Ukraine Beset by Economic Woes
02 March 1994
KIEV -- Tanya Solorub has not been paid in two months, but she still spends seven hours a day at a knitting machine in a sweltering corner of the Vereteno textile factory.
"They keep promising to pay us, and we keep working," the 27-year-old said without lifting her head from a half-finished navy blue jumper. "I don't know what else to do."
All of Ukraine is in the same boat. A third of the country's large factories have shut down. Most of the rest are months behind in paying their employees. Production crashed in January, down 33 percent from a year earlier. Inflation hit 9,000 percent in 1993. Neighboring countries are threatening to cut off fuel because of debts.
And nobody seems to know what to do.
On Thursday, Ukrainian President Leonid Kravchuk begins a visit to Washington in which he is expected to ask President Bill Clinton for emergency help.
Kravchuk has one big bargaining chip: the 1,800 nuclear warheads that Ukraine inherited when the Soviet Union broke up.
In January, he signed a pact with Clinton and Russian President Boris Yeltsin to eliminate those weapons. Since then, however, Kravchuk has pulled out of Ukraine's June presidential election, saying he could not defend the country's collapsing economy before the voters. His withdrawal means he may not have enough time or clout to push the disarmament pact through a reluctant parliament.
Although Kravchuk probably will not phrase it so bluntly, the message to Washington is clear: The U.S. must come up with big bucks if it wants Kravchuk to get back in the race and Ukraine to go non-nuclear.
Kiev sources say the Ukrainian government is hoping for an immediate, $300 million "bridge loan," followed by $700 million from the IMF.
The problem, according to IMF advisers and Ukrainian economists, is that Ukraine has no idea where this financial bridge would lead.
"Today, after two years of independence, we still do not have a clear plan for economic reform. We needed one a long time ago," said Vitaly Melnichuk, chairman of the parliament committee on privatization of state enterprises.
Economic collapse is a major reason why two ethnically Russian regions, Crimea and eastern Ukraine, have growing popular movements for independence or re-attachment to Russia.
The roots of Ukraine's economic woes are monstrously energy-hungry factories and an extremely slow pace of free-market reforms. Russia, Kazakhstan and the Baltic states have moved faster to free prices, sell state property and make their currencies convertible.
With 53 million people, Ukraine was the second most populous Soviet republic. It called itself the nation's breadbasket and believed it was getting a raw deal under Moscow's central planning. Ukrainians were convinced they gave more to other republics than they got in return.
Since independence, however, Ukraine has had a negative trade balance with the former Soviet Union. When Russia and Turkmenistan began charging world prices for oil and natural gas, it was an enormous shock.
The first step in adapting would be to make Ukraine's industry subject to market forces. Instead, the government has bowed to a powerful lobby of factory directors who continue to receive heavy subsidies, rely on state loans and avoid private ownership. Only 12 percent of the country's 6,850 large- and medium-sized industrial enterprises have gone private. Sixty-five percent are state-run, and 23 percent are owned by the state but leased to workers and management.
Kravchuk, a former Communist Party leader turned Ukrainian nationalist, has largely surrendered economic policymaking to the powerful parliament speaker, Ivan Plyushch, and Prime Minister Yefim Zvyagilsky. They are allied with industry and support heavy government spending, paid for by printing more money.
"They keep promising to pay us, and we keep working," the 27-year-old said without lifting her head from a half-finished navy blue jumper. "I don't know what else to do."
All of Ukraine is in the same boat. A third of the country's large factories have shut down. Most of the rest are months behind in paying their employees. Production crashed in January, down 33 percent from a year earlier. Inflation hit 9,000 percent in 1993. Neighboring countries are threatening to cut off fuel because of debts.
And nobody seems to know what to do.
On Thursday, Ukrainian President Leonid Kravchuk begins a visit to Washington in which he is expected to ask President Bill Clinton for emergency help.
Kravchuk has one big bargaining chip: the 1,800 nuclear warheads that Ukraine inherited when the Soviet Union broke up.
In January, he signed a pact with Clinton and Russian President Boris Yeltsin to eliminate those weapons. Since then, however, Kravchuk has pulled out of Ukraine's June presidential election, saying he could not defend the country's collapsing economy before the voters. His withdrawal means he may not have enough time or clout to push the disarmament pact through a reluctant parliament.
