By Myron Wasylyk, Senior Vice President & Managing Director, The PBN Company, Kyiv

US Vice President Joe Biden’s visit to Ukraine this week accomplished three very important objectives not only for the US-Ukrainian bilateral relationship, but also for communicating Washington’s security policy views to Central and East Europeans.

First, Biden affirmed for official Kyiv the continuity of US-Ukrainian relations and their strategic importance to both sides on a wide range of issues. This ended speculation in both capitals about the status and nature of the bilateral relationship and affirmed that an independent, democratic and prosperous Ukraine remains a strategic priority for America.

During meetings with Ukraine’s political and business leaders, Biden specifically affirmed Washington’s support for the 1994 Budapest Memorandum, which gave Kyiv security assurances from the United States, United Kingdom and Russia in exchange for Ukraine’s getting rid of its nuclear weapons arsenal, one of the world’s largest at the time. The term of the memorandum expires this year and the Ukrainians were keen to receive a signal of support from Washington.

In another important step for Kyiv, the Charter on Strategic Partnership signed by Presidents George Bush and Victor Yushchenko was renewed. Biden announced a bilateral commission would be established to focus on economics, trade, energy, security and rule of law with an inaugural meeting of the commission scheduled for this autumn in Washington, DC Biden also affirmed US support for Ukraine’s Euro-Atlantic integration without mentioning NATO by name.

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By Yulia Sobko, Head of Financial Communications and Investor Relations, The PBN Company, Kyiv

A Russo-Ukrainian gas dispute has, since 2005, been a recurring winter event that threatens serious repercussions for EU gas supplies. This year, however, the annual disagreement has been worse than ever, rearing its head each month and even dragging on into the summer. This situation has not only caused irrevocable damage to both Ukraine and Russia’s international image, but also has serious economic consequences that have been exacerbated by the recession.

Ukraine, which continues to be fully reliant on Russian gas, has been hard hit by the credit crunch and has severe budgetary problems. A revised supply deal signed in January gave Gazprom more favorable terms, and Ukraine is already in arrears on its gas payments.

In early June, Naftogaz, the Ukrainian gas supply company, said it will struggle to pay future bills and that it needs to raise a whopping $4.2 billion. Given that Russia supplies 25% of EU gas, and 80% of those supplies flow to Europe through Ukraine’s pipeline network, Ukraine was hoping for European funding to meet its obligations. It also put forward an alternative supply proposal in which the European gas companies supplied via Ukraine would pay Russia directly and then ‘store’ their gas in Ukraine, eliminating Naftogaz as the financial middleman. German utility RWE expressed interest in the idea and said it has put proposals on the table. However, Germany’s biggest gas company, E.ON Ruhrgas, has ruled out the idea. European industrial group Eurogas said it was still consulting its members and could not yet gauge their response.

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By Yulia Sobko, Head of Financial Communications and Investor Relations, The PBN Company, Kyiv

As June comes to close, the Ukrainian banking sector is able to take a bit of comfort from recent events. The government has finally set a bank bailout in motion by allocating 1% of GDP (UAH 9.6 billion) to recapitalize Rodovid Bank, Ukrgazbank and Bank Kyiv in exchange for majority stakes. Nadra and Ukrprombank are also waiting in the wings, pending resolution of issues with creditors.

Prominvestbank, the first victim of the banking crisis that was nationalized in late 2008, recently paid back its loan. Finance&Credit decided it doesn’t need state support as its financial situation has markedly improved.  And even though banking sector experts don’t exclude the possibility of insolvencies in other systemically important banks, it is hoped that the bailout, together with the generally more optimistic market sentiment, might mean we are on a path of a gradual strengthening of the system.

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President Yuschenko’s chief of staff, Victor Baloha, has resigned, accusing his former boss of cronyism and of betraying promises made during the 2004 Orange Revolution. Myron Wasylyk, Senior Vice President and Managing Director, The PBN Company Kyiv, analyzes Baloha’s performance

Victor Baloha’s tenure as head of the Presidential Secretariat, akin to presidential chief of staff, has been filled with very important political victories for President Victor Yuschenko, as well as a number of failures.

Baloha’s parting words show him as a spiteful and disloyal lieutenant whose limited intellectual boundaries became ultimately inconsistent with the strategic vision of his former boss.

But Baloha did help Yuschenko in some ways as chief of staff.

Immediately after his summer 2006 appointment, Baloha moved quickly to bring relevance and order back to a Secretariat left disorganized by two Yuschenko allies not known for their political astuteness or management skills – Oleksandr Zinchenko and Oleh Rybachuk.

Then Victor Yanukovych had just won the plurality in regularly scheduled parliamentary elections and put together a coalition with Socialist MPs, who betrayed Orange Revolution allies in exchange for seating Oleksandr Moroz as Verkhovna Rada’s speaker. A series of nationally televised roundtable sessions were held and a political agreement on pursuing a pro-Western policy was signed by Yanukovych and all other political players except Yulia Timoshenko.  This paved the way for Yuschenko to fulfill his constitutional obligation of submitting Yanukovych’s nomination for the premiership.

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By Viktor Kovalenko, Account Manager - Government Relations, The PBN Company, Kyiv

In the middle of May, a special meeting of Ukraine’s National Security and Defense Council is scheduled to discuss the problems associated with launching nationwide digital broadcasting (DB).  According to official data, Ukraine has the infrastructure to enable 85-95% of households to receive a digital signal.  But despite this, DB has gotten off to a slow start in Ukraine - it was only six months ago that some TV channels started test digital broadcasting in Kyiv and Odessa, two of the biggest cities.  Other countries in the region have left Ukraine in the dust - Belarus has already started digital broadcasting, and even Kyrgyzstan has launched a digital network.

The delays are due to the fact that DB has become a contentious political issue - yet another example of the notorious rivalry between President Viktor Yuschenko and Prime Minister Yulia Timoshenko.  At the beginning of the process, there were two rival agencies competing for the state’s DB mandate, which would give control of a budget worth millions: the Ministry of Transport and Communications controlled by Prime Minister Timoshenko and the National Council for TV & Radio, which supports President Yuschenko.  The Ministry’s scheme would cost UAH 4.3 billion, while the Council’s plan came in at more than UAH 6 billion.

After more than three years of deadlock, on April 22 of this year President Yuschenko finally signed decree #259/2009, awarding the DB mandate to Timoshenko’s Ministry. The decision seems to be budgetary - in this time of crisis the President went for the cheaper offer.  Some communications experts, however, say that the Ministry plan was also better developed, and that from a technical standpoint the President made the correct decision.

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