Kuchma and Yeltsin meet in Moscow (09/27/98)

Kuchma and Yeltsin meet in Moscow

by Roman Woronowycz
Kyiv Press Bureau

KYIV - Strapped together in a financial crisis that neither side has shown any strong ability to defuse, the presidents of Ukraine and Russia met in Moscow on September 18-19 to coordinate an anti-crisis plan and to discuss economic relations between the two countries.

"If we do not help each other, no one will help us," said Ukraine's Leonid Kuchma before he boarded a flight to Moscow on September 18.

Even as President Kuchma and his politically beleaguered partner Boris Yeltsin of Russia talked, the currencies of both countries continued their monthlong slide.

Suffering from the aftershocks of the ruble collapse, the Ukrainian currency, the hryvnia, continued to sink even after an infusion of cash from the International Monetary Fund early this month. On September 18 it was trading at 2.99 to the dollar, a nearly 33 percent drop from a month earlier. Meanwhile, the Russian ruble, which had strengthened against the dollar last week, began to fall again. As President Kuchma left for Moscow it stood at 18 rubles to the dollar, 300 percent below its value at the time the Russian financial crisis began.

The two sides apparently did not come up with a specific plan to reinvigorate their economies or stop the downslide of their currencies, but did agree to form an anti-crisis committee chaired by Vice Prime Ministers Serhii Tyhypko of Ukraine and Yuri Masliukov of Russia.

Upon his return from Moscow, President Kuchma expressed satisfaction with the outcome of the talks. "The discussions were even better than I had expected," said President Kuchma at Boryspil Airport outside of Kyiv.

The president was pleased that Moscow had accepted a Ukrainian proposal that the payment of trade debts, chiefly Ukrainian obligations, could be made in commodities and not hard cash, which would include payments for gas and oil purchases. Details on what goods would be accepted and the schedule of payments were still to be worked out.

A second Kuchma initiative, to transform the CIS into a free trade zone, met less positive results. The president had suggested that instead of an inefficient CIS customs union, which Moscow has only partially succeeded in organizing, the region should introduce a system of minimal customs regulations among the newly independent states. President Kuchma told reporters in Ukraine that President Yeltsin had looked "positively" on the idea. However, the proposal was relegated to an intra-state committee.

The Ukrainian delegation, which included Prime Minister Valerii Pustovoitenko, Vice Prime Minister Tyhypko and National Bank of Ukraine Chairman Viktor Yuschenko, also held talks with Russian officials on the decline of trade between the two countries in the last two years.

Prime Minister Pustovoitenko said the rapid decline in trade between Ukraine and Russia is an irrational development, especially because the two countries signed a long-term economic cooperation agreement just last year. "In the last six months there has been almost no implementation of the program," said the Ukrainian prime minister.

In 1997 trade between Russian and Ukraine fell by $2 billion from the previous year. So far this year it has shrunk an additional $1.1 billion.

In the end, according to the Associated Press the two sides could agree only to take necessary measures to stem the decline and that economic committees would intensify their work.

However, Russia did agree to lift a 3 percent tariff on Ukrainian imports, while Ukraine gave Russia a 10-year agreement to allow the transport of its oil and gas through Ukraine to Western Europe.

The economies of Ukraine and Russia are still strongly entwined, even though it has been seven years since the two countries parted ways with the dissolution of the Soviet Union. Ukraine still relies on Russia for almost all of its gas and oil, and as a market for more than 40 percent of its exports, worth some $10 billion.

In addition, Ukraine's banks have large interests in the Russian economy. At the onset of the financial meltdown in Moscow, Ukrainian banks held nearly $100 million of their capital assets in Russian banks - money that is currently frozen.

Originally Moscow and Kyiv had agreed to meet in Kharkiv, Ukraine, for a wide-scale economic summit that was to have included high-level business delegations from both sides. Those plans changed quickly when it became clear that, with both a financial and political crisis on his hands, there was no way that President Yeltsin would be leaving Moscow soon.

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