In the Spotlight 11/11/2013

ISSUE 37 (156) IN THE SPOTLIGHT 11/11/2013

CONTENT

1. Top news…page 4

2. International political…page 4

Ukraine-EU…page 4

European politicians do not rule out signing of association deal with Ukraine might be delayed

Ukraine should fulfill EU requirements by 13 November – EU Parliament mission

Ukrainian pro-presidential party questions benefits of country's European integration

Ukrainian Foreign Ministry says draft declaration for Vilnius summit ready

Ukraine may finish first stage of plan for simplifying visa regime with EU by Vilnius summit

Ukraine-Russia…page 7

Ukraine starts paying off debt to Gazprom

Ukraine might reconsider terms of contract with Russia on gas transit to Europe

Russia to consider possibility of Ukraine's signing some Customs Union agreements

Ukraine-IMF…page 8

IMF delays decision on Ukraine until December

EU taking no part in Ukraine-IMF talks – media

3. Domestic political…page 9

Ukrainian authorities…page 9

Two bills required for EU bid pass first reading in parliament

President endorses law which might prevent Klitschko from running for post

President reshuffles governors in Odessa, Ivano-Frankivsk regions

Ukrainians of call-up age now free to go abroad

Ukrainian opposition…page 10

Ukrainian authorities begin new legal process against Tymoshenko

Parliament sets up ad hoc group to work out law on Tymoshenko's treatment

"Public debates" on Tymoshenko's treatment initiated in regions – media

Opposition demands Yanukovych report on negotiations with Putin

Court to consider Tymoshenko's UESU case on 6 December

4. Media…page 12

Serhiy Kurchenko becomes owner of UMH Group media holding

5. Economy…page 13

Single treasury account shrinks to 10-year low

Ukraine's foreign exchange reserves drop by 1bn dollars over the month past

Fitch downgrades Ukraine from “B” to “B-”

Balance of payments deficit decreases

Budget revenues grow by 2 percent over 10 months

Largest Ukrainian companies to be privatised – media

National Bank artificially holding hryvnya rate down – media

Sugar production falls by half

Revenue Ministry: Roshen owes 6m dollars to the State

6. Energy market…page 15

Ukraine cuts gas import from Europe

Ukraine disappointed by Energy Community inaction regarding gas reverse

Turkmenistan ready to supply gas to Ukraine

PGNiG terminates contract with Naftohaz Ukrayiny on gas supply to Poland

Ukraine signs agreement with Chevron

Local budgets to have 10 percent of returns from joint hydrocarbon production

Adriatic gas corridor delayed

World Bank to give Ukraine 350m dollars to improve heating efficiency

Naftohaz Ukrayiny loses stake in largest gas trader

TOP NEWS

European politicians do not rule out signing of association deal with Ukraine might be delayed

The issue of jailed former Ukrainian Prime Minister Yuliya Tymoshenko has not been resolved yet.

You can find more details in the section “INTERNATIONAL POLITICAL. Ukraine- EU”, as well as in the section “DOMESTIC POLITICAL. Ukrainian opposition”.

Ukraine owes Gazprom over 2bn dollars

Ukraine's debt to Gazprom has reached 800m dollars for the August gas deliveries and 1.4bn for the October supplies.

You can find more details in the section “INTERNATIONAL POLITICAL. Ukraine- Russia”.

Ukrainian economy continues to deteriorate

As of the beginning of November, there was 51.3m dollars left on the treasury single account. Ukraine's foreign exchange reserves shrunk by 1bn dollars to 20.6bn dollars in October.

Yuzhmash, Turboatom and Antonov companies likely to be privatized soon.

You can find more details in the section “ECONOMY”.

INTERNATIONAL POLITICAL

UKRAINE-EU

European politicians do not rule out signing of association deal with Ukraine might be delayed

The issue of signing the association agreement with Ukraine will be resolved at the last moment, the president of Lithuania, which is currently presiding over the EU Council, Dalia Grybauskaite, has said.

The Lithuanian head of state also stressed that the association agreement might be signed after November 2013.

For his part, Lithuanian Foreign Minister Linas Linkevicius believes that the statements on the potential postponement of signing the association agreement between Ukraine and the EU until a later date poses a threat to the possibility of signing the document.

Swedish Foreign Minister Carl Bildt stated that he had never been certain that the association agreement would be signed at a summit in Vilnius.

