Monthly Archives: January 2006

AUR#651Europe & Gas Crisis: Who Is To Blame? What Is To Be Done?; PM And The RosUkrEnergo Enigma; Gazprom’s ‘Gift’ to RosUkrEnergo

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 651
Mr. E. Morgan Williams, Publisher and Editor  
Washington, D.C., Kyiv, Ukraine, TUESDAY, JANUARY 31, 2006
                           ——–INDEX OF ARTICLES——–
         Clicking on the title of any article takes you directly to the article.               
Return to the Index by clicking on Return to Index at the end of each article
             TO BLAME?] CHTO DELAT’ [WHAT IS TO BE DONE]?
ANALYSIS & COMMENTARY: By James Sherr, Fellow
Conflict Studies Research Centre, Defence Academy of the UK
Published in Ukrainian and Russian by Zerkalo Nedeli, Mirror Weekly
International Political Social Weekly, No. 3 (582)
Kyiv, Ukraine, Saturday, 28 January-3 February
The Action Ukraine Report (AUR), # 651, Article One
Published in English, Washington, D.C. Tuesday, January 31, 2006

2 UKRAINE: GAS AND THE GOVERNMENT: GAS AGREEMENTS,
               CONSTITUTIONAL REFORM, FREE SPEECH AND
                         DEMOCRACY INTERSECT PAINFULLY
ANALYSIS AND COMMENTARY: By Tammy Lynch
THE ISCIP ANALYST, Formerly The NIS Observed,
An Analytical Review, Volume XII, Number 1
Institute for the Study of Conflict, Ideology & Policy
Boston University, Boston, MA, Friday, January 27, 2006

3.             GAS INTERMEDIARY: RosUkrEnergo (RUE) – Q&A
By Roman Kupchinsky, Investigative Journalist and Analyst
Prague, Czech Republic, Thursday, January 26, 2006

4.          PM YEKHANUROV AND THE ROSUKRENERGO ENIGMA
                        “The key gas person in Ukraine is the president.”
The magnificent eight: Yuriy Komarov, Andrey Akimov, Alexander Medvedev,
& Alexander Riazanov; & the following members nominated by Centragas AG:
   Yuriy Boiko, Ihor Voronin, Wolfgang Putcheck, & Robert Shelter-Jones
         Represent the ultimate owners of RusUkrEnergo, the beneficiaries
ANALYSIS & COMMENTARY
: By Yulia Mostovaya
Zerkalo Nedeli On The Web (ZN), Mirror-Weekly, No 3 (582)
International Social Political Weekly
Kyiv, Ukraine, Saturday, Sat 28 Jan – 3 Feb 2006

5NAFTOGAZ UKRAINY DENIES FACT OF SIGNING DOCUMENTS
 WITH ROSUKRENERGO ON ESTABLISHMENT OF JOINT VENTURE
Ukrinform, Kyiv, Ukraine, Monday, January 30, 2006

6UKRAINE’S NOFTOGAZ SEES ROSUKRENERGO JV DEAL TUES
By Geoffrey T. Smith, Dow Jones Newswires
Moscow, Russia, Monday, January 30, 2006

7.          RUSSIA’S GAS DIPLOMACY FUELS REALIGNMENT

                                  OF FORMER SOVIET BLOC
By Marc Champion in Davos, Switzerland & Guy Chazan in Moscow
Staff Reporters of The Wall Street Journal
The Wall Street Journal, New York, NY, Monday, January 30, 2006

8UKRAINIAN OPPOSITION RUNS TELEVISION ADVERTISING

UT1State TV, Kiev, in Ukrainian 1850 gmt 28 Jan 06
         The Russian-Ukrainian gas conflict and its broader implications
           The lost benefit of Gazprom being simultaneously profit of
         RosUkrEnergo will amount to $4 billion a year or $20 billion in
              five years in the framework of the new trading scheme.         
ANALYSIS & COMMENTARY:
By Stanislav Belkovsky and Vladimir Golyshev
Zavtra, No. 4. Moscow, Russia, Wed, January 25, 2006

10PRES BLAMES LOCAL OFFICIALS FOR WEEK LONG HEATING
            OUTAGE IN EASTERN UKRAINIAN CITY OF ALCHEVSK
Associated Press, Kiev, Ukraine, Monday, January 30, 2006

11UKRAINE: GAS CRISIS EASES MINER’S GREAT DEPRESSION
       Huge coal reserves could help build energy independence for Ukraine
New Trade Union World Briefing – Ukraine
International Confederation Of Free Trade Unions
ICFTU OnLine, Brussels, Belgium, Tuesday, 31 January 2006

12CENTRAL EUROPE SEEKS EU HELP OVER RUSSIAN GAS SUPPLIES 
By Christopher Condon in Budapest
Financial Times, London, UK, Saturday, January 28 2006

13.                      MINSK DISPATCH: DADDY’S SOURCE
        Politicians & journalists have been imprisoned, killed, or disappeared
      The Ukrainian gas crisis threw light upon Russia’s fuelling of Alexander
            Lukashenko’s despotic Belarussian regime, writes Tom Parfitt
Tom Parfitt, The Guardian, London, UK, Monday January 30, 2006

14PAINTING BY FAMOUS UKRAINIAN KAZILMIR MALEVICH
                          REPORTEDLY FOUND IN UKRAINE
             Painting to be displayed Wednesday, Feb 1 in Chernovtsy
RIA Novosti, Moscow, Russia, Monday, January 30, 2006

15UKRAINE MARKS 88TH ANNIVERSARY OF KRUTY TRAGEDY
Ukrinform, Kyiv, Ukraine, Monday, January 30, 2006

16CHERNOBYL OVERSHADOWS PUSH FOR NUCLEAR POWER
By Jonathan Gorvett in Pripyat, Ukraine
Aljazerra.net, Doha, Qutar, Thursday 26 January 2006
========================================================
1
 EUROPE AND THE GAS CRISIS: KTO VINOVAT? [WHO IS

         TO BLAME?] CHTO DELAT’ [WHAT IS TO BE DONE]?
ANALYSIS & COMMENTARY: By James Sherr, Fellow
Conflict Studies Research Centre, Defence Academy of the UK
Published in Ukrainian and Russian by Zerkalo Nedeli, Mirror Weekly
International Political Social Weekly, No. 3 (582)
Kyiv, Ukraine, Saturday, 28 January-3 February
The Action Ukraine Report (AUR), # 651, Article One
Published in English, Washington, D.C. Tuesday, January 31, 2006
 
What conclusions are the members of the European Union drawing from
the gas crisis? On 3 January, the French newspaper “Le Monde” summed
them up in this way:  ‘A new geopolitics is revealing itself’.  ‘New’ they
might be to Western Europe.  But there is nothing new about these
geopolitics in Ukraine.

On becoming Acting President of the Russian Federation in December
1999, Vladimir Putin cut the supply of oil to Ukraine for the fifth time
since 1991.  Very soon it became clear that the dispute would not play itself

out according to the shambolic, but forgiving rules of the Yeltsin ‘system’.

The taps stayed off until April 2000, when President Kuchma took the first
steps to meet Putin’s political demands. The dynamic of concession led, by
turns, to the dismissal of Ukraine’s then (and once again current) foreign
minister, Boris Tarasyuk in September 2000.

By winter-spring 2001, energy interests, Ukrainian and Russian, played an
influential role in securing the dismissal of the first deputy prime
minister, Yulia Tymoshenko, and finally the then Prime Minister (and now
President) Viktor Yushchenko.  Many Western Europeans never under-

stood that. Many Ukrainians have never forgotten it.

The first paragraph of the official (2003) “Energy Strategy of the Russian
Federation to 2020″ is a model of understated honesty.  It defines the
country’s fuel and energy complex as an ‘instrument for the conduct of
internal and external policy’ and helpfully adds that ‘the role of the
country in world energy markets to a large extent determines its
geopolitical influence’.[1]

What is this influence to be used for?  In his “Wall Street Journal” article
of 11 January, Sergei Ivanov, Deputy Prime Minister and Minister of
Defence, stated that ‘our top concern is the internal situation in some
members of the Commonwealth of Independent States’.

Should that concern trouble the EU, or is it time to accept, à la Ivanov,
that no one should attempt to ‘change the geopolitical reality in a region
of Russia’s strategic interest’?

Once again that question hangs in the balance.  Russia’s gas diplomacy with
Ukraine has been a shock to the European system, a reminder of its ability
to adopt a merciless approach to its ‘legitimate interests’ and a stinging
refutation of the EU mantra that ‘Russia is a major and reliable supplier of
energy’.  Yet after its recent enlargement, the reality for the EU is
dependence.

Today almost 60 per cent of natural gas in the EU-25 is imported:  50 per
cent of that from Russia and over 80 per cent of that via Ukraine.  By 2030,
the proportion of imports is expected to reach 70 per cent.  So the new EU
mantra has become ‘energy strategy’, and all agree that its premise must be
to reduce this dependence.

In principle, this need establishes a common interest between the EU and
Ukraine-and, for the latter, an enormous opportunity.  But there is a world
of difference between ? common interest and a common front.  Russia has
convinced many that it knows what it wants and knows how to get it.  But
Ukraine?

Does Ukraine have the ability to define its interests, pursue them and do
what it says it will do?  Is it capable of acting as the EU’s partner and,
what is more, a future EU member?  Or will the incompetence of its leaders,
the incoherence of its policy and the recklessness of its opponents throw
the opportunity away?

                               PERSPECTIVES OF RUSSIA
Today, few inside Europe’s political establishment like Russia, and it is
fair to say that few inside Russia’s political establishment care.  Does it
matter?  In the words of Gazprom’s senior executive for the UK, Yuriy
Komorov, ‘It does not matter if you like Russians.  Whether it is gas, oil,
mining, wood, it is all here’.  For seasoned pragmatists inside the EU, it
does not matter either.

But what does matter is the rules of the game.  The rules were the first
casualty of the crisis. They existed for a long time, and they have bred
much complacency. ‘Even during the Cold War, the Soviet Union never
used energy as a weapon!’

But during the Cold War, the Soviet Union used weapons as weapons and

by these means controlled what it needed to control.  Unsettling Europe’s
faith in the rules, and in its own reliability, was Russia’s greatest blunder in
the crisis.

But beyond acknowledging this, Europe’s establishment is divided, as it is
in almost all things.  Some of the most experienced people in official
corridors counsel against demonising Russia, and there is reason in what
they say.  Ukraine has for too long had its independence cushioned by
Soviet-era subsidies, and it is not tenable or just that the practice should
continue.

For their part, Ukrainians have been evasive negotiators and, until the
ultimata started, Kyiv ignored every proposal that Gazprom had made since
June.  Whatever the Kremlin’s geopolitical motives, it has economic
justifications for acting as it has, and its economic arguments need to be
answered with economic arguments.  That case has been accepted by nearly
every serious analyst and policy maker.

Yet not for the first time, Russia’s methods have overshadowed the other
issues and, in so doing, they have become the issue itself.

[1] For Ukraine, the ‘market’ is that of a monopolist who knows that gas is
a primary commodity and that there is no available substitute.  The
quadrupling of the price in these circumstances (and at the start of winter)
is a destabilising, dangerous step and can only be seen as a hostile act.

[2] Ukraine’s $50 price was not a Soviet era price, but the level
established in the 9 August 2004 supplement to the 2003 contract which,
to be sure, was constructed on the basis of political interests rather than
market principles. In the real world, changed interests regularly lead to
the renegotiation of contracts and, with extreme provocation, their
denunciation.  But even denunciation follows norms which Russia did

not observe.

If this were purely a Russian-Ukrainian affair, the EU would find a way of
compartmentalising it.  But it is not.  It occurs in a definite context, and
that context is full of geopolitical symbolism and substance.

The context, in the words of Vlad Sobell, the Czech born former senior
economist of RFE/RL, is ‘Russia’s re-emerging position as a superpower,
driven chiefly by its actual, or potential, domination of the global
supplies of energy’.  He goes on to say that:

       At this point, Russia’s stance is purely defensive, with Moscow
       being primarily concerned with the maintenance of federal integrity
       and stability in its CIS backyard. However, this could change if the
       West continues to poison relations by lecturing the Kremlin on how
       to manage Russia’s internal affairs and by the promotion of so called
       ‘colour revolutions’.

Is the conclusion, then, that Russia’s defence requires the ‘stability’
(i.e. subservience) of neighbours, and that if Europe refuses to accept
this, Russia might cease to use its energy ‘domination’ defensively?  What
might this mean?

Even those who find this question premature  now discern a strategy, or at
least a method, behind the  latest sequence of steps.

[1] THE FIRST STEP was the agreement to construct the so-called Baltic
gas pipeline: a step that was portrayed in geopolitical terms, predictably,
by Poland, but (publicly at least) by virtually no other EU government at

the time, despite the fact that the pipeline will be 30 per cent costlier than
an overland version.

Yet privately, there was much irritation inside the EU at a bilateral
agreement that appeared to contradict the Union’s ethos of coordination,
the promotion of ‘consistent approaches to market regulation’-and which
appeared to take the Directorate-General Energy and Transport and the
European Regulators Group for Electricity and Gas by surprise.

[2] THE SECOND STEP was the designation of the just retired German
Chancellor, Gerhard Schroeder, to the project, whose German boss,
Matthias Warnig is, according to the “Economist,” a former ‘Stasi’ officer.
That step caused subdued anxiety in the Germany policy-making
establishment itself.  Is the EU dealing with a supplier or a power?

The Russia-Ukraine gas crisis has put these issues in the public domain and
given them far more resonance in policy-making circles than they had only
weeks before.

As a result, some are abandoning one simplistic paradigm (‘Russian
partnership’) for another (‘a new Cold War’), and some extravagant
thoughts are being aired even in respectable places (e.g., the Frankfurter
“Allgemeine Zeitung,” 3 January: ‘Today Yushchenko’s pro-Western
direction doesn’t suit the Kremlin, and tomorrow it may be an EU
resolution on Chechnya’).

But more sobering thoughts are not far behind.  If the ‘gas weapon’ can be
used against Ukraine, can it not also be used against an EU member, such as
Poland?  When the Baltic pipeline project was launched, this was a question
for discussion.  Today many believe it is a question that calls for action.

Already, member states are articulating a remarkably similar vision of how
they must act:  by diversifying energy sources (liquefied natural gas,
nuclear power, renewables), by building new infrastructure, by diversifying
supply (new pipelines), by conservation and by greater transparency (because
even in the EU, too much information with security implications is regarded
as commercially privileged).

But how should the EU act with regard to Russia?  The realistic consensus
would be:  no retreat from established principles (about values and about
our deepening relationships with newly independent states), no lessening of
cooperation where cooperation makes sense-and, where cooperation does not
make sense, plain speaking with  doors closed and microphones off.

Today that consensus is close to becoming a reality. But where would it
leave Ukraine?  As ever, much of the answer will depend upon Ukraine.

