Ukrainian Prime Minister Yekhanurov: A Fight On Two Fronts

- Super! This is a clear example of what may come out of a harmless initiative.

We raised the issue of Christmas holidays, initiated by Kyiv’s administration, in the talk with the president. Yushchenko supported this idea, having mentioned that Christmas holidays are observed all over the world. To tell the truth, at a Cabinet meeting I raised this issue without any preliminary work or preparation. Only the Finance Minister and Social Policy Ministers were against it. The discussion that followed proved that most Cabinet members were positive about this idea. In any case, they stopped coming to me with requests to approve their “business trips” during the first week of January…

As a matter of fact, this is not an obligatory order, but a recommended one: we cannot tell private businesses when they should work and when not. Moreover, this recommendation does not apply to a whole number of state organizations, such as the Post Office or the Pension Fund.

- He believes that the transfer of workdays to February and March will have a negative effect on the wages of contract workers.

- Many foreign ambassadors complaint that holidays are very unexpected in Ukraine. It is very difficult for diplomatic missions (and not for them only) to plan their work when it is not known how many days off will be allowed for this or that holiday.

- In our case, everyone was informed two weeks in advance. The final decision will be made at the Cabinet meeting on Friday. However, there is indeed such a problem and it must be solved, despite the fact that it is not the only problem requiring regulation.

About Gas, Arbitration, and RosUkrEnergo

- I believe that the contract will be carried out and the gas will be supplied. But… we will still be conducting nervous negotiations.

- As a matter of fact there is a contract between Naftogas of Ukraine and Gasprom of Russia on volume and conditions of transit of Russian natural gas through the territory of Ukraine for the period between 2003 and 2013. It is currently in effect. I cannot imagine how a public company bound by contract obligations can refuse to fulfill them. I asked the deputy head of Gasprom, Oleksandr Riazanov, during our negotiations in Moscow on December 19 in the presence of the head of the Russian Cabinet Mikhail Fradkov: “Is the contract effective?” And he said: “Yes.”

- One can always find a reason to make a statement. But in article 14 of this contract it is clearly stated that: “This contract comes in effect on January 1, 2003… It remains effective until 10 am on January 1, 2014.” And one more thing: “During the period between 2005 and 2009 the Customer (Gasprom) will sell annually natural gas at the price of 50 US dollars for 1000 cubic meters, which is not subject to change by the parties, from the gas transportation services of Russian natural gas through the territory of Ukraine to ensure the gas balance of Ukraine.”

- “Any disputes about these contract or as a result of it are subject to examination and final settlement in the Arbitration Institution of the Chamber of Commerce in the city of Stockholm.” (This is Article 12 of the contract). I am not afraid of possible arbitration. Ukraine has already had a positive experience of arbitration. So if we have to appeal, we know what to do and where to go.

- If we have some factual grounds for it. For the time being I don’t have such grounds. But do you know, that I already have experience in the Stockholm court? One summer the then-Minister of Justice approached me. He called me in Dnipropetrovsk and said: “Yuriy Ivanovych, our planes are being seized. I ask you [to help], you know property [issues].” I agreed that in November I would fly to Stockholm. And then suddenly I’ve changed work. But the Stockholm Court insisted that since we promised an expert, he must appear before the court. They were told that the expert is the Prime Minister, but said that did not matter. In short, we had to arrange a direct TV link and I testified at the Stockholm court. Now I know how they work there and can tell that they are very serious people.

- I see what you are driving at. Indeed, there are two documented proofs: the minutes from negociations between Gasprom and Naftogas on 23 August and the minutes from 30 August 2005. Let’s consider them official documents, since they were produced during an official negotiation, and leave out the fact that such minutes do not entail commercial obligations.

The first of the two sets of minutes, in addition to the propositions of Naftogas, reads that Gasprom will regard the proposal of the Ukrainian party and will give its answer by 26 August 2005 with consideration of all aspects, including the judicial one. If we assume that the letter of the deputy to the Gasprom chair board A.Riasanov of 26 August was such an answer, then it gives a negative answer concerning the change of the conditions of the acting contract.

The last document is the minutes of the meeting in which it was said that about 20 bilateral covenants, agreements and contracts should be changed in order to reconsider the conditions of the contract.

Now, let’s see who signed those documents on behalf of Ukraine. Ihor Voronin, deputy board chairman of Naftogas of Ukraine, signed Agreement 4 (2004), and Yuriy Nemchenko, another deputy board chairman signed both sets of minutes.

- Yuriy Nemchenko was given the directive concerning his participation in the negotiations. But it stated different things, which means that he was given other oral instructions.

