Economy for the Week 

The significant devaluation of the hryvnia promoted the growth of rates on the interbank credit market, where the price of resources, as Interfax-Ukraine reports, shot up twofold from 4-6% on Monday to 10-12% (overnight rate).

Most experts attribute the fall of the hryvnia to price hikes for oil products. Director of Raffeisenbank Ukraine Serhiy Manokha believes, "Gasoline prices have doubled. This causes inflationary expectations, and then the hryvnia has to be devalued."

Chief of interbank operations at the Nadra Bank Serhiy Borysov, according to Interfax-Ukraine, does not rule out that the abrupt tremor in the exchange rate might have been caused by "certain actions of a certain group of banks." However, by Wednesday, the Nadra Bank refused to comment on the current situation.

Deputy chairman of the board of governors of the Finances and Credit Bank Vadym Chankin told The Day's correspondent, "Inflation expectations always occur in August. What is more, they become a beneficial psychological factor in the presidential election campaign. This in fact has given the market some momentum. But I think quotations will roll back from their peak, as the National Bank is sure to bring into play the regulatory mechanisms it used as long ago as last September. However it is too dangerous to make predictions today. It is common knowledge the coming fall will be very active from the business standpoint. And no one knows what turn events will take. The point is in the mentality of business people. If official sources keep prattling that they are certain to maintain a stable hryvnia, this causes a certain crack, a crisis of confidence."

Mr. Chankin also pointed out that the government's attempts to revitalize the oil product market in Ukraine by means of privileges is like beating a dead horse or trying to catch up with the train that just left. "I have just been to Kremenchuk, and I saw that the oil refinery stands idle as do other similar plants. So when should we run after loans, and when will this oil be delivered, refined, and sold?"

A minute after the interview with Mr. Chankin, The Day received a call from National Bank spokesman Dmytro Rikberg who stressed, in speaking about gasoline, panic, and psychological factors, that the financial market is quite all right. This can be interpreted as National Bank commitment to bring the hryvnia back to its place.

Meanwhile, the fall of the hryvnia immediately told on essential goods in the provinces. As The Day's Mykhailo VASYLEVSKY reports from Khmelnytsky, cigarettes immediate showed a 30% price jump. The dollar has vanished from kiosks, and illegal moneychangers have reappeared. The dollar sells at UAH 4.70 on the black market. In addition, the man in the street thinks this is only the beginning, for no one expects gasoline prices to go down now.

INCIDENTALLY

The most effective hryvnia-gasoline fire extinguisher has been invented by Leonid Kuchma who struck a deal with a Greek multimillionaire Vardis Vardinoiannis on the supply of a million tons of light oil products to Ukraine.

As the chief representative of the Vardinoiannis Group in Ukraine Ioannis Litinas informed The Day, the contract on delivery of the oil products was signed by the Ukrnaftoprodukt holding company under guarantee of the Cabinet of Ministers which urgently passed the needed resolution. The first 30,000 tons began to be shipped on July 24 to the Feodosiya oil terminal. Mr. Litinas said the latter would have to receive "four tankers a month, i.e., about 100,000 tons. The same quantity of fuel will also go to Odesa." He declined to reveal the price, referring the question to Ukrnaftoprodukt, but he noted the contract stipulated 7 to 30 days for delivery.

We were told at Ukrnaftoprodukt that the price of the fuel being supplied is oriented toward the world price of $165 (SIF) per ton. The person who spoke with The Day noted, "We simply won't be able to handle" supplies valued at as many as a billion hryvnias (1 million tons), since Ukraine in fact does not need that much.

The fire extinguisher designed by the government to simultaneously save the hryvnia and the harvest seems to have been brought into action too late, which can only bring new losses and debts.

PS: Viktor Yushchenko was asked at the press conference about possible political causes for the current hryvnia decline. He answered evasively, saying he needed allies in the struggle for a stable hryvnia and regards the press as such. Then who are the enemies?

By Vitaly KNIAZHANSKY, The Day