Blue &Yellow: Politics and Economics in Ukraine

Under the Kharkiv agreements of April 21, 2010, Russia granted Ukraine a 30 percent discount on the price of gas, relative to the January 2009 agreement concluded by the Tymoshenko government. In return for the favor, Yanukovych agreed with Russian President Dmitry Medvedev to prolong the stationing of Russia’s Black Sea Fleet on Ukraine’s territory until well into the 2040’s.

That discount notwithstanding, the gas price per one thousand bcm is rebounding to levels that hurt Ukraine’s inefficient steel and chemical industries. After a fleeting drop from $306 in the first quarter of 2010 to $233 in the second quarter (an immediate result of the Kharkiv agreements), the price rose to $249 in the third quarter, $252 in the fourth, $264 in the first quarter of 2011, $295 in this year’s second quarter, and is forecast at $300 on an annualized basis in 2011. The main factor behind the upward curve is the peg of the gas price to the cost of the oil products basket. The latter’s cost surge is attributed to the Arab turmoil, among other factors (Interfax-Ukraine, April 14, 21).

Excerpt from Eurasia Daily Monitor (Volume 8, Issue 79, "Yanukovych seeks new gas discount from Moscow", no link). The agreement was rubbish, [1]. The Russians received an amazing deal while the Ukrainians received a "discount". They had the punitive gas price set up by the 2009 agreement reduced, but accepted a 25 year lease on the Russian Crimea  naval base in exchange. One year later and another deal is needed to fix a deal that was meant to fix the 2009 deal.

Dershowitz said Monday that he was drawn to the case by a recording that prosecutors say incriminates former President Leonid Kuchma. A voice on the tape that sounds like Kuchma's is heard complaining about journalist Heorhiy Gongadze and suggesting that someone "deal" with the problem.Gongadze was kidnapped in September 2000 and his headless body was later discovered outside Kiev, the Ukrainian capital. Kuchma has denied any involvement."A main point is that he is a victim of a manufactured tape, that nobody can be confident that the recording is authentic," Dershowitz said in an interview with The Associated Press. "And there is nothing worse than being a victim of false evidence."

The owner of the Kyiv Post, a Ukrainian English-language newspaper, Mohammad Zahoor, wants to sell the newspaper for $2.4 million as it is not profitable, the Kommersant Ukraine wrote on Thursday.
"I am a businessman, not a politician. This business [the Kyiv Post] brings me no political dividends, but only a monthly loss of $80,000. We are still subsidizing the Kyiv Post, but it cannot last forever," Zahoor told the newspaper.
According to him, he is ready to sell the newspaper for $2.4 million, the businessmen derived this figure basing on the price he paid for the Kyiv Post in 2009, and the funds he has invested into its development since.

Via Interfax-Ukraine, why did he purchase KP in 2009 if it was a money loser?

Unemployment in Ukraine increased by more than 13% over January 1 through March 1, 2011, President of the Ukrainian League of Industrialists and Entrepreneurs (ULIE) Anatoliy Kinakh said at a meeting on April 15.

In particular, this happened due to worsening of work conditions for the self-employed due to the adoption of some provisions of the Tax Code, he said.
"Unfortunately, our forecasts came true: over the first three months of the current year the level of joblessness in Ukraine increased by 13.2%, as of March 1, compared to January 1. This is a very negative tendency," he said.

As I noted in a previous post, official unemployment was very low after the economy contracted in Ukraine.  While "worsening of work conditions" may contribute to the higher unemployment changes, I'm skeptical that its the only factor. Are the changes in the tax code simply shedding light on the unemployment that was already there?

"He liked to listen to Arab music on an old cassette player," she recalls, and was "obsessive about his outfits," adding that during trips through poverty-stricken African countries, "he would fling money and candy out the window of his armored limousine to children who ran after our motorcade." 

Even so, Balinskaya is careful to remind readers that there are a lot of silly rumors flying around about Qaddafi, denouncing as "nonsense" suggestions that his fantastically beautiful Ukrainian medical staff also served as a harem. 

"The truth is that Papik was much more discreet than his friend, the womanizer Silvio Berlusconi," she says, explaining that he only hired pretty Ukrainian women because he simply "liked to be surrounded by beautiful things and people."

From Radio Free Europe, the tidbits provided about Qaddafi in the article are few. It simply reinforces the idea that he was a world-class megalomaniac.

The Melnychenko tapes have stirred anxiety in many corners of Kyiv, where they have the potential to spawn a host of additional cases. Numerous officials, including current Prime Minister Mykola Azarov and parliament speaker Volodymyr Lytvyn, are allegedly implicated in the recordings, captured in conversations revealing a massive web of corruption and criminal activities.  

Prosecutors have indicated they are not pursuing charges against Lytvyn, who as speaker holds immunity that Kuchma doesn't. But many observers -- including Melnychenko himself -- believe Lytvyn, who once served as Kuchma's chief of staff, played a critical role in the killing. 

Emphasis mine, I suppose this is one way to keep someone in line, by showing him what happens when you step out of line (and immunity).

But Russia last week upped the pressure in its attempts to trump months-long EU talks by saying it could offer Ukraine an annual $8 billion discount on gas supplies, setting the stage for a tug-of-war between Brussels and Moscow for Ukraine's allegiance. 

Ukraine's choice is about more than trade: It is seen as crucial in deciding the geopolitical path of this former Soviet republic of 45 million, wedged between Russia and Europe. 

A free-trade agreement with the EU is seen as a stepping stone to deeper integration with the 27-nation bloc; joining the customs union with Russia, Belarus and Kazakhstan would rule out an EU deal and tie it to fellow former Soviet states.

From Wall Street Journal, others [1,2] have written about Russia's attempt to persuade Ukraine to drop a free trade agreement with the European Union.  This persuasion involves threats that a EU trade agreement would cost Ukraine economically.  EU data on Ukraine trade (2009 figures) shows that the "EU27" is the biggest trade partner for Ukraine, with Russia second. However, a custom union with Russia would end EU talks.  Putin is forcing Ukraine to choose between two different options. I'd say that getting a gas "discount" is not worth the price for Ukraine. This discount could easily be removed if Ukraine and Russia get into a disagreement in the future. In fact there should be an asterisk attached to the proposed discount...

* Contingent on Ukraine's good behavior as determined by Russia