In the opinion of the chairman of the delegation to the EU-Ukraine Parliamentary Cooperation Committee, Pawel Kowal, if the signing of the association agreement is derailed during the Vilnius summit, the parties might

return to this issue no sooner than after two and a half years. He also stressed that this would have very serious consequences for both Ukraine and the EU.

The Polish daily Rzeczpospolita quoted its sources in Brussels as saying that the EU member states had split into three groups on the issue of signing the association agreement with Ukraine. “Poland, the UK and the Central European countries want to sign the association agreement no matter what. Germany, the Netherlands and Sweden insist on [former Prime Minister Yuliya] Tymoshenko's release, while France and South European countries do not have a specific decision in this case,” the newspaper reported.

At the same time, the influential Ukrainian business daily Kommersant Ukraina quoted its own sources as saying that the Ukrainian presidential administration did not rule out a possibility that the signing of the association agreement might be derailed.

The editor in chief of the LB.ua news and analysis website, Sonya Koshkina, quoted a source close to the presidential entourage as saying that “the game [the negotiations on the signing of the association agreement - editor] will continue until the last moment”. She added that Ukrainian President Viktor Yanukovych proceeded from the fact that Europe wanted to sign the association agreement and that for this reason “Ukraine will succeed in Vilnius”.

Ukraine should fulfill EU requirements by 13 November – EU Parliament mission

The European Parliament's monitoring mission, which is headed by Pat Cox and Aleksander Kwasniewski, has set 13 November as Ukraine's deadline to fulfill the following EU requirements for signing the association agreement: adopting draft laws on prosecutor's offices by parliament, improving electoral legislation, as well as releasing jailed former Prime Minister Yuliya Tymoshenko, the Ukrainian deputy parliamentary speaker, Ruslan Koshulynskyy, has said.

As previously reported, the Cox-Kwasniewski mission will release its final report on 14 November. The Council of the EU will decide on the signing of the association agreement with Ukraine on the basis of this document.

The head of the Ukrainian pro-presidential parliamentary faction Party of Regions, Oleksandr Yefremov, noted that the co-chairmen of the mission were constantly in touch with Tymoshenko and representatives of the opposition, but they had never met members of the Party of Regions, which was the largest faction in parliament.

In his opinion, the chief task of the mission is not the signing of the association agreement with the EU, but releasing the former prime minister.

Ukrainian pro-presidential party questions benefits of country's European integration

Disagreements about processes geared towards Ukraine's European integration have intensified in the pro-presidential parliamentary faction Party of Regions, the faction's head, Oleksandr Yefremov, has said.

He added that residents of southern and eastern parts of the country, from where the Party of Regions derived most of its support, were not happy about economic conflicts with Russia. Such a situation in the regions influenced opinions of the Party of Regions MPs, Yefremov explained.

The leader of the Party of Regions faction also said that Ukrainian President Viktor Yanukovych always urged the pro-presidential party's MPs to move in the direction of European integration.

Ukrainian parliamentary speaker Volodymyr Rybak stated that the president had held meetings with MPs of the Party of Regions and asked them to allow jailed former Prime Minister Yuliya Tymoshenko to go abroad for medical treatment but they had not agreed to do this.

In his turn, Yanukovych stated that Ukraine could not give up its cooperation with the countries of the Customs Union in order to cooperate with EU member states. The Ukrainian head of state also stressed that the model of EU cooperation chosen by Ukraine was the most acceptable.

Ukrainian Foreign Ministry says draft declaration for Vilnius summit ready

A draft of the final declaration for a summit in Vilnius was drawn up during a meeting of representatives of the Eastern Partnership member states, which took place in Brussels on 4-5 November, the EurActiv website quoted Ukrainian Deputy Foreign Minister Andriy Olefirov as saying.

The Ukrainian diplomat added that the document envisaged the signing of the association agreement between Ukraine and the EU, as well as the initialing of the same agreements between the EU, Georgia and Moldova.

Ukraine may finish first stage of plan for simplifying visa regime with EU by Vilnius summit

Ukraine has not been able to complete the first stage of implementing an action plan to simplify the visa regime with the EU over the past three years, Ukrainian Foreign Minister Leonid Kozhara has said.

