. And all of these organizations influence political parties, parliament and the government in one way or another,” Keller said.
He added that his country’s middle class was also the engine that drove small and medium-sized businesses, which “are the essential factor in innovations in our economy. They are the most flexible and modern part of our economy.”
Bondarenko said that the further development of the middle class in Ukraine depends mostly on the political situation in the country and the existence of a plan for the development of the nation’s economy.
“While the development of the middle class depends on a market economy, the health of the middle class is in turn an indicator of a mature market society,” he said. 
Ukrainians ready for elections, polls say
by Stephen Bandera, Kyiv Post Editor
Jul 11 2007, 21:56
More than 75 percent of Ukraine’s voters are ready to take part in early parliamentary elections, scheduled for Sept. 30, according to the most recent public opinion polls.
Voter turnout is important for these elections, because for the first time since independence, a minimum voter turnout of 51 percent has been established. Coalition and opposition politicians alike have pointed to the minimum voter turnout as one of the ways the elections can be undermined.
On July 9 the SOCIS center for social and political research and the FOM Ukraine polling agency released the results of two separate polls conducted at the end of June. Both polling firms queried more than 2,000 respondents.
According to SOCIS president Mykola Churylov, 54 percent of respondents indicated that they would take part in the Rada elections. Another 23 percent said they would most likely take part. Meanwhile, FOM director Oleksandr Bukhalov said July 9 his results showed that more than 78 percent would take part in the pre-term ballot. His polling firm is a project of the Russian FOM Public Opinion Foundation associated with Gleb Pavlovsky, an erstwhile advisor to Russian president Vladimir Putin.
These findings were also confirmed by a poll conducted by the Democratic Initiatives Foundation, according to DIF academic director Iryna Bekeshkina. The results of that poll are due to be released July 12. She said that around three-quarters of respondents indicated they would go to the polls.
“We posed the question similar to FOM and combined the numbers for the people who said they would vote with those who said they were most likely to vote,” Bekeshkina explained. “Voter turnout has always been higher than the numbers indicated in polls, and we expect that trend to hold true for these elections,” she said.

Regions largest faction
The pro-Russian Party of Regions would have a slight majority in parliament if elections were held last month, according to FOM’s Bukhalov. His calculations showed that only four parties or electoral blocs would qualify for seats in parliament, namely the Party of Regions (227), the oppositionist Byut (109), the pro-presidential Our Ukraine (84) and the Communists (30). A simple majority in the 450-member legislature is comprised of 226 votes.
Bukhalov also said that support for the Regions and Our Ukraine has risen in the last few months, while Byut’s numbers have fallen. FOM’s findings indicated that support for the Regions has grown by 6 percent since March, while support for Our Ukraine has risen by more than 3 percent over the same period. Byut, meanwhile, has lost nearly 4 percent in the last four months. The Communists have lost nearly one percentage point over the same period, according to FOM.
FOM’s results showed that People’s Self-Defense, led by former Internal Affairs Minister Yuriy Lutsenko, was supported by 2.8 percent of respondents. The poll was conducted before Our Ukraine, People’s Self-Defense and eight other parties announced the creation of a mega-bloc.
Bekeshkina said that DIF asked respondents whether they would support a tri-party bloc comprised of Our Ukraine, People’s Self-Defense and the Ukrainian Right. She said that the expanded bloc would enjoy the support of nearly 17 percent of voters. Her polling firm shows Byut at about the same level, some 2 percent higher than the numbers reported by FOM.

Undecided voters
FOM’s research showed that some 17 percent of Ukrainians planning to vote in the election are undecided. The numbers recorded by DIF are similar, with 19 percent of respondents indicating they have yet to make up their minds. According to Churylov, the number of undecided voters is proportionately divided among the leading political forces. In a July 9 interview in the Khreshchatyk newspaper, Churylov said that it is “an illusion” to think that the creation of a mega-bloc would attract more voters.
“In the last elections we have seen [the tendency] of protest voting, meaning not ‘for’ but ‘against’ certain candidates,” he said.

