Ultima Thule

In ancient times the northernmost region of the habitable world - hence, any distant, unknown or mysterious land.

Thursday, May 19, 2005

Yushchenko gets tough with Tymoshenko

By Aussiegirl

It's about time -- I was beginning to wonder who was running this government, Yushchenko or Tymoshenko. In a welcome sign, it looks as though Viktor Yushchenko is not taking Tymoshenko's mishandling of the economy and the fuel crisis lying down. He has issued criticisms and orders that various recent decisions of the government regarding oil prices be rescinded, vowing once again that all government policy shall aim towards a full market economy with the market setting prices of commodities like fuel. Let's see if there is any man on earth who can control Yulia and make her toe the line -- it was not she who was voted into office, after all, it was Yushchenko -- and he placed her in her present office on condition that she act in good faith to carry out the policies he put forth in his campaign and his inaugural speech. Way to go, Viktor, maybe time for you to stop traveling and pay attention to what the little woman is doing at home.

The Washington Post has the article:

Ukraine's President Viktor Yushchenko intensified criticism of his government on Thursday and vowed to stick to market principles while tackling a fuel crisis that led to long queues for petrol.

Yushchenko, who came to power just over 100 days ago after a bruising election and "Orange Revolution" protests, appointed his radical ally Yulia Tymoshenko to head the ex-Soviet state's government in February.

He has appeared increasingly at odds with her over both the dramatic fuel shortages and plans to review some of the privatisations of industry conducted under his predecessor. In a decree issued late on Wednesday, Yushchenko criticized Tymoshenko's government over the shortages, demanding prompt action to stabilize the situation, reduce energy dependence and allow the market to function without impediment.

On Thursday, he told executives from Russian and Ukrainian oil firms: "What happened on the oil market was a clear example of how not to manage affairs. I saw no professional approach. Today, I am asking for this page to be turned."

He pledged to do everything possible to "make it profitable, on strict market principles, for oil to be brought to Ukraine, refined and used on the domestic market.

"I give my word that we will do everything to make Ukraine attractive as a transit
country."

Yushchenko has linked nearly every policy move to a drive to emerge from Moscow's shadow and one day join the European Union.
His decree, using unusually harsh language, said government policy "does not correspond to the basis of a market economy."

"This crisis emerged because of the improper actions of the Ukrainian government in terms of setting prices and excessive administrative regulation of oil and oil products," it read.

It was the second time this week Yushchenko had chided Tymoshenko's cabinet, though queues shortened at petrol stations. A 10-liter limit per customer remained in force.

Tymoshenko, who roused crowds with calls for radical action during last year's mass protests, blames the fuel crisis on a "plot" by Russian companies, which control four of six Ukrainian refineries and dominate the retail fuel market.

The president's decree gave the Economy Ministry a week to rescind decisions setting prices on the oil market.

It ordered the government to produce a solution within a month on creating a comprehensive oil company able to explore, produce, refine and sell oil. A separate order called on Tymoshenko to transfer state shares from three refineries into a fund intended to help create the company.

Ministers were commissioned to set up a program for a state oil reserve and draft a law eliminating all value added tax on oil transiting through Ukraine. And the government was ordered to start talks with other countries on oil supplies.

Tymoshenko has appeared increasingly on the defensive in recent weeks amid mixed economic results and policy disputes. Growth has slowed from last year's record level of 12.1 percent though the premier says previous figures were exaggerated.

Yushchenko on Wednesday blamed her government for being "two to three weeks behind" in tackling the fuel crisis.

The prime minister has also been at odds with Yushchenko on calls to submit to a review privatisations deemed dubious with the possibility of staging new tenders.
Tymoshenko on Wednesday denied her government was drafting a list of such companies and accused two ministers of "intrigues."

Yushchenko last week said officials were drawing up a list of 29 companies that could be sold off again, but gave no names.


COMMENTS:

michael morrison´┐Żsaid...
Mixed signals: A government-owned refinery is not really a free or market economy.
Still, his insistent rhetoric sure does sound good.

I wonder if we could trade George W. Bush to the Ukrainians and have Mr. Yuschenko in his place.

The last president we had who talked about a free economy had his hands tied and we got further into federal control and regulation, and got higher federal debt and deficit.

