April 27 (Bloomberg) — Russian Prime Minister Vladimir Putin proposed creating a nuclear power holding company with Ukraine as the two former Soviet republics rebuild ties.

“We have made massive proposals, referring to generation, nuclear power engineering, and nuclear fuel,” Putin told reporters after a meeting with Ukrainian President Viktor Yanukovych in Kiev today. Any cooperation may be phased, Putin said after the surprise visit to Kiev.

Russia and Ukraine have reached agreements on natural gas subsidies and a navy base since Yanukovych’s election in February improved ties between the neighboring states. Putin also met yesterday with his Ukrainian counterpart,Mykola Azarov, to discuss industrial cooperation.

Putin and Azarov plan to meet in Sochi on the Russia’s Black Sea coast on April 30, where an intergovernmental commission will meet, Putin said. Russia and Ukraine are also discussing aviation and shipbuilding, he said.

Yanukovych said the proposals are “interesting.”

Ukraine currently operates four nuclear power plants with 15 reactors, according to the World Nuclear Association database. It was the site of the world’s worst nuclear accident when a reactor at the Chernobyl facility exploded on April 26, 1986, spewing radiation across eastern and northern Europe.

Nuclear Upgrades

Russia is ready to take “an active part” in upgrading Ukrainian reactors and will allow Ukrainian partners on the Russian market, Putin said. Nuclear cooperation in third countries is also possible, he said.

Russia plans to boost the share of nuclear power in total output to 25 percent from 15 percent to 16 percent now, Putin told reporters near Milan yesterday.

Ukraine will get $40 billion to $45 billion of investment from Russia in the next ten years because of a gas agreement reached last week, with fuel supplies subsidized by Russia’s budget, Putin said. This year, Russia will run a deficit that is wider than Ukraine’s, if the neighboring country takes into account the reduced gas price, he said.

Russian President Dmitry Medvedev and Yanukovych reached the gas agreement in Kharkiv, eastern Ukraine, on April 21. Russia agreed to cut the price of gas for Ukraine by as much as 30 percent, and in exchange Ukraine agreed to allow Russia to keep its Black Sea fleet at the Ukrainian port of Sevastopol until 2042, with a possible five-year extension. The fleet’s lease was set to expire in 2017.

“The price they proposed to regulate the issue is excessive,” Putin said. “I could eat Yanukovych and the prime minister together for that money. Not a single military base in the world costs as much.”

The Ukrainian government may ratify the accord today.

Debates planned on the fleet in Ukraine are “surprising,” as Russia discussed the extension with the previous government led by Yulia Tymoshenko and received no objections, Putin said.

“But it is not just about money to us,” Putin said. “Cooperation with Ukraine and cooperation in the military sphere improves the level of trust between our countries.”

April 20 (Bloomberg) — Ukrainian monetary policy makers may lower the benchmark interest rate, the highest in Europe, if inflation slows, said Valeriy Lytvytskyi, an adviser to central bank Governor Volodymyr Stelmakh.

The Natsionalnyi Bank Ukrainy “will concentrate” on refinancing to boost the country’s economy, he told reporters in the capital Kiev today. While gross domestic product may have grown in the first quarter, it’s “too early to say” if Ukraine has exited its recession, he said.

Ukraine’s economy shrank 15.1 percent in 2009, the steepest decline since 1994, as the global credit crisis curbed demand for exports while shutting off capital flows. The central bank on March 9 cut its overnight rate to spur growth.

“We will cut rates,” once monthly inflation stays below 1 percent,” Lytvytskyi said. “The most important task is to reduce the gap between refinancing rates and key discount rates.”

The hryvnia traded at 7.9245 per dollar at 1:33 p.m. in Kiev, from 7.9165 yesterday. The currency has gained 1.5 percent this year. The central bank has bought about $1 billion at the interbank market this month, Lytvytskyi said, adding that he expects the exchange rate to remain stable.

Policy makers last month reduced the overnight rate to 12.5 percent from 15.5 percent when Treasury bills are used as collateral and to 13.5 percent from 17 percent for non- collateral loans. Overnight loans are the central bank’s main refinancing tool.

Inflation Slows

Inflation, the fastest in Europe, slowed to 11 percent in March, the lowest in 33 months, as the economic decline slowed the increase of food prices by cutting demand. The monthly rate fell to 0.9 percent, dipping under 1 percent for the first time this year. The producer-price index, an early indicator of inflation trends, rose to 18.6 percent in March, the highest in more than a year.

The country obtained a $16.4 billion stand-by loan with the International Monetary Fund at the end of 2008 to stay afloat. The former Soviet state has received $10.6 billion in several tranches, which were used to cover the 2009 budget gap and payments for Russian natural gas deliveries.

Ukraine based its 2010 state budget assuming a 13.1 percent December inflation rate. The government, which seeks to resume cooperation with the IMF to help cover the budget deficit this year, will need to increase the price of natural gas paid by households and the cost of utility services.

The economy had expanded each year from 2000 to 2008, driven by investment, domestic consumption and industrial production, which slid 21.9 percent last year. The outlook is “difficult” and the country needs more investment and increased consumer demand, Lytvytskyi said.