Although Kravchuk probably will not phrase it so bluntly, the message to Washington is clear: The U.S. must come up with big bucks if it wants Kravchuk to get back in the race and Ukraine to go non-nuclear.
Kiev sources say the Ukrainian government is hoping for an immediate, $300 million "bridge loan," followed by $700 million from the IMF.
The problem, according to IMF advisers and Ukrainian economists, is that Ukraine has no idea where this financial bridge would lead.
"Today, after two years of independence, we still do not have a clear plan for economic reform. We needed one a long time ago," said Vitaly Melnichuk, chairman of the parliament committee on privatization of state enterprises.
Economic collapse is a major reason why two ethnically Russian regions, Crimea and eastern Ukraine, have growing popular movements for independence or re-attachment to Russia.
The roots of Ukraine's economic woes are monstrously energy-hungry factories and an extremely slow pace of free-market reforms. Russia, Kazakhstan and the Baltic states have moved faster to free prices, sell state property and make their currencies convertible.
With 53 million people, Ukraine was the second most populous Soviet republic. It called itself the nation's breadbasket and believed it was getting a raw deal under Moscow's central planning. Ukrainians were convinced they gave more to other republics than they got in return.
Since independence, however, Ukraine has had a negative trade balance with the former Soviet Union. When Russia and Turkmenistan began charging world prices for oil and natural gas, it was an enormous shock.
The first step in adapting would be to make Ukraine's industry subject to market forces. Instead, the government has bowed to a powerful lobby of factory directors who continue to receive heavy subsidies, rely on state loans and avoid private ownership. Only 12 percent of the country's 6,850 large- and medium-sized industrial enterprises have gone private. Sixty-five percent are state-run, and 23 percent are owned by the state but leased to workers and management.
Kravchuk, a former Communist Party leader turned Ukrainian nationalist, has largely surrendered economic policymaking to the powerful parliament speaker, Ivan Plyushch, and Prime Minister Yefim Zvyagilsky. They are allied with industry and support heavy government spending, paid for by printing more money.
|
|
Tweet |
|
This article has no comments. Be the first to leave a comment |
Discussion
Comments
To post comments you must be registered
Comments via Facebook
Most Read
1.
City Mistakenly Plants Marijuana Field Instead of Lawn
After the city spread soil containing "grass" seeds around the Brateyevo metro station, a field of marijuana plants sprouted up instead of a lawn.
2.
Putin's Foreign Policy Goes on the Road
In a symbolic gesture, President Vladimir Putin on Thursday arrived in Minsk to pay his first foreign visit as head of state to controversial Belarussian leader Alexander Lukashenko.
3.
Ruble Hits Lowest Rate in 3 Years
The ruble dipped to a three-year low Thursday as oil prices fell further.
4.
European Debt Crisis Driving Workers East
Despite its inconveniences, Moscow has become a magnet for foreign job-seekers, as unemployment in Europe is hitting record highs amid the debt crisis.
5.
Businessman Shot in Central Moscow
A prominent business leader was shot and wounded by three masked men in the heart of Moscow on Friday — just steps away from FSB headquarters.
6.
Superjet Flight Data Recorder Found Near Volcano Crash Site
Villagers have found the flight data recorder from the Russian plane that slammed into an Indonesian volcano three weeks ago, killing 45 people.
7.
Duma Deputy Robbed at Ritzy Hotel
State Duma Deputy Gennady Gudkov was robbed at the upscale Hotel National across from the street from the Kremlin after a conference, Gudkov said Wednesday evening.
8.
China-Russia Airplane Venture Planned
United Aircraft Corporation and Chinese Commercial Aircraft Corporation plan to start a joint venture to develop long-haul aircraft.
9.
Fridman Wants Big Change at TNK-BP
TNK-BP co-owner Mikhail Fridman said BP's Soviet-born partners are urging the British company to return to talks about changing the proportion of the 50-50 partnership.
10.
Russian Railways in Smoking Crackdown, Privatization Freeze
Smokers will find train journeys longer and a tad more frustrating as traditional indulgence of the habit is phased out on Russian Railways' passenger routes.
1.
City Mistakenly Plants Marijuana Field Instead of Lawn
After the city spread soil containing "grass" seeds around the Brateyevo metro station, a field of marijuana plants sprouted up instead of a lawn.
2.