Previously, the foreign minister of Lithuania, which is currently presiding over the EU Council, Linas Linkevicius, said that Moldova might be granted a visa-free regime with the EU as soon as at the beginning of the next year, while the situation with Ukraine was more complicated when it came to this issue.

At the same time, the EurActiv website quoted Ukrainian Deputy Foreign Minister Andriy Olefirov as saying that a draft of the final declaration for the Eastern Partnership summit in Vilnius noted a positive assessment of Ukraine's work in the EU negotiations on visa-free travel. He stressed that the EU monitoring mission had also positively evaluated this process.

The EU ambassador to Ukraine, Jan Tombinski, believes that the first stage of the action plan for simplifying the EU visa regime might be concluded before the Vilnius summit.

To achieve visa-free travel, Ukraine should align its anti-corruption and anti- discrimination legislation with EU laws.

UKRAINE-RUSSIA

Ukraine starts paying off debt to Gazprom

On 4 November, the Ukrainian state-run oil and gas company Naftohaz Ukrayiny started to pay its debts to the Russian company Gazprom for the gas consumed in August 2013, Ukrainian Energy and Coal Industry Minister Eduard Stavytskyy has said.

On 7 November, he also said that Ukraine had already paid off over 20 percent of its debt, which is approximately 146m dollars.

Stavytskyy added that Naftohaz would clear its debts to the Russian monopoly by means of collecting the debts of companies supplying heat and electricity to consumers.

On 5 November, Naftohaz said that consumer debt for used gas had reached 17bn hryvnyas, or 2.1bn dollars. At the same time, the difference between the purchasing price of imported gas and its selling price was 10.7bn hryvnyas (1.3bn dollars). This difference is not reimbursed to the company by the government.

At the same time, the influential Ukrainian business daily Kommersant Ukraina quoted its own sources as saying that Naftohaz Ukrayiny had conducted talks with Gazprom on restructuring its debt, but Russia had not granted Ukraine any concessions.

The newspaper also reported that the Ukrainian government intended to issue state treasury bonds to clear Gazprom's debt. “In essence, the entire scheme boils down to the National Bank's giving Naftohaz a part of its foreign exchange resources,” the head of the SP Advisors company's analytical department, Vitaliy Vavryshchuk, explained.

The Kommersant Ukraina daily also quoted its source from the Ukrainian Ministry of Energy and Coal Industry as saying that Naftohaz Ukrayiny would be able to fully pay off its debt for the gas consumed in August no sooner than on 15 December.

We shall remind you that on 29 October, Gazprom CEO Aleksey Miller said that Kiev had failed to pay 882m dollars for the Russian gas delivered in August and that the contract allowed Russia to move Ukraine to the system of advance payments.

On 7 November, Gazprom representative Sergey Kupriyanov said that Ukraine was obliged to transfer 1.355bn dollars to the account of the Russian company as a payment for the gas supplied in October.

Ukraine might reconsider terms of contract with Russia on gas transit to Europe

If Gazprom continues with its formal approach to the problem of the Ukrainian gas debt, Kiev might use its right to reconsider the terms of the contract on gas transit to Europe, Ukrainian Deputy Prime Minister Yuriy Boyko has said.

He added that Ukraine was ready to cut back as much as possible on purchases of Russian gas. The deputy prime minister recalled that Ukraine had decreased to one-fourth its purchases of Russian gas since the contracts were signed in 2009.

Naftohaz Ukrayiny's deputy CEO, Vadym Chuprun, said that due to the debts of companies providing heat and electricity to consumers, the company had halved its purchases of Russian gas since the beginning of November.

The influential Ukrainian business daily Kommersant Ukraina quoted a source from the company operating the Ukrainian gas transport system, Ukrtranshaz, as saying that in 2014, Naftohaz Ukrayiny would not pump gas into Ukrainian underground storage facilities for Gazprom's needs [for gas deliveries to Europe – editor].

We would like to add that on 7 November the head of the Ukrainian pro- presidential parliamentary faction Party of Regions, Oleksandr Yefremov, stated that Gazprom was preparing to file a lawsuit against Naftohaz Ukrayiny with the Arbitration Institute of the Stockholm Chamber of Commerce. The lawsuit has to do with forcing Ukraine to pay Russia 10bn dollars for its failure to purchase the volumes of Russian gas specified by the contract.