Mega-party
On July 5, 10 political parties signed an agreement to run for parliament together as a “mega-bloc.” The bloc will be called Our Ukraine–People’s Self-Defense and former Internal Affairs Minister and PSD head Lutsenko was named by the presidential press service as the person who would lead the list.
He will be followed by OU leader Vyacheslav Kyrylenko, Foreign Affairs Minister Arseniy Yatsenyuk and Defense Minister Anatoliy Hrystenko. Two television journalists were also named to the list’s top 10: Olha Herasymiuk and Volodymyr Ariev.
Viktor Baloha, the head of the Presidential Secretariat, was named as campaign manager. This drew the criticism of politicians from the Regions and the Communists, who said that Baloha’s appointment as campaign manager meant that the “administrative resource” – the levers of regional power controlled by Yushchenko’s secretariat – would be used to benefit a single political force.
Lutsenko said on July 5 that the mega-bloc is aiming to secure at least 20 percent of the popular vote on Sept. 30 and that OUPSD would not form a coalition with the Regions, Communists and Socialists in the next parliament.
The 10-party agreement also stated that a single political party would be formed on the basis of the 10, but the idea and timing of the formation was challenged by three of the parties. Rukh leader Borys Tarasyuk said that the final electoral list would be subject to an inter-party convention scheduled for later this summer.

Stall tactics continue
Meanwhile, Socialist leader and Rada chairman Oleksandr Moroz continued questioning the legitimacy of an early election date throughout the week. When the Parliamentary Assembly of the Organization for Security and Cooperation in Europe convened in Kyiv last week, Moroz called for legislators from the 54 member-states to help protect Ukraine from a “state coup.”
“The institute of the president is conducting essentially an anti-constitutional offensive against parliamentarianism, democracy, European ideals and values,” Moroz told the OSCE assembly on July 5. Earlier that day, Moroz said the parliament would not invite OSCE observers for the election until the legal basis for holding them is in place.
President of the PA OSCE Goran Lennmarker responded to Moroz on July 5 during his opening address at the annual session.
“I have already told President [Viktor] Yushchenko, and want to repeat in the presence of the fifth Verkhvona Rada speaker, that on Sept. 30 we will surely send our observers,” Lennmarker said to Moroz, who was sitting in the presidium.
On July 10, Foreign Minister Arseniy Yatsenyuk announced that he has personally signed invitations to the Commonwealth of Independent States to send observers for the Sept. 30 elections, Ukrainian News reported.

Comic relief
On July 8, the man behind pop icon Verka Serdyuchka announced that he would run for parliament. Andriy Danylko, who placed second in this year’s Eurovision Song Contest, announced plans to organize the “Against All” electoral bloc. “Against all” is the very last option on voting ballots, as Ukrainian voters are given the choice to vote for “none of the above.” In the 2006 elections, nearly 1.8 percent voted “against all.”

Government’s Ukrtelecom sale plans continue to flop
by Nazar Kudrevsky, Kyiv Post Staff Writer
Jul 11 2007, 22:17
The Ukrainian government has repeatedly failed in its bid to raise more than $200 million within recent weeks by privatizing minority stakes in fixed-line telephone company Ukrtelecom, one of the country’s most prized assets.
The tender, intended to showcase the multi-billion-dollar company to investors ahead of the sale of a larger stake to strategic investors, has gone sour. Investors have refused to show up for tenders organized in recent weeks, alleging that the starting price was too high. And the failed tenders have given Ukraine’s pro-Western president, Viktor Yushchenko, another reason to criticize the governing coalition of his arch rival, Prime Minister Viktor Yanukovych.
Yushchenko has over the years repeatedly called for a majority stake in the aging telecom giant to be privatized to a strategic investor capable of infusing fresh capital needed to compete with fast-growing mobile telecommunications companies that have gradually eaten away at Ukrtelecom’s potential clientele.