Tabloid: Superjet Downed by U.S. Industrial Sabotage
A tabloid claims that Russian intelligence agencies are investigating the possibility that the U.S. military may have brought down the Sukhoi Superjet that crashed in Indonesia.
3.
McFaul Faces Kremlin Scorn Once Again
The Foreign Ministry assailed U.S. Ambassador Michael McFaul for comments the ministry said went "far beyond the bounds of diplomatic etiquette."
4.
Sweden Wins Eurovision; Grannies Take Second
Sweden’s Loreen won the Eurovision Song Contest in Azerbaijan on Sunday before an international TV audience of 100 million, days after angering Azeri authorities by meeting rights activists critical of the host country’s human rights record.
5.
Red Square Flyboy Regrets Air Stunt
When Mathias Rust landed his white Cessna on Red Square on May 28, 1987, he had placed all his hopes for world peace in Mikhail Gorbachev.
6.
Protest and Chaos Seen in Kudrin-Ordered Study
Continued protests in Russia will likely lead to violence or chaotic change, according to a new study ordered by the former finance minister.
7.
Russia's New Propaganda Minister
After Monday's announcement that historian Vladimir Medinsky was appointed the culture minister, critics quickly labeled him the new propaganda minister. Medinsky's academic ethics and historical distortions may raise serious questions, but for the Kremlin, he has three important attributes that are much more important: He is a model United Russia leader, a firm Putin loyalist and a skilled sophist.
8.
Ukraine in Uproar Over Status of Russian Language
Ukraine's ruling party has triggered violent protests with a move to upgrade the official role of Russian, a sensitive issue opponents say will split the country.
9.
150 Detained at Anti-Kremlin Rallies
About 150 people were detained Sunday as scores of people gathered for a series of anti-government demonstrations in Moscow and St. Petersburg.
10.
Vkontakte Founder Tosses 5,000-Ruble Notes Out Window
<p>The founder of the social networking site Vkontakte celebrated St. Petersburg’s 309th anniversary over the weekend by tossing paper airplanes carrying 5,000-ruble notes out a building window.</p>
1.
Hundreds of Arrests Set Grim Backdrop for Victory Day Celebrations
As Moscow gears up to celebrate its victory in World War II, 67 years ago Wednesday, the shadow of political conflict shrouds the capital as hundreds of arrests cloud Victory Day festivities.
2.
City Mistakenly Plants Marijuana Field Instead of Lawn
After the city spread soil containing "grass" seeds around the Brateyevo metro station, a field of marijuana plants sprouted up instead of a lawn.
3.
Russian Satellite Takes Highest-Ever Resolution Picture of Earth
A stunning 121-megapixel snapshot of the Earth was taken by a Russian weather satellite in what is thought to be the highest resolution picture of the planet ever taken from space.
4.
Bodies, No Survivors Spotted at Superjet Crash
Search and rescue helicopters and volunteers struggling through thick forest and mountainous terrain spotted bodies but no survivors on the Indonesian mountainside where a Sukhoi Superjet 100 crashed by the time darkness forced an end to the search Thursday night.
5.
Tabloid: Superjet Downed by U.S. Industrial Sabotage
A tabloid claims that Russian intelligence agencies are investigating the possibility that the U.S. military may have brought down the Sukhoi Superjet that crashed in Indonesia.
6.
Mysterious Photos Reveal an Unseen WWII
After the end of World War II, Paul Sadler returned home to Chicago with three German books and a photo album from the Dachau concentration camp.
7.
Furniture Magnate Shot Dead in Mercedes in Moscow Region
A 46-year-old furniture magnate was killed with six gunshot wounds to the head and chest early Sunday as he arrived in his Mercedes at his home in the Moscow region.
8.
Vladivostok Bridge Climbers Fined 300 Rubles Each
Three thrill-seekers who climbed two Vladivostok bridges earlier this week and took photos from the top were fined 300 rubles ($10) each for trespassing.
9.
New Cabinet Has Familiar Cast of Characters
President Vladimir Putin on Monday announced the makeup of the new Cabinet answering to Putin and Prime Minister Dmitry Medvedev, with three-fourths of the members having been replaced.
10.
Superjet Missing in Indonesia With 50 on Board
A dark cloud was cast Wednesday on the revival of Russia’s aviation industry when a Sukhoi-built Superjet 100 with 50 people on board disappeared from the radar screens of Indonesian flight controllers.