The parliament intends to cancel mandatory state registration of foreign investments. The parliament approved the first reading of the relevant draft law No. 6122 proposed by parliamentary deputies Yurii Poluneev of the Yulia Tymoshenko Bloc and Serhii Kliuev of the Party of the Regions was approved by 254 votes (only 226 votes were required for its approval).

In particular, the draft law provides for cancellation of the relevant provision of Article 13 of the law “On the Foreign Investment Regimen,” which stipulates that state registration of foreign investments is compulsory.

The draft law No. 6122 also provides for cancellation of the provision that stipulates that state registration of foreign investments in the form of currency values is to be effected in accordance with the procedures established by the National Bank of Ukraine.

In addition, the document provides for lifting several restrictions on foreign investments and international loans that were imposed by the anti-crisis law No. 1533.

In particular, the draft law provides for cancellation of the restrictions on obtaining foreign-currency loans and fulfillment of obligations to foreign investors.

According to the authors of the draft law, its adoption will make the Ukrainian economy more attractive to investment and lift the unjustified restrictions on loans and investments (thus allowing funds to be attracted more actively from abroad in the forms of loans and investments).

As Ukrainian News earlier reported, the parliament re-adopted the draft law No. 3585 proposed by Parliamentary Deputy Yurii Poluneev on October 22, 2009. This draft law provides for imposing restrictions on obtainment of foreign-currency loans from nonresidents and fulfillment of obligations to foreign investors.

Former president Viktor Yuschenko signed this law (given the No. 1533) in mid-November 2009.

It is always nice to hear when nations alter their visa regime to make it easier for Ukrainians to travel. This article in the Kiev Post suggest that this trend is likely to continue.

After two years in the doldrums, travel companies should receive a boost this summer as countries ease visa regimes for Ukrainians.
The initiatives by authorities in Croatia, Greece and Israel are expected to drive a new spurt in holidays abroad. With airlines rushing to launch flights to these new hot destinations, operators hope for a quick return to the pre-crisis market.

“The main reason is visa liberalization,” said Vyacheslav Burdyukov, general director of Wind Rose travel company.

As the crisis hit, incomes dropped and the hryvnia plunged, meaning Ukrainians had less money to spend on foreign holidays, and what they had didn’t go as far. In the last two years, tour operators report a drop in clients of 30 to 40 percent.

But the crisis also served as a spur for countries such as Croatia to open up their borders to try to attract more tourists and boost their struggling economies. Last year, the number of Ukrainian tourists to Croatia jumped to 37,000 from 31,000 in 2008, an 18 percent rise, after the need for a visa was waived during the summer months. The visa regime has again been cancelled from April 1 to Oct. 31 this year.

Greece was one of the European Union countries worst hit by the crisis, and is making a drive to attract tourists. Travel companies say they have an agreement with the embassy in Kyiv to ease applications for those who buy packages. The Greek embassy was unavailable for comment.

With hoteliers also expected to keep their prices low in order to boost visitors, operators are placing bets on Greece as a big hit this summer.

“Realizing that the number of tourists from Europe will drop, Greek hotels are eyeing up the [Ukrainian] market and offer a new balance of price and value,” said Arkadiy Maslov, commercial director of Tez Tour Ukraine, one of the largest tour operators on the Ukrainian market.

Turkey and Egypt are traditional favorites for tourists given their close location, affordability and the fact that a visa can be purchased on arrival. Croatia and Greece are expected to gain in popularity as they share a similar climate, miles of stunning coastline and reasonable prices.

According to various estimates of market players, the price for a seven-day vacation to Greece will range from 400 to 1,000 euros, depending on the month.

Airlines have also spotted the opportunities of these new destinations, starting up commercial and charter flights and making them even more attractive to holidaymakers.

“Before, the only way to get [to Croatia] was by bus. With several airlines on market, this will change,” said Burdyukov from Wind Rose, which already offers flights.

Ukraine International Airlines is set to begin regular flights to three Croatian towns from May.

“There will be a total of three or four air carriers to Croatia, which will make flights available for $250-350 for a round trip,” said Burdyukov.

Another country set for visa liberalization and an increase in airlines is Israel. The country has already significantly liberalized its visa requirements and is expected to cancel it by autumn 2010, when the travel season starts there.

With most people’s budgets still tight, planning your own trip is an increasingly popular, cheap way to travel. But Ukrainians are often reluctant to plan their own trips because of the difficulty of obtaining an EU visa, distrust in online booking and a lack of English.

Some companies offer special courses in arranging a trip to Europe, applying for a Schengen visa or even offer to organize a low-cost trip for you.
“My friends in Europe do not understand what I charge for,” said Orest Bilous, the founder of MakeMyTrip.com.ua, which sells ready-made, low-cost tours and personally tailored trips to destinations around the globe.

The company arranges trips using the web sites of nearly 30 low-cost airlines and hundreds of booking pages, available to everyone for free but unfamiliar to most, to offer discounts.

