The end of last week may turn out to be truly momentous for our country, as its final days were marked by two interconnected and equally contradictory events. On Thursday Ukraine learned about its long-term development strategy, mapped out by Yuriy Yekhanurov's cabinet, and the creation of the UkrGazEnergo joint venture and the contracts signed by the cabinet.

Coming from the prime minister, the government's strategy sounds attractive because it contains such lofty goals as turning Ukraine into a democratic European country with a competitive economy and high living standards, which are supposed to be achieved by boosting the economy, increasing Ukraine's role in the world, developing and tapping the nation's intellectual potential, boosting quality of life, and ensuring national unity.

In doing so, the cabinet must have foreseen the criticism that ministers, who have been dismissed, especially during an election campaign, are not supposed to offer any long-term program. Addressing students at the Kyiv-Mohyla Academy, Yekhanurov therefore emphasized that with due account of the coming elections and the resulting appointment of a new cabinet, this document is maximally workable and apolitical.

To what extent is this program feasible? Is it aimed at softening the negative impressions of the Orange government's performance by beating the drum for another "radiant future?" Is this supposedly "apolitical" document in fact the election program of the political force led by the prime minister?

Let us try to assess the prospects of implementing the long-term strategy whose crucial point is undoubtedly a doubled gross domestic product by the year 2012 (forecasts say this year will see only zero GDP growth). Yekhanurov failed to explain to the students how this will be done (a similar promise in Russia relies on oil and gas price hikes) and promised to return to this subject later.

Analysts interviewed by The Day believe that all the problems have resulted from the gas price rise and increased industrial and public expenditures on energy conservation. In their opinion, this situation will last for at least some three to five years, and it is difficult to expect any growth at all during this period.

Here I must mention the other noteworthy event, the creation of a notorious gas joint venture, which is chiefly aimed at supplying natural gas and other kinds of energy resources to Ukrainian consumers. The revised gas prices and the latest murky gas deals between Russia and Ukraine and their business entities are the factors that are creating many risks and thus casting doubt on the implementation of the Ukrainian government's strategic plans.

According to Eduard Zaniuk, PR chief of Naftogaz, the Swiss company RosUkrEnergo, and the newly-established joint venture have signed a five-year contract on gas deliveries. "The price, $95 per 1,000 cubic meters, has been fixed for five years," Zaniuk stressed.

Deliveries will reach 34 billion cu. m. in 2006 and up to 60 billion in the next four years. In particular, it is stipulated that UkrGazEnergo's authorized fund will amount to five million hryvnias "exclusively in ready money," while the joint venture's statute forbids the company to take over, dispose of, or manage the gas transportation system and its constituent parts, including underground gas reservoirs.

This is where the mysteries come in. To start with, the latest gas deals in Kyiv were "blessed" by Prime Minister Yekhanurov (who explained this during a TV appearance as, "So that some people's legs don't tremble during the signing").

Does this mean that the ministers in charge of energy and/or the Naftogaz management took a dim view of the contracts, and the prime minister decided to shoulder all the responsibility? The public could, of course, welcome this courageous act if it knew the real meaning of the differences inside the government team.

For the time being, the following "nonessential" fact can attest to the existing discord. Naftogaz was represented at the briefing on the joint venture and its contracts (signed by the Ukrainian prime minister) only by the deputy chief of its legal department, Andriy Halushchak.

It is anyone's guess why, according to Interfax-Ukraine, a little known individual named Vladyslav Shperun was suddenly appointed acting chairman of Naftotgaz when its current boss Oleksiy Ivchenko is hale and hearty.

But the main collision lies elsewhere. The contract between the Ukrainian-Russian joint venture and the essentially Russian company RosUkrEnergo (President Yushchenko said recently that no Ukrainian government entities are represented in the latter but did not reveal if any of our private companies are part of it) is being officially interpreted as one that guarantees the price of $95 per 1,000 cu. m. for all five years.

Meanwhile, an informed source told the above-mentioned agency that the contract points out that if any circumstances beyond the contracting parties' control should arise on the fuel and energy market or should the price not reflect the market price level; either of the parties can effectively demand the launching of a negotiating process.

In this case the contract should be revised within 10 days, and any refusal to revise it should be well-grounded. In other words, the contract does not rule out a gas dispute or, to be more exact, a shock for Ukraine.

It will also be recalled those three days before signing these documents in Kyiv, RosUkrEnergo representatives announced that the price of $95 per 1,000 cu. m. was only guaranteed for the first six months of 2006 and will thereafter depend on the purchasing price of Central Asian gas.

After the signing, one of the executive directors of RosUkrEnergo, Kostiantyn Chuychenko, claimed that, if necessary, the company might revise the price of the natural gas being supplied to UkrGazEnergo. According to Chuychenko, the documents "set out a procedure typical of this kind of international contract."

Meanwhile, another executive director from the same company, Oleg Palchikov, believes that the contract does not contain this kind of a formula; he says that the price of gas for UkrGazEnergo will be formed by variations of Central Asian gas prices.

If the signed contacts are not transparent even for these people, then what about Ukrainian businesses, which will now have to draw up their financial and production plans literally in the dark? What will they say to the promised twofold GDP growth - that this may be achieved by increasing the tax burden many times over?
By Vitaliy Kniazhansky
The Day Weekly Digest in English, #3

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