Still, it's nice at least to hear free market, even if it doesn't come to pass.
10:48 PM

Aussiegirl´┐Ż said...
Agreed, Michael -- the problems in Ukraine are wide and deep, it is not easy to turn a former communist economy around -- you are essentially re-creating the wheel, once the wagon is already in place and has been on the road for a long, long time.

The Soviet Union kept all the member states completely interdependent, to keep them from having any ideas of independence. This is particularly a problem with energy, as Ukraine is heavily dependent on Russia in the areas of natural gas and oil. Russia has been pressuring Ukraine with cutoffs of oil supplies which puts pressure on the economy, and also breeds dissatisfaction among the population, which is what Russia is after. It's a juggling act of major proportions to try to keep all those balls in the air at one time and still maintain your polical viability for the next election.

Ukraine is further operating under the additional burden of trying to recover from unwise "shock economics" unwisely foisted on them by western advisors, who thought you could re-create the economic conditions of the 19th century in America, with essentially robber barons creating huge industries from which eventually the riches would trickle down to the average man. The robber barons were recreated by giving away whole nationalized enterprises, steel mills, refineries, oil companies, etc. to private cronies, who became billionaires overnight.

The problem now is, what do you do? Renationalize some of the worst offenders in the hope of selling them at fair market value? Or simply asking the present owners to pay the difference between what they paid and the fair market value? Also Yulia is talking about many renationalizations, which naturally scares off any foreign investors, while Yushchenko is only calling for the most egregious to be revalued. In essence, in a country where the state owned everything -- how do you institute private property -- and how do you return it to the people in an equitable way without destroying what remains of the economy in the first place.

Somehow the countries of Poland and Czechoslovakia have managed to do this, but they were so-called satellites, and not so heavily intergrated, and also had a closer proximity to their own democratic pasts. Ukraine has no such advantages. Add to that the problems of all these years of corruption and cronyism and a rising mafia and clan structure, and you have a knot that is going to take decades to unravel. Let's hope that Yushchenko has at least set Ukraine's foot on the right path.
May 20, 2005 3:32 PM

2 Comments:

At 10:48 PM, Blogger Michael Morrison said...

Mixed signals: A government-owned refinery is not really a free or market economy.
Still, his insistent rhetoric sure does sound good.
I wonder if we could trade George W. Bush to the Ukrainians and have Mr. Yuschenko in his place.
The last president we had who talked about a free economy had his hands tied and we got further into federal control and regulation, and got higher federal debt and deficit.
Still, it's nice at least to hear free market, even if it doesn't come to pass.

 
At 6:34 PM, Blogger Aussiegirl said...

Agreed, Michael -- the problems in Ukraine are wide and deep, it is not easy to turn a former communist economy around -- you are essentially re-creating the wheel, once the wagon is already in place and has been on the road for a long, long time. The Soviet Union kept all the member states completely interdependent, to keep them from having any ideas of independence, this is particularly a problem with energy, as Ukraine is heavily dependent on Russia in the areas of natural gas and oil. Russia has been pressuring Ukraine with cutoffs of oil supplies which puts pressure on the economy, and also breeds dissatisfaction among the population, which is what Russia is after. It's a juggling act of major proportions to try to keep all those balls in the air at one time and still maintain your polical viability for the next election. Ukraine is further operating under the additional burden of trying to recover from unwise "shock economics" unwisely foisted on them by western advisors, who thought you could re-create the economic conditions of the 19th century in America, with essentially robber barons creating huge industries from which eventually the riches would trickle down to the average man. The robber barons were recreated by giving away whole nationalized enterprises, steel mills, refineries, oil companies, etc. to private cronies, who became billionaires overnight. The problem now is, what do you do? Renationalize some of the worst offenders in the hope of selling them at fair market value? Or simply asking the present owners to pay the difference between what they paid and the fair market value? Also Yulia is talking about many renationalizations, which naturally scares off any foreign investors, while Yushchenko is only calling for the most egregious to be revalued. In essence, in a country where the state owned everything -- how do you institute private property -- and how do you return it to the people in an equitable way without destroying what remains of the economy in the first place. Somehow the countries of Poland and Czechoslovakia have managed to do this, but they were so-called satellites, and not so heavily intergrated, and also had a closer proximity to their own democratic pasts. Ukraine has no such advantages. Add to that the problems of all these years of corruption and cronyism and a rising mafia and clan structure, and you have a knot that is going to take decades to unravel. Let's hope that Yushchenko has at least set Ukraine's foot on the right path.

 

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