A longstanding debate
On July 4, Yushchenko’s administration once again urged the government and State Property Fund (SPF), headed by Socialist Party member Valentyna Semenyuk, to quickly privatize Ukrtelecom to a strategic investor rather than wasting time with failed minority auctions.
Such a strategy has in the past year been widely opposed by Yanukovych’s government and Semenyuk. But the failed auctions of recent weeks have essentially proven them wrong, and the president right.
On July 4, Yushchenko’s administration criticized the idea of selling minority stakes in Ukrtelecom and emphasized the idea of attracting a strategic investor by selling a controlling share. Deputy administration chief Oleksandr Shlapak said there was no need to postpone the privatization of a majority stake in Ukrtelecom. The failed auctions for a minority stake have shown that there is no other realistic strategy for the company’s future, he suggested.
Debates over whether to sell off minority shares or a majority stake in Ukrtelecom have carried on for almost 10 years. During this period, the telecom giant has seen one of its most prized assets, mobile telecommunications leader UMC, sold off to Russia’s Sistema telecom group. Left without a promising mobile phone business, Ukrtelecom has struggled to keep up with customer demand in a market that has seen mobile phone penetration rise above 100 percent.
Western portfolio and institutional investors were said to express their interest in buying stakes in Ukrtelecom, as were Ukrainian billionaires, such as Rinat Akhmetov. Comstar-UTS, a fixed-line operator in Russia controlled by Moscow tycoon Vladimir Yevtushenkov, the majority owner of Sistema, was also interested in the company.
This March the SPF approved a plan to privatize Ukrtelecom. According to the plan, a 50 percent stake plus 1 share would remain in state ownership, while 37.86 percent was to be placed among foreign investors on international stock exchanges. According to the plan, 5 percent was to be auctioned off on five Ukrainian stock exchanges, a move intended to raise more than $200 million for state coffers and tease Western investors ahead of larger bids on foreign exchanges.
Originally, the SPF planned to complete the sale of Ukrtelecom’s share to foreign investors by the end of the year, within a period from August to December.
The sale of a 5 percent stake was to have been implemented from March 28 through June 23, but repeated auctions failed to attract bidders. Only one auction found a buyer, granting the investor 0.072 percent of the company for almost $3.1 million.
The failed auctions and upcoming early parliamentary elections, scheduled for Sept. 30, threaten to put off the government’s bold privatizations plans altogether.
Currently Ukrtelecom is 92.778 percent state-owned. A 7.14 percent stake was privatized on privileged terms to employees and top management in 2006.

A debacle of a sale
The first 1 percent stake in Ukrtelecom was supposed to be auctioned on the Ukrainian Stock Exchange (UFB) on May 22. However, on May 21, a Kyiv Economic Court ruling imposed a ban on the planned sale. The lawsuit was filed by Dotrin-2002, an advocacy group for the disabled in Khmelnytsky Region. The court ruling also banned the sale of a 1 percent stake scheduled to take place on the PFTS, Ukraine’s main trading platform, on June 8. The SPF and UFB challenged the court decision, but the damage was already done.
Market insiders suggested that the advocacy group was merely used as a front for powerful business interests. Their aim could have been to scare off bigger foreign bidders, increasing their chance to get shares in the prized company for less.
Later, an auction scheduled for May 29 at the UFB was cancelled. No bids were submitted.
Then, auctions scheduled to take place at the UFB on June 5, 12, 19 and 26, and July 3 and 10 also failed due to a lack of bids.
Auctions scheduled to take place at the Kyiv International Stock Exchange on July 5 and 12 were cancelled due to a lack of bids.
Analysts say an exaggerated starting price on bids has chased away potential investors. They doubt Ukrtelecom will be privatized this year as originally planned.
Also, on June 19 the Kyiv Economic Court imposed a ban on the sale of Ukrtelecom’s shares at auctions scheduled to take place on June 21 on the Kyiv International Stock Exchange, July 11 on the Ukrainian Interbank Currency Exchange and Aug. 1 on the Inneks exchange. The court issued the ruling according to the solicitation of a private company, Transcom.

