Ukraine to Get EU Market-Economy Status

KIEV, Ukraine -- Ukraine is set to win European Union recognition as a market economy, a British government spokesman said Tuesday, a move that would help ease its integration into the West and make it easier for the country to trade with the Union, especially in steel, of which Ukraine is a large producer.

Ukraine aspires to become a member of the EU
Tony Blair, the British prime minister and holder of the Union's rotating presidency, will announce the plan at a summit meeting on Dec. 1 in the Ukrainian capital, Kiev, said Jonathan Allen, a British government spokesman in Brussels.

The remarks came as President Viktor Yushchenko pledged to speed up privatizations and reform energy and other markets to stimulate trade and economic growth.

"We would like to mark 2006 with a series of concrete structural reforms," he said at a conference attended by foreign investors. "We all understand that without change Ukraine cannot move forward and that goes for both the economic and social sectors."

Market-economy status would signal greater European trust in Ukraine by ensuring that the Union used Ukrainian data for trade inquiries affecting the country. The Union uses other nations' figures to calculate "antidumping" levies against Ukraine.

EU antidumping duties, designed to protect companies in the 25-nation bloc from lower-priced imports, cost Ukraine €200 million to €300 million a year, or $234 million to $256 million, Oleh Rybachuk, then Ukrainian vice prime minister and now state secretary, said in February.

Obtaining market-economy status is part of Ukrainian policy goals that also include starting talks on a free-trade zone with the Union, winning membership in the World Trade Organization and reorganizing the energy market.

The Ukrainian government had sought EU market-economy status in the first half of the year. The European Commission, the Union's trade authority, said the main obstacles were government price controls and legislation that prevented companies from going bankrupt.

The EU plan to grant such recognition is "on the basis of the commission's assurance that Ukraine meets the technical requirements for market-economy status," Allen said.

Yushchenko also confirmed on Tuesday that Ukraine had secured support from Kazakhstan to build a $6 billion pipeline to ship Caspian crude oil to Poland via Ukraine, increasing supplies to Europe after oil prices rose to a record this year.

Poland, Kazakhstan and Ukraine agreed to extend and expand an existing Ukrainian pipeline to link the Black Sea port of Odessa with the Gdansk terminal in Poland on the Baltic Sea, Yushchenko said. The partners could lift the oil link's capacity to 40 million tons a year, or 800,000 barrels a day.

"Ukraine will be reforming its energy sector because we want to integrate into Europe," Yushchenko said. "We have conducted all the talks and reached an agreement with Azerbaijan, Kazakhstan, Poland and Georgia."

Kazakhstan, which plans to almost triple oil output to 3.6 million barrels a day in 2015, is expanding its ports to reduce the former Soviet state's reliance on Russia as an export route.

Chevron's Tengizchevroil, Kazakhstan's biggest oil exporter, said Nov. 22 that it planned to send more crude oil across the Caspian to Azerbaijan as a planned increase in output would exceed the capacity of existing pipelines via Russia.

The oil would be shipped from Baku, the Azeri capital, to the Black Sea, via Georgia. The link could carry 10 million tons to 15 million tons of Kazakh oil in 2006, Yushchenko said.

Ukraine is seeking to reduce its economic dependence on Russia, which supplies most of the country's oil and gas, after President Vladimir Putin last year backed Yushchenko's opponent in contested elections.

Ukraine is in a dispute about gas imports with the Russian energy company Gazprom, which wants to triple the price Ukraine pays for its gas.

Gazprom, which supplies a quarter of Europe's natural gas, is concerned that Ukraine's refusal to agree on 2006 gas supply contracts could disrupt exports to countries like Germany and Italy, which are shipped through pipelines that cross Ukraine, Gazprom's deputy chief executive, Alexander Ryazanov, said Tuesday in Moscow.

The Ukrainian oil pipeline from Odessa to the western town of Brody stood idle for three years after its completion in 2001. The Ukrainian government had planned to ship crude oil through the link to Brody, where it joins the Druzhba pipeline from Russia to Germany. The pipeline had been idle until BP's Russian venture, TNK-BP, started using it last year to transport Russian oil in the opposite direction, to the Black Sea.

Source: International Herald Tribune