Russian prime minister discusses trade, other issues during Ukraine visit (07/25/99)

Russian prime minister discusses trade, other issues during Ukraine visit

by Roman Woronowycz
Kyiv Press Bureau

KYIV - Russian Prime Minister Sergei Stepashin met with his Ukrainian counterpart, Valerii Pustovoitenko, in Kyiv on July 16 in an effort to rekindle declining Ukraine-Russia trade relations and to resolve the ongoing problem of Ukraine's energy debt to Moscow.

In a trend that began with the collapse of Russian financial markets last summer, trade between Russia and Ukraine has declined by 28 percent, or $1.5 billion, in the first five months of 1999. Last year's trade volume fell to $12.5 billion from its peak of $15 billion in 1997.

"The disruption of economic ties between the two countries has served no useful purpose," said Mr. Stepashin at the opening of the fifth session of the Ukrainian-Russian Cooperation Commission, an inter-governmental body established when the two countries signed a treaty on friendship, cooperation and partnership in 1997.

The decline in trade between the two countries has been ascribed to the Russian financial crisis and the instability of the Moscow government, which has changed leadership three times in the last year. Also to blame are a series of tariffs that the Russian and Ukrainian governments have placed on each other's goods, most notably Russia's surcharge on Ukrainian sugar, Ukraine's largest export to its northern neighbor.

In Kyiv, Prime Minister Pustovoitenko called for the implementation of a free-trade zone between the two countries to reinvigorate economic relations, with no exceptions to the policy. He predicted the move would stimulate a 25-30 percent increase in trade.

Mr. Pustovoitenko criticized the pace of implementation of the long-term economic treaty that the two sides signed last year, which outlined bilateral economic relations to the year 2007. He said the two sides have been slow on reaching decisions on several projects, including joint production of the AN-70 transport jet and in shipbuilding and rocket manufacturing sectors.

"It is only in joint actions that we will be able to make tangible economic progress, said Mr. Pustovoitenko, according to Interfax-Ukraine.

The two sides could not agree, however, on the most important issue before the commission and the two prime ministers: Ukraine's debt to Moscow for oil and gas supplies. Not only did they not find common language on how the money Ukraine owes Russia is to be repaid, they could not even agree on the amount of that debt. While Moscow said Ukraine owes $1.8 billion, Kyiv maintained that its indebtedness is approximately $1 billion.

Kyiv argued that the balance in dispute is owed not by the government, but by private oil and gas traders for which it bears no responsibility.

The two prime ministers left the issue open for further discussions, which are scheduled to be held in Moscow next month. They did, however, concede that Ukraine would repay its oil and gas debt with Ukrainian food commodities, at a price to be established during future talks. They also agreed that the cost of commodities sold to Russia would be below world prices.

Mr. Stepashin, who maintained at a joint press conference given by the two prime ministers that the Russian figure of $1.8 billion for Ukraine's gas and oil debt is the correct one, also said that the value of the foodstuffs would be established at current Russian prices.

"The supplies of food and other commodities in repayment of the debt will be done at the domestic price in Russia," Mr. Stepashin said, according to Interfax-Ukraine. Mr. Pustovoitenko would only say that "it will be done at an agreed price."

The Ukrainian prime minister also said that Ukraine had asked Russia to increase sales of diesel oil to Ukraine as the harvest season begins. Payment for that fuel also would be made in agricultural commodities.

More talks on oil and gas were held in Sevastopol, where Mr. Stepashin traveled with Mr. Pustovoitenko on July 17. The two prime ministers met there with representatives of Lukoil, the largest privately held Russian oil company, which has bought a controlling stake in the Odesa Oil Refinery.

Mr. Stepashin also met with Russian naval commanders in the Crimean port city, the home of the Ukrainian navy and the Russian Black Sea Fleet. Moscow has complained that the BSF agreement that Russia has with Ukraine is merely a framework and that the blanks must be filled in.

A major issue has been Ukraine's control over the BSF's ability to fly its aircraft freely over Ukrainian airspace. Ukraine and Russia agreed to designate areas for the BSF air squadrons in which they can fly without obtaining prior approval from Kyiv.

Mr. Stepashin's commenced his visit to Ukraine on July 15 with an evening meeting at the presidential country estate Zalyssia, located outside Kyiv, where he met with President Kuchma.

The following day he held talks with the chairman of the Verkhovna Rada, Oleksander Tkachenko, who reiterated his oft-repeated call for integration of the Russian and Ukrainian economies. Mr. Tkachenko said that, without such integration, within the next two or three years the situation in both countries can only worsen.

According to Interfax-Ukraine, Mr. Stepashin would only go so far as to agree that the key to economic improvement is expansion of Ukraine-Russian relations - not integration. "The point at issue is certainly not the creation of a single state, although it is simply a must to eliminate the obstacles standing in the way of the development of relations," he said.

Mr. Stepashin noted in his discussion with the Ukrainian Parliament chairman that another area of concern in Ukraine-Russia relations is the lack of clarification of borders between the two countries. However, he did not explain why discussions on the subject were taken off the Ukrainian-Russian Cooperation Commission's agenda at the last minute. Some Kyiv newspapers had suggested that the issue was removed at the behest of the Russians, who are not yet politically ready to settle the matter.

Mr. Stepashin did, however, express support for the issue of dual citizenship for Russian and Ukrainian citizens, which he said he had discussed with President Kuchma. According to Mr. Stepashin, the Ukrainian president "expressed great caution regarding that idea."

Three documents were signed by the Ukrainian and Russian delegations during Mr. Stepashin's three-day visit to Ukraine: agreements on Russian Black Sea Fleet's use of Ukrainian air space and on cooperation in development of the tourism sector, as well as a protocol on the outcome of the Ukrainian-Russian Cooperation Commission.

Even though the Ukrainian and Russian prime ministers failed to sort out the debt situation between their two countries, both sides called the meetings amicable and constructive, underscoring that they marked the resumption of regular contacts, which lately had been sporadic.

Mr. Stepashin's visit to Kyiv was the first by a Russian prime minister in more than a year. Two previous Russian heads of government, Serhii Kirienko and Yevgenii Primakov, had scheduled and then put off visits to the Ukrainian capital several times.

Referring to the repeated cancellations and ex-Prime Minister Primakov's much-publicized mid-air turnaround while on a flight to the United States as NATO bombing of Kosovo began, Mr. Stepashin quipped during his Kyiv press conference, "I am glad my plane did not make a U-turn over the Dnipro, but landed in Boryspil."

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