What’s next?
While market analysts continue to stress that procrastination in selling a controlling share in Ukrtelecom drives the value of the whole company down and scares potential investors, stubborn SPF leadership continues to unsuccessfully push forward its ill-fated privatization plans for the company.
Nina Yavorska, head of the SPF’s press service, said recent court decisions that banned sales of the company’s stakes frightened off potential investors. Nevertheless, she said that “we offer stakes for sale almost every day.”
Currently the SPF is also preparing to offer 37.86 percent of the company on the London Stock Exchange.
“This will be a unique project. The State Property Fund has not yet entered international markets,” Yavorska said.
Few analysts actually expect a tender for a larger stake on the LSE to go forward, given the failures to auction off minority stakes in recent weeks.
Oleksandr Ryabchenko, director of the Kyiv-based International Institute for Privatization, Asset Management and Investments, said that the strategy the SPF chose to privatize Ukrtelecom was doomed from the very beginning. The company faces deep challenges and needs a strategic investor fast, he added.
Currently Ukrtelecom controls about 78 percent of Ukraine’s fixed-line communications market. But with the increasing availability of mobile communications, the company’s profits are thinning.
The company has big plans on paper, but none will go forward without strategic private management. One of the plans Ukrtelecom has developed to catch up with mobile telecommunications operators entails the launching of a 3G network, or third-generation technology that offers customers fast audio and video communications using mobile telephones.
After many years of poor management, it’s a big step in the right direction, but “development of a 3G mobile communications network, for example, requires big investments,” Ryabchenko said. And big investors are not likely to pour their cash into such big and potentially risky plans in return for a minority stake.
Ryabchenko said the state could raise $2-2.5 billion by selling off a controlling share in the company.
“The current way [of selling the company’s stakes] – first to sell small stakes on the stock market, to sell everything, except for the controlling share – automatically leads to decreasing of [stakes’] prices on the stock market…This is the wrong strategy,” he said.
Bickering between the political camps of Yushchenko and Yanukovych are expected to shift into high gear ahead of the Sept. 30 elections. The Ukrtelecom privatization debate is not expected to be settled during this turbulent period. It could also become one of the issues for debate.
“The situation will not change before the elections,” predicted Ryabchenko.

Tycoon fetches $2 billion for bank
by John Marone, Kyiv Post Staff Writer
Jul 11 2007, 22:20
Ukrainian tycoon Viktor Pinchuk’s Interpipe Group inked a deal July 5 to sell Ukrsotsbank, a top-five Ukrainian bank in terms of assets, for a whopping $2 billion, marking the biggest deal of its kind to date.
Another top-five Ukrainian bank has been snatched up by a major European banking group, marking the largest such deal to date and the second largest price paid for an asset in Ukraine.
Italy’s Unicredit Group has agreed to pay a whopping $2 billion for Ukrainian tycoon Viktor Pinchuk’s Ukrsotsbank.
The purchase, which is expected to be approved later this year, will have Ukrainian bank sales comprise more than one-fifth of the country’s total foreign direct investment, or $6 billion out of $29 billion in FDI received since independence.
Attracted by the country’s high-growth potential, European banking groups have been on a two-year buying spree in Ukraine.
But with the share of foreign capital in Ukraine’s banking system forecast to continue growing, some state officials and local bankers have already rung the alarm bell.
Pinchuk, the son-in-law of former Ukrainian President Leonid Kuchma, however, is laughing all the way to the bank, as he defies all estimates of his considerable wealth.

