Ihor KIRYUSHIN: "It Will Be Hard To Survive This Winter" 

In Ukrainian residents' rating of events, the autumn's plunging temperatures can pretty soon outstrip even the current financial and monetary crisis. Apartments are already cold, children and the elderly are beginning to fall ill...

Meanwhile winter lies ahead, which is not expected to be warm. What do specialists think about all this? The Day correspondent posed this question to Ihor Kiryushin, former director of the Shelton company engaged in processing and delivering oil products, Greens M.P., and a member of the Verkhovna Rada Committee on the Energy Sector, Nuclear Policy, and Safety.

"For some reason, crises in this country always begin before winter, badly affecting people. If in March, when it was known that grain prices would drop and there would not be such demand for our metal in Southeast Asia, and the National Bank started to do what did in September, i.e. devaluated the hryvnia, things would have been much quieter now. However, the thesis on hryvnia protection has turned out to be much stronger than common sense. And now our major power source, Russia, has been impacted by severe crises. It needs financial resources we don't have. Hence, the energy market will present more than enough difficulties. As in the previous year, there may be a need to [temporally] switch off whole districts from the power grid. Since Russia has to supply natural gas, and gas pipelines run across Ukraine' territory, transit fees for supplies to European countries will be paid by natural gas. The situation with crude oil is even more complicated. After all, it is a commodity sold for hard currency. And to buy hard currency at our exchange is now next to impossible. Accordingly, we should revert to the Bidding Committee and define what is "critical import" and what can wait. Otherwise it would be difficult to survive this winter.

"But we have already passed through that, and the result was not very good".

"I am not saying we should be doing this for a long time. Just winter and spring. If we could only overcome this hard time; if we could manage to buy petroleum and supply our power plants with black oil, we will overcome it. And coal? Our miners must provide it. And it can also be bought from the Kuznetsk Coal Basin (Russia). Quite a few proposals are coming from there. Russia badly wants money and foodstuffs. If we manage to buy all the things we need, we will survive. But we can't afford to buy things which are of no use to this country now. We can even clamp down on our businessmen importing food products. We will certainly last for half a year without supplies of goods from Italy, France and the U.S., which are unaffordable to most Ukrainians, and, say, without furniture. What is now more important for us? Entering winter requires taking cardinal measures. By the way, adopting them is not easy to do. Parliament chastises the government for such decisions. But all of them are forced. And the best decision is chosen out of the worst. We cannot cut off people's heat. Of course, one can stand an evening by candlelight, but one can hardly sit in an unheated room for too long. We should think about that.

"All over the world energy resources are not a problem: they become less expensive. In this country, it is just the opposite.

"The Committee views the situation as very critical. For instance, in his June 24 Decree the President introduced new excise rates. This represented his good wish to refill the Treasury. The fact is, pensions and salaries to budget dependents should be paid. But did anyone calculate how much these excise duties would increase the prices of foodstuffs, and how the prices for manufactured products would rise, and how it would impact their competitiveness?

"We elaborated recommendations on how to refill the budget without increasing prices for foodstuffs and manufactured goods. Excise duties for low octane gasoline brands should be decreased, and most taxes should be collected at gas stations selling high octane gasoline. This is the way to renew the budget.

"Also, measures to combat smuggling and illegal sales should be intensified. Smuggling utterly ruins the state, trade, and business. Most large firms operate on 10% profitability because of competition from smugglers. Who can compete with their prices if they do not pay taxes?

"In addition, there are joint ventures which won the litigation against the state over the tax issue. The taxes for these companies remain unchanged in accordance with the state guaranty issued in 1992. Currently, there are nine such companies entitled to import into Ukraine anything they want without paying excise duties or taxes. The President plans to issue a decree canceling those privileges, but this is only a provisional measure.

"The only right decision is to cancel all excise duties and shift the collection of such taxes to the terminal point: if it concerns gasoline, then it is the gas station that has to pay. Let the tobacco shops pay for their patents. This will create equal conditions for the companies dealing with excised goods and prevent an increase in prices for food products, which is very important under conditions of a financial crisis. We have come to terms on these issues with most parliamentary factions, including the Communists: diesel fuel and low octane gasoline brands should have a minimal excise duty and price. The cost of transporting goods and harvesting crops depends on this. These types of fuel are used by those of a poorer lot, like old car owners. By amending the presidential decree, we improve it rather than make it worse. And we do not deviate from IMF recommendations on introducing and increasing excise rates. We decrease them, but we receive real money from those selling such fuels."

"How will this be accomplished?"

"Currently, the Economy Ministry and the Ministry of Foreign Economic Relations, in cooperation with the Committee, are supposed to work out a method for introducing monthly patents to sell 92 and 95 octane gasoline. Such a patent may cost from Hr 2,500 to Hr 4,000 and its price will be attached to the dollar exchange rate. Therefore, it will be the same excise duty, but now it will be collected from the sale of fuel used by very wealthy people. At the same time, duties imposed on low octane gasoline, the "average commodity", should be kept at a minimal level. The budget will be filled with real money. Gas stations will pay anyway, and it is important to assure that they pay not to the local budget, but to the central budget, which finances pensions and other social expenditures, supports the army and the whole budgetary sphere. In this regard, I am an adherent of rigid centralization. The center is the place where funds are distributed and, if necessary, given out. The fact is that there is a lack of funds. Most of the receipts the government had pinned its hopes on proved mythical. Suffice it to say that, according to accounting documents, 92 and 95 octane gasoline never made it into Ukraine: this is because they were subject to excises. Gas stations offered those brands in abundance, but only 76 octane passed through customs. This is how pensioners were robbed of their money.This is not acceptable anymore."