In his turn, Boyko said he was not aware of this lawsuit.

Russia to consider possibility of Ukraine's signing some Customs Union agreements

Russia is ready to consider Ukrainian proposals on becoming a party to some agreements of the Customs Union, the Ukrainian government envoy to the Eurasian Economic Commission, Viktor Suslov, has quoted Russian presidential adviser Sergey Glazyev as saying.

Suslov stressed that this possibility had been ruled out during all the negotiations which had been previously held between the presidents and prime ministers of Ukraine and Russia.

He added that becoming a party to these agreements would allow Ukraine to retain its access to the Russian market for machine-building products and for wide industrial cooperation.

UKRAINE-IMF

IMF delays decision on Ukraine until December

The International Monetary Fund (IMF) will decide in mid-December on the continuation of its cooperation with Ukraine, the press service of the organization has reported.

We shall remind you that following a visit of the IMF mission to Ukraine, its experts recommended the Ukrainian government to fulfill the organization's requirements, such as increasing household gas prices, making the hryvnya exchange rate flexible, stopping the payment of debts with bonds, slashing

expenditures on state procurement, as well as capping pay rise for state employees.

President Viktor Yanukovych said that the IMF requirement to raise household gas tariffs would not be satisfied.

In his turn, Ukrainian Deputy Prime Minister Yuriy Boyko said that Ukraine would propose to the IMF a model which would allow the country to reduce the deficit of Naftohaz Ukrayiny without adversely affecting low-income groups of the population.

Ukrainian Finance Minister Yuriy Kolobov said that a draft budget for 2014 was being drawn out with the consideration of the IMF requirements.

The head of the Committee of Economists of Ukraine, Andriy Novak, believes that the state of the Ukrainian economy is so difficult that it would be impossible to finish the financial year without an IMF loan. He expressed this opinion during a round table organized by the Gorshenin Institute.

EU taking no part in Ukraine-IMF talks – media

The EU has not been taking part in the Ukraine-IMF negotiations on the possible resumption of funding for the Ukrainian economy and it has not urged the organization to grant the country financial assistance if the latter experiences Russian economic pressure, the Ukrainian news agency UNIAN quoted a high- ranking European Commission official as saying.

We shall remind you that the Reuters news agency reported that the EU had been negotiating with the IMF on allocating additional funding to Ukraine by the end of the year.

The US assistant secretary for the Bureau of European and Eurasian Affairs, Victoria Nuland, said that the USA supported Ukraine in its negotiations with the IMF.

DOMESTIC POLITICAL

UKRAINIAN AUTHORITIES

Two bills required for EU bid pass first reading in parliament

On 8 November 2013, the Ukrainian parliament passed the first reading of the bill on prosecution bodies submitted by President Viktor Yanukovych.

The bill provides for the prosecution to be deprived of the authority to perform general supervision and pre-trial investigation, supervise this investigation and at the same time prosecute on behalf of the state. Also, prosecution bodies are no longer authorized to directly interfere in the activities of people, private businesses and organizations.

The same day, 8 November, MPs approved in the first reading the Party of Regions' bill amending the election law.

Although critical of the documents, representatives of the opposition factions – Fatherland, UDAR and Freedom – agreed to support the bills sponsored by the pro- government party "for the sake of the association with the EU".

The opposition also said that unless all the laws required for the EU bid (on prosecution, on the election law, and on convicts' treatment abroad) were adopted, they would not vote for other documents.

President endorses law which might prevent Klitschko from running for post

President Viktor Yanukovych has signed into law the bill amending the Tax Code so that individuals who hold foreign residence permits shall not be considered residents of Ukraine.

UDAR said earlier that this clause may be used to prevent its leader Vitaliy Klitschko, who has a German residence permit, from running for president.

UDAR believes that by signing this law, the president became an accomplice to the blatant violation of the law on regulations and to fraud because the bill was adopted without a debate in the session hall, while amendments to it were introduced without being considered by the relevant committee.

An amendment concerning taxpayers' registration was introduced by Fatherland MP Ihor Brychenko.

Later police held an investigation to check if his signature was falsified. However, the Interior Ministry said that the test proved the signature authentic.

President reshuffles governors in Odessa, Ivano-Frankivsk regions

On 7 November 2013, Ukrainian President Viktor Yanukovych dismissed the chairmen of the Odessa and Ivano-Frankivsk regional administrations, Eduard Matviychuk and Mykhaylo Vyshyvanyuk, and appointed them as his advisers.