- The issue is the well-known organization RosUkrEnergo, which could be called a private business supplying Turkmen gas to Ukraine. This is the commercial or business component of the entire gas transportation project. It makes money for its founders. The previous Cabinet made a decision to replace RosUkrEnergo, because it was a “wrong” organization and it transported the “wrong” gas. They wanted to substitute it with the “right” organization with the “right” gas. This, however, did not happen…

- What for? I defend previous the Prime Minister of Ukraine!

- Why would we replace it? I am satisfied with the transportation, I am satisfied with the fact that currently gas goes to Ukraine. You see, during wars there are certain painful points of pressure on the opponent or adversary. The number of such points should be limited. We cannot fight on all fronts at once. A fight on two or three fronts has never been successful. That is why Fuel and Energy Minister of Ukraine Ivan Plachkov is now (Decmeber 22 - editors) in Turkmenistan and I can fly there the moment it is needed.

- I don’t know this. I can only tell you that the current problems are chiefly due to the fact that the system, which had been built for years, was ruined recently. Now we should sort out the situation and think what to do further. Of course we should look for the founders and find out the details. We will. But now I don’t have time for that.

- I signed a directive for Plachkov…

- What secret! What are you talking about? We are a transparent government. Plachkov went with a directive. I personally dictated it and signed it.

- What are you talking about! Even at the market people bargain in such a way so that others do not hear them.

- I did not like it that Ivchenko held two posts at the same time that could not be combined. And it was not only him. There were three persons in the Cabinet. Now Ivchenko has been dismissed from the political post.

- It is hard to say. I will be satisfied with it if we have normal relations with our main supplier of energy sources. We’ll see.

About the Economy, Price Formulas and the Political management of Gasprom

- It is an absolutely bearable problem. It is only a matter of a transition period for the gas price increase. I believe that eventually it will ensure true independence for Ukraine and transition from patriarchal relations to normal business relations. Then we will indeed become a European country.

But let us look at the gas balance first. About 76 to 80 billion cubic meters of gas is annually consumed in Ukraine. What are the production losses? I’ll tell you: 7.8 billion, or 10% of the total consumption. This figure is alarming… That is why I ask: first, why do the gas losses make up such a huge amount? Second, where is the gas lost?

- Yes.

- Now they’ll be set up. We are very interested in this. And power-consuming furnaces will be replaced. But if you ask me the question “When?” I’ll answer: I don’t know yet. I haven’t approached this topic yet.

Instead I have already gained an understanding of metrology issues. Our metrology laboratory in Boyarka will be equipped with the most modern equipment. After the appropriate certification procedure, it will be authorized to certify operation pipelines.

We will take the following path: having received the conclusion of the metrological laboratory we will be able to ask for an increase of gas pressure in the main Ukrainian pipelines by 25%: in other words, to increase by a quarter the carrying capacity of the Ukrainian gas transportation system. We will have to do this, since Europe’s need in gas will significantly increase, while we must ensure a reliable gas transit to Europe through its territory.

The Bohorodchany Uzhhorod gas pipeline, which is currently under construction within the framework of the Ukrainian-Russian gas consortium, will increase the carrying capacity of the Ukrainian gas transportation system, in the course of time. Meanwhile, we must enable our existing facilities. The reliability of the gas transportation system is currently the priority.

- Here is one option for a transition period, which is adopted in the civilized world. Our current price is 50 dollars per thousand cubic meters. This is a bargain price since we have patriarchal relations with Russia. What price does Russia want to propose to us for January? Name one.

- The first issue is the fight about this price, the second - the transition formula. We, for example, propose a 24-month transition period. Or let’s say 12 months to make our calculations easier. Let’s multiply 50 dollars by 11 months and add to it 230 multiplied by 1 and divide it by 12. This (65 dollars -editor) is the real January price. Then multiply 50 by 10, 230 - by 2 and so on. We will come up with the figure 230 for the last month of the year.

I would like to emphasize: Gasprom is an open, public, and civilized company, set up in line with the principles of international law. It cannot allow price discrimination for its consumers. Consequently, we ask questions which the Economics Minister will formulate: what is the price of the gas transported to the Caucasus, Baltic region, Moldova, Belarus, Transdnistrovie, and Ukraine? How is it arrived at? Then it may turn out that a resident of the London suburbs, who owns some shares in Gasprom, goes to court with the question: “Why is the management of an open public company affected by politics, which in its turn negatively affects the economic indices of the enterprise in which I have invested my money?”

- Absolutely true. It is a matter of politics. A month ago the State Duma of Russia adopted a law on liberalization of Gasprom shares; it such a way, this company is becoming absolutely civilized. It can sell its shares on the international market. But when a state interferes in the company management, it worsens the management, which results in financial losses.

About foreign countries that will help us

- No.

- We do not have reasons for that.

- I gave instructions to the Economic Ministry, so that they will give a clear definition of what “economic pressure”, “price discrimination”, etc is. This will be done.