The deal
UniCredito Italiano SpA announced on July 5 that it had signed a share purchase agreement through its subsidiary Bank Austria Creditanstalt AG with Pinchuk’s holding company Interpipe Group for the acquisition of approximately 95 percent of Ukrsotsbank’s share capital.
UniCredit said it had agreed a purchase price of $2.07 billion for the stake in Ukrsotsbank, Ukraine’s fourth largest bank in terms of assets.
If the deal is approved by regulators in Italy, Austria and Ukraine, UniCredit will also pay $130 million, or the amount of a recent additional share issue by Ukrsotsbank.
According to Kyiv-based investment bank Dragon Capital, the sale will mark $6 billion in total FDI for Ukraine from bank sales, or 21 percent of the $29 billion in FDI that the country is expected to receive by the end of this year.
It will also mean that three out of Ukraine’s top five banks are under foreign control.
What’s more, the price tag the Italian banking group agreed to pay for Ukrsotsbank is the second largest offered for a Ukraine asset, trailing only the $4.8 billion paid by Mittal Steel in 2005 for Ukraine’s largest steel mill.
“The acquisition of Ukrsotsbank will reinforce the Group’s presence in Ukraine, one of the fastest growing markets in the region, where the UniCredit Group is already present through its subsidiaries HSV Ukraine and UniCredit Bank Ltd,” reads a statement released by UniCredit.
UniCredit also recently announced its acquisition of ATF Bank in Kazakhstan, in what it said was another step to strengthen its position in Central-Eastern Europe and the CIS.
Boasting 35 million clients and 7,200 branches in over 20 countries, UniCredit calls itself one of Europe’s top financial groups. As of the end of last year, the Italian banking group reported total assets of about 823 billion euros. In Central and Eastern Europe alone, UniCredit has 3,100 branches and outlets, and 24 million customers.
Ukrsotsbank, which is listed on a Ukrainian stock exchange, posted total assets of 2.6 billion euros at the end of last year. It boasts 485 branches and outlets in every region of Ukraine, and over 5 percent of the country’s market share of customer loans and deposits.

Size matters
According to Ekaterina Trofimova, a credit analyst for international rating agency Standard & Poor’s, UniCredit chose to buy Ukrsotsbank primarily because of the Ukrainian bank’s size – including its assets, number of customers, market share and branch network. 
“Clearly, this was the largest bank currently available for purchase in Ukraine,” she said.
Other large Ukrainian banks, including Aval and Ukrsibbank, were sold off at top dollar in the second half of 2005, as European financial giants jostled to get in on Ukraine’s high growth rates.
Trofimova said Ukraine’s banking sector as a whole is attractive to foreign investors because of its growth potential, including expected growth in business and revenues.
“Mature financial markets, in the West for example, are less attractive for investment because of their lower growth potential,” she added.
Growth potential is in turn determined by the size of a country’s population, whether its economy is sufficiently diversified, and GDP growth.
The Kyiv-based International Center for Policy Studies (ICPS) stated in a recently released report that Ukraine’s GDP would grow by 8 percent this year, then by 6 percent per annum in 2008 and 2009.
Private consumption will remain the economy’s driving force, growing an average of 13.5 percent per annum over the next three years, according to ICPS.
Real salaries are expected to rise by an average of 14-16 percent per annum, wetting the appetite of Ukrainian citizens for major household items that were unavailable during Soviet times and unaffordable during most of the independence period.
Double-digit growth has been recorded in recent years on corporate credit lines, household loans and deposits.
The number of urban Ukrainians who use banking services rose from 71 percent to 74 percent from the first to the second half of 2006, according to market research company GfK Ukraine.
For Western European banks awash with excess capital, which some estimates put as high as $100 billion, Ukraine is a good place to invest.

Foreign influence
“Increasing levels of FDI is a trend that will drive and shape Ukraine’s banking system for the future,” Standard & Poor’s Trofimova said.
The gains will be both qualitative and quantitative, she added.
On the qualitative side, the entry of European banking groups on the local market will introduce more discipline and transparency, better market practices and corporate governance, and improved services and expertise, according to the credit analyst.
On the quantitative side, Ukraine’s banking system will get lower financing costs, better access to international funding and more capital.
“The level of capital in Ukraine’s financial sector is currently extremely low,” Trofimova said.
Another element that foreign players will bring to Ukraine’s banking business is competition, which isn’t always welcome.
“Foreign banks bring in lots of cheap credit and a higher quality of service and expertise, which may pose a threat to local bankers,” Trofimova said.
Most of Ukraine’s 150-plus banks have been primarily used to finance the business groups that control them and are thus ill-prepared to compete with international giants such as UniCredit.
As of April 1 this year, assets of Ukrainian banks under the control of foreign investors were around 32.5 percent of the total, according to Ukraine’s National Bank.
Compared to Ukraine’s successful neighbors, such as the Czech Republic, Poland and Hungary, this figure is still quite small.
But critics of increased foreign influence in Ukraine’s banking sector say it’s already too much.
The NBU recently reported that foreign capital in Ukrainian banks could reach 45 percent by the end of the year.
Petro Poroshenko, a pro-presidential politician and top-ranked businessman, raised concerns while still serving as the secretary of Ukraine’s National Security and Defense Council.
“If foreign banks with state capital play a significant role in Ukraine’s economy, and these banks are able to pursue the policies of foreign powers in Ukraine’s financial system, then this issue demands unusually decisive measures and means for decisions to be taken,” he said earlier this year.
Trofimova said state concerns over ownership of a country’s banks are not limited to Ukraine.
“A country’s financial sector is like the body’s circulatory system. If the political environment were to become less secure, foreign banks could just pull all their money out and leave,” she said.
The Association of Ukrainian Banks (AUB) has called on the government and parliament to set a limit on foreign ownership of Ukrainian banks, as has been done in Russia.
“Such banks get an advantage not only from the fact that the name of the bank is in itself effective, but they also have the opportunity to attract cheaper resources and thereby dump onto the credit market,” AUB President Oleksandr Sugonyako told a press conference last year.
“The state should think about the extent of the presence of foreign capital,” he added.

