Ukrainian and Russian officials calculate mutual indebtedness (02/27/00)

Ukrainian and Russian officials calculate mutual indebtedness

by Roman Woronowycz
Kyiv Press Bureau

KYIV - A Ukrainian Finance Ministry official disclosed on February 22 that Russia's debt to Ukraine exceeds by nearly $1 billion the debt Kyiv owes Moscow.

Vice Minister of Finance Serhii Makatsaria said that an ad hoc intergovernmental committee of Russian and Ukrainian government financial experts had tabulated the total commercial and governmental indebtedness of both sides and had arrived at a figure of $3.9 billion for Russia and $3 billion for Ukraine. The numbers were released during a February 17 meeting of the ad hoc committee.

The Finance Ministry's disclosure came on the day that Russia's Vice Prime Minister Mikhail Kasianov, effectively the head of government since Prime Minister Vladimir Putin's elevation to the presidency, arrived in Kyiv for further talks with Ukraine's Prime Minister Viktor Yuschenko on Ukraine's gas indebtedness.

Ukraine, which has few oil and gas deposits of its own, is heavily dependent on Russia for its energy supplies. Kyiv's inability to consistently pay for gas and oil often has overshadowed other aspects of relations with Moscow. Since early January, when Ukraine's newly appointed Vice Prime Minister Yulia Tymoshenko returned from Moscow to say that Ukraine owes more than it had previously believed, the Ukrainian government has made negotiations on the debt a major priority, fearing that it was losing control of the situation.

Prime Minister Yuschenko said after consultations with Mr. Kasianov that further progress had been made in assessing the total Ukrainian bill for gas due Russia.

"There has been progress in understanding the reasons for how the debt was formulated," explained Mr. Yuschenko. He said that as of February 1, leaving room for adjustments, Ukraine's gas debt stood at $1.4 billion.

Mr. Kasianov agreed with the figure and said that, although the discussions were difficult, there was movement.

"We are struggling forward, as opposed to what some would like to believe," said Mr. Kasianov.

Although neither side commented on the big debt picture, which shows that overall Russia owes more than Ukraine, those numbers were verified in a protocol signed between the finance ministries of the two countries on February 17, according to Interfax-Ukraine.

The protocol, which includes national and corporate indebtedness, lists the primary source of Russia's national debt to Ukraine as the difference in the established worth of diplomatic and government complexes in Ukraine handed over to Russia and those in Russia given to Ukraine. This includes property given to Russia for its Black Sea Fleet. Interfax did not give a value for the holdings.

It also shows a $50 million debt owed Ukraine in the development of the AN-70 aircraft, a joint Ukrainian-Russian project, as well as $15 million owed by private Russian firms to Ukraine's Danube Shipping Company.

Ukraine, on the other hand, owes Russia some $2 billion for what is simply called "crediting relations" for the years 1992-1993 and about $1 billion to Gazprom, which includes a $238 million debt by the private Ukrainian energy firm Naftohaz Ukrainy. Another Ukrainian energy distribution conglomerate, United Power Grids, owes Russia's Defense Ministry $337 million.

The debt tally to which the two sides agreed does not include money Ukraine owes for nuclear fuel rods purchased from Russia or the indebtedness to Ukraine of the former Soviet export bank, VneshEkonomBank, whose assets were frozen by Russia with the collapse of the Soviet Union in 1991.

During Vice Prime Minister Kasianov's one-day stay in Kyiv the two sides also discussed the reinvigoration of trade relations, which have cooled since Russia's financial crisis two summers back and Moscow's heavy taxation of Ukrainian alcohol and sugar. Prime Minister Yuschenko said that 47 issues divide the two, including customs regimes and duties, and value-added taxes (VAT), which would take time to resolve. He said that lower level discussions would resume within two weeks.

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As the Ukrainian and Russian sides met to resolve the energy debt issue, Moscow announced that it had received the last two of 11 aircraft from Ukraine in payment for Russian oil and gas as part of a deal signed in September 1999. The aircraft, eight Soviet era TU-160 and three TU-95MS strategic bombers, along with 600 X-22 cruise missiles, were valued at around $800 million and turned over as repayment for earlier energy debts accumulated by Ukraine.

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