Crimean Finance Minister Mykola Skoryk was appointed as governor of Odessa Region, and the head of the Party of Regions' regional branch, Vasyl Chudnov, as Ivano-Frankivsk regional governor.

Ukrainians of call-up age now free to go abroad

On 5 October 2013, parliament approved the government bill lifting the ban on foreign travel by individuals subject to army call-up.

On 14 October, President Viktor Yanukovych issued a decree cancelling the call-up to the Armed Forces of Ukraine.

Ukraine is the world's 20th most militarized country, according to the Global Militarization Index 2013 published by Bonn International Centre for Conversion.

UKRAINIAN OPPOSITION

Ukrainian authorities begin new legal process against Tymoshenko

The Ministry of Revenues and Levies of Ukraine has begun legal process in the USA and in Switzerland to protect the interests of Ukraine in relation to over 200m dollars, which is believed to have been misappropriated by persons including the two former Ukrainian Prime Ministers, Yuliya Tymoshenko and

Pavlo Lazarenko. Lawrence Graham law firm, which was instructed to act as lead counsel in coordinating the anticipated claims, said this is a press release on 4 November 2013.

The same day Party of Regions MP Volodymyr Oliynyk said that two cases were initiated in the USA and Switzerland to claim back Tymoshenko's money. In his words, the total amount uncovered was 500m dollars. "Part of it is the money shared with Lazarenko, which was frozen and on US accounts. Another part of it is on Tymoshenko's account in a Swissbank," Oliynyk said.

The head of the Party of Regions parliamentary faction, Oleksandr Yefremov, said that new lawsuits would be filed against Tymoshenko with British and European courts to claim back the embezzled funds. He said that he was talking about up to 1bn dollars.

Shortly after mass media reported about the new case against Tymoshenko, the Party of Regions said she could not be allowed to go abroad for treatment.

Tymoshenko's lawyers and opposition representatives flatly dismissed the new allegations against her.

Fatherland MP Arsen Avakov said that the new criminal case against Tymoshenko was nothing but a distracting campaign ahead of the Vilnius summit, the news and analysis website LB.ua said.

EU ambassador to Ukraine Jan Tombinski said that any criminal cases against Tymoshenko could not obstruct her pardoning since the presumption of innocence principle was applied to individuals whose criminal cases were still opened.

Parliament sets up ad hoc group to work out law on Tymoshenko's treatment

On 8 November 2013, the Ukrainian parliament set up a working group to prepare the bill on convicts' treatment abroad.

The group is chaired by Party of Regions MP Hennadiy Vasylyev.

Earlier, on 6 November, the committee for legal support for law enforcement refused to suggest to parliament four registered bills which could allow ex- Prime Minister Yuliya Tymoshenko leave Ukraine for treatment in Germany. This decision was adopted by 9 out of 16 committee members present. All nine are representatives of the pro-government Party of Regions.

The responsible committee should have met on 4 November, however it did not do so due to the lack of quorum. The Party of Regions MPs did not show up for the meeting.

According to the head of the Fatherland parliamentary faction, Arseniy Yatsenyuk, the Party of Regions' stance might disrupt the signing of the association agreement with the EU.

He also said that the opposition had collected the number of votes necessary to convoke an extraordinary parliament meeting.

In his turn, speaker Volodymyr Rybak scheduled the meeting for 13 November.

The Zerkalo Nedeli weekly quoted its sources in the Party of Regions as saying that even if parliament adopted this bill, Tymoshenko might be banned from going to Germany for treatment by court.

However, the leader of the UDAR faction, Vitaliy Klitschko, said that the EU does not demand that Ukraine send the ex-prime minister for treatment abroad to be eligible for signing the association agreement. It only encourages Ukraine to pass the law that would provide such an opportunity, he said.

"Public debates" on Tymoshenko's treatment initiated in regions – media

Local authorities in the south and east of Ukraine have been instructed to initiate "public debates" on the possibility of sending former Prime Minister Yuliya Tymoshenko for treatment abroad very soon, the Zerkalo Nedeli weekly has quoted its sources in the administrations of these regions as saying.