- If on January 1^st Russia reduces the gas supply to the Ukrainian pipe by the amount allotted for Ukraine, while Ukraine continues collecting its share from the gas pumped to Europe, which side will Europe take?

- There are no grounds to stop supplies of gas to Ukraine, since the contract is still in effect. What does it mean, “reduce”? There is a maximum pressure in the pipe, and a minimum. When there is a minimum, Europe will not receive gas purely for physics reasons.

- And what then?

- Then Europe will deal with the supplier together with us.

- Will it deal with us and Russia or join us and deal with Russia?

- It will join us, I believe.

- Against the background of gas negotiations, Russian politicians and diplomats make statements concerning the return of VAT on the sale of energy resources of the country of origin and on the toughening of Russia’s positions on issues of the property of the former USSR abroad. Did they make such proposals official in the negotiations?

-No.

— I think that it is you, dear journalists, who should give such an assessment. This is a qualitative question. Please assess and draw your conclusions, and we will draw ours.

Not only this country. But you are right…

Nevertheless, in Russia all the branches of government are demonstrating a consolidated policy. They are like one fist. And the Ukrainian officials are pluralistic in their words and deeds, to say the least. Nobody knows what Matviyenko, Kinakh, or Lytvyn is saying about natural gas at the moment. In January there will be even more chaos. When will the Ukrainian government learn to work professionally and as a single team? Will it ever learn?

Yes, this year our forces became sort of unbalanced. But I wouldn’t say I have any problems with the National Security and Defense Council. Twice a week, at 8 a.m. sharp, Anatoliy Kinakh comes to me and we discuss the topical issues of the day and work out a common position. If you hint at his statement on the gas transportation system, I can tell you that our opinions on this issue are identical.

It’s easy to work with those who are “in the game”. Problems are created by those who look for every pretext to advertise themselves by disseminating firsthand statements, without even having read them.

And you are right that we, unfortunately, don’t have a serious information policy. The former institutes have been liquidated and new ones haven’t been created yet. What kind of information policy did we have before? - just regular directives to journalists. Now they are free, but they haven’t learned to work at a higher professional level. Our public service bodies have too few high-class specialists in this field. Learning takes years.

And yet, this country is different now. [Lithuanian Prime Minister] Brazauskas told me about the chairman of the Lithuanian state property fund, who journalists caught driving the fund’s car to a forest. The official found himself in the spotlight and was on the hot seat for two months: the press wrote a lot about morality and taxpayers’ money. There was another example in the Czech Republic: a high-ranking official was seen at a football match at 7 p.m. and two hours before he was noticed getting into a car. And one journalist saw him driving from one city to another with flashing lights on - to get to the match in time. The journey between the two cities took at least two hours, so the man had to leave his office one hour earlier. And that was enough for him to have to resign.

It’s all about a healthy atmosphere in society. And we are on the way to it. You know, (former U.S. President) Bill Clinton said when he visited Ukraine last time, ‘Your press has been lashing out at politicians and members of government so ferociously of late that I have the impression that your country is really becoming democratic.’

As far as the parliament is concerned… Yes, the leaders of the major factions have visited Moscow. When I was visiting Moscow last time, our parliamentary delegation was there. I think some people have a switch in their brains, which changes the color of their positions once they cross the border. Of course, the different tenors of their statements don’t add to Ukraine’s positions. Maybe the Russians are right, saying that we need some catalyst to consolidate, that our nation lacks patriotism. But we are already on the way: I have information from our industrialized regions about seriously growing consolidation. Nothing consolidates people more than…

…A threat to the business of owners of energy-consuming industries.

What can I say? - The question is absolutely correct. This problem has several components: a state management, a legal, an informational, a civil, and a corporate one. By a consolidated position I mean unanimity among the President, the Government, and the Parliament. They are supposed to come up with a unanimous position and convey it to everyone through direct contacts.

I think you can see that we have solved the problem of different comments. I prohibited all members of the government except [Fuel and Energy Minister] Ivan Plachkov from making any comments about the “gas process”. It is really hard for former opposition politicians to put up with the restrictions of their new executive positions. The former oppositionists, intoxicated by freedom, need some time for “decompression”.

A week before Plachkov went to Turkmenistan, Ukraine nearly disrupted the regular air link between Kyiv and Ashgabat just because of a miserable debt. How do you explain this fact?

I didn’t know.

So what is your and Kinakh’s unanimous position with regard to the Russo-Ukrainian gas transportation consortium?

Ukraine is for an international gas transportation consortium, which is supposed to build new pumping facilities for the Novopskov-Uzhgorod pipeline. The first part of the project should cover the 254-km Bogorodchany-Uzhgorod section. A new 1,500-km pipeline would be a good job for the consortium.