Continuing trend
But UniCredit is just the latest in a long line of Ukrainian bank sales to foreign buyers over the past two years.
Austria’s Raiffeisen International moved in with the first big acquisition, paying $1 billion in 2005 for Bank Aval, Ukraine’s second largest bank in terms of assets. Later that same year, France’s BNP Paribas paid out half a billion dollars for a 51 percent stake in Ukrsibbank, currently Ukraine’s third largest bank.
In 2006, another French bank, Credit Agricole, bought Ukraine’s mid-sized Index-Bank for $250 million. A few months later, Hungary’s OTP banking group snatched up a banking operation that Raiffeisen had in Ukraine prior to its acquisition of Aval, paying about $860 million. OTP is now Ukraine’s seventh largest bank in terms of assets.
And this year, Swedbank purchased TAS-Kommertsbank, ranked number 13, for $735 million, including an additional payment of up to $250 million payable in three years.
Other smaller transactions have taken place in between, with Austrian, Greek, Czech and Russian banks putting down tens of millions of dollars for a place on Ukraine’s banking market. 

More is better
Companies controlled by tycoon Viktor Pinchuk originally inked a deal to sell an 88 percent stake in Ukrsotsbank not to UniCredit but to Italy’s Banca Intesa for $1.1 billion in February 2006.
But minority shareholders in Ukrsotsbank linked to competing Ukrainian business groups tied the deal up in US courts by September of that same year.
In the meantime, the price tag for Ukrsotsbank had increased to $1.4 billion, as Ukrsotsbank’s market value and profitability surged.
Then, as the March 31, 2007 signing deadline neared, Ukrainian regulators pulled the plug on the deal in a controversial last-minute decision.
Banca Intesa, which had by then merged with Italy’s Sanpaolo, announced shortly thereafter that they had pulled out of the bargaining.
Sources close to the deal said the regulators’ decision benefited Pinchuk, as the Ukrainian tycoon knew he could get even more for Ukrsotsbank from another buyer.

The underrated tycoon
As recently as February, Pinchuk was estimated by US business magazine Forbes to be worth only $2.8 billion, a few hundred million more than he will get for Ukrsotsbank. But the Ukrainian businessman also boasts significant interests in pipes, metallurgy, agriculture, energy, machine building, transportation and media.
Pinchuk’s Interpipe Group is one of the country’s largest holding companies. Dragon Capital said Pinchuk is worth almost five times the figure given by Forbes. “We estimate his current worth, based on our updated valuations and the latest share price performance of his listed companies, at $9.3 billion,” reads a statement from the investment bank.