According to Zerkalo Nedeli, this issue must be discussed on the local pro- government TV and radio. The weekly said that these debates would arrive at the pre-determined conclusion: "Tymoshenko may go but only after she and Pavlo Lazarenko return the money".

Opposition demands Yanukovych report on negotiations with Putin

The Fatherland parliamentary faction has demanded that Ukrainian President Viktor Yanukovych and his administration file an official report on his negotiations with Russian President Vladimir Putin in Russia's Sochi on 27 October, faction leader Arseniy Yatsenyuk has said.

According to the Kommersant Ukraina business daily, during a five-hour meeting Putin attempted to dissuade Yanukovych from signing the association agreement with the EU.

Yanukovych had another meeting with Putin on 9 November, the press service of the former said.

It is to note that it had been planned that Yanukovych would have another meeting with Putin on 9 November. This was reported by the Ukrainian president's press office.

Court to consider Tymoshenko's UESU case on 6 December

As reported on 6 November 2013, the Kharkiv Kyivskyy district court will hear the case of financial abuse by the United Energy Systems of Ukraine corporation, in which ex-Prime Minister Yuliya Tymoshenko was allegedly involved, on 6 December.

MEDIA

Serhiy Kurchenko becomes owner of UMH Group media holding

Serhiy Kurchenko, the owner of VETEK Group, and UMH Group president Borys Lozhkin announced early closure of the acquisition deal, under which

Kurchenko's companies receive 99.9 percent of UMH Group stock, VETEK's press service has said.

Transaction amount remains undisclosed.

UMH Group manages a portfolio of press, radio and online media projects in Ukraine and Russia. Among its most well-known publications are Korrespondent, Forbes, Telenedelya, Komsomolskaya Pravda v Ukraine, Argumenty i Fakty v Ukraine etc.

The deal was earlier supposed to be closed in March 2014. According to the Zerkalo Nedeli weekly, the deal was closed ahead of schedule because the new owner wanted faster access to the content of mass media incorporated into VETEK Group, which is believed to be associated with President Viktor Yanukovych's close entourage.

ECONOMY

Single treasury account shrinks to 10-year low

The balance on the single account of the State Treasury Service in October fell to its lowest level since the beginning of this year – to 410m hryvnyas (51.3m dollars), the Ukrainian news agency UNIAN reported, citing data from the State Treasury Service.

This amount is 10 times lower as compared to the beginning of the previous month, 4 times lower against October 2012 and 10.5 percent below the balance recorded at the beginning of this year.

Moreover, according to the statistics agency, it is the smallest balance seen over the last 10 years (since August 2003).

According to news and analysis website LB.ua, Ukrainian city mayors and governors are complaining more often that the State Treasury delays transfers to local budgets. The use of the money belonging to local governments may indicate that there is a lack of money in the state budget, the website noted.

Ukraine's foreign exchange reserves drop by 1bn dollars over the month past

Foreign exchange reserves in October reduced by 1bn dollars to 20.632bn dollars, the National Bank of Ukraine (NBU) has reported.

Such a drop was caused by payments on government bonds (totaling 108m dollars), repayment of debt to the International Monetary Fund (651m dollars) and outlays on support of the hryvnya exchange rate (297m dollars), the NBU noted.

Since the year's beginning, foreign exchange reserves have shrunk by 4bn dollars.

Fitch downgrades Ukraine from “B” to “B-”

Fitch Ratings has lowered the long-term issuer default ratings of Ukraine in foreign and local currencies from “B” to “B-” with a negative outlook.

The agency has also lowered the ratings of Ukrainian Eurobonds and the country's ceiling to “B-”.

Earlier, Standard & Poor's revised downwards the rating of Ukraine from “B” to “B-”, while Moody's lowered Ukraine's rating from “B3” to “Caa1”.

Balance of payments deficit decreases

The deficit of the balance of payments in September 2013 fell by 10.5 times year-on-year and by 2.2 times month-on-month to 105m dollars, the National Bank of Ukraine has reported.

The deficit of the balance of payments in January-September 2013 amounted to 1.5bn dollars as compared to a deficit of 0.8bn dollars recorded in January- September 2012.

Budget revenues grow by 2 percent over 10 months

State budget revenues in January-October 2013 amounted to 278.6bn hryvnyas (34.9bn dollars), a 1.9-percent increase compared to the same period of 2012, according to the State Treasury Service.