Besides, the Ukrainian side is positive (while the Russian side is not) that the next part of the project should be the construction of a pipeline section from the Kazakhstan-Russia border to Novopskov, and we insist that this work be carried out by the GTC. I laid it all out to the Russian officials during the negotiations.

We hail the idea of founding a consortium that would do this kind of job, and everyone has to understand that we won’t agree to anything else. This is the common position of the President, the Prime Minister, and the National Security and Defense Council.

The Russians have a different idea of a gas transportation consortium. Why can’t you specify it?

Moscow offers us European prices.

Or else...?

No “elses”. We are waiting for Russia’s official proposal on the pricing formula.

Have you been to Crimea in the capacity of Prime Minister? This question interests us because on Wednesday the Cabinet of Ministers discussed the problems of the Russian Navy’s presence on Ukraine’s territory. The prevailing sentiments in Crimea are pro-Russian rather than pro-Ukrainian…

I haven’t visited Crimea. An order to study the issue was given back in February by Yulia Tymoshenko. It took almost ten months to prepare the necessary materials: the issue was ping-ponged from one agency to another. The first agenda item at the Wednesday session was joint inspections by the Ukrainian and Russian Defense Ministries. We agreed with the Russian side that our inspectors would have access to the Black Sea Fleet premises and the Cabinet of Ministers determined the inspection procedures.

Item number two was the 1997 agreement on the stationing of the Russian naval base. Its first part pertained to the land and buildings leased to Russia. This issue is in the competence of the Ukrainian Defense Ministry, because this property belongs to Ukraine. The second part pertained to the land, which the Black Sea Fleet used in Soviet times but has not ceded it. They just stay there. We have referred this issue to the State Property Fund. Besides, we have found 146 hectares of free land occupied without permission by the Russian Navy. I asked [SPF Chairwoman] Valentyna Semenyuk, ‘Do you need a gun or will you go there unarmed and tell them that this land belongs to us? You could tell them: all right, guys. If you need it, then let’s strike a rent deal. If you don’t, then how much time do you need to withdraw?’ I think it’s a normal approach.

There is also a question of Russian children going to our schools in Crimea. This is Ukraine’s “humanitarian aid” to the Russian Federation. We don’t demand money, but we want to know what status this process has. Our polyclinics and hospitals render medical aid to Russian seamen and their families. No problem - we wish them good health, but we want to know how much we need to appropriate for their treatment. We calculate expenses for medical aid to a certain number of Ukrainian citizens, but in actual fact our hospitals provide services to more people. So we have to spend more.

So how many hectares does the Russian Black Sea Fleet occupy?

I’ll give an exact figure as soon as the State Property Fund completes the inventory. The available figures are tentative.

We know that a delegation from Moscow came to Kyiv in the spring. They wanted to meet with Semenyuk, but she didn’t receive them.

I know about this unpleasant fact. I asked her, ‘What is your fund doing? If you are against privatization, then who needs you here? If you don’t want to deal with state property, why keep so many people on the staff?’

Finally, we found a common language and now the fund is ready to take on this extra job. I think the fund will have a separate department to deal with these issues.

You know, this question doesn’t concern me personally. It is about the government of Ukraine. It is hard to negotiate with anyone when your opposite number takes you as a provisional head of government. Everybody understands that the competence of this Cabinet expires in May, but its current status is especially important, because it is a matter of national interests and patriotism.

I might just as well capitalize on my “interim” status, but it’s against my principles. I think I’ll never be a public politician - I’m not that type. Besides, my background is that of an executive. The interim status may be convenient for me in a way, but it’s not good for Ukraine and its economy.

A lot of political forces would be happy if this government resigned before the parliamentary elections in March. But that is not allowed by the Constitution. Besides, the parliament has too little time to give us our walking papers, because its final session ends in mid-January.

Who will be appointed Vice Prime Minister for Regional Policy?

The President has made up his mind and will name the Vice-Premier next week.

Is it Serhiy Grynevetsky?

I told you: the Vice-Premier will be appointed next week.

A lot of Western analysts say that one of Ukraine’s biggest problems is the permanent electoral process. The too-short period between parliamentary and presidential elections leaves too little time for comprehensive reforms. You top the election roll of the political force that is sure to win a lot of seats in the new parliament. Are you going to initiate legislative changes toward solving this problem?

Of course, it would be good if parliamentary elections immediately followed presidential elections or vice versa. Then voters’ attitudes would not change much. If parliamentary elections took place three or six months after presidential elections, then both the legislative and the executive branches of government would be dominated by the same political force. Imagine what happens if a new parliamentary majority appoints a prime minister who opposes the head of state and elects a speaker who opposes both. What happens if there is no accord within this triangle?

You see, there are things I can agree or disagree with. But there are rules of team play. There are higher goals and motivations that should restrict one’s personal ambitions. To my mind, ambitions are irrelevant to state affairs. And I want gradually to turn the Cabinet of Ministers into a parliament of executives engaged in collective work.