Ukraine increased export of commodities for 5 months of 2007 for 34,4%, up to 18,88 milliard dollars
12 July, 15:31
The export of commodities from Ukraine for January-May, 2007 made up 18 milliards 877,2 million dollars, the import - 22 milliards 624,1 million dollars, according to the data of Federal State Statistics Service. As compared to the similar period of the last year the export increased for 34,4%, import - for 35%. Negative balance made up 3 milliard 746,9 million dollars (in January-May, 2006 - 2 milliards 710,3 million dollars). The coefficient of coating of export with import made up 0,83 (in 2006 - 0,84).
Foreign trade operations were conducted with partners from 193 countries of the world. The volumes of export deliveries to the countries of CIS made up 36,3% of the total volume of export, to Europe - 32,4% (including the countries of European Union - 30,4), Asia - 20,1%, Africa - 5,8%, America - 5,3%. The import from countries of CIS made up 46% of its total volume, from Europe - 36,3% (including import from the countries of European Union - 34,9), from Asia - 13,5%, from America - 3,2%, from Africa - 0,8%, from Australia and Oceania - 0,2%.
In general volume of export of commodities for January-May, 2007, as compared to the proper period of the last year the share of black metals increased - from 34% to 35%, black metals wares - from 5,6% to 6,6%, caldrons, machines, vehicles and mechanical devices - from 5,2% to 5,4%, electric machines and equipment - from 3,1% to 3,9%, railway and tram locomotives, track equipment - from 2,6% to 3,4%. The share of cereal crops diminished from 3,7% to 2,7%, as well as the share of ores, slags and ash - from 2,5% to 2,1%, energetic materials, oil and products of its processing - from 8,1% to 6,2%, products of inorganic chemistry - from 3,4% to 2,8%.
The share of polymeric materials and plastics increased in the total volume of import of commodities from 4,1% to 4,3%, of black metals - from 3,1% to 3,6%, of caldrons, machines, vehicles and mechanical devices - from 11% to 11,9%, surface transport vehicles, except for railway ones, - from 10,1% to 11,8%. The share of energetic materials, oil and products of its processing diminished from 31,1% to 30,6%, of paper and cardboard - from 2,4% to 2,2%, of electric machines and equipment - from 6,1% to 4,8%.
Source: RBC-Ukraine
The Cabinet intends to confirm the prognosis of GDP and inflation of 2008
11 July, 16:07
During the session on Wednesday the Cabinet intends to confirm the prognosis of basic economic and social macroindices of 2008, including GDP 7,2%, and inflation 6,8%, said the first vice-prime, Minister of Finance Nikolay Azarov, opening the session of the Cabinet on Wednesday.

At that he marked that par value of GDP is projected at the level of 810 milliard UAH, and thus, first in history of Ukraine, there is more than 4000 USD of GDP per one person. In addition, this prognosis envisages the growth of export for 24%, import - for 15,5% in 2008. Growth of average wage rate for 17% is planned.
On the basis of these prognoses the Cabinet intends to develop and introduce in Verkhovna Rada before the 15-th of September the bill of 2008 state budget.
As it was reported, the Ministry of Economic Affairs developed in May the prognosis of economic and social development of Ukraine of 2008, foreseeing the increase of GDP - 7,2%, industrial production - 9% and inflation the next year - 6,8%.
At the same time the Ministry of Economic Affairs developed the alternative script of socio-economic development, taking into account the possible substantial worsening of the external-economic business environment (pessimistic prognosis), which envisages the increase of GDP 4,8%, of industrial production - 6,4% and inflation - 8,7% in 2008.
The Ministry of Economic Affairs also keeps the macroeconomic prognoses of 2007 unchanged: growth of GDP - 6,5%, of industrial production - 8% and inflation - 7,5%.
Following the results of 2006, GDP increased for 7,1%, industrial production - for 6,2%, inflation made up 11,6%.

According to the materials of Correspondent.net

The growth of import of coke-coal will depend on growth of production of coke in Ukraine
13 July, 13:36
The growth of import of coke-coal will depend on growth of production of coke in Ukraine. Anatoliy Starovoyt, the head of «Ukrkoks» Association declared about it in interview for UGMK.INFO.
«The Ukrainian mines promise to provide by-product coke plants with coke-coal in full, but we do not see prospects. God grant to save the current volumes of extraction», - said the expert.