Revenues to the budget's general fund over 10 months made 241.4bn hryvnyas (30.2bn dollars), which is 4.7 percent up on the same period of the previous year.

The 2013 general fund, which is used to finance protected expenditures (public sector salaries, scholarships, debt service, utilities, purchase of medicines, etc.) is based on a revenue growth forecast of 11 percent.

The Kommersant Ukraina business daily reported, citing its own sources, that the deficit of funds for protected expenditures by the year's end will reach 18bn hryvnyas.

Largest Ukrainian companies to be privatised – media

The Zerkalo Nedeli weekly reported that there were debates in the government concerning an urgent privatization of a number of assets, including Yuzhmash, Turboatom and Antonov, to draw additional sources to fill the budget.

This being said, the publication notes that these assets have always been of a particular interest for Russia, but president Viktor Yanukovych is strongly reluctant to compromise with Russia in this issue.

National Bank artificially holding hryvnya rate down – media

The recent appreciation of the US dollar on the interbank market to 8.22 UAH/USD has forced the National Bank of Ukraine (NBU) to resort to administrative measures in order to restrain the rate on the cash market, the daily Vesti reported, citing its own sources.

In particular, Ukrainian banks were instructed not to set the selling price of the US dollar for the public above 8.199 UAH/USD.

A key requirement of the International Monetary Fund for Ukraine to receive a new loan is to weaken the Ukrainian hryvnya and to increase gas prices for households.

According to the Zerkalo Nedeli weekly, the International Monetary Fund has kept unchanged the terms of its requirements (for Ukraine to receive a loan) regarding gas tariffs for households, and so before any decision is made on this issue, “the NBU has no choice but to use administrative methods to restrain the growth of the dollar rate, expecting that it will decline after the agreement is reached with the Fund.”

Sugar production falls by half

Since the beginning of 2013, Ukraine has produced 702,700 tonnes of beet sugar, which is two times less than in the same period of the previous year, as reported by the Zerkalo Nedeli weekly.

According to UkrTsukor Association, only 38 refineries are processing sugar in Ukraine, while last year there were 63 plants processing sugar beets.

Zerkalo Nedeli also reported that, according to forecasts made by market participants, domestic sugar consumption will contract from 1.8m tonnes to 1.5m-1.6m tonnes due to Russia's banning imports of products of Roshen confectioneries.

At the same time, according to the Kommersant Ukraina business daily, for the first time over the last decade sugar prices are growing during the processing season.

Revenue Ministry: Roshen owes 6m dollars to the State

The Ministry of Revenues and Levies of Ukraine has found a number of violations of the tax legislation by Roshen company, which is owned by MP Petro Poroshenko, during 2010-2012, the ministry's press service reported.

Based on the results of a series of audit checks by the ministry, the amount of additional taxes to 25 factories belonging to the Ukrainian corporation has totaled 47m hryvnyas (5.9m dollars).

According to the Kommersant Ukraina business daily, the main claim against Roshen concerns VAT refunds from exports to Russia.

ENERGY MARKET

Ukraine cuts gas import from Europe

Since November, Ukraine has cut the daily import of natural gas across Hungary by an average of 58 percent, down to 3.6m cu.m. per day, the Hungarian pipeline operator FGSZ Ltd has said.

Ukraine's import through Poland since November has also decreased down to 1.4m cu.m. per day, whereas in the last days of October it ranged from 3.3m cu.m. to 4.1m cu.m., the Ukrainian News news agency has said.

Ukraine disappointed by Energy Community inaction regarding gas reverse

Deputy Prime Minister Yuriy Boyko has said that Ukraine is in tough negotiations with the leadership of the European Commission and the European Energy Community regarding the change of position by European partners with regard to the construction of the South Stream gas pipeline bypassing Ukraine and reverse gas supplies.

According to Boyko, Ukrainian Prime Minister Mykola Azarov sent a letter to European Commissioner Gunther Oettinger criticizing the European Energy Community for its stance on the diversification of gas supply routes.

Boyko stressed that by launching the construction of its sector of the South Stream gas pipeline in October, Bulgaria violated the rules of the energy community.

He added that Slovakia, being a member of this organization, must help Ukraine to diversify supply routes, however it ignores the interests of its eastern neighbour.

