RIVERS OF GASOLINE FOR JAPANESE MONEY Will the Ukrainian Cabinet muster the courage for guarantees?

The Export-Import Bank of Japan sent Ukraine's Eximbank an official confirmation of a long-term (over 10 years) loan for the publicly held Halychyna Oil Refinery Complex. Mykhailo Skikun, Halychyna's technical director, says the credit is over $200 million, and that it will "solve practically all problems in terms of construction and launching into operation an actually new oil refinery."

There is a hitch. The project is at a standstill as the Cabinet is deliberating government guarantees which the Japanese regard as obligatory. People in Drohobych are enthusiastic, nevertheless, with the letter of intent signed by the Ukrainian Agency for Reconstruction and Development, Eximbank, and the Japanese Ministry of Trade.

According to Mr. Skikun, the construction project's cost (including startup procedures) is over $300 million, and there are no analogous projects anywhere in the former socialist camp. True, the project did not have to be started from scratch. Halychyna set about building premises back in 1995, which took several dozen million dollars, but when it came to buying equipment company resources when dry. Now everything depends on the government; if the Cabinet gives the required guarantees, the credit will be received in two or three months and renovation work will be completed in 2001 or so.

Should the Cabinet say no, Halychyna will use an alternative loan project (without guarantees), but Mr. Skikun warns that it will cost "several times more," adding that the Japanese bank's long-term rate is "extremely low, compared to that offered by European structures."

The future oil refinery will operate using energy-saving technologies, processing 3.4 million tons of oil a year and producing high-octane Eurosuper-type gasoline. Halychyna handles about as much "black gold" with all of its current capacities. Experts believe that Japan's interest in the development of Ukraine's petrochemical industry may indicate that the next step by the land of the rising sun will be to flood the Ukrainian market with its products.