In such a government, no one would hide under the table when the government makes an unpopular decision like a price increase. In our government, unpopular decisions are made by one man - Finance Minister Viktor Pynzenyk. His post obliges him to make them and he is always left holding the bag. But it’s not the way it should be.

If the new parliament produces a speaker and a premier who represent political forces that are alternative to Viktor Yushchenko, we will get an uncontrollable and ineffective machine with each part clashing with the other. But there is another bad scenario. A lot of businessmen are running for parliament, so the new legislature is going to be dominated by business interests even more than the incumbent one is. And when they receive their MP mandates, they may join forces under the presidential auspices and elect their speaker and premier. Then we will have a limited liability company with all financial flows, staff competences, and other resources distributed among the stakeholders. Do you know that?

It may happen so… You know, I am in a unique situation. I find it very easy to negotiate both with other countries and within this country. On the one hand, everybody knows and says that this government is short-lived. But on the other hand, I am absolutely free as I am not bound by any obligations.

I said to Oleksandr Moroz before my appointment, ‘If any member of my government fails to fulfill any decision the Cabinet makes, he’ll be fired on the same day. If you don’t agree, you may vote against me.’ The Socialists debated for a long time and finally decided that the ministers would have to comply with the Cabinet’s decisions. And the way SPF Chairwoman Valentyna Semenyuk acted during the privatization of Kryvorizhstal proved that the Socialists kept their word.

She simply took a sick leave.

It’s not so. I called her on Thursday evening and told her to come next morning and sign some documents. She came next morning and signed everything she had to, and then took her sick leave. She did everything that was necessary to complete the privatization procedure. I have no complaints about her. When she asked to resign, I called the President and told him, ‘Semenyuk has fulfilled all her duties properly and she shouldn’t resign.’

Which would you prefer after the elections: a government headed by Viktor Yanukovych or a government headed by Yulia Tymoshenko?

I would prefer a government headed by Yekhanurov.

Do you, as a candidate for the Premiership, have a program for the country’s economic development?

I have a program in a small book and its full version is on my computer.

Why do you keep it under wraps?

I can’t make it public. I need to win the race. My economic views are known well enough, so there’s not much to publish.

Do you think you can win the race, keeping your election program under your hat like all other competing political forces do?

The publication of the program won’t help! You should understand one thing: real actions are never articulated. They mustn’t be. There must be certain limits of what can be said.

Should voters hear lies?

You didn’t get it. There is 100 percent truth: the realities we are living with and the problems we are facing. I don’t exceed the limits of this 100 percent and don’t mix the truth with lies. But I can’t tell the whole truth. Before a surgery the patient has to be prepared, at least psychologically.

Such “window” plans may work in the international electoral practice. But we in Ukraine have a specific situation. After last year’s dramatic presidential elections, our voters became politically active. They are interested in the political situation and seek information from the mass media. There are many “autonomous” analysts who form the public opinion. They are well aware that this country needs a plan of development.

I let my practical deeds speak, leaving it up to the people to evaluate them. I don’t want to lie, but I can’t tell them the whole truth, either. I can’t tell them what Russian Prime Minister Fradkov said to me. I kept notes of our talks and I can show them to you. But don’t use them anywhere! They will not only destroy our trust, but will tell on the atmosphere of our negotiations with Russia.

I can’t tell the whole truth to the country, but it doesn’t mean that I’m not trying to solve at least twenty percent of all the problems. And here’s what Fradkov said…

Do you think we will have a strong government after the elections?

No. Take Brazauskas, for instance. He is criticized severely and we are breaking our backs to achieve Lithuanian living standards. The Lithuanians are dissatisfied with their low salaries. Their country is a member of the European Union, but their monthly salaries average a mere ?500.

Are the Lithuanians satisfied with their taxes?

Who’s ever been happy about taxes?

It’s not until next fall that the new parliament will start passing bills. And tax-related bills won’t be considered before the end of next year. If the lawmakers manage to carry out a tax reform in 2007, then we can introduce a new taxation scheme in 2009. Take, for instance, taxation of real estate. It will take more than a year to start working. The bill on taxation of real estate has been in the making for three years, and I’m still unsure that it is ready.

But the new parliament will hardly differ much from the incumbent one. It might be even worse.

That’s exactly what I said to calm everyone down. I told Pynzenyk, ‘The new parliament will be something! When you submit your national budget bill for 2007, you’ll have a lot more problems than you’ve had with this budget.’

The parliament has the final say.

Yes, but the agricultural sector does not have to earn money: it receives subventions from the central budget. Why does the army have to?

Our state has been independent for 14 years, but our political elite has not yet realized the vital importance of the army as an indispensable institute of any sovereign state. At the same time, everyone understands the importance of agriculture. Pynzenyk offered a compromise solution, which he worked out jointly with the Budget Committee. That’s his job - to be the bad guy.