 

                             PERSPECTIVES OF UKRAINE
Across Europe and Eurasia, millions believe that the more threatening Russia
appears to be, the better Ukraine’s European integration prospects become.
But today there can be no certainty of this. Uncertainty is called for
because for every European decision maker who believes that Russia’s
pugnacity should not be appeased, there is another who believes we should
do nothing to increase it.

The same holds true for EU enlargement.  Were it not for enlargement, the EU
would be less dependent and less vulnerable than it is. ‘Now that we have
cooked this dish, we have to eat it’. To compound these vulnerabilities, to
invite Ukraine into the accession process whilst this plate is still full
would, so the argument goes, be the height of irresponsibility.

Yet the greatest uncertainty for the EU is now Ukraine itself.  Its once
united ‘orange’ forces accuse one another of treachery, its structures of
power are paralysed, and every opinion poll reveals despair, derision and
disgust.   Putin has blundered in Europe, but so far at least, in Ukraine he
has got exactly what he wanted.

What can reasonably be done to ensure that his victory is short lived?
First, political forces need to understand EU perceptions of the agreement
of 4 January, because it affects EU interests and because it is on the basis
of this agreement that future EU-Ukraine energy cooperation will have to
begin.

At first, European capitals (and Washington) regarded the agreement as a
lesser evil.  Many continue to do so.  That is because, over the short term,
Russia is fated to remain a monopolist and Ukraine a hostage.

Turkmenistan, which is hostage to the same pipeline network as Ukraine,
might as well  be ‘on another planet’ (as Alla Yeremenko noted in these
pages on 14-20 January).  Within the lifetime of the agreement, there will
be no significant alternative supplies available.  Whilst gas reserves and
Kryvorizhstal money might have enabled Ukraine to ‘hang tough’ for a year,
they are the only silver bullets in Ukraine’s arsenal, and they can be used
only once.

In practice, Ukraine would have been obliged to siphon gas for weeks or
months-or at least until such time as the EU and United States threatened
dire consequences.

So, in the days after 4 January it seemed that Yushchenko and his
negotiators were to be congratulated for avoiding the worst.  They had
saved the pipeline network, secured the EU’s respect, maintained the
support of the United States and strengthened the probability of an
invitation to NATO’s Membership Action Plan in December.

But second impressions are different, and they focus two points.

[1] The lesser point is the extreme instability of the terms regarding
price.

[2] The greater point is the primacy of RosUkrEnergo.  Behind Gazprom
stands the Russian Federation and a line of accountability to the Russian
state. Although Gazprom appears to own half of RosUkrEnergo, behind
the rest stand figures who, as President Yushchenko admits, are largely
unknown.

It would therefore appear that Ukraine has ceded control over its imports,
over part of its internal energy distribution (by means of a joint venture)
and a portion of Russian supplies to Europe to an opaque structure
accountable only to itself.  The more that Western capitals digest the
implications of this, the more uneasy they are bound to become.

                   CHTO DELAT’? [WHAT IS TO BE DONE?]

       [1] In the short term, the EU, the United States and Kyiv must
re-establish rules of the game between themselves, starting with full
disclosure about what agreements contain and who is party to them;

       [2] In the short term, they must also work out a common negotiating
strategy to ensure that future price rises are incremental and absorbable.
Gazprom should be left in no doubt that it will be deemed responsible for
significant price rises.  The Kremlin should be left in no doubt that a
renewal of the crisis will affect fundamental European interests;

       [3] In the short-to-mid term, the EU and United States must make

a renewed effort to find supplies for the (northern flow) of the Odessa-
Brody pipeline, the operating terms of which come up for renewal in less
than two years time.

       [4] In the short-to-mid term, the  EU and Ukraine should establish

a working mechanism, analogous to NATO’s Joint Working Group on
Defence Reform, designed to stimulate and support the development of
a national energy strategy for Ukraine based on the principles of diversity,
transparency, conservation, modernisation of infrastructure and the
expansion of accountability and competence.  NATO should explore the
establishment of a similar mechanism, focusing on energy security.

For these initiatives to secure support, Ukraine’s authorities must:

       [1] Introduce transparency in Ukraine’s energy policy and

energy sector.  For a start, they should relaunch the curtailed SBU
investigation into RosUkrEnergo and remove any barriers to SBU
collaboration with Western bodies investigating extortion and fraud.

       [2] Behave as an EU partner would be expected to behave

over issues of joint regional concern (Moldova and Belarus)
and, by doing so, demonstrate that Ukraine takes its membership
aspirations seriously.

To those who believe that the EU and Ukraine are doomed to disappoint
one another, this may be asking too much.  To those who believe in
Ukraine’s place in Europe, it is the least one can ask.  -30-
—————————————————————————————————
NOTE: The views expressed in this article are those of the author
and not necessarily those of the UK Ministry of Defence.  The AUR
appreciates the author James Sheer sending us the English version
of his latest analysis and commentary article.
————————————————————————————————–
Contact James Sherr, james.sherr@lincoln.oxford.ac.uk
———————————————————————————————
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
2.  UKRAINE: GAS AND THE GOVERNMENT: GAS AGREEMENTS,
               CONSTITUTIONAL REFORM, FREE SPEECH AND
                       DEMOCRACY INTERSECT PAINFULLY

ANALYSIS AND COMMENTARY: By Tammy Lynch
THE ISCIP ANALYST, Formerly The NIS Observed,
An Analytical Review, Volume XII, Number 1
Institute for the Study of Conflict, Ideology & Policy
Boston University, Boston, MA, Friday, January 27, 2006

In January, Ukraine’s parliamentary election season began in an
atmosphere largely foreign to Ukraine and other former Soviet republics
– one of free speech, vigorous public debate and a generally free
national press.  The democratic atmosphere, which Ukraine’s leaders
have proudly supported, has been a challenge for them.

Questions about the country’s latest gas deal with Russia, combined
with the introduction of perplexing constitutional reforms, have led to
the virtual paralysis of the presidential administration and the
parliament’s dismissal of the cabinet.

The latter is being contested by the president as unconstitutional,
but, regardless, it has effectively halted much of the government’s
work.   Two months before the 26 March election, the potential
orientation of the country’s next parliament is unclear, political
brinksmanship already is underway over who will assume the premier’s
chair following the poll, and the country faces questions that are
likely to impact its development for years to come.

          GAS AGREEMENT? WHAT GAS AGREEMENT?
The current crisis was created in the days following the announcement
of a new gas agreement between Russia and Ukraine.  On 4 January, when
the agreement was signed, Ukraine declared it a success.  “The people
of Ukraine and Russia won,” said Prime Minister Yekhanurov. (1)
Later, President Yushchenko went further.  He proclaimed the deal “a
brilliant achievement” and suggested that “the political fight has been
won.” (2)

At the press conference announcing the deal, the head of Ukraine’s
Naftohaz gas concern, Oleksiy Ivchenko, provided limited information.
“We shall be buying gas of different origins, both Russian and Central
Asian, from the RosUkrEnergo company,” he said.  “The price of gas
will be 95 US dollars per 1,000 cubic meters at the Russian-Ukrainian
border.” (3) Yushchenko later confirmed Ivchenko’s statements.
“Ukraine has gotten a price of 95 dollars.  Look at the map of Europe.
Who has this price?  . We have secured a stable gas balance for five
years.” (4)

But, even at the press conference it was clear that the agreement was
far more complex than stated by Ivchenko – the only official Ukrainian
representative at the negotiation.  Russia’s Gazprom head Aleksey
Miller touted the fact that “a long term contract for supplying Russian
gas has been agreed,” and announced, “The initial price is 230 dollars
for 1,000 cubic meters.”  This price for Russian gas, he later
explained, would be paid to Gazprom by the intermediary RosUkrEnergo,
which would then mix this gas with much cheaper Central Asian gas and
sell the mixture to Ukraine for an average price of 95 dollars.  (5)

Thus, instead of paying between $50 and $65 per cubic meter for Russian
gas, and between $44 and $50 per cubic meter for Turkmen gas, as it did
in 2005, Ukraine would pay $95 for a mixture of these, plus possibly
some additional supplies from Uzbekistan and Kazakhstan.

Soon it became clear, however, that the actual document differed in
some ways from the information provided at the celebratory press
conference.  Most importantly, it provided only limited guarantees for
Ukraine.

On 5 January, former Prime Minister and Orange Revolution leader Yulia
Tymoshenko released a copy of the gas agreement at a press conference,
and made it, as well as several other related documents, available on
her political party’s website.   The press conference and contents of
the agreement were discussed extensively on all major Ukrainian media,
and Tymoshenko announced plans to contest the document in court, while
calling for the dismissal of those who stood behind it.

Of particular interest was the lack of any set price – or even
guaranteed gas volumes — for Central Asian gas.  “The sides shall sign
appropriate agreements and contracts,” the document reads, “with the
aim of forming, starting from 1 January 2006, an annual gas balance of
the RosUkrEnergo company in the following volumes .”  No actual
guarantee is given for any volumes listed.

The document sets a price, of sorts, for the Russian gas that will be
sold by Gazprom to  RosUkrEnergo for use in Ukraine.  It states, “Up to
17 Billion cubic meters of Russian gas to be bought from . Gazprom at a
price to be set by a formula, proceeding from the basic gas price (PO =
230 dollars per 1,000 cubic meters).”

Later in the document, RosUkrEnergo pledges to sell to Ukraine “in

2006 – 34 billion cubic meters of gas to be sold at the price of 95 US
dollars per 1,000 cubic meters which is in force in the first six
months of 2006.”  No mention is made of the second half of 2006.
Additionally, while the document notes that RosUkrEnergo will sell gas
to Ukraine at an unspecified price in 2007, the agreement makes no
mention of the years 2008-2010, calling into question statements that
it is a “five-year” agreement. (6)

At her press conference, Tymoshenko objected not only to the lack of
guarantees of price and gas quantity to Ukraine, but also to the
involvement of the gas intermediary company, RosUkrEnergo.  During
her tenure as premier, the company was investigated by Ukraine’s Secret
Service for money laundering and ties to organized crime. Following her
dismissal, the investigation apparently was shelved, although it is
unclear if this was done for lack of evidence or for political
expediency.

Tymoshenko noted that Gazprom owns 50% of RosUkrEnergo,
while the other 50% is owned by a subsidiary of Austria’s Raiffeisen
Investment.  Raiffeisen claims to merely manage the activities of the
company on behalf of individuals who do not want their identities
disclosed.

Tymoshenko has charged that these individuals are politically
well-connected Ukrainians enriching themselves through RosUkrEnergo’s
deals.  “It is a front company, an artificially created company, so
that gas coming to Ukraine comes through a filter that will catch a
significant amount of money,” she told the New York Times. (7)

Speaking on “Freedom of Speech,” a live Ukrainian debate program, she
further pointed out that the 4 January document commits Ukraine’s
Naftohaz to create a corporation with RosUkrEnergo for distribution of
gas internally to Ukrainian customers.  This, she charged, placed the
management of, and profits from, Ukraine’s gas transport and storage
facilities in doubt.

During the program, representatives of Yushchenko and Yekhanurov’s
political party, Our Ukraine, vigorously denied that the joint venture would
lead to loss of control over any of Ukraine transport or storage facilities.
(8) However, point 3 of the agreement does, in fact, announce the creation

of a joint venture, “whose authorized capital shall be formed by contributing
cash and bringing in other assets.”

Charles Tannock, a British Conservative member of the European
Parliament, echoed the concerns about RosUkrEnergo, during a
discussion of the gas deal by the European Commission’s delegation for
Ukraine.

He noted the “very opaque” nature of RosUkrEnergo, suggesting its
ownership structure leaves it open to “allegations by minority
shareholders in Gazprom and the Western political classes that there is
a possibility of political corruption here as a result of this secret
deal.”  (9)

President Yushchenko has denied vigorously the charges about
RosUkrEnergo, suggesting that he is prepared to investigate any
corruption allegations.  But he says that he has seen no evidence of
wrongdoing.

However, during an interview with Great Britain’s Channel 4 news, the
president was, according to reporter Jonathan Miller, “at a loss for
words” when asked who profits from RosUkrEnergo’s business.  After
a long pause, Yushchenko answered, “I don’t know.  They may be
Ukrainians, but I really don’t know who these people are.” (10)  In
spite of this, according to Prime Minister Yekhanurov, Ukraine was
forced to make the deal with RosUkrEnergo.

“It is not that we were not aware of what RosUkrEnergo is and so on,”
he said during a television interview.  “We have no alternative. The
Russian side offered a company. We have no proof [of RosUkrEnergo’s
alleged shady deals]. Neither our security agencies nor our commercial
partners have any official proof of lack of transparency in the
operation of that company.”

Moreover, “The thing is that whole of the pipeline extending from the
Turkmen-Uzbek border to the Russian-Ukrainian border at Novopskov
is filled [with gas] by Gazprom’s contractor RosUkrEnergo, and we were
offered a choice: either this [work with RosUkrEnergo] or ship gas by
train. So, we had no choice.” (11)

And what of the price for gas?  It appears that under the new
agreement, Ukraine will have limited choice in this area also.  When
asked about the price Ukraine will pay for gas in the future, Ukrainian
Economic Minister Arseniy Yatsenyuk said, “This is an extremely
difficult question.  The 95 dollar price depends on how the venture is
to be created and what contracts it will sign thereafter.”  (12)

Further, Ukrainian Defense Minister Anatoliy Hrytsenko said last week
that “most members of the government do not know what was actually
signed in Moscow on 4 January.”  He suggested, “Information published
in the press leaves a lot of unanswered questions.  To what level will
the private middleman raise the price in the second half of the year –
to 130, 230, 330, 530 dollars?  . Who now will guarantee Ukraine a
balance of gas for the whole year?  Today I don’t know the answer to
these and many other questions.”  (13)

As a result of the level of criticism of the deal, and questions about
Ivchenko’s right to sign the document on Ukraine’s behalf, officials
have now publicly downgraded the document from a “long-term contract”
to a “protocol of intent.”

It appears that Ukrainian negotiators may have hoped to conclude
supplementary intergovernmental agreements before specific information
about the 4 January document was released.  Given the ease with which
documents were kept out of the public eye throughout President Leonid
Kuchma’s administration, this hope was not unfounded.

However, despite questions about the current government’s commitment
to rooting out corruption entirely, Ukraine is no longer Kuchma-land.
The press is no longer muzzled.  The political opposition is no longer
oppressed. Yulia Tymoshenko is no longer denied access to the airwaves.

It very well may be that the government’s continuing negotiations with
Russia will close the holes noted above.  However, Tymoshenko is
calling on Ukraine to reject all the terms in this deal, suggesting
that the country should depend on an already existing agreement signed
in 2004.   What Russia’s response to this suggestion would be, during
one of the coldest winters in Ukraine in over 20 years, is unknown.

But, no matter what the result of any new negotiations, the initial
misdirection surrounding the “deal” provided effective fodder to the
government’s opponents, who, just two months before the parliamentary
election, set their sights on the cabinet.

                 GOVERNMENT? WHAT GOVERNMENT?
On 10 January, after days of building questions, and increasing attacks
from political parties vying for places in the election, parliament
voted to dismiss the government of Prime Minister Yuriy Yekhanurov.

Support for the dismissal came from a disparate a group of parties.
The Yulia Tymoshenko Bloc joined with Parliamentary Speaker Volodymyr
Lytvyn’s People’s Party, the Communists, the former Kuchma-allied Ne
Tak Bloc and Viktor Yanukovich’s Party of Regions.  Although a number
of charges were leveled at the Prime Minister, the primary
justification given was that the gas agreement with Russia violated
Ukraine’s national interests.  The fact that the members of these
parties largely see themselves as having been wronged in some way by
the president and government probably also was not an insignificant
point.

The vote came as something of a surprise even to many deputies, since
no confidence votes are generally announced at least four days in
advance, and constitutionally can only be held after a written request
for a vote by one-third of the members of parliament.  (14) Because
these provisions were not met, President Yushchenko immediately called
the vote “unconstitutional,” “incomprehensible and illegitimate,” and
refused to recognize it.  (15)

However, according to the official Decision of the Verkhovna Rada
(parliament), the vote to dismiss the government was based upon a
constitutional amendment that came into effect on 1 January, and that
appears to give the parliament an extraordinary ability to dismiss the
government with no cause.  Article 85 of the amended constitution says:
“Powers of the Verkhovna Rada shall include:

(12) Appointing to office – upon the submission by the President of
Ukraine – the Prime Minister of Ukraine, .; appointing to office – upon
the submission by the Prime Minister of Ukraine – other members of the
Cabinet of Ministers of Ukraine, .; dismissing from office the
officials mentioned above; deciding on the resignation of the Prime
Minister of Ukraine and of members of the Cabinet of Ministers of
Ukraine.”

The Constitution gives no criteria on which the parliament should base
a decision to “dismiss from office the officials mentioned above,” and
no corresponding legislation or procedures appear to supplement this
article.  Furthermore, the article does not clearly state that a
dismissal results in the resignation of the cabinet (as is specifically
stated in the article outlining the criteria for a no confidence vote).

The questions surrounding the implementation of this constitutional
article has led to paralysis in many areas of the government’s work.  A
curious additional vote by parliament to dismiss, once again, the
Justice and Fuel and Energy Ministers – but this time individually –
added further confusion, as did a vote demanding that the government
reconsider the gas protocol.   Finally, the fact that Ukraine’s
constitution does not allow a new government to be formed until after
the election underscores the uncertainty over this move in Ukraine.

Because of these constitutional questions, (Acting) Prime Minister
Yekhanurov recently announced that plans to sign supplemental
intergovernmental agreements with Russia are on hold, suggesting that
Ukraine was “unable to prepare the documents.” (16)  The Head of the
Presidential Secretariat, Oleh Rybachuk, explained, “Lawyers are
working to confirm the authority of each of the cabinet ministers in
order to remove any doubt about their right to sign [international
documents].”  (17) Ukrainian media have reported also that plans to
create the Naftohaz – RosUkrEnergo joint venture, for the moment, are
stalled.

                   THE POLITICAL REVERBERATIONS
While the primary effect of the parliament’s vote has been to undermine
the government’s ability to work, the political effects are more
difficult to assess.  Most analysts suggest that voting on the same
side as the stigmatized Viktor Yanukovich will weaken support for the
Yulia Tymoshenko Bloc in the upcoming election.  There was, indeed, a
backlash against the move in certain areas of Ukraine.

A poll conducted from 12-17 January by the Razumkov agency found that
Yushchenko and Yekhanurov’s Our Ukraine had received a small bump in
its support following the gas confrontation with Russia, from around
13% to 15%, while Tymoshenko’s poll numbers have remained even at
around 12%.  It is difficult to know, however, if those numbers will
hold as questions about the gas agreement linger.

Additionally, talk of a public “coalition” between Tymoshenko and
Yanukovich seems far-fetched, and Tymoshenko has begun attempting
to dispel this idea by returning to her Bloc’s historical anti-corruption,
oligarch-bashing roots.

On 20 January, the Bloc released transcripts of a Secret Service
interrogation of  Mykhailo Chechetov, the head of the State Property
Fund under President Kuchma.  The transcripts, which later were
confirmed as authentic by Interior Minister Yuriy Lutsenko, are filled
with accusations of wrong-doing in the privatization sphere not only by
President Kuchma but also then-Prime Minister Viktor Yanukovich.

On the final day of the parliament’s session, the Tymoshenko Bloc was
joined by the Socialist Party and the Reforms and Order Party (both of
which opposed the dismissal of the government) in calling on the
president to take action regarding these accusations.  The vote failed,
after being opposed by both the current “opposition” and the majority
of Our Ukraine.

For his part, Yushchenko this week reiterated his call for a public
referendum – possibly as early as late April or May – on the changes to
the constitution that allowed the parliament to vote to dismiss the
government.  (18)

It appears that, as Ukraine heads into the height of its parliamentary
election campaign, the only aspects that are absolutely clear are that
democracy and free speech are painfully but vigorously growing,
political “coalitions” are fluid, personal grudges are rampant, and the
constitutional crisis likely will not end with the campaign. -30-
———————————————————————————————
                                     SOURCE NOTES:
(1) “Russia and Ukraine reach complex deal,” International Herald
Tribune, 4 Jan 06.
(2)  NTN TV, 1700 GMT, 6 Jan 06; BBC Monitoring, via Lexis-Nexis.
(3) RTR Russia TV, 0800 GMT, 4 Jan 06; BBC Monitoring, via
Abdymok.
(4) NTN, Op. Cit.
(5) RTR Russia TV, Op. Cit.
(6) “Soglashenie ob urehulyrovaniy otnoshenii v gazoboi sfere,” Bloc
of Yulia Tymoshenko Website, 5 January 2006, in Russian,
(http://www.byut.com.ua/ukr/publications/documents-7), and “Agreement
on settling relations in the gas sphere,” UNIAN News Agency, 1551 GMT,
5 January 06, in English, (www.unian.net).
(7) “Ex-Premier of Ukraine Attacks Gas Price Deal,” New York Times, 6
Jan 06.
(8) Svoboda Slova (Freedom of Speech), ICTV, 20 Jan 06; video via
(www.tymoshenko.com.ua).
(9) “EU: Questions Linger about Russian-Ukrainian Gas Deal,” RFE/RL,
12 January 06.
(10)  “Ukraine’s Gas Deal for Europe,” Channel 4 News, 19 Jan 06; via
(www.channel4.com/news/).
(11)  TV 5 Kanal, 1800 GMT, 12 Jan 06; BBC Monitoring, via Lexis-Nexis.
(12)  One plus One TV, 1730 GMT, 22 Jan 06; BBC Monitoring, via
ProQuest.
(13) “Interview with Ukrainian Defence Minister Anatoliy Hrytsenko,”
Fakty i Kommentarii, 19 Jan 06; BBC Monitoring, via The Action
Ukraine Report (AUR).
(14) Constitution of Ukraine, Article 87.
(15) Agence France Presse, 10:25 GMT, 12 Jan 06; via Lexis-Nexis, and
Agence France Presse, 5:10 PM GMT, 10 Jan 06; via Lexis-Nexis.
(16) UNIAN News Agency, 21 January 06; via ForUM, 23 Jan 06.
(17)  Interfax-Ukraine, 1227 GMT, 22 Jan 06; BBC Monitoring, via
Lexis-Nexis.
(18) Website of President Viktor Yushchenko (www.president.gov.ua),
23 Jan 06.
——————————————————————————————–
The author may be contacted at tammymlynch@yahoo.com
———————————————————————————————

[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
3.       GAS INTERMEDIARY: RosUkrEnergo (RUE) – Q&A

By Roman Kupchinsky, Investigative Journalist and Analyst
Prague, Czech Republic, Thursday, January 26, 2006

Q. What physical property does the Swiss company RosUkrEnergo (RUE)
own? Does it own any gas fields in Russia or Central Asia, or any pipelines
in the former Soviet Union? What services does RUE provide?

A. RosUkrEnergo does not own any property except a few bank accounts,
pens, pencils, a few computers and some very expensive Mercedes sedans.

Most gas fields in Russia belong to Gazprom which owns the licenses to
extract gas from these fields. According to Russian law, only Gazprom is
allowed to sell Russian gas outside the borders of the former Soviet Union.

In Central Asian countries, gas fields are owned by those countries. None
of these fields are leased to RUE in either Russia or Central Asia.

The pipeline from Central Asia is called the “Center” pipeline. It
transverses Turkmenistan, Uzbekistan, Kazakhstan and Russia to the
Ukrainian border and is owned respectively by the countries it goes through.

RosUkrEnergo does not own any length of this pipeline or the compressor
stations which pump the gas through the “Center” pipeline. RUE merely
manages the transport of gas going through the pipeline until it reaches
Ukraine.

The services which RosUkrEnergo performs is to sign transit documents
and customs declarations and send bank transfers to pay those countries the
customs fees and for the cost of the work they perform in pumping gas (the
transit fee). RUE does not have any technicians, any repair men or
technicians to operate the compressor stations. .

Q. How is RUE paid for signing these documents and paying bills?

A. The payment details for RUE were NOT included in the copy of the
4 January “agreement” which was released by Yulia Tymoshenko to the
press so all I can base my answer on is the old Eural Trans Gas agreement
I have a copy of and media reports.

I say “agreement” because it is not a contract and does not contain any
contractual obligations by either side. It is an expression of intent and
nothing more.

The original contracts between RUE and Gazprom and Naftohaz Ukraine,
signed in 2004, were never made public despite numerous vows on the part
of Putin, Kuchma, Yuriy Boyko, the head of Naftohaz Ukraine and Alexei
Miller, the head of Gazprom, that RUE was as pure and transparent as
mothers milk.

According to media reports, RUE is to be paid in the same manner as its
predecessor, Eural Trans Gas was paid – the Ukrainian side will give RUE
13 (or possibly 15) billion cubic meters of gas which RUE will then sell to
Europe using the services of Gazexport, the foreign sales subsidiary of
Gazprom. RUE will make a profit of close to $2 billion by reselling the gas.
This is a very hefty fee for signing documents.

Since RUE is registered in a Swiss Canton, it will only pay an agreed upon
amount of taxes to the Canton. The Russian treasury will not see a penny in
taxes from this deal.

Q. Why did Russia give RUE exclusive rights to be the sole supplier of gas
to the Ukrainian border? Was there a tender?

A. There was no tender when RUE, or its predecessor, Eural Trans Gas,
were given exclusive rights to be the middleman in this arrangement.
Gazprom simply decided on what type of  company it wanted, formed
the company, and signed an agreement with it.

It is not clear if RUE pays Gazprom for this exclusive right. In the Eural
Trans Gas contract there was no mention of any fee paid to Gazprom for
this right. In reality however, part of the huge fees which RUE is paid by
Ukraine might go back to the Russian side – but to whom and how much
is a Russian (and apparently an Austrian) state secret.

Q. Could not Gazprom or Naftohaz Ukraine have performed the same
services which RUE performs and saved a lot of money?

A. Yes, that is the main point of contention. Of course Gazprom could have
done this without RUE as well as Naftohaz Ukraine.  There was no need to
have a company registered in Zug (RUE) and two other companies registered
in Austria (Arosgas Holdings and Centragas Holdings) and an Austrian
Investment company which does nothing except hold bearer bonds and make
a lot of noise about its suspiciously clean bill of health.

There was no need to set up Eural Trans Gas in 2002 in a forlorn town
outside of Budapest, owned by an unemployed Romanian actress and a young
Romanian married couple who could not pay their own gas bills and a lawyer
in Tel Aviv who represented Semyon Mogilevich to be the owner of the
company and to have Dmytro Firtash ask this lawyer to please, do us a favor
this one time and help us transport Turkmen gas to Ukraine.

Q. What value does RUE add to the Ukrainian-Russian gas deal?

A. None. All it does is act as a transmission belt for huge sums of money
and a tax shelter for Russia’s finest. Its main assets are its bank accounts
and close contacts to the Russian elite. RUE in reality is the alter ego of
Gazprom.  -30-
———————————————————————————————
NOTE: Roman Kupchinsky is the organized crime and terrorism analyst
for RFE/RL Online and the editor of “RFE/RL Organized Crime and
Terrorism Watch.” He was director of the RFE/RL Ukrainian Service
for 10 years. Contact: KupchinskyR@rferl.org
——————————————————————————————–
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]

========================================================
4.      YEKHANUROV AND THE ROSUKRENERGO ENIGMA
                      “The key gas person in Ukraine is the president.”
The magnificent eight: Yuriy Komarov, Andrey Akimov, Alexander Medvedev,
& Alexander Riazanov; & the following members nominated by Centragas AG:
   Yuriy Boiko, Ihor Voronin, Wolfgang Putcheck, & Robert Shelter-Jones
         Represent the ultimate owners of RusUkrEnergo, the beneficiaries

ANALYSIS & COMMENTARY: By Yulia Mostovaya
Zerkalo Nedeli On The Web (ZN), Mirror-Weekly, No 3 (582)
International Social Political Weekly
Kyiv, Ukraine, Saturday, Sat 28 Jan – 3 Feb 2006

Strange as it may seem, Ukraine’s Prime Minister Yuriy Yekhanurov had
very little to do with the Ukrainian-Russian gas negotiations and agreement
reached on 4 January 2006. According to MP Vira Ulyanchenko, “the key
gas person in Ukraine is the president,” and the negotiating team that he
personally oversees is closed to any outside interference.

Yuriy Yekhanurov realized the true implications of the agreement signed by
Olexiy Ivchenko post factum from personal contacts with gas experts,
oligarchs, economists, industrialists, and from the press.

The signing of statutory documents of a joint venture to be established by
RosUkrEnergo and NJSC Naftogas Ukrainy pursuant to the 4 January
agreement has been delayed several times. There are rumors of silent
bureaucratic sabotage of the joint venture’s incorporation.

Officials in the Ministry of Foreign Affairs, Ministry of Economy, Ministry
of Finance, and other governmental agencies seem to have been taken aback
by the joint venture’s draft statute proposed by their Russian counterparts.

Moscow suggests including in the statute every minute detail, such as
management and maintenance of the gas transportation system. Our
government is not prepared to go as far as that, therefore the Ukrainian
party is trying to curtail the joint venture’s mandate and reduce its
functions to trade in gas, as envisioned in the 4 January agreement.

BREAKTHROUGH & HUGE SUCCESS AS YUSHCHENKO CLAIMED?
The impression is that the prime minister of Ukraine, having lost some of
his earlier illusions, opposes the officially adopted line of behavior and
interpretation of the gas agreement between Moscow and Kyiv as a
“breakthrough and huge success” that Viktor Yushchenko claimed in his
article published in The Wall Street Journal.

Yekhanurov, alongside the Antimonopoly Committee, is perplexed and
bewildered by the involved parties’ unwillingness to produce a package of
documents with the necessary and sufficient data on RosUkrEnergo, the
company likely to become a sole supplier of gas to Ukraine. Under the
circumstances, it takes a lot of courage for the Ukrainian premier to insist
on this lawful requirement.

YEKHANUROV MADE STATEMENTS HE SHOULD NOT HAVE MADE
At the same time, Yuriy Yekhanurov has made a series of statements that he
never should have made. For instance, at a press conference on 25 January,
Yekhanurov said that Deputy Chairman of the Board of the NJSC Naftogas
Ukrainy Ihor Voronin and former Chairman of the Board of Naftogas Yuriy
Boiko had, indeed, been members of the RosUkrEnergo Coordination
Committee but recently left it.

He also said he was in possession of documents that testify “in October
2004, the NJSC Naftogas Ukrainy Collegium decided to delegate Boiko and
Voronin to the Coordination Committee.” According to Yekhanurov, Ihor
Voronin provided a certificate bearing the RosUkrEnergo seal and confirming
that Voronin was no longer a member of the company’s Coordination
Committee.

“I was told,” continued the prime minister, “that there is a similar letter
concerning Boiko, but I did not see it.” The key phrase here is “I was
 told.” Some time ago, Yuriy Yekhanurov asked journalists to investigate the
RosUkrEnergo company’s activities.

In our opinion, recent ZN publications were informative enough for an
intelligent reader to understand what kind of a company it is.

If the head of government still has his doubts, why doesn’t he ask a couple
of questions of those who told him?

[1] Question one: Do the premier’s sources know that the NJSC Naftogas
Ukrainy has no Collegium, but rather has a Board of Directors instead?

[2] Question two: Why wasn’t the prime minister shown the minutes of the
RosUkrEnergo general meeting on the establishment of the Coordination
Committee? The people responsible for duly and timely informing the
country’s top executive official have those minutes at their disposal.

BOIKO & VORONIN REPRESENTED RUSUKRENERGO SHAREHOLDERS
Had Yuriy Yekhanurov leafed through them, he would have noticed it was not
Naftogas Ukrainy that “delegated” Yuriy Boiko and Ihor Voronin to the
Coordination Committee. The two men represented the RosUkrEnergo
shareholders who set up the Centragas Holding.

Moreover, the head of the cabinet would have never overlooked a difference
in the dates: he told the press the NJSC Naftogas Ukrainy Collegium had made
its decision in October 2004, whereas the decision to found the Coordination
Committee and designate Yuriy Boiko and Ihor Voronin as its members is
spelled out in the minutes of the RosUkrEnergo general meeting dated 29 July
2004. Wasn’t the premier told whom these two gentlemen were representing in
Vienna for over two months?

Furthermore, in an interview to the NTN TV Channel, Yuriy Boiko argued that
“the coordination board is something like a supervisory council in a
Ukrainian JSC.” Had the supervisory council in a Ukrainian JSC had such
functions, who would have needed a board?

The minutes of the RosUkrEnergo AG general meeting read quite clearly: “Mr.
Shmeliov opened the meeting and explained that its aim was to found and
appoint members to the Coordination Committee, the company’s corporate
body that would meet on a regular basis, exercise supervision over the
company business management by the CEOs and Board of Directors, and
serve as a forum for the company’s ultimate owners to discuss and resolve
the company business issues outside the general meeting.

This general meeting has thus formed the Coordination Committee to consist
of the following members appointed by Arosgas AG: Yuriy Komarov, Andrey
Akimov, Alexander Medvedev, and Alexander Riazanov; and the following
members nominated by Centragas AG: Yuriy Boiko, Ihor Voronin, Wolfgang
Putcheck, and Robert Shelter-Jones.

The meeting resolved that the Coordination Committee’s decisions should not
be valid unless made unanimously, provided that at least two persons
nominated by each company shareholder were in attendance at the committee
session.

The minutes read: “The Coordination Committee can make decisions with due
regard of its absent members’ votes, which decisions should be valid if
supported by at least two members nominated by each company shareholder.”

                        THUS, THE MAGNIFICENT EIGHT
Thus, the magnificent eight, including Messrs Boiko and Voronin, represent
ultimate owners of RosUkrEnergo, the beneficiaries, i.e. all those whose
names remain an enigma to a number of investigative agencies and Ukrainian
negotiators. It is in the ultimate owners’ interests that the Coordination
Committee “exercises supervision and makes business decisions.”

Hence the next question: whom did the Ukrainian high-ranking officials
represent in the committee given that the NJSC Naftogas Ukrainy is not a
shareholder of RosUkrEnergo? And why were they “delegated,” as
Yekhanurov puts it, to the Coordination Committee if the Ukrainian JSC
holds no shares in RosUkrEnergo?

There are other questions worth asking of those who “told” things to the
prime minister. Suppose the document dated October 2004 does exist. In
this case, did Voronin and Boiko produce it at their meetings with the SBU
investigators?

If it really confirms that Naftogas delegated its representatives to the
RosUkrEnergo Coordination Committee, it could have spared them many
problems last spring. Did they deny any involvement with RosUkrEnergo?
Why did they conceal their activities in Vienna until now?

If the NJSC Naftogas Ukrainy nominated Voronin and Boiko to the Coordination
Committee, why then did RosUkrEnergo release them? Did it have the relevant
powers? Does it mean that they were replaced with the new Naftogas Ukrainy
managers? If not, why?

At the time of their appointment to the Coordination Committee, both Boiko
and Voronin were public servants. Who gave directions to Boiko, then
Chairman of the Board of the NJSC Naftogas Ukrainy, in respect of voting at
the Coordination Committee sessions? President Kuchma? Prime Minister
Yanukovych? Minister of Fuel and Energy Tulub?

Can Boiko present copies of those directives or official documents
describing the purposes of his business trips to attend the RosUkrEnergo
Coordination Committee sessions? Did the Ukrainian public servant get any
remuneration from RosUkrEnergo, and who paid for their trips to Vienna?

             THERE IS NO RULE OF LAW IN THIS COUNTRY
Even if the answers to the above questions imply unpleasant consequences
for Boiko and Voronin, there is no need for them to worry: there is no rule
of law in this country.

That is why Voronin could make plans for heading the Ukrainian-Russian
joint venture that is being born in the throes, and Boiko could hope to take
over the helm at Naftogas Ukrainy after the elections.

Yet why should the leader of the Our Ukraine election bloc be trying to
shield a representative of the opposing bloc?

Yekhanurov should do his best to keep his image untarnished by the new
administration’s controversial acts, but he tries to whitewash the old
regime instead. Why? It is yet another question to those who “told him.”
—————————————————————————————————-

NOTE:  Subheadings inserted editorially by The Action Ukraine Report.
http://www.mirror-weekly.com/ie/show/582/52447/?429496729=b24c19fc88dc3be10b77b095bf5375f7
———————————————————————————————————————————
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========================================================
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========================================================
5.  NAFTOGAZ UKRAINY DENIES FACT OF SIGNING DOCUMENTS
  WITH ROSUKRENERGO ON ESTABLISHMENT OF JOINT VENTURE

Ukrinform, Kyiv, Ukraine, Monday, January 30, 2006

KYIV – The national joint-stock company NaftoGaz Ukrainy didn’t sign any
constituent documents with the RosUkrEnergo company (Switzerland) on
establishment of a joint enterprise for realization of natural gas to
Ukrainian consumers, the NaftoGaz Ukrainy press center said, by way of
commenting on ex-Prime Minister Yuliya Tymoshenko’s statement regarding
the documents were allegedly signed in the January 27/28 night.

As leader of the “Batkivshchyna” party Yuliya Tymoshenko said on Sunday
evening air of the NTN Ukrainian tv channel, the NaftoGaz Ukrainy and the
RosUkrEnergo signed an agreement of establishing the joint venture, which is
provided by the Ukrainian – Russian gas agreement of January 4, 2006.

“We have an information that the relevant agreement was signed at 3 a m,
with which the NaftoGaz Ukraine fully surrendered the internal gas market

of Ukraine to the RosUkrEnergo”, Mrs Tymoshenko said.

The NaftoGaz Ukrainy press service circulated a press release stating that,
as of January 30, 10 a m, the company kept on negotiating with the
RosUkrEnergo toward concluding the agreement on establishment of the joint
venture for realization of natural gas on the territory of Ukraine. The date
and place of the agreement signing will be reported additionally.

The establishment of the joint venture of the NaftoGaz Ukrainy and the
RosUkrEnergo is envisaged in the agreement of regulation of gas relations,
which was signed in Moscow on January 4, 2006. The RosUkrEnergo, which
was defined as supplier of Russian and Central Asian natural gas to Ukraine,
may supply up to 34 billion cubic meters of gas in 2006 and starting from
2007 up to 58 bn. cu. m. of gas.  -30-
——————————————————————————————–

[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================      
6. UKRAINE’S NOFTOGAZ SEES ROSUKRENERGO JV DEAL TUES

By Geoffrey T. Smith, Dow Jones Newswires
Moscow, Russia, Monday, January 30, 2006

MOSCOW — Ukrainian state oil and gas company Naftogaz Ukrainy

(NGAZ.YY) expects to finalize on Tuesday details of a joint venture to import
gas from Russia and Central Asia, a spokesman told Dow Jones Newswires
Monday. “The talks haven’t been concluded yet, but it is expected they will
be Tuesday,” he said.

Earlier Monday, former Prime Minister Yulia Timoshenko said Naftogaz had
already agreed the terms of a joint venture with RosUkrEnergo, which is
itself a 50-50 joint venture between Russian gas monopoly OAO Gazprom
(GSPBEX.RS) and unidentified parties.

RosUkrEnergo is responsible for importing natural gas to Ukraine from Russia
and the Central Asian states of Turkmenistan and Kazakhstan [under special
rights given to it by Gazprom].

Under a recent makeshift compromise agreed three weeks ago, RosUkrEnergo

is to sell gas to Ukraine at a price of $95 per thousand cubic meters until the
end of the month. Gazprom says that it will sell its gas to RosUkrEnergo at
$230 per thousand cubic meters.

Numerous Ukrainian politicians have called for Naftogaz to take a more
active role in gas importing, rather than have the task done by
RosUkrEnergo, a privately-held company that discloses no financial
information and whose ownership structure is a closely-guarded secret.

The Naftogaz spokesman said it is unlikely that Naftogaz will get immediate
knowledge of RosUkrEnergo’s owners as a result of the deal.

He also noted that it was still unclear whether Naftogaz itself, or its
100%-owned domestic gas supply unit Gaz Ukrainy would be RosUkrEnergo’s
partner in the joint venture.  Company Web site: http://www.naftogaz.com
————————————————————————————————–
By Geoffrey T. Smith, Dow Jones Newswires (+7 095) 974 8055;
geoffrey.smith@dowjones.com
——————————————————————————————–
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
7.        RUSSIA’S GAS DIPLOMACY FUELS REALIGNMENT

                                 OF FORMER SOVIET BLOC

By Marc Champion in Davos, Switzerland & Guy Chazan in Moscow
Staff Reporters of The Wall Street Journal
The Wall Street Journal, New York, NY, Monday, January 30, 2006

Russia’s natural-gas diplomacy is driving some of its former satellites to
look elsewhere for energy supplies but is drawing others closer to Moscow’s
orbit, reshaping economic dependencies and stirring deep unease in the
region.

The Republic of Georgia, a new democracy just across the Caucasus

mountains from the Russian region of Chechnya, is moving as fast as it can
to find other energy sources after pipeline explosions earlier this month cut
off its supplies of Russian gas. Islamic separatists in Chechnya have been
battling Moscow for over a decade. Russia, which has the world’s largest
gas reserves, has blamed the Jan. 22 pipeline blasts on unidentified
terrorists.

The disruption came amid a continuing clash between Russia and Ukraine, a
country of 50 million people, over the price of the gas Moscow ships there.
At one point, the dispute led to a brief shutoff of supplies, also reducing
deliveries to Western Europe, which gets most of its Russian gas through
pipelines across Ukraine. Neighboring Moldova, too, saw its gas supplies
cut before signing a deal to pay higher prices to Russia’s gas monopoly,
OAO Gazprom.

Russian officials say they are simply shifting to market-based prices for
fuel, ending a Soviet-era practice of subsidized gas sales to their
neighbors. But the abruptness of the shift and Moscow’s high-handed
behavior toward pro-Western governments such as Georgia’s has added to
worries that the Kremlin is using Russia’s vast energy reserves as a
political lever. They fear that gas has become a means for Russia to reward
regimes it views as loyal and punish those it views as too independent.

In an interview at the World Economic Forum in Davos, Switzerland,

Georgian  President Mikheil Saakashvili said Moscow’s response to the
pipeline explosions — including unreturned phone calls and slow repairs —
highlighted the need to find alternative sources of energy. “We knew we
were in trouble, but this has accelerated things,” he said.

Mr. Saakashvili said he believes Russia’s handling of the explosions that
hit the gas pipeline to Georgia was part of “Soviet”-style efforts by
Moscow to destabilize his pro-Western government.

On Friday, other former Soviet satellites farther West, including Poland
and Romania, called for construction of new liquefied-natural-gas terminals
to receive fuel shipments, and urged that construction of a gas pipeline
from Turkey to Austria be speeded up, to reduce their dependence on Russia.

Russian officials have reacted angrily to Georgia’s assertions and its
criticism of their response to the pipeline blasts, contending that crews
worked around the clock to restore supplies. Yesterday, Gazprom turned
Georgia’s gas back on. But repairs that were supposed to take just a few
days dragged on for a full week, leaving many Georgians without fuel

during a cold snap.

The energy tensions come as Western capitals have watched with growing
alarm as Russian President Vladimir Putin has further tightened political
control at home, undermining democratic institutions and warning that
foreign agents are trying to destabilize his country.

Georgia’s Mr. Saakashvili has all but accused Russia of causing the
explosions, comments that the Russian authorities have dismissed as
“hysteria” and “bacchanalian.”

“It’s ridiculous to accuse Russia of blowing up its own pipeline,” said
Sergei Mikheyev, a foreign-affairs analyst at the Center for Political
Technologies, a Moscow think tank.

Mr. Saakashvili said he wasn’t saying he had proof of Russian
responsibility, but that he was most concerned about the way Russia
responded once the gas was cut. He said some in Moscow wanted to

punish Georgia for turning West, to use TV footage of “miserable”
Georgians to demonstrate that democracy doesn’t work and to turn
Georgians against his government.

Mr. Saakashvili said Georgian officials immediately called Russian Prime
Minister Mikhail Fradkov after the explosions and that Mr. Fradkov told
them he would call back in one to two days once the situation was clearer.
“He never called,” Mr. Saakashvili said. Calls to Gazprom also went
unreturned, he said. Only once he began giving interviews to CNN and the
BBC did Moscow begin to respond, he added.

Although Gazprom then said the company had arranged for extra gas to

pass to Georgia through a pipeline in Azerbaijan, that lasted only briefly.
Russian officials blamed a failed compressor station on the line.

“In a way it was a blessing, because we are looking for other alternatives
now,” Mr. Saakashvili said. Rather than wait for Gazprom to fix the
pipeline, Georgia announced on Friday a deal to import emergency supplies
of gas from Iran via Azerbaijan, which borders both countries.

Beyond looking abroad for new sources of energy, Mr. Saakashvili said he

is accelerating plans to build hydroelectric plants, continuing a process that
has seen Russia’s share of electricity supplies to Georgia drop to 30%
currently from 80% in 2003. A new pipeline due for completion in the autumn
from the Shakh Deniz field in Azerbaijan will let Georgia cut its complete
dependence on Russian gas to about half, Mr. Saakashvili said.

Mr. Saakashvili also said he is planning to invite energy ministers and
companies from around Europe to a meeting in Georgia this summer to

figure how best to diversify energy supplies in the region.

Russia’s recent energy disputes with its neighbors mostly involve Gazprom’s
efforts to force gas importers in Russia’s so-called “near abroad” — the
former Soviet republics — to start paying market prices for gas, rather
than the heavily discounted prices they have enjoyed until now.

Belarus, a close ally of Moscow that ceded ownership of key export channels
to Gazprom, has so far been allowed to keep a gas price of less than $50
per 1,000 cubic meters, compared with the market price of more than $230.
Ukraine, Georgia and others have said they are prepared to pay more, but
that the transition should be staggered. Georgia reached a deal late last
year to double the price it pays for Russian gas to $110 per 1,000 cubic
meters.

The U.S. and European Union have expressed concern over Russia’s tough
energy tactics — especially when Gazprom’s tussle with Ukraine caused gas
pressure to fall in pipelines transiting Ukraine to Western Europe — but
they have limited leverage. Russia is currently the linchpin, for example,
in bringing diplomatic pressure to bear on Iran over its alleged
nuclear-weapons program.

Even as former Soviet satellites try to find sources of energy outside
Russia, Russian diplomats and gas executives have been working hard to
reinforce their dominant positions in the energy-rich former Soviet states
of Central Asia.

Uzbekistan, isolated internationally after its brutal suppression of
protests in the town of Andijan in May, last week joined a Moscow-led bloc
of former Soviet states, the Eurasian Economic Community. That followed
Uzbek President Islam Karimov’s decision to kick out a U.S. military base
and the signing of a $1.5 billion deal between Gazprom and Uzbekistan’s
state oil and gas company to jointly develop some of the country’s gas
fields. That deal would give Gazprom complete control over Uzbekistan’s

gas exports.

On Friday, Gazprom CEO Alexei Miller also visited impoverished

Kyrgyzstan, pledging “hundreds of millions of dollars” to help it explore
and develop its oil.

The countries hardest hit by Russia’s gas negotiations have tended to be
those that have started looking West. Mr. Saakashvili is scheduled to
travel to Germany this week, where he expects to meet Chancellor Angela
Merkel and to discuss energy diversification. Germany buys the largest
proportion of its gas from Russia of any Western European nation and is
planning to build a pipeline direct to Russia under the Baltic Sea.

“If these things are possible in the direction of Georgia, then they are
possible in every direction,” Mr. Saakshvili said of the Russian supply
disruptions. “Everyone’s policy should be to diversify.”  -30-

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8.  UKRAINIAN OPPOSITION RUNS TELEVISION ADVERTISING

          ON SPECIAL TIES TO AND RELATIONS WITH RUSSIA
 
UT1State TV, Kiev, in Ukrainian 1850 gmt 28 Jan 06
BBC Monitoring Service, UK, Saturday, January 28 2006

The state-owned UT-1 television channel ran an election advertisement

of the opposition Party of Regions on 28 January.

A male voice-over says: “The gas crisis has emerged because of an
unnecessary conflict with Russia. And now there is a dirty deal which will
push gas prices up to the extent that this will bankrupt enterprises and
raise heating bills excessively. The Party of Regions is a strong
administration, which will build special relations with Russia, solve the
gas crisis and make heating and gas bills affordable again.”

Video shows newspaper headings in Russian: “Ukraine initiates the creation
of a gas consortium”, “Oil prices are rising”, “No fuel to warm private
homes in Kharkiv”. Words “Party of Regions” are shown at the bottom of

the screen.

Video also shows blue and white banners (campaign colours of the Party of
Regions), Viktor Yanukovych smiling, and people carrying slogans “For the
Party of Regions!”.

The last video picture shows the Party of Regions’ top election candidates
Rinat Akhmetov, Taras Chornovil, Viktor Yanukovych, Yevhen Kushnaryov

and Nina Karpachova standing together. An inscription is run on the
foreground: “The Party of the Regions and Viktor Yanukovych. Improving
your life now!”.

The voice-over says: “The Party of the Regions and Viktor Yanukovych.
Improving your life now!”.  -30-

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9.                                    GASSIFIED RUSSIA
          The Russian-Ukrainian gas conflict and its broader implications
            The lost benefit of Gazprom being simultaneously profit of
          RosUkrEnergo will amount to $4 billion a year or $20 billion in
               five years in the framework of the new trading scheme. 
        
ANALYSIS & COMMENTARY:
By Stanislav Belkovsky and Vladimir Golyshev
Zavtra, No. 4. Moscow, Russia, Wed, January 25, 2006

The recent gas conflict with Ukraine offers some insight into the
methods and priorities of Putin’s ruling corporation. Contrary to
the Kremlin’s propaganda, Russia did not win the gas pricing
dispute. The whole saga demonstrates that Russia is becoming a
colony.

On January 10, 2006, the Supreme Rada (parliament) of Ukraine
voted to dismiss the Yekhanurov government – supposedly, for
betraying national interests by signing the new gas agreement with
Russia.

The monarch’s dream-interpreters in the Kremlin and
elsewhere, erroneously described as “politicians” or “analysts,”
hastened to inform the story-starved January media of the good
news: look, didn’t we tell you that the famous protocol of January
4 is good for Russia rather than Ukraine? We’ve won, damn it!
This is a bluff, of course; blatant and clumsy, like all the
Kremlin’s propaganda over the recent non-election years. The
evidence, meanwhile, speaks of an indisuptable success for
Ukraine, President Viktor Yushchenko, and Prime Minister Yuri
Yekhanurov in their gas conflict with the grim Great Russian
supplier. From the standpoint of Gazprom, its broad and snow-
covered majority shareholder (commonly known as Russia), and
its credulous minority shareholders, the results of this widely-
publicized conflict seem very odd, to put it mildly.
In reality, the results are as follows.
Gazprom no longer supplies natural gas to fraternal Ukraine.
RosUkrEnergo becomes the exclusive supplier for the next few
years. Notorious Semen Mogilevich participated in establishment of
this company in 2004. This company is a much more serious market
player than it may seem at first glance. Founders are its main
asset. RosUkrEnergo belongs by 50% to Gazprombank, which will in
turn become property of Dresdner Bank, one of the most influential
business partners of President Vladimir Putin, by 2007. The other
half of RosUkrEnergo is controlled by Raiffeisen Investment A.G.,
a semi-offshore company registered in comfortable Switzerland.
Composition of the real owners and beneficiaries of this small and
shady joint stock company changed a few times when old persons
responsible for Russian-Ukrainian gas trade left the political
arena and new persons appeared on it. Now there are reasons to
believe that the private individuals on which the price of Russian
gas finally depends and their German cronies are standing behind
Raiffeisen. Thus, henceforth gas supplies to Ukraine will be
guaranteed not by loose Gazprom that always covers its tracks in
non-transparent blue streams but a company of very solid men
willing to remain prominent energy businessmen after 2008 and
forever.
Ukraine is no longer buying Russian gas. These 17 billion cubic
meters that obedient RosUkrEnergo buys from proud Gazprom
for advertised enormous $230 are exported to Western Europe in
reality. The entire gas due to Ukraine under the contract is
bought by RosUkrEnergo from Turkmenistan, Uzbekistan and
Kazakhstan at $45-60 and is supplied to Ukraine at $95.
The lost benefit of Gazprom being simultaneously profit of
RosUkrEnergo will amount to $4 billion a year or $20 billion in
five years in the framework of the new trading scheme. If we read
attentively the notorious protocol of January 4 we can make sure
that RosUkrEnergo also receives more than 20 billion cubic meters
of gas already bought by Gazprom dirt-cheap (at $65 per 1,000
cubic meters) from Russia.
 
The offshore company from Switzerland will also export this gas at
the most predatory West European price. Rumbling through the
rough fabric of crooked figures it is possible to find the real meaning:
Gazprom has presented a significant part of its revenues to an
immodest intermediary for which these revenues are evidently more
necessary.
Gazprom ceased being the monopoly exporter of Russian gas to
the European Union. Moreover, it acquired a competitor on the
European spot gas market in the form of RosUkrEnergo that it
itself had born. Taking into account raising of the transit tariff
by Ukraine from $1.09 to $1.60 for transportation of 1,000 cubic
meters by 100 kilometers the gas conflict looks totally lost by
the Russian monopoly and hence the Kremlin standing behind.
 
In such situation these should be Russian elites who worry and demand
report (if not dismissal) of the Russian government and management
of Gazprom. However, nobody worried because Russian elite is not
of the kind to think about trifles like $20 billion stolen from
Russia. Everyone steals. There is nothing surprising and blamable
in this.
What made Vladimir Putin who at the end of 2005 declared
himself nearly the future energy emperor of Eurasia and vicinity
agree with such astonishing deal?
[1] FIRST, these were primitive private interests. Who has said
that $20 billion on quiet accounts in toy Liechtenstein look worse
than in the corporate treasury of vast Gazprom?! As long as
progressive political humanity does not finally understand that
first of all Putin is a businessman motivated by healthy marketing
greed and only after that a politician the logic and motivation of
the Kremlin will keep generating hundreds of questions being
equally simple and confused.
[2] SECOND, Putin was frightened by the menacing shout from
Brussels. On January 3, the Russian President learned that on
January 4 the energy commission of the European Union would
condemn Russia in Brussels and would demand Gazprom to supply
gas unconditionally to Ukraine that was preparing to freeze for the
sake of independence.
 
Vladimir Putin, the best friend of the European gas consumers, could
not allow such scenario. That is why Putin ordered Gazprom to reach
an agreement urgently until the fatal morning of January 4.
The top management of Gazprom did not have time enough to
bargain with Alexei Ivchenko, leader of the congress of Ukrainian
nationalist and incumbent CEO of the Ukrainian state-run company
Neftegaz Ukrainy. The final figure of $95 was almost 60% less than
it had been demanded before. As to the virtual $230 for
RosUkrEnergo, everything was clear about this figure a long time
ago.
 
Equally well Gazprom could sign a contract with its Sibneft
subsidiary for supplies of gas of especially rare kind at $500 per
1,000 cubic meters and to tell the whole world about the “new
marketing reference points.” This was not incidental that already
on January 5 and 6 Romania and Moldova inspired by the Ukrainian
example demanded lowering of the gas price for them, obedient and
poor, too.
All in all, the outcome was bad only for Gazprom and for
Russia. For the top managers of these two commercial entities and
for the friendly state of Ukraine everything was well. There are
no reasons for alarm.
Why does the Ukrainian opposition feel such unhidden rage?
Why did 250 parliament members of the 450 possible (along with 226
necessary) supported the vote of no confidence in the cabinet of
Yuri Yekhanurov?
This happened because Victor Yanukovich, Yulia Timoshenko and
other lower-rank opposition members are motivated by the real
offence not at Yushchenko and Yekhanurov and even not nationalist
Ivchenko but at excellent Vladimir Putin.
Back in autumn of 2005, Yanukovich and Timoshenko reached an
agreement on everything with the Kremlin. By February of 2006, the
gas crisis had to reach its apogee including empty underground
reservoirs, dead plants and mines, infuriated Ukrainian people and
fuel Maidan brandishing pieces of the sacred gas pipeline. At that
moment opposition leaders had to come to the stage undertaking a
high intermediary mission and reaching a happy agreement on
everything. This meant that they would win the parliamentary
elections scheduled for March 26 easily.
Whereas Yanukovich claimed mostly political mediation
Timoshenko was also going to become a gas master establishing a
new market operator to replace RosUkrEnergo that had grown old.
 
In alliance with semi-forgotten ITERA (this company was allied with
former CEO of Gazprom Rem Vyakhirev and had friendly relations
with Timoshenko back in the mid-1990s when the future orange
princess was head of the trader company United Energy Systems of
Ukraine) the former Prime Minister of Ukraine was going to supply
Central Asian gas to Ukraine at $115-120. The generous Kremlin
promised to arrange reliable transit. This was not incidental that
all criminal proceedings were dropped when the gas crisis was in
full swing because there was no need for legal actions anymore.
In any case, in the morning of January 4 both most prominent
opposition politicians of Ukraine woke up with a feeling that kind
uncle Putin “let them down.” They did not take into account that
for a businessman of Putin’s kind a wish to punish damned
Yushchenko was nothing in comparison to stability of gas revenues
and delicate financial schemes. Then Timoshenko and Yanukovich
decided to stake their all, to announce Yekhanurov’s $95 a defeat
and a treachery. Well, at elections of March 26 it will be clear
to which extent this tactic is justified and successful.
The ended “war” gives us a right to once again to look into
the corpulent self-complacent face of the Putin’s ruling
corporation.
The odd finale of the Russian-Ukrainian conflict has shown
evidently that:
      [1] Putin’s team is entirely dependent, both politically and
psychologically, on external forces, primarily the European Union
and the United States;
      [2] for these people their own private economy is much more
important than general state policy;
      [3] they are unable to compete seriously in a really
competitive environment.
With such brave guys in charge, it is impossible to build an
empire, even a gas empire. It is only possible to build a colony.
This is a colony where authorities steal from 50% to 100% of
everything that can be stolen, people drink cheap vodka in
hopeless misery and foreign corporations methodically achieve
their goals through bribes and moderately cynical attitude to the
silent colonial population.
 
This is the gasified Russia prepared for us by the Kremlin.
(Translated by Pavel Pushkin)
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10. PRES BLAMES LOCAL OFFICIALS FOR WEEK LONG HEATING
         OUTAGE IN EASTERN UKRAINIAN CITY OF ALCHEVSK

Associated Press, Kiev, Ukraine, Monday, January 30, 2006

KIEV – Ukrainian President Viktor Yushchenko Monday blamed local

officials in an eastern Ukrainian city for mismanagement that left tens of
thousands of residents shivering in unheated apartments during last week’s
record-breaking cold spell.

“These people don’t deserve respect, they deserve to be sacked,” Yushchenko
said, referring to local officials in Alchevsk in the Luhansky region. Some
60,000 people have been without heat for more than a week in the city.

The shutdown occurred Jan. 22 when one of the main pipes pumping hot water
from a central boiler into apartment houses, schools and other municipal
buildings froze and broke down. Yushchenko called for a criminal
investigation, and pledged that his government would do whatever it took to
get the heat flowing again.

“For a week already, Alchevsk…resembles the frozen side of the moon,”
Ukraine’s Gazeta Po-Kievskiy declared. Ukrainian media broadcast images of
residents sitting around kitchen tables bundled up in winter hats, coats and
gloves.

Ihor Krol, spokesman for the Emergency Situations Ministry, said that some
3,600 workers from across the country had been dispatched to Alchevsk to
restore the heating supply. Gradually, buildings were being hooked up to the
system.

A first allotment of $494,000 was being sent to the city to fund repairs,
Yushchenko’s office said. He said that a special emergency headquarters

was now in charge in the city, Ukraine’s Unian news agency reported.

Last week’s cold snap caused a record jump in gas consumption in Ukraine

and led to the deaths of some 220 people as this country’s aging and inefficient
heating systems struggled to cope. Most of the deaths occurred in the
Luhansky region; the Health Ministry has said many were homeless and
intoxicated people. Temperatures have since risen to more normal winter
levels in Ukraine.  -30-
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11. UKRAINE: GAS CRISIS EASES MINER’S GREAT DEPRESSION
      Huge coal reserves could help build energy independence for Ukraine

New Trade Union World Briefing – Ukraine
International Confederation Of Free Trade Unions
ICFTU OnLine, Brussels, Belgium, Tuesday, 31 January 2006

BRUSSELS – The cut off in the supply of Russian gas to Ukraine on 1
January 2006 has reopened the debate on the country’s energy

independence. Could the huge coal reserves in Ukraine’s subsoil help to
build this independence?

Ukraine’s mining trade unions believe so, but are also well aware that most
of the mines are in a growing state of disrepair and require massive
investment.

Their dilapidation – the result of bad management of the State mines and the
machinations of oligarchs bent on making a quick fortune – has also
contributed to making Ukrainian mines amongst the most dangerous in the
world.

In 2005, 157 workers died as a result of accidents in Ukrainian mines, 7768
were injured. Thousands of retired miners continue to toil in the pits, as
their pensions are too low to provide them with a decent standard of living.
Women and children are working in the clandestine mines that are
proliferating wherever coal can be found close to the surface.

All of this under the gaze of the unscrupulous businessmen who have become
powerful “oligarchs” by exploiting the numerous flaws in the Ukrainian
authorities’ management of the mines. Having made their fortunes, they are
now investing in their own businesses, such as football clubs.

Entitled “Ukraine: the miners’ great depression”, this Trade Union World
Briefing released today by the ICFTU sheds light on the disastrous social

situation in the coalmining region of Donbass in southeast Ukraine.

Its towns and cities are now referred to as “depressed”, having lost their
economic heart with the closure of the coalmines and the subsequent sharp
decline in social services, which had until then been provided by the mine
(such as road maintenance, funding for schools and nurseries, etc.). There
were 1.2 million mining jobs in Ukraine when it became independent in 1991.
Today, there are only around 300,000. Many ex-miners have had to resort to
leaving the country.

The Ukrainian government wants to privatise all the coalmines still in
operation, to the great dismay of the mining unions, who consider the public
authorities to be the only viable investor, given the massive injection of
funds needed to renovate the mines, which will only start to make a profit
after several years.

For the unions, the authorities’ bad management is responsible for the
growing dilapidation of most of the State mines, and their consequent lack
of profitability. The corruption of all too many bureaucrats at all levels
has allowed oligarchs to amass fortunes at the expense of the mines and
their workers.

“Some privatisations were handled by groups of people in power who
considered the State budget to be a supplement to their own businesses,”
affirms Volodymir Novikov, Ukraine’s deputy minister of fuel and energy.
Only 10 out of 167 mines, that is, those requiring very little investment to
become profitable, are currently in the hands of serious private investors.

This new Trade Union World Briefing also raises the question of Ukraine’s
energy independence. Following Russian gas giant Gazprom’s suspension,

on 1 January, of its supplies to Ukraine, owing to disagreement over prices,
the Ukrainian energy ministry notified three power stations of the need to
replace part of the gas with coal.

Although a solution has, in the meantime, been found to this crisis in
relations between Russia and Ukraine, the episode has rekindled hopes in the
Donbass region, where the mining unions believe that Ukraine has sufficient
coal reserves to be energy independent. Major economic and ecological
challenges will nonetheless have to be taken up if the Ukrainian government
commits to this path.  -30-
————————————————————————————————-

NOTE: You can read the entire Trade Union World Briefing: “Ukraine:
the miners’ great depression” by clicking on the following link:
http://www.icftu.org/displaydocument.asp?Index=991223357&Language=EN

The ICFTU represents 155 million workers in 236 affiliated Organizations in
154 countries and territories. ICFTU is also a member of Global Unions:
http://www.global-unions.org
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12. CENTRAL EUROPE SEEKS EU HELP OVER RUSSIAN GAS SUPPLIES 

By Christopher Condon in Budapest
Financial Times, London, UK, Saturday, January 28 2006

BUDAPEST – Eight central and east European countries yesterday appealed

for financial help from Brussels to help reduce their region’s dependence on
Russian gas.

Meeting in Budapest, representatives from Poland, the Czech Republic,
Slovakia, Austria, Hungary, Slovenia, Croatia and Romania agreed to a

broad plan that would leave them less vulnerable to sudden cuts in Russian
gas due to political disputes or technical problems.

The plan calls for the construction of shared gas storage facilities,
acceleration of the Turkey-to-Austria Na-bucco pipeline project, and the
building of smaller intra-regional pipelines and two terminals for receiving
liquefied natural gas (LNG) in Croatia and Poland. Janos Koka, Hungary’s
economy minister, said the group also agreed to urge Brussels to step up
talks with Russia on guaranteeing stable supplies of gas.

The request came as Andris Piebalgs, the EU’s energy commissioner, speaking
at the World Economic Forum in Davos, said he believed Russia would be a
reliable energy supplier to Europe in the long term.

In Budapest, however, Mr Koka stressed that central and east Europe’s energy
supplies were at risk not merely because of political factors, but also for
technical reasons.

The region has been struggling to cope with lower than normal supplies and
near record demand because a week-long cold snap sent temperatures below
freezing as far south as Greece and killed more than 100 people.

The cold snap follows a price row between Russia and Ukraine at the
beginning of January that caused Gazprom, the Russian gas supplier, to cut
supplies. Several of the countries present at yesterday’s meeting receive
Russian gas via Ukrainian pipelines.

On Thursday, the Croatian and Hungarian governments agreed to co-operate

in building an LNG terminal at Croatia’s Krk island and a 340km pipeline
linking the terminal to Hungary. Ivo Sanader, Croatia’s prime minister, said
the LNG terminal would cost about Euro 1bn ($1.2bn, £685m). Poland would
like to build an LNG facility on the Baltic Sea and increase its access to
Norwegian gas.

The Group of Eight countries, which will be expanded at future meetings to
include the three Baltic countries, Serbia and Bosnia, wants the EU to
promise financial support and to endorse tighter energy policy co-operation
at an energy summit to be held in March.

The group agreed to finalise by next Wednesday a set of written proposals
that would be presented to Mr Piebalgs, who is working on a proposed

common EU energy policy ahead of the March meeting. (Additional reporting
by Reuters)  -30-
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13.                 MINSK DISPATCH: DADDY’S SOURCE
       Politicians & journalists have been imprisoned, killed, or disappeared
     The Ukrainian gas crisis threw light upon Russia’s fuelling of Alexander
           Lukashenko’s despotic Belarussian regime, writes Tom Parfitt

Tom Parfitt, The Guardian, London, UK, Monday January 30, 2006

A crust of blood had already formed on Vassily Grodnikov’s crushed skull
by the time his brother broke down the door of his cottage and found his
corpse.

The 67-year old writer had got drunk and fallen on his head, prosecutors
in Belarus later concluded. “It’s absurd,” says Mr Grodnikov’s brother,
Nikolai, who shakes with fear at speaking openly for the first time about
the death. “The postmortem showed there wasn’t a drop of alcohol in his
body.”

As Europe wakes up to the Kremlin’s stranglehold on its natural gas
supplies, a stark light has been shone on how the Russian president,
Vladimir Putin, does business with the other independent states that once
made up the Soviet Union.

Moscow’s demand for Ukraine to pay a fivefold increase for deliveries of
Russian gas earlier this month was widely seen as punishment for Kiev’s
push to join the European Union and Nato since its “orange revolution”
last winter.

What is less known is the flip side to this gritty political game: the
Kremlin is propping up a despotic pro-Moscow regime on the edge of
Europe that only survives because it gets extremely cheap gas from Russia.

Belarus – wedged between its giant neighbour and Poland – looks and feels
like a microcosm of the old Soviet Union, complete with bad suits, big
squares and ruthless KGB oppression. It is run by President Alexander
Lukashenko, a paternalistic hardliner who brooks no dissent.

“Lukashenko has put fear into this country in a way that hasn’t been seen
since Stalin,” says the Belarussian opposition leader, Alexander
Milinkevich, a physicist who plots strategy against his nemesis in a
mouldering apartment in the suburbs of the capital, Minsk. “He wouldn’t
last a month without Putin giving him cheap energy.”

Lukashenko uses the crushing weight of an 80% state-run economy to exert
almost total control, says Milinkevich. Gas supplies from Russia at $47 per
1,000 cubic metres (compared to the $230 market price that Moscow
demanded from Ukraine) keep Soviet-era factories creaking along. And there
are no inconvenient oligarchs to fund the opposition.

But while Belarus’s GDP is on the rise, the eerily spotless streets and
facades of Minsk conceal a dirty underworld of persecution, killings and
disappearances.

Mr Grodnikov’s alleged murder comes as Lukashenko’s hardline regime

twists a tourniquet on the slightest sign of dissent in the run up to
presidential elections on March 19.

The writer’s body was discovered recently at the cottage outside Minsk

where he wrote articles about state corruption for Belarus’s last surviving
daily independent newspaper, Narodnaya Volya (People’s Will).

His brother, Nikolai, thinks he knows why he died. “They killed him

because they are terrified of a revolution, and he found out about their
plans to squash any protest,” he said.

Guardian Unlimited has learned Mr Grodnikov was investigating rumours
of police plans to secretly detain opposition activists at a dacha
settlement for senior interior ministry officials near the capital. He died on

the day he planned to go to the settlement. State prosecutors refused to
investigate.

Since Lukashenko – who is known as Batka (Daddy) – came to power in
1994, a series of politicians and journalists have been imprisoned, killed,
or simply disappeared.

As a result, the United States and European Union countries are trying to
crank up pressure on Lukashenko ahead of the presidential poll in March.

The US secretary of state, Condoleezza Rice, has called for Belarus “to
throw off the yoke of tyranny” and Britain is taking a confrontational
stance, with ambassador Brian Bennett accusing Lukashenko of leading “a
slide into dictatorship”.

One senior western diplomat in Minsk confirmed that foreign experts are
being drafted in to “help [opposition] parties with their organisation, and
showing them how democracy works, how to get in touch with the people”.

It is a tricky pursuit, as paranoia grows in Russia and Belarus about
western “meddling” in their internal affairs. The two countries have a union
with each other, military cooperation is strong and their peoples are
practically inseparable in terms of national identity. Moscow supports the
Minsk regime because it wants to preserve it as a buffer zone against Nato
encroachment.

Lukashenko, meanwhile, has warned foreign states to keep their noses out
of the election.

Last month, his simpering “parliament” made it a crime to discredit the
country by passing “false information” to a foreign state or organisation
about its political, economic or legal situation. The popular uprisings in
other former Soviet states were “simple banditry, deftly carried out with
western money”, Lukashenko claims.

Observers say the president was rattled by the rose revolution in Georgia in
2003 and the orange revolution in Ukraine in 2004. “He’s worried,” said the
diplomat. “He knows he can engineer 80% of the vote in his favour, but he’s
forming special police units to break up crowds, just in case.”

The opposition faces a huge task to oust Europe’s pariah. Anti-Lukashenko
parties have not a single seat in parliament and most have been denied
registration. Independent press is being hounded out of existence. And
because of his grip on the state-run economy, Lukashenko’s opponents can
be cowed with threats of being sacked and never working again.

Milinkevich, the opposition leader who is due to meet senior EU officials
today, is seen as the only hope for change, but his profile is low because
he is denied exposure in state media.

“I’m placing my hopes in the younger generation,” says the scientist, who
heads a loose coalition of democratic forces and will stand for the
presidency. Underground youth movements like Zubr (Bison) are small, but
their numbers are swelling as increasing numbers of students are expelled
from university for dabbling in politics.

“If the presidential election is falsified, we will go the streets to
protect our rights,” says Nikita Sasim, 21, a Zubr leader who says he was
hospitalised with concussion after police beat him at a recent protest.

Yet the opposition know its chances are slim. Lukashenko dominates
television broadcasts and is riding high in official polls with an almost
trance-like power over many of his compatriots.

“He is an excellent example in all areas,” says Sergei Yuran, 45, an
engineer, shuffling through snow in central Minsk. Ludmila Yolkina, a music
teacher, says: “We don’t want all that civil unrest like in Ukraine. Look at
our ordered city and nice clean streets.”

The gas crisis made western Europe question President Putin’s democratic
credentials as he took over the presidency of the G8. His support for Batka
could be the next big point of confrontation.  -30-
————————————————————————————————-
Email tom.parfitt@guardian.co.uk
http://www.guardian.co.uk/elsewhere/journalist/story/0,,1698153,00.html?gusrc=rss
——————————————————————————————-
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
14.    PAINTING BY FAMOUS UKRAINIAN KAZILMIR MALEVICH
                           REPORTEDLY FOUND IN UKRAINE
               Painting to be displayed Wednesday, Feb 1 in Chernovtsy

RIA Novosti, Moscow, Russia, Monday, January 30, 2006

KIEV – An artist from western Ukraine said he had found a painting by
Ukrainian-born Kazimir Malevich, a leading figure in the Russian
Avant-Garde, or by one of his students.

Anatoly Fedirko, known in his home town of Chernovtsy for his uncommon
artistic enterprises, said experts had confirmed the picture could have been
painted by Malevich, a pioneer of geometric abstract art and the founder of
Suprematism in Russia, or one of his students.

The painting will not be less valuable if the latter version is confirmed.
Experts said it dated back to the early 20th century and mimicked the
artist’s legendary style.

The finding is currently being kept in a Kiev bank. Fedirko said he would
display the painting in Chernovtsy February 1.

Malevich is best known for his works “Black Square” (1915) and “Black
Cross” (1916-1917), renowned for their previously unseen geometrical
simplicity.

Malevich, who studied art in Kiev and Moscow and experimented with
various modernist styles, including Cubism and Futurism, turned to teaching
in 1922 in Petrograd (later Leningrad and now St. Petersburg).

Under Stalin, Malevich was sent to a prison camp because his work was in
opposition to official ideology at the time. He died in poverty in Leningrad
in 1935.  -30-
——————————————————————————————-
LINK: http://en.rian.ru/russia/20060130/43249704.html
——————————————————————————————-
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
15. UKRAINE MARKS 88TH ANNIVERSARY OF KRUTY TRAGEDY

Ukrinform, Kyiv, Ukraine, Monday, January 30, 2006

KYIV – President Viktor Yushchenko called on Ukrainians to honor the

Kruty heroes, three hundred young Ukrainians, who perished on January
29, 1918 defending Kyiv and the Ukrainian People’s Republic from
Bolsheviks, led by Muravyov, attacking.

The President is convinced that January 29, 1918 was a unique page of
Ukrainian history “which bears a colossal emotional and historic load.”

He urged on the Government and the people together to defend Ukraine’s
national interests and on politicians to be tolerant and asked citizens to
be wise. “Our unity gives us might,” he concluded, having reminded that
controversies in the Ukrainian People’s Republic ruling caused weakening
positions of the Ukrainian independent state and its further invasion by the
bolshevist Russia.

On January 21, 2006 President Viktor Yushchenko signed a resolution on
commemoration of the memory of Kruty Heroes in connection with the 88th
anniversary of their deed.

Under the document, memorial places lengthwise the Kyiv – Moscow railroad
and at the Kruty station, where some 300 cadets were atrociously killed, as
well as the Kyiv Dnieper slopes at the Askold Sepulchre in Kyiv, where due
to efforts by the Union of Ukrainian Youth bodies of 27 heroes were buried
in 1991 and a cross erected, will be made orderly.

In the Soviet time the Kruty tragedy was concealed by historians and the
burial place was leveled to the ground.  -30-

——————————————————————————————-
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
16.  CHERNOBYL OVERSHADOWS PUSH FOR NUCLEAR POWER

By Jonathan Gorvett in Pripyat, Ukraine
Aljazerra.net, Doha, Qutar, Thursday 26 January 2006

As Ukraine looks to nuclear power to fuel its increasing energy needs,
critics have warned that the lessons of the 1986 Chernobyl reactor
meltdown may have gone unheeded.

Ukraine’s dispute with Russia over gas supplies in early January caused
panic in Europe – and even the eventual defeat of the government in Kiev.

With high oil prices and increased demand continuing to dominate
international markets, interest in nuclear power has resurged as securing
energy sources becomes a key issue for many European countries.

Ukraine is planning to boost its nuclear sector, and Viktor Yushchenko, the
president, has even floated the idea of using the old Chernobyl site as a
new dump for nuclear waste

Paulius Kuncinas, a Kiev-based energy analyst, says: “In 2004, Ukraine
commissioned two large new reactors.

“The government plans to build up to 11 new reactors by 2030. The

rationale is that it is a cheap way to replace gas. Ukraine also has large
uranium deposits.” But the move towards nuclear energy may be lingering
in Chernobyl’s shadow.
                                      FATAL MELTDOWN 
The result of an experiment that went horribly wrong, the Chernobyl nuclear
plant’s reactor number four exploded on 26 April 1986, releasing large
amounts of radioactivity into the atmosphere. A radioactive cloud affected
people as far away as Scotland.

The nuclear sector in Europe took a plunge in the wake of the disaster.
Many countries moved to decommission existing nuclear power stations and –
except in France and Finland – cancelled plans for new ones. Low oil prices
and fears over nuclear safety were key factors in this loss of public trust.

Today, the reactor sits at the heart of a 30km exclusion zone, an area still
dangerous for visitors.

“It’s something of a wildlife sanctuary,” says Maxime Orel of the Ukrainian
Ministry of the Catastrophe, a special government unit set up to manage and
monitor disaster relief at the site.

“The reason is that hunting is banned, because the animals are laced with
Strontium 90, a deadly radioactive isotope. They get it from eating the
plants, which are also radioactive.”

Nobody knows how many people died in the disaster, particularly as effects
such as cancers may not appear for years. Official estimates, which are
widely disputed, from the three former Soviet countries affected – Ukraine,
Belarus and Russia – say about 25,000 had died by the year 2005.

“At the time, no one wanted to believe this disaster had happened,” explains
Orel. The Soviet authorities covered up much of what had happened.
                                         GHOST TOWNS 
We are walking in the abandoned city of Pripyat, 1km from the reactor and
once a home to more than 40,000 people.

“The residents of Pripyat say they heard only a small noise when the reactor
blew – a hand clap, nothing else – at about 2am,” continues Orel. “The
following morning, people, mothers with children, went about their daily
business. No one told them what had happened, but the radiation level was
already extremely high. There was radioactive dust in the air and it covered
all the buildings and streets.”

The entire town was evacuated some days later. Because residents were told
they would return in three days, they left clothes, furniture and pets
behind. “When they came back, all the pets were dead,” Orel told
Aljazeera.net.

Now the town stands deserted, its miles of apartment blocks, shopping
centres, wide boulevards and amusement parks too radioactive to be lived in
again. With the wind and snow, followed by spring rains and summer heat, the
concrete buildings will likely have long since cracked and eroded away
before the radiation levels become safe.

Yet this natural process of decay is also a growing cause for alarm.
                                       GROWING ALARM 
“Chernobyl is one of the most complex sites, geologically, of any nuclear
power station,” says Jan Vande Putte, the nuclear campaigns coordinator for
environmental activists Greenpeace International.

“Several million cubic metres of radioactive waste were dumped around the
reactor in ditches, most of it in the 12 months after the disaster and in an
emergency situation. They did this next to a river which regularly floods.”

The fear is that radioactive material could get into the water table and
seep down river into the Kiev Reservoir, which lies north of Ukraine’s
capital. Kiev lies two hours’ drive downstream from Chernobyl.

In the immediate aftermath of the 1986 explosion, thousands of soldiers,
firemen and rescue workers – known as liquidators – also rushed to the site
to pour thousands of tons of lead and sand around the reactor. Many of them
died or received severe radiation burns in the process, but eventually they
contained the reactor in what has since become known as “the sarcophagus”.
Yet this structure too is now causing alarm.

“Inside the sarcophagus, in one second you can take a fatal dose of
radiation,” says Orel. “Yet its north wall is unstable. Ground water is
undermining the cement and sand dropped by the helicopters during the
emergency, it’s a mess. Highly polluted and very unstable.”
                                       CONTAINMENT HOPES 
French company Framatom is working fast onsite to build a new sarcophagus

to contain the old one. Orel hopes it will be completed as soon as possible.

Nuclear sector companies have been busy recently elsewhere in Ukraine too.
Reactor number four was just one of several at Chernobyl, yet all these have
been closed since 2000.

To compensate for the loss, the Ukrainian government commissioned two new
Russian designed reactors, Khmelnitsky 2 and Rivne 4, and received financial
backing from a string of European, US and Russian authorities.

“There is pressure on the Ukrainian government to find new energy
resources,” Kuncinas told Aljazeera.net.

“Coal-fired power plants and nuclear plants are the two options being
considered. Coal is not very popular as it enjoys little support outside
Ukraine.”
                             CHEAP ENERGY PRODUCTION 
Tony Blair, the British prime minister, announced late last year that his
government would be reviewing “the development of a new generation of
nuclear power stations”.

Elsewhere, countries from Lithuania to China have also announced nuclear
plans. Advocates argue that it is a way of producing cheap energy that does
not harm the environment by producing greenhouse gases.

A return to nuclear power has also been welcomed by Western business
groups. They fear that uncertainty over energy supplies – such as that
recently shown in Russia’s spat with Ukraine – coupled with rising gas and

oil prices will have a major impact on their future competitiveness.

Yet back in the snows of Pripyat, such considerations seem a long way away.
“Once, they thought of this as a paradise,” says Orel. “The people who lived
and worked here at the reactor were all young – the average age was 25. They
were paid much more than normal Soviet citizens and had everything they
wanted. Now who knows how many are still alive.”
—————————————————————————————————
http://english.aljazeera.net/NR/exeres/A99CD701-62E9-47BF-93AA-B3A8BF51E147.htm

————————————————————————————————————–
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AUR#651Europe & Gas Crisis: Who Is To Blame? What Is To Be Done?; PM And The RosUkrEnergo Enigma; Gazprom’s ‘Gift’ to RosUkrEnergo

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 651
Mr. E. Morgan Williams, Publisher and Editor  
Washington, D.C., Kyiv, Ukraine, TUESDAY, JANUARY 31, 2006
                           ——–INDEX OF ARTICLES——–
         Clicking on the title of any article takes you directly to the article.               
Return to the Index by clicking on Return to Index at the end of each article
             TO BLAME?] CHTO DELAT’ [WHAT IS TO BE DONE]?
ANALYSIS & COMMENTARY: By James Sherr, Fellow
Conflict Studies Research Centre, Defence Academy of the UK
Published in Ukrainian and Russian by Zerkalo Nedeli, Mirror Weekly
International Political Social Weekly, No. 3 (582)
Kyiv, Ukraine, Saturday, 28 January-3 February
The Action Ukraine Report (AUR), # 651, Article One
Published in English, Washington, D.C. Tuesday, January 31, 2006

2 UKRAINE: GAS AND THE GOVERNMENT: GAS AGREEMENTS,
               CONSTITUTIONAL REFORM, FREE SPEECH AND
                         DEMOCRACY INTERSECT PAINFULLY
ANALYSIS AND COMMENTARY: By Tammy Lynch
THE ISCIP ANALYST, Formerly The NIS Observed,
An Analytical Review, Volume XII, Number 1
Institute for the Study of Conflict, Ideology & Policy
Boston University, Boston, MA, Friday, January 27, 2006

3.             GAS INTERMEDIARY: RosUkrEnergo (RUE) – Q&A
By Roman Kupchinsky, Investigative Journalist and Analyst
Prague, Czech Republic, Thursday, January 26, 2006

4.          PM YEKHANUROV AND THE ROSUKRENERGO ENIGMA
                        “The key gas person in Ukraine is the president.”
The magnificent eight: Yuriy Komarov, Andrey Akimov, Alexander Medvedev,
& Alexander Riazanov; & the following members nominated by Centragas AG:
   Yuriy Boiko, Ihor Voronin, Wolfgang Putcheck, & Robert Shelter-Jones
         Represent the ultimate owners of RusUkrEnergo, the beneficiaries
ANALYSIS & COMMENTARY
: By Yulia Mostovaya
Zerkalo Nedeli On The Web (ZN), Mirror-Weekly, No 3 (582)
International Social Political Weekly
Kyiv, Ukraine, Saturday, Sat 28 Jan – 3 Feb 2006

5NAFTOGAZ UKRAINY DENIES FACT OF SIGNING DOCUMENTS
 WITH ROSUKRENERGO ON ESTABLISHMENT OF JOINT VENTURE
Ukrinform, Kyiv, Ukraine, Monday, January 30, 2006

6UKRAINE’S NOFTOGAZ SEES ROSUKRENERGO JV DEAL TUES
By Geoffrey T. Smith, Dow Jones Newswires
Moscow, Russia, Monday, January 30, 2006

7.          RUSSIA’S GAS DIPLOMACY FUELS REALIGNMENT

                                  OF FORMER SOVIET BLOC
By Marc Champion in Davos, Switzerland & Guy Chazan in Moscow
Staff Reporters of The Wall Street Journal
The Wall Street Journal, New York, NY, Monday, January 30, 2006

8UKRAINIAN OPPOSITION RUNS TELEVISION ADVERTISING

UT1State TV, Kiev, in Ukrainian 1850 gmt 28 Jan 06
         The Russian-Ukrainian gas conflict and its broader implications
           The lost benefit of Gazprom being simultaneously profit of
         RosUkrEnergo will amount to $4 billion a year or $20 billion in
              five years in the framework of the new trading scheme.         
ANALYSIS & COMMENTARY:
By Stanislav Belkovsky and Vladimir Golyshev
Zavtra, No. 4. Moscow, Russia, Wed, January 25, 2006

10PRES BLAMES LOCAL OFFICIALS FOR WEEK LONG HEATING
            OUTAGE IN EASTERN UKRAINIAN CITY OF ALCHEVSK
Associated Press, Kiev, Ukraine, Monday, January 30, 2006

11UKRAINE: GAS CRISIS EASES MINER’S GREAT DEPRESSION
       Huge coal reserves could help build energy independence for Ukraine
New Trade Union World Briefing – Ukraine
International Confederation Of Free Trade Unions
ICFTU OnLine, Brussels, Belgium, Tuesday, 31 January 2006

12CENTRAL EUROPE SEEKS EU HELP OVER RUSSIAN GAS SUPPLIES 
By Christopher Condon in Budapest
Financial Times, London, UK, Saturday, January 28 2006

13.                      MINSK DISPATCH: DADDY’S SOURCE
        Politicians & journalists have been imprisoned, killed, or disappeared
      The Ukrainian gas crisis threw light upon Russia’s fuelling of Alexander
            Lukashenko’s despotic Belarussian regime, writes Tom Parfitt
Tom Parfitt, The Guardian, London, UK, Monday January 30, 2006

14PAINTING BY FAMOUS UKRAINIAN KAZILMIR MALEVICH
                          REPORTEDLY FOUND IN UKRAINE
             Painting to be displayed Wednesday, Feb 1 in Chernovtsy
RIA Novosti, Moscow, Russia, Monday, January 30, 2006

15UKRAINE MARKS 88TH ANNIVERSARY OF KRUTY TRAGEDY
Ukrinform, Kyiv, Ukraine, Monday, January 30, 2006

16CHERNOBYL OVERSHADOWS PUSH FOR NUCLEAR POWER
By Jonathan Gorvett in Pripyat, Ukraine
Aljazerra.net, Doha, Qutar, Thursday 26 January 2006
========================================================
1
 EUROPE AND THE GAS CRISIS: KTO VINOVAT? [WHO IS

         TO BLAME?] CHTO DELAT’ [WHAT IS TO BE DONE]?
ANALYSIS & COMMENTARY: By James Sherr, Fellow
Conflict Studies Research Centre, Defence Academy of the UK
Published in Ukrainian and Russian by Zerkalo Nedeli, Mirror Weekly
International Political Social Weekly, No. 3 (582)
Kyiv, Ukraine, Saturday, 28 January-3 February
The Action Ukraine Report (AUR), # 651, Article One
Published in English, Washington, D.C. Tuesday, January 31, 2006
 
What conclusions are the members of the European Union drawing from
the gas crisis? On 3 January, the French newspaper “Le Monde” summed
them up in this way:  ‘A new geopolitics is revealing itself’.  ‘New’ they
might be to Western Europe.  But there is nothing new about these
geopolitics in Ukraine.

On becoming Acting President of the Russian Federation in December
1999, Vladimir Putin cut the supply of oil to Ukraine for the fifth time
since 1991.  Very soon it became clear that the dispute would not play itself

out according to the shambolic, but forgiving rules of the Yeltsin ‘system’.

The taps stayed off until April 2000, when President Kuchma took the first
steps to meet Putin’s political demands. The dynamic of concession led, by
turns, to the dismissal of Ukraine’s then (and once again current) foreign
minister, Boris Tarasyuk in September 2000.

By winter-spring 2001, energy interests, Ukrainian and Russian, played an
influential role in securing the dismissal of the first deputy prime
minister, Yulia Tymoshenko, and finally the then Prime Minister (and now
President) Viktor Yushchenko.  Many Western Europeans never under-

stood that. Many Ukrainians have never forgotten it.

