THE ACTION UKRAINE REPORT – AUR – Number 600

“THE ACTION UKRAINE REPORT – AUR”
An International Newsletter
The Latest, Up-To-Date
In-Depth Ukrainian News, Analysis, and Commentary

“Ukrainian History, Culture, Arts, Business, Religion,
Sports, Government, and Politics, in Ukraine and Around the World”

“THE ACTION UKRAINE REPORT – AUR” – Number 600
Mr. E. Morgan Williams, Publisher and Editor
KYIV, UKRAINE, MONDAY, NOVEMBER 14, 2005

——–INDEX OF ARTICLES——–
“Major International News Headlines and Articles”

1. ENERGY SECTOR REFORM AND EUROPEAN INTEGRATION
REMARKS: John E. Herbst, U.S. Ambassador to Ukraine
At the NaftoHaz-sponsored Conference
“Oil and Gas Industry of Ukraine: On the Way to European Integration”
Wednesday, November 9, 2005; 10:00 a.m.
International Exhibition Center, 15 Brovarskyi Prosp., Kyiv
Public Affairs Section, U.S. Embassy in Kyiv
Kyiv, Ukraine, Thursday, November 10, 2005

2. IMF EX BOARD CONCLUDES CONSULTATION WITH UKRAINE
Authorities need to restore macroeconomic stability and implement
structural reforms to complete the transition to a full-fledged market
economy needed to unleash the economy’s significant untapped potential.
International Monetary Fund (IMF)
Washington, D.C., Friday, November 11, 2005

3. THE LONG AND WINDING ROAD WEST
One of Ukraine’s richest men, Victor Pinchuk, pops into Brussels
Guardian Unlimited, London, UK, Thursday, Nov 10, 2005

4. ORANGE OUT OF FASHION, BUT STILL EVOKES WARM

Mara D. Bellaby, AP Worldstream
Associated Press (AP), Kiev, Ukraine, Friday, Nov 11, 2005

5. UKRAINE WON’T APPEAL EUROPEAN COURT RULING

Associated Press (AP), Kiev, Ukraine, Thursday, Nov 10 2005

6. CLINTON INC. SENT TO FIX UKRAINE CRISIS
Washington Whispers, U.S. New & World Report
New York, New York, November 21, 2005

7. WILL THE ORANGE REVOLUTION TURN GREEN?
Prime Minister Yekhanurov spent his time courting potential investors
By Matthew Swibel, Forbes magazine, NY, NY, Wed, Nov 9, 2005

8. EU UNVEILS 1ST GALILEO SATELLITE: INTO SPACE IN DEC
Ukraine has joined the EU’s satellite navigation program
Associated Press (AP), Brussels, Belgium, Wed, Nov 9, 2005

9. GAZPROM WANTS TO EARN EXTRA $2 BILLION ON

Polish News Bulletin, Warsaw, Poland, Thursday, Nov 10, 2005

10. USA TO PAY FOR UKRAINIAN TROOP PULLOUT FROM IRAQ
UT1 State TV, Kiev, in Ukrainian 1630 gmt 10 Nov 05
BBC Monitoring Service,UK, in English, Thursday, Nov 10, 2005

11. NATO PARLIMENTARY ASSEMBLY PRESIDENT SAYS

DOOR OPEN TO UKRAINE
Associated Press (AP), Copenhagen, Denmark, November 11, 2005

12. UKRAINE PRES APPEALS TO STUDENTS TO TRUST HIM

Associated Press (AP), Kiev, Ukraine, Thu, Nov 10, 2005

13. WHO ARE YUSHCHENKO’S TRUE ALLIES?
ANALYSIS AND COMMENTARY: By Taras Kuzio
Eurasia Daily Monitor, Vol 2, Issue 212, The Jamestown Foundation,

Washington, D.C., Monday, November 14, 2005

14. UKRAINE-NATIVE HAS PRESIDENTIAL INTERNSHIP WITH THE
AMERICAN RED CROSS: A DREAM COME TRUE
Had an Edmund S. Muskie and Freedom Support Act Graduate Fellowship
Yaroslava Tytarenko worked on USAID-funded projects in Kiev, Ukraine
By Sharon J. Alfred, American Red Cross National Headquarters
Washington, D.C., Wednesday, November 9, 2005

15. UKRAINE: FORGOTTEN CHILDREN
Help Us Help The Children, Canadian program supporting orphans
CTV.ca News Staff, Scarborough, Ontario, Canada
Saturday, November 12, 2005

16. IN CORNER OF UKRAINE, A STRIP OF IRON CURTAIN

STILL AWAITS ITS FALL
Dismissal of the Ukrainian government stalled the process once more.
Agence France Presse (AFP), Maly Selmentsi, Ukraine, Thu, Nov 10, 2005

17. UNIQUE RELIEF FROM ASTHMA DEEP UNDERGROUND

Agence France Presse (AFP), Solotvino, Ukraine, Sun, Nov. 13, 2005

18. LVIV’S KARPATY BLIND BANDURA CHOIR STOPS STRIKING
Ukrainian News Agency, Kyiv,Ukraine, Thu, November 10, 2005
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1
. ENERGY SECTOR REFORM AND EUROPEAN INTEGRATION

REMARKS: John E. Herbst, U.S. Ambassador to Ukraine
At the NaftoHaz-sponsored Conference
“Oil and Gas Industry of Ukraine: On the Way to European Integration”
Wednesday, November 9, 2005; 10:00 a.m.
International Exhibition Center, 15 Brovarskyi Prosp., Kyiv
Public Affairs Section, U.S. Embassy in Kyiv
Kyiv, Ukraine, Thursday, November 10, 2005

Thank you, Mr.Chairman, for moderating this forum, and thank you to the
organizers and participants of this conference for coming together today to
discuss the European integration of Ukraine’s oil and gas industry.

Ukraine has made a strategic commitment to European integration. Integration
will bring greater foreign direct investment, as Western producers discover
Ukraine as a manufacturing center for the European market.

Integration will bring higher standards of living for Ukraine’s population,
and it will strengthen Ukraine’s commitment to democracy, freedom of
speech and of the media, and good governance.

Integration will also create challenges for Ukraine. Ukraine will need to
open up its business practices and markets to European partners, and it
will need to increase the competitiveness of its industries. As integration
progresses, Ukraine will need to manage a gradual rise of input costs to
European levels.

Key to Ukraine’s successful integration will be energy sector reform.
Today, Ukraine has significant additional operating costs due to energy
inefficiency.

Reliance on a small range of foreign energy sources limits competitiveness
in pricing and hinders a gradual move to world prices. For any country,
energy reform precludes such a high degree of dependence on a single
foreign supplier.

Key to Ukraine’s future energy reform will be the rational use of its oil
and gas transit systems, positioned as they are between Russia and the
Caspian on one side and Europe on the other.

Ukraine will also enhance its energy sector by improving energy efficiency
and by increasing domestic production of both onshore and offshore
hydrocarbon reserves. U.S. companies and investors have potential roles in
all three of these areas.
A REALISTIC AND COMMERCIALLY VIABLE PIPELINE PROJECT
Congestion in the Bosphorus and declining North Sea production make

bypass options around the Bosphorus Straights to Northern Europe
increasingly attractive to international companies.

Ukraine, as the world’s largest energy transit country, can be a part of a
possible bypass route by using its Odesa-Brody pipeline or other pipeline
routes. Any pipeline project in Ukraine, or extension of an existing
project, of course, should be done on a commercially viable and transparent
basis.

Such a project should identify the array of upstream producers who own the
oil, the transit companies to ship the oil, and the midstream refiners to
process the oil at the other end. All links in the chain should be in place
before the project begins, with an agreed market tariff rate that makes the
project profitable.

Government-to-government negotiations may play a role in project
development, but the key ingredient will be the commercial contracts with
private businesses to produce and refine the oil.

By bringing online a new pipeline route, the government of Ukraine would
gain not only the revenues from the transit fees, but also valuable
experience in transparent, western-style business practices. Success breeds
success; once one commercially-viable transport project is accomplished in
Ukraine, Western investors would be more willing to enter into similar
agreements in the future.

I stress that any pipeline project must be commercially viable and
transparent, because any effort to shortcut market forces in order to
achieve greater energy integration with Europe will fail. Market forces
should determine pipeline routes; oil should flow to where there are buyers.

The price differential between Russian Urals and Caspian crude will of
course be a factor in any rational business plan. And, if for domestic
consumption Ukraine decides to use higher-cost Caspian crude, Ukraine
must decide how it will pay for this price premium.
INCREASING ENERGY EFFICIENCY
In recent weeks the Government of Ukraine has recognized that any balanced
plan for energy reform must address energy efficiency. Prime Minister
Yekhanurov has announced plans for a 60% reduction in industry’s
dependence on natural gas.

Part of this reduction will come from increased energy efficiency, and part
from a switch in energy sources. President Yushchenko announced that
Ukraine’s Energy 2030 plan would feature a new component on energy
efficiency.

The need for energy efficiency in Ukraine cannot be overstated. For every
dollar’s worth of industrial production, Ukraine consumes about two and a
half times as much energy as does Poland. This addiction to energy is a
symptom of the availability of cheap energy. The age of cheap energy,
however, is over.

As Ukraine moves toward Euro-Atlantic integration, it must also move toward
world prices. World prices will bring greater transparency to the energy
sector and force industry to modernize. These higher prices will encourage
increased domestic energy production, and will justify investments in
infrastructure to decrease energy loss.

Industrial modernization is overdue. Ukraine’s metallurgy and heavy industry
sectors rely on Soviet-era energy-intensive technologies, such as open
hearth blast furnaces in steel mills. Open hearth furnaces were last used in
the United States in the 1980s.

Ukraine’s old factories with their old technologies are not competitive with
global industry that has been gaining efficiency over the last quarter
century. In the long run, energy saving technologies will decrease operating
expenses and increase net profits for Ukrainian industry. By consuming less
energy overall, Ukraine will be better able to control its energy future.

Energy efficiency policies need to be developed using market mechanisms
and incentives to save and modernize. Efficiency should not be
state-administered.
OPENING UKRAINE’S ENERGY SECTOR TO WESTERN INVESTMENT
American and other energy companies are very interested in Ukraine’s
hydrocarbon reserves, both onshore and offshore. Given the right set of
commercial and government assurances, a range of companies are ready to
launch deep water exploration in Ukraine’s Black Sea, as well as onshore
exploration, new field production, and enhanced recovery from existing
fields.

A major find in the Black Sea would significantly improve Ukraine’s energy
security by lessening its dependence on foreign suppliers. While there is
now exploration underway off the coasts of Turkey and Georgia, Ukraine’s
continental shelf remains unexplored.

Nothing is known, therefore, about the potential type and amount of
hydrocarbon reserves it may contain. Since this summer, the Ukrainian
government has postponed plans to hold a tender on exploration licenses.

Even if the tender is held soon, it may not attract investors effectively
because it is expected to issue only limited-term exploration licenses,
rather than the industry standard combined exploration and production
license.

Only stronger guarantees of investment and property rights, along with a
more transparent tender process can attract the technologies, expertise, and
investment capital Ukraine needs to explore its potential Black Sea
reserves.

Several American companies are ready to assume the risk of exploring and
possibly developing Ukraine’s offshore sector, once these conditions are
met.

Regrettably, Ukraine’s Communist faction recently registered draft
legislation in the Rada that limits foreign investment in offshore reserves
by requiring 60% of offshore ventures belong to state-controlled companies.
The Verkhovna Rada’s Fuel and Energy Committee has endorsed the
legislation.

This is a big step in the wrong direction if Ukraine is serious about
attracting foreign direct investment in its energy production. Ukraine’s
parliament can show its commitment to open markets by stopping this
legislation.

U.S. companies also can contribute to energy development and security in
Ukraine by launching onshore enhanced recovery projects and new production
projects. New exploration and drilling technologies have resulted in better
data at the exploratory phase and longer lasting and more efficient drilling
operations once production begins.

But as in offshore exploration, Ukraine needs to provide transparent
licensing procedures and guaranteed property and title rights if it wants to
attract U.S. companies and technology to the onshore sector.

Alternative technologies — many of them American — will play a role in
Ukraine’s energy reform program. President Yushchenko has announced
plans to focus on renewable energies and micro hydro-power stations as
sources of clean, alternative energy.

In my opinion, methane gas capture should also be on this list, since
Ukraine has announced that its Energy 2030 plan will include increased use
of Ukraine’s 37 billion tons of coal reserves.

Methane gas, the potentially dangerous by-product of coal production can be
captured and safely used for pipeline injection, power generation, or local
uses such as on-site boiler fuel, mine heating, and hot water generation.
The U.S. is helping already with development of this new domestic Ukrainian
source of energy.

In September 2005 the U.S. Trade Development Agency awarded a nearly six
hundred thousand dollar grant to Ukraine to fund a feasibility study on the
development of Coal Bed Methane in the Donetsk Region.
CONCLUDING POINT
A diversity of foreign energy suppliers and routes, improved efficiency, and
increased domestic supply will facilitate Ukraine’s energy integration into
Europe as an independent transit country, supplier, and consumer of energy.
Transparent and market-based processes are critical for all three areas’
development.

The U.S. supports Ukraine in this effort, and we look forward to continuing
dialogue on this issue and to supporting American business as they partner
with Ukrainian counterparts. -30-
—————————————————————————————————
LINK: http://usembassy.kiev.ua/infocentral_eng.html
CONTACT: Public Affairs Section, United States Embassy
Kyiv, Ukraine, info@usembassy.kiev.ua
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[return to index] [The Action Ukraine Report (AUR) Monitoring Service]

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2. IMF EX BOARD CONCLUDES CONSULTATION WITH UKRAINE
Authorities need to restore macroeconomic stability and implement
structural reforms to complete the transition to a full-fledged market
economy needed to unleash the economy’s significant untapped potential.

International Monetary Fund (IMF)
Washington, D.C., Friday, November 11, 2005

WASHINGTON – On November 9, 2005, the Executive Board of the
International Monetary Fund (IMF) concluded the Article IV consultation
with Ukraine. [1]
BACKGROUND
After four years of strong activity, annual growth has slowed sharply, from
a peak of about 12 percent in 2004, to 3 percent for January-September
2005.

In part, the decline reflects a somewhat less favorable external
environment-export growth has fallen from 41 percent in 2004 (in nominal
terms) to about 9 percent over the first half of 2005; while import growth
remained roughly unchanged from 24 percent to 23 percent respectively.

However, the fall in domestic growth also reflects the impact of continuing
political uncertainty on domestic investment.

Inflation has been trending upward since mid-2003. From a low of -0.6
percent in 2002, the 12-month Consumer Price Index (CPI) reached 12.3
percent by end-2004, peaked at 14.9 percent in August 2005, and declined
somewhat to 12.4 percent in October 2005.

Much of the recent surge in inflation has been concentrated in select
food-related items, reflecting in part the impact of higher pensions and
wages on consumer demand.

Prices at the wholesale level, however, have eased from the highs of last
year; the Producer Price Index (PPI) reached a peak of about 25 percent
toward the end of 2004, and has since fallen to 12.9 in October 2005 owing
to a slowing economy.

Wages continue to grow strongly. In July 2005, the average nominal monthly
wage was 38 percent above its level the previous year, representing an
increase of about 20 percent in real terms.

Fiscal policy in 2005 has aimed at a significant fiscal tightening, with the
supplementary 2005 budget targeting a general government deficit of 2½
percent of GDP; compared to the 4½ percent of GDP realized during 2004,
and the 6-7 percent of GDP implicit in the original 2005 budget.

However, the budget allowed for a substantial increase in public pensions
and wages, and offset this additional spending by a large increase in the
tax burden, partly reflecting the closing of tax loopholes, and steep cuts
in capital investment.

The spending provisions have helped raise average public pensions and
wages by over 50 percent (against an inflation target of just under 10
percent), with a noticeable impact on household income and consumer
prices.

Budget implementation in 2005 has been on track. Cash revenue through
September have been buoyant, reflecting tax measures introduced in the 2005
budget, while recent data point to a significant underexecution of spending
at the central government level.

If maintained, it could compensate for the unbudgeted pension spending
pressures that have materialized (some ¾ percent of GDP) and should put
achieving the general government deficit target of 2½ percent of GDP within
reach. The stock of value added tax refund arrears amounted to ½ percent of
annual GDP at end-September 2005.

The re-auction of the steel company Kryvorizhstal resulted in unexpectedly
high net privatization revenues (after repaying the previous owners) of $4
billion (5 percent of GDP), significantly in excess of the overall budgeted
privatization revenue for 2005 (1¾ percent of GDP).

Monetary conditions have remained loose. Apart from a 5 percent nominal
appreciation of the hryvnia against the U.S. dollar during the first four
months of the year and, more recently, a somewhat reduced presence in the
interbank foreign exchange market, the NBU has continued to purchase
foreign exchange rather than allow the exchange rate to appreciate.

Moreover, sterilization efforts have remained limited. The largest support
in absorbing liquidity has come from the government; which has issued new
T-bills to buy back the higher-yield restructured securities held by the
National Bank of Ukraine (NBU), and which has built up deposits by
maintaining a tight fiscal stance.

With continued foreign exchange inflows, there is excess liquidity in the
banking system, and most interest rates are now negative in real terms.
Monetary aggregates have expanded more slowly in 2005, compared to
2004, but this comes against a backdrop of decelerating money demand,
as inflation has risen into double digits.

Reflecting high domestic inflation, the real exchange rate has appreciated
markedly; with the real effective rate rising by about 12 percent during the
12 months to end-July 2005. However, all indicators, including cross-country
wage data, suggest that price competitiveness of Ukrainian exporters remains
strong.

The NBU has taken tentative steps toward greater nominal exchange rate
flexibility, and has relaxed a number of foreign exchange restrictions,
including Ukraine’s export surrender requirements and the provision that
non-residents predeposit the full amount of their auction T-bill bids.

In August, the NBU allowed banks to operate on both sides (buy/sell) of the
foreign exchange market within the same day, and also allowed forward
operations. Together with the 1.5 percent foreign exchange transaction tax,
which the draft 2006 budget envisages to halve, these restrictions were the
main elements impeding development of Ukraine’s foreign exchange markets
and instruments.

In contrast, however, the NBU has introduced a new, but likely non-binding,
restriction on purchases by non-residents of government securities with
original maturities of less than one year (government papers generally have
original maturities that exceed one year) and a 20 percent reserve
requirement on foreign currency loans with a maturity of up to 180 days
from non-residents.

The banking system weathered last year’s political turmoil well. However,
credit expansion and credit quality are still a concern. Credit growth
remained high at 44 percent in September 2005, after some deceleration in
late 2004 and early 2005.

Banks are refocusing their lending on household-sector loans (their share in
total loans has increased from 5 percent at end-2001 to 20 percent by
end-September 2005), including mortgage lending to the buoyant housing
market. The non-performing loans ratio of the banking system is declining,
but remains high.
EXECUTIVE BOARD ASSESSMENT
Executive Directors noted that Ukraine made impressive economic gains
during 2000-04, largely as a result of favorable external factors and
prudent macroeconomic policies.

However, the period since late 2004 has been a turbulent time for Ukraine,
involving political uncertainties and major shifts of policy that adversely
affected business confidence and investment. In tandem with less favorable
external conditions-notably on the terms of trade-and slow progress on
structural reforms, this turbulence led to a significant weakening in
economic performance in 2005: growth slowed sharply, inflation accelerated,
and the current account surplus halved.

Directors welcomed the tentative signs of stabilization of the macroeconomic
situation in recent months.

Directors stressed that a focused effort by the authorities to restore
macroeconomic stability and implement structural reforms to complete the
transition to a full-fledged market economy will be needed to unleash the
economy’s significant untapped potential. They considered that Ukraine’s
medium-term growth outlook is highly favorable, provided the right policies
are put into place.

Against this background, Directors welcomed the authorities’ expressed
commitment to fiscal discipline and their progress in implementing a sound
fiscal policy in 2005, as well as their initial steps toward greater
exchange rate flexibility, their commitment to market-strengthening
structural reforms, and their efforts to resolve lingering uncertainty
regarding property rights in Ukraine.

Directors observed that the relaxation in the fiscal stance during the
run-up to the 2004 presidential elections, together with the large increases
in public pensions and wages in the supplementary 2005 budget,
contributed significantly to recent inflationary pressures.

While this has been partly offset by targeting a reduced 2005 fiscal deficit
of 2½ percent of GDP, higher spending has necessitated a significant
increase in the overall tax burden, although in good part through the
welcome closing of tax loopholes and improvements in taxpayer
compliance.

Directors commended the prudent budget implementation in 2005, noting
that the authorities seem broadly on track toward achieving their 2005
general government deficit target, and encouraged the authorities to clear
all legitimate VAT refund arrears.

Looking ahead, Directors underscored the need for a fiscal stance that
supports disinflation. They urged the authorities to continue to resist
strong pressures to raise spending, particularly on social transfers and
subsidies, and the fiscal deficit in the run-up to elections in 2006.

They recommended that the general government deficit not exceed 2¼
percent of GDP in 2006, underpinned by a freeze on recurrent expenditure
in real terms and realistic macroeconomic assumptions.

In line with this target, Directors called on the government to allocate the
Kryvorizhstal privatization windfall primarily to debt redemptions that do
not add to domestic liquidity, and to resist pressures to re-open the tax
loopholes that were closed in the 2005 budget.

Such a fiscal strategy would avoid fuelling inflationary pressures, and
would increase the authorities’ ability to address future contingencies as
well as Ukraine’s sizeable medium-term fiscal needs, including spending on
public infrastructure.

Directors considered the reestablishment of a viable public pension fund to
be a key medium-term priority. They noted that the recent massive pension
hikes have put the pension fund in a precarious financial position,
requiring large budget transfers to cover contribution shortfalls and
constraining the authorities’ scope for reducing the high tax burden on
labor.

Directors encouraged the authorities to improve the targeting of the minimum
pension subsidy, raise effective retirement ages, and prune privileged
pension regimes.

Directors stressed that tighter monetary conditions are needed to help
contain inflation, while acknowledging both the limitations of interest rate
policy given the absence of a developed monetary transmission mechanism
and the need to pay attention to ongoing relative price adjustments.

They urged the NBU to reduce further the excess liquidity in the banking
sector through a deceleration in money growth. Directors cautioned against
the NBU’s tentative plans to support bank intermediation by establishing a
long-term credit facility, since the NBU’s main role should be to provide
liquidity rather than long-term credit.

Directors broadly agreed that a gradual shift to increased exchange rate
flexibility and inflation targeting would increase the NBU’s ability to
achieve low and stable inflation, particularly in the context of strong
foreign investor interest and a competitive exchange rate.

They therefore welcomed the NBU’s recent steps toward a more flexible
exchange rate regime. However, they stressed the need for the NBU to
communicate its policies and intentions more consistently, and to ensure
that the appropriate preconditions and technical capacity for a successful
policy shift are in place.

In this regard, they encouraged the NBU to build on its recent efforts to
deregulate the foreign exchange market and further strengthen its
operational framework, while developing financial markets.

Directors noted Ukraine’s low productivity relative to potential, and
stressed that competitiveness is best enhanced through productivity-
boosting reforms and prudent policies to lower inflation.

Directors saw a strong case for improving macroeconomic policy
coordination, and welcomed the recent NBU initiative to reach a more
formal understanding on policy coordination between the NBU and the
government.

Directors welcomed the authorities’ vision of sweeping structural reforms.
They observed that Ukraine’s lagging growth performance since 1992 relative
to that of most other transition economies-even accounting for the strong
growth rates of 2000-2004-in large part reflects long-standing difficulties
in reaching a political consensus to build the more market-friendly
institutions that would allow Ukraine to use its resources more efficiently.

They stressed, in particular, the importance of reforms to strengthen public
administration, fight corruption, and establish a stable and predictable
business environment.

In this context, Directors welcomed the Ukraine-EU Action Plan, which
commits Ukraine to a wide range of structural policy actions and anchors the
authorities’ reform drive within the process of closer integration with the
EU and global markets. They urged the authorities to launch an aggressive
campaign to educate the public on the benefits of these reforms.

Directors encouraged a rapid resolution of the debate on past
privatizations. The recent presidential memorandum guaranteeing property
rights, the government’s efforts to clearly and quickly identify those state
enterprises to be privatized, the official commitment to fully comply with
privatization legislation, and the transparent re-auction of the
Kryvorizhstal steel mill were all seen as important steps in the right
direction.

Directors noted, however, that a credible legislative proposal that outlines
the full scope of possible challenges to past privatizations may still be
needed to address lingering investor concerns.

Directors welcomed the government’s ambitious trade-policy agenda. While
he liberalization achieved so far this year constitutes important and
tangible progress, Directors considered that early implementation of the
remaining measures needed for WTO membership should remain a priority.

Directors viewed the development of domestic capital markets as key in
strengthening the monetary policy transmission mechanism and improving risk
management and financial intermediation. In line with Fund and World Bank
recommendations, the authorities should establish benchmarks for government
securities, set up a coherent debt management strategy, and swiftly adopt a
Joint Stock Company Law.

Directors noted that there are continuing fragilities in the financial
sector, and encouraged the authorities to strengthen further the supervisory
framework. They commended the NBU for tightening regulations, including
those pertaining to foreign-currency loan-loss provisioning, open foreign
currency positions, limits for related-party lending, and the definition of
bank capital.

They welcomed the submission to Parliament of revised legislation that would
allow limits on early withdrawal of deposits during financial emergencies.

However, Directors regretted the delay in amending the Banking Act, and
encouraged the authorities to consider short-term measures to shore up the
banking system until the new legislation is approved-including raising the
minimum capital adequacy ratio to 12 percent.

They also encouraged a switch from the highly procedural supervision methods
to a more risk-based framework, and a strengthening of the bank resolution
process.

Directors welcomed the progress in improving statistics. Although these are
broadly adequate for surveillance, shortcomings remain. In particular, stock
data on sectoral financial assets and liabilities need to be reconciled with
flow data, especially on the external side; and the quality of labor market
data, particularly on wages and employment, could be improved.

Directors welcomed the candid Ex Post Assessment (EPA) of Ukraine’s
longer-term program engagement with the Fund. They welcomed the EPA’s
findings that Fund-supported programs were quite effective in supporting
macroeconomic stability, and that the continuous policy dialogue between the
Fund and the authorities influenced important policy decisions and resulted
in a beneficial transfer of knowledge to Ukrainian policy makers.

At the same time, Directors noted that Fund-supported programs did not
succeed in accelerating the pace of reform of more market-friendly
institutions, which ultimately explains Ukraine’s relatively poor program
compliance.

In light of this, they concluded that stronger program ownership, rooted in
stronger political consensus, would be key to maximize the chances of
success of any future program. -30-
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[1] Under Article IV of the IMF’s Articles of Agreement, the IMF holds
bilateral discussions with members, usually every year. A staff team visits
the country, collects economic and financial information, and discusses with
officials the country’s economic developments and policies. On return to
headquarters, the staff prepares a report, which forms the basis for
discussion by the Executive Board. At the conclusion of the discussion, the
Managing Director, as Chairman of the Board, summarizes the views of
Executive Directors, and this summary is transmitted to the country’s
authorities.
———————————————————————————————–
LINK: http://www.imf.org/external/np/sec/pr/2005/pn05156.htm
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3. THE LONG AND WINDING ROAD WEST
One of Ukraine’s richest men, Victor Pinchuk, pops into Brussels

Guardian Unlimited, London, UK, Thursday, Nov 10, 2005

The great and the good of Europe are often spotted making a beeline for the
tennis court-sized office occupied by Jose Manuel Barroso on the 13th floor
of the European commission’s Berlaymont headquarters in Brussels, but on
Tuesday this week jaws must have dropped as one of the richest men in the
former Soviet Union popped in.

Viktor Pinchuk, a key figure behind the scenes during last year’s Orange
Revolution in Ukraine, came to plead his country’s case for a seat at
Europe’s top table.

The stocky millionaire businessman, who used to control Ukraine’s largest
steel mill, was a leading member of a delegation from the pan-European Yes
group, which wants to set in motion eventual EU membership for the land

once known as the breadbasket of the Soviet Union.

The sight of Mr Pinchuk in Brussels may come as a surprise to those in
Ukraine who remember him as the son-in-law of Leonid Kuchma, the dour
former president who tried to thwart democracy last year in an attempt to
please Russia.

Mr Pinchuk’s involvement in the purchase of the country’s giant
Kryvorizhstal steelworks for just under $800m (GBP458m) – a sixth of its
value – on the eve of last year’s election was seized on by the eventual
winner, Viktor Yushchenko, as a symbol of the less-than-transparent ways of
the old regime.

Life has since moved on as the country gears up for the first anniversary of
the Orange Revolution, when a popular uprising swept the old, pro-Russian
guard from office.

Last month the billionaire Mittal brothers paid $4.8bn for a 93% stake in
the Kryvorizhstal mill as part of a deal that boosted Ukraine’s coffers
after the state won back control of the plant in a court case last June.

And now Mr Pinchuk is willing to upset the Russian president, Vladimir
Putin, by trying to set in motion Ukrainian membership of the EU.

His Yalta European Strategy (Yes) group – named after the Black Sea resort
where the iron curtain was formally laid in place after the second world
war – is treading carefully out of respect for Russia and for EU countries
wary of upsetting Moscow.

Stephen Byers, the former British cabinet minister who chairs Yes, says it
would be wrong for Ukraine to rush headlong into EU membership even
though the country has a strong case under the Treaty of Rome, which
founded the union.

The treaty states that any European country is entitled to join. Ukraine’s
supporters like to point out that its 48 million citizens live in the
country that takes up the largest slice of European soil.

However, Mr Byers said in remarks that show the group is not prepared to do
President Yushchenko’s bidding: “I have reservations about an application to
join the EU now. We should look at a series of confidence-building measures
so that Ukraine can be in a position to apply.”

The first goal is to be awarded market economy status, which would allow
Ukraine to join the World Trade Organisation by the spring of next year. Yes
then wants Kiev to sign an association agreement with the EU in the hope of
joining fully in 10 years’ time.

Ukrainians living in the east, who feel a cultural affinity with Russia and
who voted overwhelmingly for the Putin favourite, Viktor Yanukovich, will no
doubt feel deeply uncomfortable at such a prospect, even if it is a decade
away.

But for many in Kiev and the rural western region, which voted just as
overwhelmingly for President Yushchenko, a 10-year timetable represents an
agonising wait as they watch their natural allies in Poland prosper in the
EU.

Conscious of these differences, the Yes group hopes Ukraine will take a big
step on December 1 when Mr Yushchenko and Tony Blair, in his role as EU
president, meet for an EU/Ukraine summit.

But it will not be plain sailing: Viktor Pinchuk, who is a member of the
fractious Rada, Ukraine’s parliament, says he will vote for membership of
the WTO, but he expects a battle. “Ukraine would have to open markets for
US poultry,” he warns. “It may kill the Ukrainian poultry industry.”

There will, however, be limits to the embrace of Europe, whatever Mr
Yushchenko thinks. The president enjoys warm relations with Nato – George
Bush lavished praise on him at a meeting at the alliance’s Brussels
headquarters earlier this year – but Mr Pinchuk believes membership would
be a step too far. “Nato is not a popular organisation in Ukraine,” he says.
“They know it was our main enemy in the past.”

Europe has its own problems. While former communist states such as Poland
are agitating for Kiev to be allowed to join the club, the likes of Germany
are wary of alienating President Putin.

The timing is also unhelpful, as the eastward expansion of the union slows
down after French and Dutch voters rejected the EU constitution, in part
because of fears about the arrival of new members. Only yesterday the
enlargement commissioner, Olli Rehn, warned that the EU must not
“overstretch” itself.

At the meeting, Mr Barroso warned Yes against setting Ukraine up as a rival
to Turkey, whose bid to join the EU fuelled the French and Dutch no votes.
The commission appeared to take a dim view of Yes’s decision earlier this
year to give heavy publicity to an opinion poll that showed stronger support
for Ukraine than for Turkey. “Do not put yourself against Turkey,” Mr
Barroso is said to have told the meeting.

But Mr Barroso was friendly, not least because Mr Pinchuk played an
important role in ensuring that the Orange Revolution did not turn violent.
At the height of the crisis he is said to have told his father-in-law not to
storm central Kiev, where the orange-clad demonstrators had gathered to
show their support for Mr Yushchenko, the man whose face was
permanently scarred in his battle for the presidency. -30-
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4. ORANGE OUT OF FASHION, BUT STILL EVOKES WARM
MEMORIES ONE YEAR LATER

Mara D. Bellaby, AP Worldstream
Associated Press (AP), Kiev, Ukraine, Friday, Nov 11, 2005

KIEV – One cold day this fall, Inna Grigoryeva put on her orange scarf. It
was her way of adding a bit of cheer to a gray day and she was overwhelmed
by the reaction – looks of surprise and affection and hope. Several people
smiled.

Orange, the emblematic color of Ukraine’s peaceful revolution last year, is
rarely seen on Kiev’s streets these days. Orange symbolized Ukrainians’
bright hopes. Reality, a year after hundreds of thousands of demonstrators
converged on Independence Square, has taken on a darker hue, muddied by
unfulfilled promises and fallible heroes.

“The fairy tale written on Independence Square now calls to mind a murder
mystery. Only the victim isn’t a person – but hope,” said Andrei Yusov, a
leading member of the youth group Pora that was a driving force in the
protests.

As Ukraine prepares for the first anniversary of the drama that filled
television screens worldwide, Ukrainians are grumbling about higher prices
and public trust has plummeted over allegations of corruption.

The revolution’s leaders have turned on each other – President Viktor
Yushchenko’s party votes more often with its old enemy, Viktor Yanukovych’s
bloc, than its ally of last year, Yulia Tymoshenko – and those who hoped for
a quick welcome into the European Union feel let down.

Opinion polls show Ukrainians increasingly think the country is headed in
the wrong direction. So there’s a natural inclination to fall back on the
heady days of last November.

“For maybe the first time, the whole world learned where Ukraine was – and
not because of Chernobyl or some other catastrophe but because of the
revolution … it defined us,” said Petro Poroshenko, a tycoon who used his
television station to break the government’s media blackout of the events
unfolding in Kiev.

The Orange Revolution began the day after polls closed in the Nov. 21
presidential election. As the election commission churned out fraudulent
vote counts in favor of then-Prime Minister Yanukovych – who was supported
by Russia – reformist opposition candidate Viktor Yushchenko summoned his
partisans to Independence Square.

Hundreds of thousands came, setting up tents and outdoor kitchens and vowing
to stay until justice prevailed. They demanded freedom, democracy, an end to
corruption and, simply, the chance to live in a normal country. They chanted
“Yu-shchen-ko!” through the night. Normal life stopped.

Riot police waited in buses for orders. President Leonid Kuchma called for
an end to “this so-called revolution.” European envoys scrambled to mediate,
as Ukraine’s raucous parliament went into emergency session. Politicians in
the Russian-speaking, strongly pro-Yanukovych eastern provinces, began talk
of secession.

The protesters were cheerful and disciplined: drinking beer and tossing
cigarette butts were frowned on and garbage was diligently picked up.
Yushchenko’s ally, the more radical Yulia Tymoshenko, urged a nationwide
strike – which could have provoked a violent crackdown – but the strike
didn’t gel.

Twelve days after the protests started, the Supreme Court declared the vote
count fraudulent and ordered a new election. Kiev erupted. A light display
flashed Yushchenko’s name on buildings around the square, and fireworks
exploded. It was more rock concert than revolution.

“The revolution became a symbol of the spirit and patriotism of Ukraine,”
said Yushchenko’s former chief-of-staff, Oleksandr Zinchenko. “It wasn’t
just about one person … it was about our freedom.” But the goodwill didn’t
last long after Yushchenko won the rerun and took office.

The revolution created high expectations, but the revolutionaries were a
mismatched group of reformers, Socialists, and populists united only by
hatred of Kuchma’s regime. They inherited a nation divided between
pro-Russian east and nationalist west. Yushchenko won office with just 52
percent, and many in the east felt the country had been hijacked.

Initially, the government pursued reforms with fervor _ raising pensions and
salaries, sacking 18,000 bureaucrats, and summoning former officials for
questioning. Yushchenko traveled to the hostile east to make clear he was
“the president of the whole country” _ and was pelted with snowballs.

One of the most contentious issues was addressing the Kuchma era’s murky
privatization deals in which much of the state’s prime industry was sold off
to insider tycoons in cut-rate deals. Tymoshenko, who became prime minister,
wanted hundreds of these deals canceled; Yushchenko resisted such a radical
strategy.

The Tymoshenko government’s heavy-handed intervention in the economy
spooked investors and was blamed for triggering a jump in meat, sugar and
gas prices.

Economic growth slid to below 4 percent – a shocking decline from the
previous year’s 12 percent – partly due to lower world prices for Ukraine’s
metal exports.

Opinion polls show that Ukrainians credit Yushchenko for advancing democracy
and improving Ukraine’s international image. It’s the other promises –
improving the standard of living, restoring trust in government, fighting
corruption – that Ukrainians complain have stalled. The country went ahead
with re-privatizing the giant Kryvorizhstal steel works, but put other such
moves on hold.

Yusov, the youth leader, admitted he’s not as disillusioned as he sounds. He
noted that although the Orange Revolution team turned on each other with
mutual allegations of corruption in September, the scandal was played out on
the nightly news, a level of transparency unheard of a year ago.

“The people and the government have become closer, but it is not because the
government moved closer to the people, it’s the people who stepped right up
into the face of the government,” Yusov said.

The glamourous and media-savy Tymoshenko sniped that the stolid Yushchenko,
a former banker, was simply fed up with seeing her face on television all
the time, and many Orange Revolution supporters complain the president is
cozying up to the revolution’s enemies.

Yushchenko held a fence-mending meeting with the oligarchs of eastern
Ukraine, the country’s industrial powerhouse and a key battleground for
parliamentary elections in March, and made a politically expedient but
ideologically uncomfortable truce with Yanukovych.

He also sent conciliatory messages to Russia after it threatened to increase
oil prices. Russia remains a key economic partner for Ukraine, and the two
countries’ historic ties made a clean break difficult for millions of
Russian-speaking Ukrainians.

“The revolution couldn’t carry on indefinitely. At some point the government
had to settle down,” said analyst Mykhailo Pohrebinsky.

For all the disappointments of the last year, Inna Grigoryeva – who recently
donned her old orange scarf – thinks the revolution brought fundamental
change. The Kiev newspaper columnist first noticed the change last year,
when riding home on a crowded minibus, jostled by fellow passengers.
Usually that makes her blood boil.

But “that time, I looked around and realized, these people went to vote just
like I did, and they put their little cross next Yushchenko’s name just like
I did. I couldn’t get angry at them. We were all taking a risk. We were all
hoping for better.”

She saw those same feelings reflected in the eyes of Ukrainians this year,
their gazes again drawn to her orange scarf. On Nov. 20, when the country
marks the revolution’s first anniversary, “all of Kiev will be orange,” she
predicted. -30-
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5. UKRAINE WON’T APPEAL EUROPEAN COURT RULING
ON GONGADZE MURDER

Associated Press (AP), Kiev, Ukraine, Thursday, Nov 10 2005

KIEV – Ukraine said Nov. 10 it will not challenge a European Court of
Human Rights ruling that it must pay 100,000 euros ($120,000) to the
widow of slain journalist Georgy Gongadze.

The court said on Nov. 8 that Ukrainian authorities failed to protect
Gongadze and mishandled the politically charged investigation into his
kidnapping and killing in September 2000.

The headless body of the Internet journalist, who wrote about high-level
corruption, was later found in a forest outside Kyiv.

The court awarded the money to Gongadze’s widow, Myroslava.

“A person managed to achieve the truth … and restore their rights,” said
Justice Minister Serhiy Holovatiy, who had served as lawyer for Gongadze’s
mother before being named to his current position last month. “The state and
the Justice Ministry must be on that person’s side.”

After President Viktor Yushchenko’s inauguration in January, prosecutors
indicted three former policemen for Gongadze’s death; a fourth suspect is at
large and being sought on an international warrant.

Gongadze’s family, however, has repeatedly complained that the government is
no closer to finding who ordered the killing.

The slaying sparked massive protests against former President Leonid Kuchma,
and secret recordings have emerged in which voices resembling Kuchma’s and
now-parliament Speaker Volodymyr Lytvyn other officials are heard allegedly
complaining about Gongadze. Kuchma and Lytvyn have denied any involvement.
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6. CLINTON INC. SENT TO FIX UKRAINE CRISIS

Washington Whispers, U.S. New & World Report
New York, New York, November 21, 2005

If you’re the president of Ukraine and your fledgling administration is
already embroiled in a political crisis, who you gonna call? Bill Clinton.

Only a year after the Orange Revolution catapulted him to power, Viktor
Yushchenko is turning to Bubba’s old team of spinmeisters and policy
wonks.

Former press secretary Mike McCurry and ex-Chief of Staff John Podesta
will head to Ukraine next week to meet with Yushchenko and dispense a
little advice. “It’s much ado about nothing,” insists Jay Carson, Clinton’s
spokesman.

But to Yushchenko, who amid allegations of corruption has joined forces
with his opponent, Viktor Yanukovich, it may be just what the spin doctor
ordered. -30-
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7. WILL THE ORANGE REVOLUTION TURN GREEN?
Prime Minister Yekhanurov spent his time courting potential investors

By Matthew Swibel, Forbes magazine, NY, NY, Wed, Nov 9, 2005

WASHINGTON – Ahead of the one-year anniversary of the Orange
Revolution, Ukrainian Prime Minister Yuri Yekhanurov made his 22nd
trip to Washington last week, and his main subject was green. And we
don’t mean global warming.

Instead, Yekhanurov, a close ally of Ukrainian President Victor Yushenko,
spent his time courting potential investors and trying to persuade U.S.
Trade Representative Rob Portman to bless Ukraine’s entry into the World
Trade Organization.

He also discussed the prospects for a market economy in the Ukraine with
Secretary of State Condoleezza Rice and Vice President Dick Cheney.

That should comfort emerging markets investors, who are closely watching
both privatization opportunities–and political unrest–in Ukraine.

Yekhanurov told a small gathering of reporters that he’s “against
privatization” if it means reprivatizing assets that were sold off before
Yushenko’s presidency began.

(The government has already seized some assets sold under the previous
regime for pennies in order to resell them at a fair price. But the prime
minister says that won’t be widespread.)

On the heels of last month’s $4.9 billion Kryvorizhstal steel mill auction,
which drew multiple bidders, including eventual winner Mittal Steel (nyse:
MT – news – people ), Yekhanurov may have been preparing U.S. investors
for the next major enterprise to be sold–UKRTelecom, his country’s major
fixed-line phone operator.

Ukraine will likely amend certain legislation so that the operator, now on a
list of companies barred from privatization, can go private. The government
now owns 92.9% in the phone company.

Would any U.S. firms consider bidding for the phone company? Already,
a U.S. firm, AES (nyse : AES – news – people ), has successfully bid for
electricity assets in Ukraine.

More foreign investment would certainly help Ukraine expand its economy.
The high price fetched by the steel mill allowed the government to propose
enlarging the fiscal 2006 deficit to about 2.5% of gross domestic product
from the current planned figure of 1.9%.

The expanded deficit is expected to be financed with future privatization
revenue. The money is spent on social programs and lost deposits at
Soviet-era banks.

Privatization auctions aren’t the only source of attraction in the Ukraine
for American businesses. Speaking to reporters, Yekhanurov disclosed
that a U.S.-based engineering firm, CH2M Hill, will likely land a $1 billion
contract to provide permanent shelter for the infamous nuclear reactor in
Chernobyl.

recently secured multimillion-dollar U.S. government contracts in the
post-Katrina cleanup. The prime minister also divulged that Hunt Oil has
shown interest in working on the shelf of the Black Sea.

One of his bluntest comments came at the expense of Russia. Yekhanurov
expressed concern that “if Russia joins [the WTO] earlier than we do, it
will be practically impossible for Ukraine to become a WTO member.”

Essentially, the Ukrainians are worried Russia could indefinitely delay the
acceptance of new applicants with time-consuming questionnaires and
other stalling tactics.

Russian Foreign Ministry spokesman Mikhail Kamynin was quoted in the
media on this account on Thursday, saying, “Moscow has taken note of
media reports about these remarks. They caused great perplexity in Russia.”

The former Soviet state is one of several countries, along with Russia,
Vietnam and Saudi Arabia, striving to join the WTO by the time the
148-member trade body meets in December.

Ukraine trades $22 billion worth of goods per year with post-enlargement
E.U., which is Ukraine’s largest trading partner. But Yekhanurov’s
government is keen to attract U.S. trade as well.

Despite the prime minister’s expressed fears about the Russians, the U.S.
may be a greater obstacle to Ukraine’s WTO membership–the U.S. is
demanding the Ukrainians cut their farm subsidies, import duties on autos
and export duties on scrap metal. -30-
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http://www.forbes.com/business/2005/11/08/ukraine-investment-revolution-cz_ms_1109beltway.html
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8. EU UNVEILS 1ST GALILEO SATELLITE: INTO SPACE IN DEC
Ukraine has joined the EU’s satellite navigation program

Associated Press (AP), Brussels, Belgium, Wed, Nov 9, 2005

BRUSSELS – The first of some 30 satellites of the European Union’s Galileo
satellite navigation program was unveiled Wednesday, one month before it
will be launched into space.

The “Giove A” satellite will be launched in the second half of December by a
Russian Soyuz rocket from the Baikonur Cosmodrome in Kazakhstan.

“This is a big step in the history of Galileo,” said E.U. Transport
Commissioner Jacques Barrot. “The program will now truly begin with the
launch of this first satellite.”

The satellite was unveiled at a brief ceremony at the European Space
Research and Technology Centre in Noordwijk, the Netherlands. A second
satellite named “Giove B” – ‘Galileo In-Orbit Validation Element’ – will be
launched in the Spring of 2006.

The first two satellites are important for testing the Galileo program from
space, the European Space Agency said in a statement.
Two more satellites will be launched in 2008 to complete a testing phase
which requires at least four satellites in orbit to guarantee an exact
position and time anywhere on earth.

The EUR3.6 billion Galileo project will comprise some 30 satellites and will
end Europe’s reliance on the U.S. GPS system which is ultimately controlled
by the U.S. military. The Galileo program will be under civilian control.

Six non-EU nations – China, India, Israel, Morocco, Saudi Arabia and
Ukraine – have already joined the program and discussions are also underway
with Argentina, Brazil, Mexico, Norway, Chile, South Korea, Malaysia,

Canada and Australia.

The E.U. will soon allocate an initial EUR1 billion from its 2007-2013
budget to fund deployment and commercial operations of the Galileo satellite
system. The private sector will contribute two-thirds of funds for the
project, which is expected to create more than 150,000 jobs in Europe alone.

Galileo will more than double the coverage of GPS, providing satellite
navigation for a wide range of people from motorists to sailors to
mapmakers. -30-
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9. GAZPROM WANT TO EARN EXTRA $2 BILLION ON
POLAND AND UKRAINE

Polish News Bulletin, Warsaw, Poland, Thursday, Nov 10, 2005

The Russian daily ‘Kommiersant’ announced that thanks to the increased price
of gas transferred to Poland and Ukraine, Gazprom wants to earn an
additional $2bn.

“If the Gazprom negotiators are able to increase the gas prices for Poland
and Ukraine, which buy around 35bn cubic meters of gas and pay – according
to Gazprom’s officials – an ‘unreasonably low price’ (Poland pays $140 for
1,000 cubic meters, Ukraine $50), Gazprom will earn an extra $2bn in 2006,”
wrote the Moscow newspaper.

On Tuesday last week, PGNiG gas monopoly announced that it had received a
letter from Gazexport, Gazprom’s daughter company, in which the Russians
proposed a renegotiation of the gas price set in an agreement signed in
1996. According to PGNiG’s president, Marek Kossowski, there is no clear
reason to change the prices to Poland’s disadvantage.

He said that the rules on the setting of gas prices are defined using a
mathematical formula and according to the contract should be valid until 2020.
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10. USA TO PAY FOR UKRAINIAN TROOP PULLOUT FROM IRAQ

UT1 State TV, Kiev, in Ukrainian 1630 gmt 10 Nov 05
BBC Monitoring Service,UK, in English, Thursday, Nov 10, 2005

[Presenter] Ukrainian Defence Minister Anatoliy Hrytsenko has pledged
to pull out [Ukraine’s] main contingent from Iraq by 30 December.

Only 50 troops will be left to share their experience with the Iraqis. It
will cost 3m dollars – but not from the Ukrainian budget – to take
peacekeepers back to Ukraine.

[Hrytsenko] The greater part of logistics items go through the US command,
including the pullout of our contingent, that is, transporting all hardware
in columns to Kuwait, payment for planes, guarding, coverage from the air,
and so on.

The US side undertakes all this, that is, we will not spend any money on
this. Our money will primarily go to pay for the upkeep of our contingent,
for salaries and other payments, and for its part in hard currency. -30-
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11. NATO PARLIMENTARY ASSEMBLY PRESIDENT SAYS
DOOR OPEN TO UKRAINE

Associated Press (AP), Copenhagen, Denmark, November 11, 2005

COPENHAGEN – There is room for Ukraine to join the North Atlantic
Treaty Organization, the president of the NATO Parliamentary Assembly, a
consultative body within the 26-member alliance, said Friday.

“If Ukraine wants to be part of the family of European nations or
Euro-Atlantic family, the door is open,” Pierre Lellouche told a news
conference before the 51st gathering of the assembly. “And we should help
them. It is a very important nation.”

Helge Adam Moeller, a member of Denmark’s ruling Conservative Party, noted
that in the late 1980s, no one would have thought that Warsaw Pact countries
one day would become NATO members.

“I am sure people then would have said that it’s impossible,” Moeller said.
“Maybe you think it is impossible now but I am absolutely sure that we will
have a bigger NATO” in the future.

NATO has twice taken on new members since the collapse of the Warsaw
Pact, its Cold War foe. Seven former-communist nations entered last year,
following Poland, Hungary and the Czech Republic who joined in 1999.

Created in 1949, NATO also has shifted from being a military alliance to an
organization tackling security issues in Kosovo and Afghanistan, and the
terrorist threat, Lellouche said.

“It’s no longer a territorial alliance. No body is going to attack in the
center of Europe. All that is yesterday’s work,” Lellouche said. “We are
much more in a world where terror, nuclear terror, mass-destruction terror
will target our cities.”

Lellouche said NATO had gone from being “a standing military alliance
guarding a territory at the center of Europe into a collective security
mechanism.” The Parliamentary Assembly only has a consultative role;
decisions are taken by member governments.

More than 300 lawmakers from nearly 40 countries were expected to attend the
autumn session of the assembly, starting Saturday in the Danish capital.

Turkish Prime Minister Recep Tayyip Erdogan and NATO Secretary-General
Jaap de Hoop Scheffer will address delegates at a plenary session on Tuesday.

The assembly brings together parliamentarians from the 26 NATO member
countries as well as 13 associated members to discuss security issues.
Topics on the agenda range from the future status of Kosovo to NATO
peacekeeping operations in Afghanistan. -30-
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12. UKRAINE PRES APPEALS TO STUDENTS TO TRUST HIM

Associated Press (AP), Kiev, Ukraine, Thu, Nov 10, 2005

KIEV – President Viktor Yushchenko appealed Thursday to young Ukrainians
to trust him, saying that he had suffered too much to betray now the ideals of
last year’s Orange Revolution.

“I sit in front of you without my own face,” Yushchenko told university
students during a televised call-in session, referring to the pockmarks and
swelling that resulted from his dioxin poisoning – a still unsolved case.

“I think that I drank not only my dose, but also a dose for all of you, as
we lived in a regime that didn’t allow us to live,” he said.
The program, called “President and Youth – Dialogue about the Future,”
featured students from Kiev and from the western city of Lviv and the
eastern city of Donetsk.

Outside the Kiev auditorium where some participants asked questions, about
30 students, including members of the youth group Pora, protested,
complaining that the students selected to participate had not been chosen
fairly.

Some questions focused on specific, university-related concerns, but the
toughest questions came from Donetsk, which overwhelmingly supported
Yushchenko’s rival in last year’s election – Viktor Yanukovych.

At one point, some Kiev students questioned Yushchenko about his former
prime minister, Yulia Tymoshenko, and his criticism of her economic
policies. Tymoshenko was dismissed in September.

“Have a look at the process for the last five or six months. It was a
serious problem but, just in time, we avoided a deep economic depression,”
Yushchenko said. “We returned to a normal dialogue with business … normal
privatization policies.”

Asked about the corruption scandals linked to his government, Yushchenko
insisted that none of the charges were proven, but he said that he insisted
that his allies resign nevertheless.

“If suspicions appear, I told them, you must go away for the sake of the
Square,” Yushchenko said, referring to the Kiev square that was the heart of
the mass protests against election fraud that came to be known as the Orange
Revolution.

Yushchenko also defended his widely criticized truce with Yanukovych – a
truce he made in order to get his nominee for prime minister confirmed.
Critics complained that the truce meant Yushchenko was cozying up to his
enemies while turning his back on Orange Revolution allies.

“On Independence Square, we stood not only for a fair election but also for
a united Ukraine, for the east and west to be united,” he said, adding that
he did it “for the sake of Ukraine.”

During the bitter campaign, Yushchenko won huge support in western and
central Ukraine, but the Russian-speaking eastern Ukraine backed Yanukovych.
The dioxin poisoning nearly killed him and knocked him off the campaign
trail for weeks; prosecutors have called it an assassination attempt. -30-
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13. WHO ARE YUSHCHENKO’S TRUE ALLIES?

ANALYSIS AND COMMENTARY: By Taras Kuzio
Eurasia Daily Monitor, Vol 2, Issue 212
The Jamestown Foundation, Washington, D.C.
Monday, November 14, 2005

The September crisis and fall of the Yulia Tymoshenko government should
not blind us to the fact that the Tymoshenko bloc in parliament are more
consistent allies of President Viktor Yushchenko’s People’s Union-Our
Ukraine (NS-NU).

Orange Revolutionary allies (Socialist Party [SPU], Party of Industrialists
and Entrepreneurs [PPPU]) still inside the government headed by Prime
Minister Yuriy Yekhanurov vote with NS-NU far less on strategic issues.

The Tymoshenko bloc and NS-NU will contest the elections separately; a
step, ironically, which is likely to bring them greater votes than if they
enter
the elections in one bloc. Two recent votes reflect the re-emergence of de
facto Orange Revolutionary unity ahead of the March 2006 parliamentary
elections.

On November 2 the Ukrainian parliament voted down by 208 votes, 18 short of
a majority, to ratify a Memorandum of Understanding with NATO over NATO
using Ukrainian air lift capacity. The Memorandum had been ratified with
centrist support in the Leonid Kuchma era because it brings tangible
economic benefits to Ukraine.

The vote failed not because the opposition voted against with only 39 votes.
Yushchenko’s allies who remained in government (SPU, PPPU) failed to deliver
30 of their 39 votes. The Tymoshenko bloc and its allied Reforms and Order
party supported its ratification.

The failure of the SPU and PPPU to support the ratification of the
Memorandum cannot but be seen as a sign that their loyalty to the strategic
domestic and foreign policy objectives of the Yushchenko administration are
low.

What to make, for example, of PPPU leader Anatoliy Kinakh who is secretary
of the National Security and Defense Council (NRBO), an institution which
under its two predecessors (Volodymyr Horbulin, Yevhen Marchuk) was always
staunchly pro-NATO.

The weekly Zerkalo Tyzhnia/Nedeli (November 5-11) complained that such a
voting fiasco placed the Yushchenko administration in a bad light as Kyiv
could not follow through on its foreign policy commitments. “Political
forces have proved unreliable and inconsistent, which came as no surprise to
voters”, it concluded.

The Tymoshenko bloc also supported the NS-NU over parliamentary voting
against the re-privatization of Kryvorizhstal. Prior to its successful
re-sale for $4.8 billion, parliament voted twice to block the
re-privatization sale.

Parliamentary votes for a moratorium on Kryvorizhstal’s re-privatization
were opposed by the Tymoshenko bloc, Reforms and Order and NS-NU,
but supported by all 39 SPU and PPPU deputies.

In a separate vote both the SPU and the PPPU backed a resolution calling for
Kryvorizhstal to remain in state hands. Kryvorizhstal had been re-privatized
from oligarchs Viktor Pinchuk and Renat Akhmetov (rada.kiev.ua).

In both cases (NATO Memorandum, Kryvorizhstal) the greatest cynicism has
been displayed by the formerly hard-line supporters of Kuchma (Regions of
Ukraine [RU] and Social Democratic united [SDPUo] parties).

Both parties supported the ratification of the NATO Memorandum under
Kuchma and privatized Kryvorizhstal in 2004 to two oligarchs for a sixth of
what was obtained last month.

The SDPUo’s call for a referendum on NATO accession has been ridiculed
by the Ukrainian media. SDPUo leader Viktor Medvedchuk did not resign in
protest as head of the presidential administration when NATO and EU
membership were included in the new 2004 military doctrine. As Prime
Minister in 2002-2004, Yanukovych led a government that had declared its
intention of seeking NATO membership in May 2002.

These two votes on crucial issues show that the September crisis has failed
to irrevocably split the Orange revolutionary camp. The best chance for a
pro-reform parliamentary majority is if NS-NU and the Tymoshenko bloc
come together after the 2006 elections.

This view is strongly backed by two factors. First, public opinion has not
been willing to accept the permanence of the split. Second, neither NS-NU or
the Tymoshenko bloc will have sufficient votes to independently create a
parliamentary majority.

Calls for re-unification of the Orange Revolutionary camp have increasingly
been heard from both the NS-NU and the Tymoshenko bloc. Tymoshenko has
initiated meetings with state secretary Oleh Rybachuk on unity with NS-NU.
Two conditions have been put forward by Tymoshenko.

First, that the business entourage which surrounded Yushchenko be not
included in the NS-NU election line-up. This demand is not problematical.
Rybachuk has blocked the access of the most criticized of this business
group, Petro Poroshenko, from the state secretariat so that he has no access
to President Yushchenko.

Second, that Tymoshenko again become Prime Minister. This demand is
unlikely to be met and could prove to be a major stumbling block to re-
unification (Ukrayinska Pravda, November 3).

Yushchenko would want to maintain Yekhanurov in this position.
Tymoshenko’s abrasive style is seen in a negative light by NS-NU senior
officials, such as parliamentary faction leader Mykola Martynenko (Ukrayina
moloda, October 27).

Parliamentary speaker Volodymyr Lytvyn, a potential NS-NU ally, called
for ‘professionals’ in government, ‘not those who can shout at meetings’, a
clear jab at Tymoshenko (Ukrayinska Pravda, November 6).

Lytvyn has depicted his eponymous election bloc as one that stands for
‘compromise’ and Ukrainian unity, not divisiveness, a jab at both
Tymoshenko and RU (Ukrayinska Pravda, November 7).

The head of the NS-NU political council, Roman Besmertnyi, is as distrustful
of Tymoshenko’s populism and personal ambitions as is Martynenko and
Lytvyn.

Nevertheless, he has accepted the need for unity negotiations after the 2006
elections to create a parliamentary majority (Ukrayinska Pravda, October 27,
November 1).

Constitutional reforms set to go into effect after January 2006 will
transform Ukraine from a semi-presidential to a parliamentary-presidential
system commonly found in central Europe and the Baltic states.

This will be a major step towards democratization as presidential systems
common in the CIS have led to authoritarianism and abuse of executive
office.

At the same time, constitutional reforms will lengthen parliament from four
to five years, prevent defection from factions and force parties to
compromise over creating a parliamentary majority who, together with the
executive, choose a government.

Of the six parties and blocs set to enter parliament, Yushchenko’s NS-NU
can only create a parliamentary majority with either two other large forces,
the Tymoshenko bloc or RU.

The cooperation and goodwill created in the run up to the election between
NS-NU and Tymoshenko bloc will serve to assist in the choice being to
reunify with the Tymoshenko bloc.

They will be celebrating the first Orange Revolution anniversary together on
November 22 on the Maidan.
————————————————————————————————-
Taras Kuzio, Visiting Professor, Institute for European, Russian and

Eurasian Studies, George Washington University, Washington, DC
tkuzio@gwu.edu
————————————————————————————————
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14. UKRAINE-NATIVE HAS PRESIDENTIAL INTERNSHIP WITH THE
AMERICAN RED CROSS: A DREAM COME TRUE
Had an Edmund S. Muskie and Freedom Support Act Graduate Fellowship
Yaroslava Tytarenko worked on USAID-funded projects in Kiev, Ukraine

By Sharon J. Alfred, American Red Cross National Headquarters
Washington, D.C., Wednesday, November 9, 2005

WASHINGTON – Working for the American Red Cross is a dream come
true for Ukraine-native and American Red Cross presidential intern
Yaroslava Tytarenko, or as she’s known to friends and colleagues, “Yasa.”

Yasa remembers being excited whenever Red Cross employees made
presentations at her school in Shostka. Very early on she came to respect
the Red Cross mission for saving lives as “a wonderful movement with a
noble mission.”

When Yasa applied for the presidential intern program she did so with great
background skills and high hopes. Many applied, but she was among the few
chosen at the Red Cross national headquarters in Washington, DC.

She was overjoyed when she learned about her selection. She says “I think
I’m very fortunate because I feel I can contribute to the wonderful work of
saving lives and making the world a better place for us all.”

As a Red Cross presidential intern, Yasa takes an active role in volunteer
review projects, particularly those that originate from the Office of the
National Chair of Volunteers.

She is also active in programs that involve teaching the rationales of
international humanitarian law, and those programs that provide training in
First Aid/CPR classes.

Yasa was instrumental in writing and reviewing the volunteer recruitment
toolkit for the “Give Hope Now” campaign.

This campaign responded to the need that Hurricane Katrina created
throughout the Gulf area; its goal is to recruit 40,000 volunteers to assist
the recovery and relief efforts needed in the hurricane’s aftermath.

Aside from working on USAID-funded projects in Kiev, Ukraine, Yasa
interned at the United Nations and is a past recipient of the Edmund S.
Muskie and Freedom Support Act Graduate Fellowship. Most recently,
she graduated from New York City’s Milano Graduate School of
Management and Urban Policy.

Yasa’s impressive breadth of experience, has led to her national
headquarters (NHQ) assignment to monitor the return on investment in
volunteers. One of her main tasks is to develop a model that will allow
the accurate value assessment of volunteer contributions.

She says that her work on developing an accurate model to assess the
value of volunteers has been one of her most enjoyable experiences at
NHQ. “It has been wonderful to meet and work with so many experts
in the field.”

Yasa speaks English and Russian, and has a basic knowledge of Spanish
and German. Her internship with the American Red Cross ends on
November 30, 2005. She speculates that she may then work for a
USAID contractor or perhaps in the United Nations office in Ukraine.
——————————————————————————————
LINK:
http://www.redcross.org/article/0,1072,0_312_4856,00.html
——————————————————————————————
[The Action Ukraine Report (AUR) Monitoring Service]
========================================================
15. UKRAINE: FORGOTTEN CHILDREN
Help Us Help The Children, Canadian program supporting orphans

CTV.ca News Staff, Scarborough, Ontario, Canada
Saturday, November 12, 2005

Olena Wresnewski-Cottrell had a tough start to life. Abandoned by her birth
parents, she spent her first nine months alongside dozens of other babies
and toddlers in an orphanage in the Ukrainian city of Lviv.

Most of the babies there were destined for a bleak existence moving from
one overcrowded orphanage to the next. But luckily for Olena, that wasn’t
her fate; she was adopted and brought to Canada.

Now at age 13, she still remembers the babies that were left behind. “I
think about how they don’t have a really good life and I was fortunate to
get one,” says Olena.

It was November 1992 when Ruslana Wrzesnewski and her husband, Andy
Cottrell, brought Olena home to Toronto. They were thrilled to have the
baby as a new addition to their family, but their joy was tempered by the
deplorable conditions they saw in the orphanages where children lacked
clothes, toys and medicine.

“When we came back on the airplane, Ruslana turned to me and said ‘This
girl has just won the lottery’,” remembers Andy. “We should do something
for the other children. And without thinking of what this project would
become, I said yes.”

What the project became is Help Us Help the Children, a Canadian charity
that raised hundreds of thousands of dollars in food, toys and clothes in
its first two years.

The project was an unqualified success, but Ruslana and Andy wanted to do
even more for the more than 100,000 children in Ukraine’s orphanages. So
they started an annual summer camp in the tiny town of Vorokhta.
SUMMER CAMP FOR ORPHANS
That was 10 years ago. The Help Us Help the Children summer camp has
grown every year since. This year’s budget of more than $350,000 is made
up mostly of charitable donations from Canada. That money goes toward
feeding, clothing, housing, teaching and entertaining 450 orphans from all
across Ukraine.

The camp has a dizzying array of lessons and events, everything from
computer training to a sewing class where the kids learn to make their own
bed sheets and pillowcases.

“They’re very needy in the orphanages,” says Marianne Gross, one of two
Canadian volunteers in charge of the sewing workshop. “They’re sleeping on
bare mattresses, so they’re very excited about bringing home their own
goods.”

Not only will the children take home their own sheets, the sewing machines
and computers will go back to the orphanages as well. And that’s just the
beginning of the bounty these kids receive. They also get brand new
wardrobes, including jeans, jackets, shirts and shoes.

The kids also get a rare opportunity to see a doctor. Everyone receives a
physical and the children with serious medical problems are sent to
specialists.

Ihor Shafran has been coming to camp for 10 years. No child has benefited
more from the charity’s medical attention than him.

“Ihor was born with terrible deformities of his legs,” says Ruslana. “When I
first met him, he got around by walking on his hands, almost like a little
monkey, unfortunately. And I remember being horrified that nothing had been
done.”

She quickly changed that, arranging for Ihor to have a series of operations
that saw him outfitted with prosthetic legs. “Then we made sure we kept
track of him, wherever, which orphanage he landed up at and he’s here at
camp.”

While Ruslana has been able to keep track of Ihor, it’s impossible to follow
the hundreds of orphans who come to camp each year. “It’s very difficult,
because sometimes you don’t know whether you’ll ever see that child again,”
says Ruslana. “You wonder whether they’ll make it or not.”
WHEN THE ORPHANS GROW UP
Tragically, many of these kids don’t make it. Ruslana estimates that six out
of 10 kids end up in prison or on the streets. When they turn 18, they are
turned away from the orphanages, often with little training or resources to
properly take care of themselves on the streets of Ukraine’s cities.

Major Vasiley Sophos is the chief warden at a medium security prison in
Ukraine that houses 1,600 male prisoners. He has worked in the penal system
for more than 20 years. During that time, he has seen countless graduates of
orphanages end up behind bars.

“When they finish at the orphanages, they are not fully prepared for life.
They are without parents and they are also without government support,” says
Sophos.

Girls from orphanages often end up in prison too, but others fall prey to an
even worse fate. They are trafficked into prostitution, forced to work the
streets and brothels in cities across Europe including Amsterdam, Budapest,
and Florence and along the notorious E-55 highway on the German-Czech
border.
HOPE FOR THE FUTURE
But there is some cause for optimism. Ukrainian president Viktor Yuschenko
is a long-time supporter of Ruslana’s camp and has pledged to improve the
lot of Ukraine’s orphans. In a rare one-on-one interview, President
Yuschenko spoke with W-FIVE about his government’s plans.

“For many years, the state paid little attention to this problem and thanks
to a program such as Help Us Help the Children, which Ruslana has run here,
it created a great example for others,” says Yuschenko. “I think that within
two to three years we’ll see a solution to this problem. In other words,
after 18, this child should have an education, housing and a job.”

Yuschenko concedes that these ambitious plans will take a few years to put
in place and there are thousands of kids at risk right now. All Ruslana can
do is try to make the kids at her camp aware of the dangers and hope that
they make the right decisions.

Instead of preachy lectures, Ruslana has brought in a Ukrainian theatre
troupe to do a series of performances about the dangers of drugs, violence
and being trafficked into prostitution.

The performers, all young people in their teens and early 20s, captivate the
audience of orphans, giving Ruslana cause for hope that the message is
sinking in.

“They have to know the truth. They have to know what’s waiting for them,”
she says.

At the end of the two weeks of camp, it’s time for the children to say
goodbye and head back to the orphanages. It’s a huge undertaking to get
more than 400 children and all their belongings on board the train.

The whole process takes nearly an hour, leaving plenty of time for hugs,
kisses and last minute goodbyes. It’s an emotional time for everyone,
including Ruslana.

“On every corner, kids are exchanging addresses, they’re crying, they’re
hugging each other. And then once they get on the train then it’s very sad.
There are a lot of tears and there’s counselors holding kids who don’t want
to let go.”

While saying goodbye is difficult, the children who were lucky enough to
take part in the camp are grateful for the opportunity and they know whom
to thank.

“When I look at Ruslana, I see a really good person,” says one
orphan-camper, 15-year-old Lila. “I love her smile. She has a wonderful
smile. I think she’s a wonderful person.” -30-
—————————————————————————————————
http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20051028/wfive_children_051028/20051112?hub=WFive
Help Us Help The Children,
http://www.geocities.com/huhtc/
—————————————————————————————————
[
return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
Power Corrupts and Absolute Power Corrupts Absolutely.
========================================================
16. IN CORNER OF UKRAINE, A STRIP OF IRON CURTAIN
STILL AWAITS ITS FALL
Dismissal of the Ukrainian government stalled the process once more.

Agence France Presse (AFP), Maly Selmentsi, Ukraine, Thu, Nov 10, 2005

MALY SELMENTSI, Ukraine – It’s been 60 years since Petor Lizak has
been able to wander down the single street of his tiny village to attend the
church where his family had prayed for decades, or visit many of his cousins
who live nearby.

Lizak, a jolly man with a thatch of white hair, was just five years old when
an invisible hand sliced his village of Szelmenc in half in August 1945,
amid a redrawing of Europe’s borders following World War II.

Within days barbed wire severed Lizak from his church, much family and many
friends — along with two-thirds of the villagers he now lived in Velke
Slemence in Czechoslovakia, while the rest were residents of Solontsi in the
Soviet Union.

The family across the street from Lizak’s house bore the full brunt of the
Iron Curtain reality — the new border ran straight through its house.

“They left quietly in the night so no one would see them” and settled with
relatives on the western side of the new border, Lizak said. Their house was
levelled.

More than six decades later, the residents of the two villages — now
nationals of Slovakia’s Velke Slemence and Ukraine’s Maly Selmentsi — are
eagerly awaiting the fall of one of the last vestiges of the Iron Curtain.

After years of talks between Bratislava and Kiev, a brand-new checkpoint has
been erected on the village’s only street this summer and the opening is a
tantalizing bureaucratic nod away. “Everyone is waiting for the opening,”
said Iosif Veresh, Lizak’s 41-year-old nephew who lives on the Ukrainian
side.

When the border first sliced the village, Lizak’s house ended up just west
of the border — a pump dumped rainwater from the roof into the 15-meter no
man’s land that snaked in both directions across the plains.

As speaking with people on the other side was not allowed, the ethnic
Hungarian villagers resorted to creative ways for communication — as the
border guards were usually either Russian, Ukrainian or Slovak speakers, the
villagers would couch announcements of births, weddings or funerals in
Hungarian folk songs that they would sing along the fence.

The Soviet Union fell in 1991, Czechoslovakia split in 1993, the villagers
received passports of newly-formed Slovakia and Ukraine, the barbed wire was
replaced with simple wire fencing, but the border remained.

While communication has become a bit easier — one can stand on either side
of the divide and yell to each other — visiting his childhood church or
relatives is still an all-day affair for Lizak: the nearest border crossing
is 50 kilometers (30 miles) away.

With 800 residents on both sides, the issue of opening a border crossing in
the village did not top the agenda in either capital, and the prospect
seemed as far removed as ever until this summer, when officials from the
Council of Europe visited Ukraine and met with its new pro-Western
president.

“He was unaware of the situation… and then we presented him the case and
right away on the spot, he wrote the instructions to the government that he
wants to see the situation resolved,” Matyas Eorsi, a Council of Europe
rapporteur on the issue, told AFP.

The effect was magical — within two months, a spanking-new border crossing
was erected on the Ukrainian side, replete with neat houses for the border
guards, fresh signs on customs procedures, and state-of-the art equipment to
detect passport counterfeits.

“I think that it’s the fastest that a border crossing has ever been built,”
joked one Ukrainian border guard official.

The road on the Ukrainian side was paved, a sidewalk was laid down, and
housing prices skyrocketed in anticipation of the expected opening in
mid-September. But the dismissal of the Ukrainian government at the
beginning of the month stalled the process once more.

“The two governments… since then have only been blaming each other for the
delay and I must say I do not understand the reason,” Eorsi said. “It is
such a small but wonderful gesture for a few hundred people… on both sides
of the border who have expected this for decades.”

Although eager for the big day and aware that only the Slovak villagers will
be able to cross the border without a visa — Ukraine has lifted visa
requirements for

European Union nationals, but Ukrainians still need one to enter the EU —
the villagers are philosophic about the delay. “We’ve waited so long, what’s
a few more months?” said Lena Mitro, 50, who has numerous in-laws on the
Slovak side. “It would be nice to see the relatives from the other side up
close. Right now, we just see them at a distance.” -30-
———————————————————————————————–
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
17. UNIQUE RELIEF FROM ASTHMA DEEP UNDERGROUND
IN WESTERN UKRAINE SALT MINE

Agence France Presse (AFP), Solotvino, Ukraine, Sunday, Nov. 13, 2005

SOLOTVINO, Ukraine – Driving by the village of Solotvino in western
Ukraine, you’d never know that a unique healing haven for lung ailments
lies deep beneath its dreary landscape of Soviet-era buildings and trash
heaps.

Three hundred meters (985 feet) underground, hundreds of people with
respiratory illnesses leave their ailments behind in the cavernous tunnels
carved out of a working salt mine, the walls glistening with salt deposits.

“There are children who get one or two treatments and they forget about
asthma,” says Yaroslav Chonka, the chief doctor at Ukraine’s allergological
hospital in Ukraine’s Transcarpathian region, on the border with Romania,
which has been treating patients with this alternative method since 1976.

Vlad Rybakov, a 12-year-old from Ukraine’s southern city of Odessa, is in
the middle of his first treatment. He came to get relief from an asthma that
appeared out of nowhere two years ago and put a stop to his track-and-field
days — and already, he feels a difference.

“Before, I would get attacks and it felt like I was going to run out of
air,” he says, standing by an alcove carved from the side of a tunnel with
beds for four patients. “But now I don’t get them anymore. And I can run
again! When I get back to Odessa, I’ll start playing sports again with the
other kids.”

The method practiced at the hospital is called speleotherapy — using the
microclimates of underground places like mines or caves to treat lung
ailments — and has been in use in eastern Europe since the beginning of the
last century, when the first such spa was opened in a salt mine in the
Polish village of Velicko, near Krakow.

The practice grew out of observations in the mid 1800s by a Polish health
official that salt miners did not suffer from respiratory ailments like
tuberculosis.

Today salt sanitoriums are dotted throughout central and eastern Europe.
Some use salt mines, others salt caves, while others offer rooms lined with
salt crystals.

What makes the Ukrainian allergological hospital unique is the location of
its underground facility — at 300 meters below ground, it is the deepest
facility of its kind in the world.

The air at that level, which feels heavy to a newcomer, is warm (a constant
temperature of around 22 degrees Celsius — 72 Fahrenheit), permeated with
salt (15 miligrams per cubic meter — 0.00053 ounces per 35 cubic feet), and
nearly free of microbes and electromagnetic waves.

“We have a sterile environment equal to a surgery room,” says Chonka. “Our
treatment is by microclimate underground that’s practically impossible to
reproduce above ground.”

A single treatment usually lasts 24 days, during which a patient will
descend into the mine up to 18 times for anywhere from three hours to
overnight. The rest of the time is spent at the above-ground facility.

While below, the adults usually read or lounge around on the beds stacked
into alcoves carved out of the tunnels. The children run around until “quiet
hour,” when the fluorescent lamps lighting the tunnels are shut off and they
lie in bed, laughing and chatting.
The results are striking.

“We can’t say that we help everyone,” Chonka says. “But the treatment is
90-95 percent effective for children, and 80-85 percent effective for
adults.”

Most patients begin to feel the effects after just a few descents into the
mine. “It’s my third day,” Sergei, a 45-year-old businessman from Moscow
says, waiting to enter the elevator to take him down for his fourth mine
visit. “After the first day, I didn’t need to use my inhaler anymore.”

Most children with non-serious forms of asthma usually undergo two or three
treatment sessions, says Chonka, who has worked at the hospital since 1981
when he became deputy chief physician. For adults and more severe illnesses,
the process can take longer.

“This is my sixth year,” says Serhiy Savchuk, a 48-year-old from the central
Ukrainian city of Kirovograd with chronic bronchitis. “After treatment, I
feel much better, but it slowly deteriorates and lasts about a year before I
have to come back.”

The hospital treats more than 5,000 patients a year — three quarters of
them under the free government health care system, with the rest paying 22
dollars a day — and has a waiting list months long.

“This place is a godsend,” says Yelena Dietrich, a German national who heard
about the facility from friends in western Ukraine and whose 10-year-old
daughter is in the middle of her first treatment. “Before, running was out
of the question for her. Now she can run.” -30-
————————————————————————————————–
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18. LVIV’S KARPATY BLIND BANDURA CHOIR STOPS STRIKING

Ukrainian News Agency, Kyiv,Ukraine, Thu, November 10, 2005

KYIV – Lviv’s Karpaty choir of blind Bandura players has called off
its strike. Choir director Vitalii Vovk made the statement to the press.

According to him, the Ukrainian Society of the Blind settled its August
debt to the choir and promised to repay its debt over September.

As Ukrainian News reported earlier, Lviv’s Karpaty choir of blind Bandura
players went on strike on November 1 to demand payment of the wage arrears
owed to them. The central department of the Ukrainian Society of the Blind
owes the choir about UAH 15,000 [$3,000]. The choir consists of 25 people.
————————————————————————————————–
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John Stephens, Cape Point Capital, Secretary/Treasurer
10. UKRAINIAN AMERICAN COORDINATING COUNCIL (UACC),
Ihor Gawdiak, President, Washington, D.C., New York, New York
11. U.S.-UKRAINE FOUNDATION (USUF), Nadia Komarnyckyj
McConnell, President; John Kun, Vice President/COO; Vera
Andruskiw, CPP Wash Project Director, Washington, D.C.; Markian
Bilynskyj, VP/Director of Field Operations; Marta Kolomayets, CPP
Kyiv Project Director, Kyiv, Ukraine. Web: http://www.USUkraine.org
12. WJ Grain, Kyiv, Ukraine, David Holpert, Chief Financial Officer,
Chicago, Illinois.
========================================================
“THE ACTION UKRAINE REPORT – AUR” is an in-depth, private,
independent, not-for- profit news and analysis international newsletter,
produced as a free public service by the non-profit www.ArtUkraine.com
Information Service (ARTUIS) and The Action Ukraine Report Monitoring
Service The report is distributed in the public’s interesting around the
world FREE of charge. Additional readers are always welcome.
TO GET ON OR OFF THE DISTRIBUTION LIST
If you would like to read “THE ACTION UKRAINE REPORT- AUR”
please send your name, country of residence, and e-mail contact
information to morganw@patriot.net. Additional names are welcome. If
you do not wish to read “THE ACTION UKRAINE REPORT” around
five times per week, let us know by e-mail to morganw@patriot.net. If
you are receiving more than one copy please contact us and again please
contact us immediately if you do not wish to receive this Report.
===================================================
PUBLISHER AND EDITOR – AUR
Mr. E. Morgan Williams, Director, Government Affairs
Washington Office, SigmaBleyzer Private Equity Investment Group
P.O. Box 2607, Washington, D.C. 20013,
Mobile in Kyiv: 8 050 689 2874
mwilliams@SigmaBleyzer.com; www.SigmaBleyzer.com
———————————————————————————————
Director, Ukrainian Federation of America (UFA)
Coordinator, Action Ukraine Coalition (AUC)
Senior Advisor, U.S.-Ukraine Foundation (USUF)
Chairman, Executive Committee, Ukraine-U.S. Business Council
Publisher, Ukraine Information Website, www.ArtUkraine.com
Member, International Ukrainian Holodomor Committee
=======================================================
Power Corrupts and Absolute Power Corrupts Absolutely.
=======================================================

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