Why is the 2006 budget based on the old approach to life insurance? Why is a police officer’s life priced at UAH 100,000 while a military serviceman’s life costs UAH 17,000?

This is a matter of insurance. I see your point. Such inequality is certainly a mistake. But it was my fault: I tried to solve this problem but failed. We are going to work on it.

- Earlier we could see what was going on: the corruption-related, shadow components were evident. Now the situation is less clear…

- I have always dreamt of doing so. I have been lecturing on investments and stock markets since 1988. Yet the truth is that our country has been unable to adopt national corporate legislation for years now. The other day I spoke with a well-known MP, urging him to facilitate the passage of the law on joint-stock companies. He said “no”. Do you know why? Because of the closed joint stock companies! The law does not provide for their operation.

It is a matter of legislation. Thus, for the time being, we will have to run privatization on a case-by-case basis…

Besides, companies under Ukrainian jurisdiction can only place depositary receipts on international markets, which is not a direct sale of companies’ shares but a sort of placement of secondary securities.

- Unfortunately, every time we submit the draft to the Rada they blackball it. Everybody knows the country needs this law. It is not bad, it contains very clear provisions. However, the Supreme Rada Committee for Economic Policy would not recommend it for passage because, as you correctly noted, most committee members represent business, closed joint stock companies, and they know what is in their interest and what is not. I was told a few years ago that the joint stock company law would not be passed before 2007. I thought the situation had changed, but it does not look like it.

- You will not find any scandalous disagreement on this matter. I just voiced my personal opinion. I believe there are certain sectors or, rather, sub-sectors and clusters in Ukraine that should have a secure niche on the world markets. These are the aircraft building industry, ferrous alloys, titanium, etc. It means I must bring together all the top managers of those clusters and think what role the state should play with them and in promoting them in their respective international markets.

Ukraine has the biggest share on the world market of ferrous alloys. The Nikopol Ferrous Alloy Plant is the fourth biggest manufacturer in the world. If we managed to harmonize the interests of all our national ferrous alloy manufacturers so that they could stand united and play on the same part of the field in international markets, we could achieve much more. So I see my task as identifying the best possible way of developing the industry at large, and then deciding whether to give it over into private hands, or keep it in the state ownership… I have to know the target and how to hit it.

- There are no guarantees, I am afraid. In my opinion, everything should be privatized. I believe in private ownership, with no reservations. Yet I want to reiterate, and I want to be heard: our aviation industry, titanium and ferrous alloy industries should occupy the place they deserve on international markets.

We need to identify this place and know our objectives. Only then can we start selling enterprises. Having got the “big picture” and all the small details, having studied the situation carefully and comprehensively, I might suggest selling the all enterprises of an industry together, as a cluster. I cannot rule out this possibility. My primary concern is for Ukrainian manufacturers to become powerful and respected players on the international markets.

- Of course, we are. But again, it is up to the Supreme Rada to make the decisions that would allow it. Adoption of the law on joint stock companies will send a positive message to the outside world that we have introduced civilized approaches in this country.

To be treated as a civilized economy, we should have clear and stable rules for the game, say, on the stock market that the whole world will understand. As matters stand, we are still trying to catch up with the “engine of civilization”. We cannot afford to let it pass by and go ahead without us; otherwise we will lose direction. There is an organization called the Organization for Economic Cooperation and Development (OECD) uniting the world’s thirty most developed countries. I have a dream that Ukraine would become at least an observer in that organization. Then we would probably understand the way the “golden billion” think, the way their legislatures, economies and societies operate. Then, drafting national legislation, we would take on board the best international management practices.

You know, there are very specific indicators and criteria that distinguish a developing country likely to become a member of the club one day. We still have a chance to belong to the “golden billion”. Amazingly, the current gas crisis could enhance our chances.

It is in the Ukrainian mentality to want to please everyone. But things are not like that in real life. In sustainable democracies, when a certain issue is put to the vote, there will be those who lose the vote and feel bad about it, but society at large will benefit. We are different. Our society reminds me of a limited liability company with a slogan “Let us divide everything so as to please everyone”. Who are those “everyones”? Decision makers are the only ones who are pleased…

- Right, but that would be another story. I have a document with me from which I would like to quote just one phrase: “Ukraine is on the threshold of the developed countries’ club”. This document substantiates this thesis.

Interestingly, the sector where I have special expertise - construction - has a great role to play in advancing Ukraine towards the club of developed economies. On Tuesday, at a meeting with the regional and local media, I discussed ten criteria of civilized life. I spoke of the money that cannot be made in either gas industry or metallurgy. The most promising sectors of today where one could want to invest are sanitation, water supply, electric power facilities, other municipal services, and infrastructure.