The crisis has also changed the shape of the travel industry in other ways. With many smaller travel agencies going out of business, the sector has consolidated and witnessed the arrival of several foreign tour operators.

European travel operator TUI Group this year purchased Kyiv travel agency Voyage-Kyiv, which owns Halopom po Evropakh, or Around Europe at a Gallop, a network of 60 tour shops across Ukraine. Another example is the acquisition of mid-size local travel company MIBS Travel by Russian tour operator Yuzhny Krest.

TUI Ukraine marketing and sales director Taras Demura said the company’s major focus will not be on offering cheap breaks, but guaranteeing quality.
He believes the Ukrainian travel market is likely to grow rapidly, as only two percent of the population currently travels abroad, compared to 60 percent in Germany.

Demura said it’s a question as much of attitude as of money, something he expects to change. “Ukrainians would rather buy new clothes than spend money on vacations, unlike Germans. We expect that priorities will change in the future and the percentage of travelers will grow to 15 percent within the next five years,” he said.

Kyiv Post staff writer Olga Gnativ can be reached at gnativ@kyivpost.com

Ukraine does not need NATO. It needs the IMF, the WTO, the EU, trade with China and good relations with Russia and the West. It needs to fix the economy and make economic reforms, not engage in an East-West geopolitical tug of war that does not provide a real benefit.  NATO is an organization which has a tenuous place in the post Cold War world.

The worry that Ukraine’s democracy will wither if she moves closer to Russia, is a real concern, noted in the article below. However, this will depend on the political participation of Ukrainian citizens who are not as disinterested as it seems. The Orange Revolution and the high level of voter participation in the recent election suggest that apathy would not take hold here for too long. Moreover, while President Yanukovich does his best to cozy up to the Russian government, in the end he may behave more like the leader of Belarus, or like Tito did with Stalin.

As for NATO, the war in Afghanistan indicates that it is a spent force. Without the USA…which will slowly withdraw support for NATO given domestic budget pressures..NATO could be abandoned in favor of regional security alliances that address the real and specfic needs of countries whom were formerly members.

Read more: http://www.mcclatchydc.com/2010/04/06/91698/ukraine-no-longer-seeks-nato-turns.html#ixzz0kOBcmCAn

Global steel prices are set to leap by up to a third, pushing up the cost of everyday goods from cars to domestic appliances, after miners and steelmakers on Tuesday agreed a ground-breaking change in the iron ore price system.

The deal by Vale of Brazil and Anglo-AustralianBHP Billiton [BLT-LN 2306.00 46.00 (+2.04%)]with Japanese and Chinese mills marks the end of the 40-year-old benchmark system of annual contracts and lengthy price negotiations. The industry instead agreed to move to quarterly contracts linked to the nascent iron ore spot market.

“The benchmark system has ended. There is no comeback,” said a senior mining executive directly involved in the talks.

The world’s top ore miners stand to profit hugely in the short term from the new price system. One executive estimated that the profits of the big three producers, Vale, Rio Tinto and BHP Billiton, would be boosted by at least $5bn this year.

The new system is a response to last year’s stalemate in the negotiations between miners and Chinese steelmakers, when both sides were unable to reach an agreement on annual prices. The balance of pricing power has shifted in the miners’ favour due to the emergence of China as a voracious consumer over the past 10 years.

Brendan Harris, a mining analyst at Macquarie in Sydney, said the shift was a “momentous” day. “It’s not every day that the pricing terms for one of the core commodities in world trade change,” he said. Steel accounts for 95 per cent of the world’s metal consumption and iron ore is the main ingredient in steelmaking.

The new price system will lift the cost of iron ore to Asian steelmakers to about $110-$120 a tonne during the April-June period, up between 80 and 100 per cent from the $60 level at which the 2009-10 annual contracts were settled.

The steelmakers said they would compensate for the increase in raw materials costs by raising steel prices by up to a third. Some companies have already raised their prices in anticipation of the move in iron ore. The cost of the benchmark hot rolled coil steel is likely to hit $725-$750 a tonne by the end of next quarter, up from $550 in January. It traded as low as $380 a tonne last year.

“The impact of higher raw material prices will be passed to consumers,” said Thorsten Zimmermann, a steel analyst at HSBC in London.

Leading Japanese steel mills, including Nippon Steel, and Chinese steelmakers, including Baosteel, had signed the new quarterly contracts, executives said. European steelmakers have yet to sign any new quarterly contracts. Rio Tinto has not announced a contract, but executives expect it to soon.

The European steel industry association, which represents some of the largest companies in the industry such as ArcelorMittal [MT 43.91 0.04 (+0.09%) ]and Thyssenkrupp, warned that the increase in iron ore costs will “inevitably” have a “significant impact on prices through the whole value chain down to the end consumer”.

The new pricing system means that iron ore costs are likely to rise even further over the summer as spot prices continue to climb, analysts said. On Tuesday the spot price for Australian iron ore hit a fresh 18-month high of $153.6 a tonne.

Chris Williamson, chief economist at Markit in London, added that steel demand and supply fundamentals were likely to drive further price increases in coming months. “Inflationary pressures are building in emerging markets,” he said.