• Українська
  • Русский
  • English
Where there is no law, but every man does what is right in his own eyes, there is the least of real liberty
Henry M. Robert

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

13 October, 1998 - 00:00

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."

 

Rubric: