President Attempts To Take Oil Crisis Under Control

Yuschenko issued a decree yesterday calling for the following emergency measures to curb prices for oil products:

• Within two weeks, the Economic Ministry must cancel its price petroleum price caps;
• Within two weeks ,the Cabinet must submit amendments to the law “On Value-Added Tax,” setting a zero VAT rate on the transit of crude oil through Ukraine;
• Within a month, the government must decide on how to create a vertically integrated system of managing corporate rights for the state, petroleum companies and oil refineries. Additionally the state must create a reserve supply of light petroleum products equal to 10% of annual consumption by January 1, 2006;
• Within two months, the government must develop a program to diversify oil product supplies, in order to end Ukraine?s dependency on Russian oil.

Concorde Capital: Overall, the measures outlined in the presidential decree will have a positive effect on oil market and could help tackle the current crisis. However, from a political point of view, the president?s decision may contradict initiatives recently undertaken by Tymoshenko. It seems that the gap between the President and Prime Minister is widening.