Fuel Crisis Drags Yushchenko Back Into the Fray of Ukraine's Politics

KIEV, Ukraine -- Little more than 100 days after Viktor Yushchenko won the Ukrainian presidency on the back of "Orange Revolution" pro-democracy protests, a petrol shortage has forced him to delve into the nitty-gritty of managing the country.

Mr Yushchenko, a former central bank chairman who had sought to maintain a detached, presidential role away from day-to-day government, last week stepped in to defuse a fuel crisis sparked last month when Yulia Tymoshenko, his hand-picked prime minister, ordered price caps on oil.

The move was intended to lower prices and overall inflation, but Russian energy companies, which meet 80 per cent of Ukraine's oil needs, sharply reduced imports, causing severe shortages.

Mr Yushchenko then ordered the caps to be gradually lifted, satisfying suppliers and easing fears that Ms Tymoshenko was pushing the country too far to the left.

In an interview with the Financial Times, Mr Yushchenko said: "I wouldn't draw the conclusion that what has happened in the government's first 100 days represents the absolute fundamentals of economic and social policy."

He also appealed for understanding from foreign investors who have been put off by some of his government's early moves.

The fuel crisis sparked speculation that Ms Tymoshenko would be asked to resign. During the weekend, both she and Mr Yushchenko denied a rift.

The Ukrainian president, in a statement, said his team was "as monolithic as always" and that his "positive evaluation of the government's work remains unchanged".

Ms Tymoshenko grabbed headlines in recent weeks with accusations against oil companies, and also announced plans to increase the state's role in a range of markets, including petrol, electricity, insurance and mortgages.

She also fanned worries among business leaders in Ukraine and Russia - who have heavily invested in the country - that a review of previous privatisations would not be limited to a pre-defined list of companies, as Mr Yushchenko had promised.

Mr Yushchenko, however, reiterated in the interview that a fixed list of companies subject to review would be published in "the near days". A list of 29 companies that was published this week by the Russian newspaper Kommersant was a preliminary but "not official" version, he said.

The list published by Kommersant was dominated by steel plants, ore mines and other metallurgy companies sold in 2003-2004 to domestic tycoons. However, it also included several Russian-owned companies.

Mr Yushchenko said he would support moves to improve the management of state assets, including the creation of a vertically integrated state oil company, but he would not permit any nationalisation. The companies whose privatisations will be reviewed could be re-auctioned, with current owners allowed the chance to keep their companies by matching the highest bid.

Mr Yushchenko said he did want to reduce Ukraine's dependence on Russia as a supplier and transit route for oil and gas by pursuing a range of investment projects.

Ms Tymoshenko had argued the oil price caps were necessary to fight what she claimed was politically motivated collusion among Russian oil companies eager to make things difficult for the pro-western president.

The president, however said he saw no evidence of cartel behaviour and criticised the price-cap policy for not being "liberal or market- oriented".

"To go in that direction is not correct, and it won't happen. I was obliged to again remind the government that such policies don't fit in the goals or methods of the new administration," he said.

He also pointed to his government's "colossal success" in quickly tackling what he argued had been a thoroughly corrupt and dysfunctional political system. He said more than 16,000 civil servants were replaced in the government's first 100 days in a crackdown on corruption and inefficiency.

Source: Financial Times