Publication: Monitor Volume: 6 Issue: 94

Ukrainian Prime Minister Viktor Yushchenko headed a government delegation to Washington for a May 8-10 visit. Nine years into Ukraine’s independence, Yushchenko became the first Ukrainian prime minister to be received by a U.S. president. Yushchenko’s main goal in Washington was to obtain political and economic support for his government’s reform programs.

–Relations with international financial organizations. Yushchenko’s visit was partly overshadowed by recent allegations both that the National Bank of Ukraine (NBU) had misused International Monetary Fund monies and that it had overstated the value of NBU’s gold and hard currency reserves in its 1997-98 reports to the IMF, when Yushchenko himself was NBU chairman. The allegations caused the IMF to delay the resumption of lending to Ukraine and to commission an audit of the NBU by Price WaterhouseCoopers. The first part of that audit, made public last week, found no evidence of misuse of the loans, in effect laying to rest that part of the allegations. It did, however, determine that the NBU had overstated the value of its gold and hard currency reserves in reports which were a partial basis for certain IMF loans which might otherwise have been denied in 1997-98. Yushchenko made the case that the discrepancy had arisen from accounting methods in use at that time. The NBU had had no reserves of its own until 1996 and did not quickly familiarize itself with Western accounting methods.

Last September the IMF suspended disbursements from a US$2.6 billion Extended Facility Fund in response to the slowdown on reforms in Ukraine. Resumption of the disbursements seemed in the cards after President Leonid Kuchma’s reelection and the appointment of Yushchenko’s reformist government. But the allegations against the NBU, which also seemed to reflect on Yushchenko personally, prolonged the suspension of lending. In light of the early results of the audit, Kyiv now expects to receive in June an IMF delegation which may recommend the resumption of lending in order to support the government’s reform program. The World Bank would in that case also resume its suspended lending programs to Ukraine. But the exoneration of the NBU is only one of the conditions. The IMF and World Bank expect the government to focus on reforming the energy sector, agriculture and the civil service as top priorities in the months ahead (UNIAN, DINAU, Infobank, Eastern Economist Daily (Kyiv), May 8-11).

–Chornobyl. The delegation reaffirmed the Ukrainian leadership’s political decision to close the Chornobyl nuclear power plant’s last operating nuclear reactor by the end of 2000. Western countries have long demanded that Ukraine take that step for safety reasons, but have yet to raise the promised funds required for the plant’s decommissioning. In Washington, the Ukrainians defended two original premises of the decision to close Chornobyl: first, that the safety hazard is of an international character, necessitating an international response; and, second, that safety issues will persist long after the plant’s closure, requiring long-term financial and technical efforts from both Ukraine and her Western partners.

Secretary of State Madeleine Albright renewed in general terms the earlier pledges, in which she was joined by Germany’s foreign affairs minister, Joschka Fischer, at a common news conference in Washington. Fischer’s Green Party is a leading antinuclear force in Europe. Albright and Fischer agreed that funds for Chornobyl’s closure and for constructing a permanent sarcophagus over the reactor would be a “welcome gift to the people of Ukraine and a great environmental victory for all of Europe.”

For those reasons, Kyiv expects its Western partners to raise the necessary funds at the Chornobyl donors’ conference, which is scheduled for July in Berlin with the participation of the European Union and G-7 countries. That conference should fulfill at least in part the commitments undertaken by those countries in the December 1995 Ottawa Memorandum with Ukraine on the terms of Chornobyl’s closure.

–Corruption. According to Yushchenko, the American side “raised with utmost severity” and “at every meeting” the problem of corruption, seen as a major hindrance to internal economic reforms and to international investments in Ukraine. The U.S. officials, moreover, termed corruption in Ukraine a problem of the state rather than one of the society. Yushchenko outlined a number of planned anticorruption measures, including curbs on barter settlements and other nonmonetary forms of payment, closing tax loopholes and eliminating “oligarchic” windfall profits in the energy market.

–International Trade. The U.S. officials made it clear that Ukraine’s goals to be admitted to the World Trade Organization and to receive the “market economy” status in trade with the United States are not close at hand. Ukraine can advance along both tracks in parallel, depending on the scope and pace of internal reforms. Along with a readiness to provide legal and technical advice toward that end, U.S. Trade Representative Charlene Barshefsky brought up the American concern regarding production of audio and video goods and computer software by pirate firms in Ukraine. Washington estimates the resulting losses to U.S. industry at more than US$200 million annually and proposes to work jointly with Kyiv to end this unlicensed trade.

The Monitor is a publication of the Jamestown Foundation. It is researched and written under the direction of senior analysts Jonas Bernstein, Vladimir Socor, Stephen Foye, and analysts Ilya Malyakin, Oleg Varfolomeyev and Ilias Bogatyrev. If you have any questions regarding the content of the Monitor, please contact the foundation. If you would like information on subscribing to the Monitor, or have any comments, suggestions or questions, please contact us by e-mail at pubs@jamestown.org, by fax at 301-562-8021, or by postal mail at The Jamestown Foundation, 4516 43rd Street NW, Washington DC 20016. Unauthorized reproduction or redistribution of the Monitor is strictly prohibited by law. Copyright (c) 1983-2002 The Jamestown Foundation Site Maintenance by Johnny Flash Productions