Merger or Takeover?
President Viktor Yanukovych of Ukraine has restarted cooperation with the International Monetary Fund. Last Sunday he assured the Ukrainian people that the IMF resolution on granting Ukraine another loan tranche would be adopted in the near future. “Considerably earlier than the end of the month,” said the head of state. Does his taking part in what is within the cabinet’s jurisdiction mean that the Ukrainian government has failed to make a breakthrough with the IMF? Deputy Prime Minister Serhii Tihipko says that “we shouldn’t postpone this decision till fall, let alone the end of the year… it is necessary to speed up the agreement; I’m sure the IMF will go along.”
Yet given the current situation obtaining the loan tranche is easier said than done. IMF Deputy Managing Director Naoyuki Shinohara said that the Fund’s advances portfolio has become noticeably thinner, stressing that the main concern was about the considerably limited capacities of credit support policy, and that in a number of cases these capacities had been exhausted.
Needless to say, the IMF’s stand has a tangible effect on that of other international finance institutions. Thus, the EBRD suspended loan programs for Ukrhidroenerho and the Kakhovska power lines associated with the Zaporizhia Nuclear Power Station (ZAES) until fall under the valid pretext of coping with environmental issues.
What alternative does the Ukrainian government have, faced with the pressing need of somehow filling in the budget deficit gaps? Well, there is always our good old friend, Russia, with a helping hand. Last week Yurii Boiko, head of the Fuel and Energy Ministry (Minpalyvenerho) and Sergei Kiriyenko, CEO of the Russian State Corporation Rosatom, met in Kyiv and signed an intergovernmental cooperation agreement to finish construction at Power Units 3 and 4 of the Khmelnytsky Nuclear Power Station. Under this agreement, the Russian signatory undertakes financing in the amount required for project documentation, construction, and launching the power units. Kiriyenko explained the financing method: “Part of this money may be shared, as agreed, between both finance ministries, and another part provided as loans from commercial banks. Apparently these banks will be in Russia.” He went on to say that such loans wouldn’t be made under a product distribution contract, but under the condition of repayment using the proceeds of the power units under full payload. Enerhoatom President Yurii Nedashkivsky said: “This loan agreement will be signed separately, along with guarantees and other mechanisms.”
Meanwhile, Interfax informs, relying on a good source in the upper echelons of power in Ukraine, that last week this country received some two billion dollars’ worth of loan from Russia, and that this money most likely originated from the Russian-Ukrainian project aimed at completing the power units at the Khmelnytsky Nuclear Power Station. There has been no official confirmation in Ukraine, but everyone understands that managing the budget deficit would be impossible without this “nuclear money.” Not coincidentally, President Yanukovych lent the Ukrainian government a helping hand when he got in touch with Russian Prime Minister Putin on Tuesday and asked him to help arrange loans from Russian government-run banks: “Mr. Putin, this is what we badly need at the moment; we would like to have an opportunity to use such loans from Russian banks to build these production facilities. We are conducting negotiations and we would appreciate your help.” Putin answered in the affirmative.
The traditional question is what Russia will expect in return. Many assume that Ukraine has given up its nuclear power engineering. “They’re preparing to surrender Ukraine’s nuclear power industry,” says ex-Prime Minister Yulia Tymoshenko. Our government has to reckon with such sharp criticism. Minpalyvenerho CEO Yurii Boiko met with journalists and, when asked about this, replied by saying that Turkey had boldly allowed Russia to build a nuclear power station on its territory, retaining only the tariff regulatory function. “What would’ve happened, had we made such a decision?” Boiko asked rhetorically and went on to describe the fantastic advantages Ukraine would have from signing a contract with Russia, providing for the construction of nuclear fuel works in Angarsk. He stressed that Ukraine would have an advantage in the joint venture tasked with this project, so that by 2017 it would have a complete nuclear fuel production cycle and be able to stop imports.
What does this all add up to? One can assume that the international tender, meant by Enerhoatom to designate the partner for the construction of nuclear fuel production facilities in Ukraine, ended ahead of schedule. Money can solve all kinds of problems.