Ukraine views Morocco as important partner on African continent, foreign minister says

00:33, 14 July

Kyiv, July 13 (Interfax-Ukraine) – Ukrainian Foreign Minister Arseniy Yatseniuk has said that Ukraine considers Morocco as a major partner on the African continent.
"We view this country [Morocco] as, in fact, a gate to Africa for Ukraine. The search for new markets is important for Ukraine. New markets for Ukraine are not in the United States and Europe, there are new markets on the African continent," he said at a press conference in Kyiv on Friday after the signing of an agreement on cooperation in tourism between Ukraine's Cabinet of Ministers and Morocco's government with Moroccan Foreign Minister Mohamed Benaissa.
Yatseniuk said a bilateral commission had been created to study issues of economic mutual relations, cooperation in the humanitarian sector, in particular, in education and the student exchange program between Ukraine and Morocco.
He said that bilateral talks on military and technical cooperation could be held between the countries, and an agreement to liquidate double taxation between Ukraine and Morocco would be signed.
Yatseniuk said that the sides had reached an agreement under which Morocco would issue not individual but group visas for Ukrainians.
He said that bilateral consultations on a visa facilitation regime for Ukrainian citizens with diplomatic and service passports and the talks on introducing a non-visa regime would continue.
Yatseniuk and Benaissa also discussed global and frozen conflicts. The Ukrainian foreign minister positively assessed a UN draft resolution on the Sahara drawn up by Morocco.
"We see Morocco as a factor of stability on the African continent," he said.

Suspension of social benefits unconstitutional, Constitutional Court of Ukraine says
12 July 2007, 00:19

Kyiv, July 11 (Interfax-Ukraine) – The Constitutional Court of Ukraine ruled on Wednesday that the steps taken within the 2007 budget to suspend all social benefits and guarantees envisioned by legislation do not comply with the Constitution.
Forty-six deputies asked the Constitutional Court to check the constitutionality of several clauses of the 2007 budget law dated December 19, 2006, and all subsequent amendments to it.
These parts of the law suspend other laws on social benefits, compensation and guarantees to individual categories of citizens. They also change conditions to provide social benefits or introduce new conditions.
The lawmakers claim that the aforementioned sections of the law restrict the public's constitutional rights to social security, wages, social benefits, compensation and guarantees.
Majority of Ukrainians say country moving in wrong way, poll shows
12 July 2007, 12:00

Kyiv, July 12 (Interfax-Ukraine) - According to a poll conducted by the Democratic Initiatives Fund and the Ukrainian Sociology Service from June 19 to July 2, over half of the Ukrainian people (58%) say the country is developing in the wrong direction.
A total of 2,000 respondents aged over 18 participated in the poll. The poll's margin of error did not exceed 2.2%. The International Renaissance Foundation financed the study.
Only 18% of Ukrainians are confident that the country is on the right course, while another 24% were undecided.
The figures are the lowest over all years of conducted studies, Fund Head Iryna Bekeshkina said at a press conference at Interfax-Ukraine on Thursday.
"I remember only one period in the country's history when studies have shown that Ukrainians considered their country was moving in the right direction. This anomalous peak was in March 2005," she said.

Monday, 16 July

11:56 Bodies of two crewmen of yacht lost in Azov Sea found
11:53 Ukraine, Morocco agree to create inter-government commission for trade and economic cooperation
11:28 Ukrainian GDP up 7.9% in H1, 7.8% in June - statistics committee
11:26 Ukraine planning to boost cooperation with Afghanistan in defense, gas, construction sectors
11:23 Director of NATO's information and documentation centre in Ukraine stresses high level of information campaign about alliance
11:18 Revenues target of general fund of national budget fulfilled by 104.6%in Jan-June, expenses by 99.8%
10:58 Yatseniuk says Ukraine won't send its servicemen to Afghanistan
10:49 Ukrainian foreign minister to visit Brussels on July 17
10:47 Kyiv regional prosecutor dismissed
10:41 CFE will cease to exist without Russia - Russian senator
10:23 Zaporizhia NPP reactor one shut down for unscheduled repairs
10:12 Ukraine critical of Russia's pullout from CFE Treaty
10:06 Putin's decision to suspend CFE logical - CSTO Secretary General
09:57 Interfax-Ukraine to host press conference entitled "Orthodox choice or European and EuroAtlantic integration of Ukraine"