- I do.

- That is correct, but all land regulations are within Parliament’s purview. Back in March, such issues were addressed effectively and non-obstructively. Now we have to push laws through the Rada with great effort. I am thankful to [Speaker] Lytvyn for his compassion and support!

It is three and a half years to go until the nest Presidential elections. The country has an opportunity to carry out reforms. I recently spoke with Slovak Prime Minister Dzurinda who, with a popularity rating of four per cent, has managed to conduct all the required reforms.

- Yes. We know what to do. We have three and a half years to do it. We can transform the country within this time. Look at Lithuania. They had the same starting conditions, but they have changed their country entirely.

- We lack investments for want of stability. Investment is a process extended in time. During the last presidential campaign it stalled - nobody risked bringing money into a country living through a revolution. After the elections, free economic zones were abolished… Potential investors thought it was the beginning of an economic revolution that would bring nationalist-communists to power. While they were sorting things out, time was lost and opportunities missed.

- Yes, all land plots have been distributed and it is very difficult to break through onto the construction market. By way of explanation, rather than excuse, I can tell you that in local governments, not a single official in charge of land resources has been replaced over the last year. We have no way of influencing local personnel policies. It is the local council’s prerogative. When I was touring Dnipropetrovsk Oblast as a governor, people kept asking me why old apparatchiki were still in their jobs. I did not know what to tell them.

- I am. And I am ready to take the steps necessary to prevent it from happening.

- You see, there are things that I cannot comment on. At the dawn of my prime-ministerial career I started to talk, but then I realized I was wrong. I was wrong once, twice, three times…

- No, he didn’t. Our relations are most constructive. I am grateful to him for giving me room to maneuver and be creativite. For instance, I nominated candidates for all the oblast administration heads appointed since I took office. Of course, I never suggest that we consider only one person for the position. I bring at least three CVs to the President, and he decides whom to choose. Accidentally, all three recently appointed administration heads are women.

- It all started with the head of the Main Audit Department.

As for the actions that I am planning to undertake, I can show you a list that I drafted on the day of my visit to Moscow, at 5 AM. But I will not discuss it with you lest it be misinterpreted later.

- Parliament has revised the draft law, with due regard for the President’s recommendations, and considered it under another name. I will try to persuade the head of state to sign it, and thus we will resolve numerous problems.

- Yes, the Cabinet passed a resolution to mitigate the situation with equipment exports ensuing from the liquidation of free economic zones and territories of priority development. However, there will be no returning to the previous system. We admit there are problems with granting privileges. Now we have to minimize the adverse impact. The governmental resolution and the new law will allow us to rectify the situation.

- I will sign the new law on techno-pools…

- The fact of the matter is that talented Ukrainian entrepreneurs use very narrow definitions of the national legislation as a bridgehead for a “wide frontal attack”. Could anyone have imagined that some of our “most creative innovators” would use free economic zones to import meat and such things as produce? Our people are sometimes too ingenious…

- One should bear in mind that the law, once it is passed and signed, will enliven some areas of innovation. However, it is my firm conviction that the rules of the game should be the same for domestic and foreign businesses, and that any privileges are faulty, in essence. In the late 1990s, they gave rise to several negative phenomena. At that time, it was possible to pursue a local economic policy (in a privileged territory) that had nothing to do with the country’s economic development and benefited nobody but the people directly involved in the process. This is the nature of all privileges. In Ukraine they are always discriminatory and, for the most part, unfair.

- I think the people whose names the media frequently mentioned in a negative context should have stepped down. Yet the party is a democratic organization and took a different decision. I think a lot can be put down to the Ukrainian mentality again: we did not want to hurt anyone. Besides, we have been through very hard times together… Allegations have not been proven, and the scandal died away.

That we all had an opportunity to voice our concerns in an open discussion is a token of the party’s future transparency and organizational health. I am glad I stated my position explicitly, although it cost me a friend or two.

- It is not true. Besides, you should remember the party’s age. It has yet to grow and mature as a political force. There are a lot of young people in the party. I once boasted of having a good reserve: now these people are coming to the fore. My advisors are under thirty, graduates of western universities, with fluent English. They gave up high salaries at foreign companies for the sake of serving Ukraine. And they are starting to gain true clout in the country’s politics.

- Frankly speaking, it is not the best list that we could have produced. There are fewer new names than I would like to see on the list. This morning, I studied it most thoroughly as a reserve cadre for the party leadership. I know many of them personally as I used to chair the party’s executive committee. As a rule, these are young people that would be in demand soon.

- Boutsa is not on the list.

- You should not forget that Boutsa was the first deputy chair of the party’s executive committee.

- One should judge by the end result.

- I think we can expect 20% of the vote. What we actually get is another matter. Our bloc has not launched its campaign yet, while several other political forces have already reached their campaign apex. We will go onto the campaign trail soon.