Turkmenistan ready to supply gas to Ukraine

Turkmen ambassador to Ukraine Nurberdy Amanmuradov has said that his country is ready to supply enough gas for Ukrainian customers any time.

According to Ukrainian Deputy Foreign Minister Viktor Mayko, it is nearly impossible to transport Turkmen gas along the traditional route via Russia. He added that the sides were working on alternative routes. The trans-Caspian gas pipeline could be one of them, Mayko added.

PGNiG terminates contract with Naftohaz Ukrayiny on gas supply to Poland

On 6 November 2013, the Polish state-owned company PGNiG terminated the contract with Ukraine's Naftohaz Ukrayiny on the import of gas to Poland by 2020 signed in 2004. The Polish company said this in a report at the Warsaw Stock Exchange.

PGNiG said the contract was terminated because the import of gas was unprofitable.

However, the UNIAN news agency said that the Polish company wanted to find "a new formula of cooperation" with Naftohaz Ukrayiny.

In June 2011, parliament permitted the export of gas produced in Ukraine.

Ukraine signs agreement with Chevron

The Ukrainian government and the US company Chevron signed a production sharing agreement to produce shale gas on the Oleske gas field located in Lviv and Ivano-Frankivsk regions.

According to Energy Minister Eduard Stavytskyy, Ukraine expects to extract up to 10bn cu.m. of gas a year from this field.

Chevron is planned to invest 10bn dollars in hydrocarbon extraction in Ukraine's western regions.

According to President Viktor Yanukovych, the joint projects with Chevron and Shell will ensure that Ukraine is fully supplied with gas by 2020 and, according to the best-case scenario, will be able to export it.

According to the chairman of the State Agency for Energy Efficiency and Energy Saving of Ukraine, Oleksandr Tron, Ukraine needs to draw in 1,110bn hryvnyas or 140bn dollars, of investments to make its economy more energy efficient.

Local budgets to have 10 percent of returns from joint hydrocarbon production

On 5 November 2013, parliament amended the Budget Code securing at least 10 percent of state returns from the sale of mineral resources extracted within the framework of production sharing agreements with local budgets.

According to the document, 5 percent of state income from such agreements will be transferred to regional budgets or the budget of Crimea, 3.5 percent to district budgets, and 1.5 percent to city and village budgets.

These funds will be excluded from the general fund of the state budget and included in local development budgets.

Adriatic gas corridor delayed

The government press service said on 4 November 2013 that the prime ministers of Ukraine and Croatia, Mykola Azarov and Zoran Milanovic, were going to sign on 5 November a memorandum to create the Adriatic gas corridor linking Ukraine, Hungary and Croatia.

On 5 November, Croatian Deputy Prime Minister Branko Grcic said that the issue of the Adriatic gas corridor, including the construction of an LNG terminal on the island of Krk, requires more time and discussion. He added that Croatia is expecting "to sign the agreement in some time".

On 25 October, Ukraine and the EU coordinated a new route of natural gas supply from Croatia via Hungary to Ukrainian gas storage facilities.

World Bank to give Ukraine 350m dollars to improve heating efficiency

The World Bank intends to finance a six-year project to improve the energy efficiency of Ukraine's central heating system, worth around 350m dollars, the press service of the Regional Development Ministry has said.

The project is expected to launch in the second half of 2014.

Naftohaz Ukrayiny loses stake in largest gas trader

According to the National Commission for Securities and Stock Market, the stake of the state-owned oil and gas company Naftohaz Ukrayiny in the closed-end joint-stock company Ukrhaz-Enerho went down from 50 percent to 0. Ukrhaz-Enerho was set up by Naftohaz Ukrayiny and RosUkrEnergo (owned at par by Gazprom and businessman Dmytro Firtash) at par in 2006.

In June 2011, the Kiev economic court of appeal invalidated the resolution of the statutory meeting of Ukrhaz-Enerho with regard to Naftohaz's participation in its establishment, and Ukrhaz-Enerho's statute with regard to Naftohaz's participation in its capital.

On 26 June 2013, the Kiev Economic Court obliged Naftohaz Ukrayiny to return Ukrhaz-Enerho its 50-percent stake.

Judging by its 2011 and 2012 reports, Ukrhaz-Enerho became one of the biggest gas suppliers, having sold customers 835.355m and 648.673m cu.m. of gas respectively.

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