- I guess we all have to continue working. I will discuss it with the ministers representing other parties, too. I think they should stay active in their jobs, taking no direct part in the campaign. The country cannot afford to grant leaves of absence to half the Cabinet. On the other hand, their parties have enough people on their list to run effective campaigns without ministers.

- I think their chances are very good. They have got experienced politicians and, more important, the people representing the spirit and ethics of last year’s orange coalition, like Volodymyr Filenko and some others.

- Can I tell you something that other journalists haven’t heard yet? Starting on the first of January 2006, Ukraine will be exporting electric power to Belarus in the amount of 2.5 billion kW/h. And I appreciate the Belarusian President’s initiative in this transaction. The Belarusians decided to diversify their power supplies.

Second, we are opening the Dnipro River, and the Belarusians are exporting their potash fertilizers to Europe, via Ukraine by the Dnipro and then by the Danube. The Yugoslavs have restored the bridge in Novy Sad and the process will be kicked off any time now.

Third, electric power from Western Ukraine will be exported directly to Slovakia, without entering Hungary (which was never the case but the documentation used to indicate otherwise). Two weeks ago, electricity tariffs for Hungary were raised. Thus Hungary will pay as much as other importers of our electricity do, rather than half as much like before.

Fourth, by 31 December 2005, the total non-reimbursed outstanding VAT will have been reduced to UAH 700 million. This is the amount appealed in courts. We will have returned the rest.

When in Lithuania, I asked local businessmen: “You know, we have reimbursed the VAT and, I believe, the kick-backs have decreased. Is that so?” They answered: “Yes, we have heard it’s eight per cent instead of the former thirty”.

It is a joke, of course, but we are decontaminating our economy, withdrawing it from the shadow step by step. You know we have to choose between figures that look nice in reports and the need to clean up the national economy. The latter will enable our country to reform. At the moment we are cleaning up wholesale trade. In January-November it decreased by 9% as compared with a similar period last year. Our GDP has declined, which is bad. We take a lot of flack, but I do not despair. At the same time, petrol prices are going down, although oil sales have made up as little as 16% of the last year’s volumes. Our financial indicators have improved two-fold.

If you analyze the situation objectively you will come to the same conclusion: traders have ceased re-selling oil several times without leaving their office.

- It will be better that this year. We will think more realistically. We will behave in a more pragmatic manner. We will not have our heads in the clouds but, rather, set attainable goals and seek down-to-earth ways of achieving them. This will allow us to gain more confidence from our compatriots, whose expectations of the administration will become more reasonable as well.

It will be a challenging year for the government, which will have to learn to operate under new conditions. So far we have no idea what these conditions will be like. How will the branches of power interact? How will the authority be distributed amongst the President, Parliament and Cabinet? A lot will hinge on the passage and implementation of the laws “On the Cabinet of Ministers”, “On the President”, “On Parliamentary Committees”, etc. They have already been drafted, but they should be adopted in conjunction with a series of other laws and regulations. My impression is that the Supreme Rada will start its lawmaking activities in October. We cannot possibly do without them.

- I think so.

- I think the imminent threat of dissolution will consolidate MPs, at least for some time.

- It is a difficult question. I hope we will be able to reconstruct something like the “People’s Power” coalition. Of course, members of last year’s orange coalition have very different approaches to the economy, but we still can negotiate and agree on the principal matters.

The incumbent cabinet is very heterogeneous in terms of economic viewpoints and political allegiances. It is a challenge to work together as it is, but I am sure heading the next government will be much more complex an undertaking. Every minister in the new government will have a political force behind him or her, invincible due to its status as a coalition member.

Today, ministers know they can be fired for failing to do their job properly. In the future, it will be difficult to dismiss an incompetent minister propped up by a coalition member-party. On the other hand, a minister will become a more responsible and independent player. He or she will have real managing powers, which I like.

- State secretaries will have a different role to play. The country cannot take the risk of depending on politicians, who often replace one another. Somebody has to ensure sustainable public administration. This will be the state secretaries’ task.

- At this juncture, it is hard to say. I will not give you any indicators different from those cited in the 2006 State Budget. Fundamentally, the situation is not bad, but a lot depends on the outcomes of the gas negotiations.

- For that we should adopt all the required legislation.

- Moscow’s path to the WTO is thornier. The difference between Ukraine’s and Russia’s approach to WTO accession is that Ukraine is prepared to reach compromises, where Russia is not. It is more difficult for them to negotiate.

- I’ll tell you this: Ukraine often declares its intention to join NATO and has a staff of eight in our rep office in Brussels. Russia does not plan to join NATO but its rep office in the Alliance’s HQ is 80-men strong. It is just an illustration of the difference between declarations and practical steps in promoting national interests.