The first paragraph of the official (2003) “Energy Strategy of the Russian
Federation to 2020″ is a model of understated honesty.  It defines the
country’s fuel and energy complex as an ‘instrument for the conduct of
internal and external policy’ and helpfully adds that ‘the role of the
country in world energy markets to a large extent determines its
geopolitical influence’.[1]

What is this influence to be used for?  In his “Wall Street Journal” article
of 11 January, Sergei Ivanov, Deputy Prime Minister and Minister of
Defence, stated that ‘our top concern is the internal situation in some
members of the Commonwealth of Independent States’.

Should that concern trouble the EU, or is it time to accept, à la Ivanov,
that no one should attempt to ‘change the geopolitical reality in a region
of Russia’s strategic interest’?

Once again that question hangs in the balance.  Russia’s gas diplomacy with
Ukraine has been a shock to the European system, a reminder of its ability
to adopt a merciless approach to its ‘legitimate interests’ and a stinging
refutation of the EU mantra that ‘Russia is a major and reliable supplier of
energy’.  Yet after its recent enlargement, the reality for the EU is
dependence.

Today almost 60 per cent of natural gas in the EU-25 is imported:  50 per
cent of that from Russia and over 80 per cent of that via Ukraine.  By 2030,
the proportion of imports is expected to reach 70 per cent.  So the new EU
mantra has become ‘energy strategy’, and all agree that its premise must be
to reduce this dependence.

In principle, this need establishes a common interest between the EU and
Ukraine-and, for the latter, an enormous opportunity.  But there is a world
of difference between ? common interest and a common front.  Russia has
convinced many that it knows what it wants and knows how to get it.  But
Ukraine?

Does Ukraine have the ability to define its interests, pursue them and do
what it says it will do?  Is it capable of acting as the EU’s partner and,
what is more, a future EU member?  Or will the incompetence of its leaders,
the incoherence of its policy and the recklessness of its opponents throw
the opportunity away?

                               PERSPECTIVES OF RUSSIA
Today, few inside Europe’s political establishment like Russia, and it is
fair to say that few inside Russia’s political establishment care.  Does it
matter?  In the words of Gazprom’s senior executive for the UK, Yuriy
Komorov, ‘It does not matter if you like Russians.  Whether it is gas, oil,
mining, wood, it is all here’.  For seasoned pragmatists inside the EU, it
does not matter either.

But what does matter is the rules of the game.  The rules were the first
casualty of the crisis. They existed for a long time, and they have bred
much complacency. ‘Even during the Cold War, the Soviet Union never
used energy as a weapon!’

But during the Cold War, the Soviet Union used weapons as weapons and

by these means controlled what it needed to control.  Unsettling Europe’s
faith in the rules, and in its own reliability, was Russia’s greatest blunder in
the crisis.

But beyond acknowledging this, Europe’s establishment is divided, as it is
in almost all things.  Some of the most experienced people in official
corridors counsel against demonising Russia, and there is reason in what
they say.  Ukraine has for too long had its independence cushioned by
Soviet-era subsidies, and it is not tenable or just that the practice should
continue.

For their part, Ukrainians have been evasive negotiators and, until the
ultimata started, Kyiv ignored every proposal that Gazprom had made since
June.  Whatever the Kremlin’s geopolitical motives, it has economic
justifications for acting as it has, and its economic arguments need to be
answered with economic arguments.  That case has been accepted by nearly
every serious analyst and policy maker.

Yet not for the first time, Russia’s methods have overshadowed the other
issues and, in so doing, they have become the issue itself.

[1] For Ukraine, the ‘market’ is that of a monopolist who knows that gas is
a primary commodity and that there is no available substitute.  The
quadrupling of the price in these circumstances (and at the start of winter)
is a destabilising, dangerous step and can only be seen as a hostile act.

[2] Ukraine’s $50 price was not a Soviet era price, but the level
established in the 9 August 2004 supplement to the 2003 contract which,
to be sure, was constructed on the basis of political interests rather than
market principles. In the real world, changed interests regularly lead to
the renegotiation of contracts and, with extreme provocation, their
denunciation.  But even denunciation follows norms which Russia did

not observe.

If this were purely a Russian-Ukrainian affair, the EU would find a way of
compartmentalising it.  But it is not.  It occurs in a definite context, and
that context is full of geopolitical symbolism and substance.

The context, in the words of Vlad Sobell, the Czech born former senior
economist of RFE/RL, is ‘Russia’s re-emerging position as a superpower,
driven chiefly by its actual, or potential, domination of the global
supplies of energy’.  He goes on to say that:

       At this point, Russia’s stance is purely defensive, with Moscow
       being primarily concerned with the maintenance of federal integrity
       and stability in its CIS backyard. However, this could change if the
       West continues to poison relations by lecturing the Kremlin on how
       to manage Russia’s internal affairs and by the promotion of so called
       ‘colour revolutions’.

Is the conclusion, then, that Russia’s defence requires the ‘stability’
(i.e. subservience) of neighbours, and that if Europe refuses to accept
this, Russia might cease to use its energy ‘domination’ defensively?  What
might this mean?

Even those who find this question premature  now discern a strategy, or at
least a method, behind the  latest sequence of steps.

[1] THE FIRST STEP was the agreement to construct the so-called Baltic
gas pipeline: a step that was portrayed in geopolitical terms, predictably,
by Poland, but (publicly at least) by virtually no other EU government at

the time, despite the fact that the pipeline will be 30 per cent costlier than
an overland version.

Yet privately, there was much irritation inside the EU at a bilateral
agreement that appeared to contradict the Union’s ethos of coordination,
the promotion of ‘consistent approaches to market regulation’-and which
appeared to take the Directorate-General Energy and Transport and the
European Regulators Group for Electricity and Gas by surprise.

[2] THE SECOND STEP was the designation of the just retired German
Chancellor, Gerhard Schroeder, to the project, whose German boss,
Matthias Warnig is, according to the “Economist,” a former ‘Stasi’ officer.
That step caused subdued anxiety in the Germany policy-making
establishment itself.  Is the EU dealing with a supplier or a power?

The Russia-Ukraine gas crisis has put these issues in the public domain and
given them far more resonance in policy-making circles than they had only
weeks before.

As a result, some are abandoning one simplistic paradigm (‘Russian
partnership’) for another (‘a new Cold War’), and some extravagant
thoughts are being aired even in respectable places (e.g., the Frankfurter
“Allgemeine Zeitung,” 3 January: ‘Today Yushchenko’s pro-Western
direction doesn’t suit the Kremlin, and tomorrow it may be an EU
resolution on Chechnya’).

But more sobering thoughts are not far behind.  If the ‘gas weapon’ can be
used against Ukraine, can it not also be used against an EU member, such as
Poland?  When the Baltic pipeline project was launched, this was a question
for discussion.  Today many believe it is a question that calls for action.

Already, member states are articulating a remarkably similar vision of how
they must act:  by diversifying energy sources (liquefied natural gas,
nuclear power, renewables), by building new infrastructure, by diversifying
supply (new pipelines), by conservation and by greater transparency (because
even in the EU, too much information with security implications is regarded
as commercially privileged).

But how should the EU act with regard to Russia?  The realistic consensus
would be:  no retreat from established principles (about values and about
our deepening relationships with newly independent states), no lessening of
cooperation where cooperation makes sense-and, where cooperation does not
make sense, plain speaking with  doors closed and microphones off.

Today that consensus is close to becoming a reality. But where would it
leave Ukraine?  As ever, much of the answer will depend upon Ukraine.

 

                             PERSPECTIVES OF UKRAINE
Across Europe and Eurasia, millions believe that the more threatening Russia
appears to be, the better Ukraine’s European integration prospects become.
But today there can be no certainty of this. Uncertainty is called for
because for every European decision maker who believes that Russia’s
pugnacity should not be appeased, there is another who believes we should
do nothing to increase it.

The same holds true for EU enlargement.  Were it not for enlargement, the EU
would be less dependent and less vulnerable than it is. ‘Now that we have
cooked this dish, we have to eat it’. To compound these vulnerabilities, to
invite Ukraine into the accession process whilst this plate is still full
would, so the argument goes, be the height of irresponsibility.

Yet the greatest uncertainty for the EU is now Ukraine itself.  Its once
united ‘orange’ forces accuse one another of treachery, its structures of
power are paralysed, and every opinion poll reveals despair, derision and
disgust.   Putin has blundered in Europe, but so far at least, in Ukraine he
has got exactly what he wanted.

What can reasonably be done to ensure that his victory is short lived?
First, political forces need to understand EU perceptions of the agreement
of 4 January, because it affects EU interests and because it is on the basis
of this agreement that future EU-Ukraine energy cooperation will have to
begin.

At first, European capitals (and Washington) regarded the agreement as a
lesser evil.  Many continue to do so.  That is because, over the short term,
Russia is fated to remain a monopolist and Ukraine a hostage.

Turkmenistan, which is hostage to the same pipeline network as Ukraine,
might as well  be ‘on another planet’ (as Alla Yeremenko noted in these
pages on 14-20 January).  Within the lifetime of the agreement, there will
be no significant alternative supplies available.  Whilst gas reserves and
Kryvorizhstal money might have enabled Ukraine to ‘hang tough’ for a year,
they are the only silver bullets in Ukraine’s arsenal, and they can be used
only once.

In practice, Ukraine would have been obliged to siphon gas for weeks or
months-or at least until such time as the EU and United States threatened
dire consequences.

So, in the days after 4 January it seemed that Yushchenko and his
negotiators were to be congratulated for avoiding the worst.  They had
saved the pipeline network, secured the EU’s respect, maintained the
support of the United States and strengthened the probability of an
invitation to NATO’s Membership Action Plan in December.

But second impressions are different, and they focus two points.

[1] The lesser point is the extreme instability of the terms regarding
price.

[2] The greater point is the primacy of RosUkrEnergo.  Behind Gazprom
stands the Russian Federation and a line of accountability to the Russian
state. Although Gazprom appears to own half of RosUkrEnergo, behind
the rest stand figures who, as President Yushchenko admits, are largely
unknown.

It would therefore appear that Ukraine has ceded control over its imports,
over part of its internal energy distribution (by means of a joint venture)
and a portion of Russian supplies to Europe to an opaque structure
accountable only to itself.  The more that Western capitals digest the
implications of this, the more uneasy they are bound to become.

                   CHTO DELAT’? [WHAT IS TO BE DONE?]

       [1] In the short term, the EU, the United States and Kyiv must
re-establish rules of the game between themselves, starting with full
disclosure about what agreements contain and who is party to them;

       [2] In the short term, they must also work out a common negotiating
strategy to ensure that future price rises are incremental and absorbable.
Gazprom should be left in no doubt that it will be deemed responsible for
significant price rises.  The Kremlin should be left in no doubt that a
renewal of the crisis will affect fundamental European interests;

       [3] In the short-to-mid term, the EU and United States must make

a renewed effort to find supplies for the (northern flow) of the Odessa-
Brody pipeline, the operating terms of which come up for renewal in less
than two years time.

       [4] In the short-to-mid term, the  EU and Ukraine should establish

a working mechanism, analogous to NATO’s Joint Working Group on
Defence Reform, designed to stimulate and support the development of
a national energy strategy for Ukraine based on the principles of diversity,
transparency, conservation, modernisation of infrastructure and the
expansion of accountability and competence.  NATO should explore the
establishment of a similar mechanism, focusing on energy security.

For these initiatives to secure support, Ukraine’s authorities must:

       [1] Introduce transparency in Ukraine’s energy policy and

energy sector.  For a start, they should relaunch the curtailed SBU
investigation into RosUkrEnergo and remove any barriers to SBU
collaboration with Western bodies investigating extortion and fraud.

       [2] Behave as an EU partner would be expected to behave

over issues of joint regional concern (Moldova and Belarus)
and, by doing so, demonstrate that Ukraine takes its membership
aspirations seriously.

To those who believe that the EU and Ukraine are doomed to disappoint
one another, this may be asking too much.  To those who believe in
Ukraine’s place in Europe, it is the least one can ask.  -30-
—————————————————————————————————
NOTE: The views expressed in this article are those of the author
and not necessarily those of the UK Ministry of Defence.  The AUR
appreciates the author James Sheer sending us the English version
of his latest analysis and commentary article.
————————————————————————————————–
Contact James Sherr, james.sherr@lincoln.oxford.ac.uk
———————————————————————————————
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
2.  UKRAINE: GAS AND THE GOVERNMENT: GAS AGREEMENTS,
               CONSTITUTIONAL REFORM, FREE SPEECH AND
                       DEMOCRACY INTERSECT PAINFULLY

ANALYSIS AND COMMENTARY: By Tammy Lynch
THE ISCIP ANALYST, Formerly The NIS Observed,
An Analytical Review, Volume XII, Number 1
Institute for the Study of Conflict, Ideology & Policy
Boston University, Boston, MA, Friday, January 27, 2006

In January, Ukraine’s parliamentary election season began in an
atmosphere largely foreign to Ukraine and other former Soviet republics
– one of free speech, vigorous public debate and a generally free
national press.  The democratic atmosphere, which Ukraine’s leaders
have proudly supported, has been a challenge for them.

Questions about the country’s latest gas deal with Russia, combined
with the introduction of perplexing constitutional reforms, have led to
the virtual paralysis of the presidential administration and the
parliament’s dismissal of the cabinet.

The latter is being contested by the president as unconstitutional,
but, regardless, it has effectively halted much of the government’s
work.   Two months before the 26 March election, the potential
orientation of the country’s next parliament is unclear, political
brinksmanship already is underway over who will assume the premier’s
chair following the poll, and the country faces questions that are
likely to impact its development for years to come.

          GAS AGREEMENT? WHAT GAS AGREEMENT?
The current crisis was created in the days following the announcement
of a new gas agreement between Russia and Ukraine.  On 4 January, when
the agreement was signed, Ukraine declared it a success.  “The people
of Ukraine and Russia won,” said Prime Minister Yekhanurov. (1)
Later, President Yushchenko went further.  He proclaimed the deal “a
brilliant achievement” and suggested that “the political fight has been
won.” (2)

At the press conference announcing the deal, the head of Ukraine’s
Naftohaz gas concern, Oleksiy Ivchenko, provided limited information.
“We shall be buying gas of different origins, both Russian and Central
Asian, from the RosUkrEnergo company,” he said.  “The price of gas
will be 95 US dollars per 1,000 cubic meters at the Russian-Ukrainian
border.” (3) Yushchenko later confirmed Ivchenko’s statements.
“Ukraine has gotten a price of 95 dollars.  Look at the map of Europe.
Who has this price?  . We have secured a stable gas balance for five
years.” (4)

But, even at the press conference it was clear that the agreement was
far more complex than stated by Ivchenko – the only official Ukrainian
representative at the negotiation.  Russia’s Gazprom head Aleksey
Miller touted the fact that “a long term contract for supplying Russian
gas has been agreed,” and announced, “The initial price is 230 dollars
for 1,000 cubic meters.”  This price for Russian gas, he later
explained, would be paid to Gazprom by the intermediary RosUkrEnergo,
which would then mix this gas with much cheaper Central Asian gas and
sell the mixture to Ukraine for an average price of 95 dollars.  (5)

Thus, instead of paying between $50 and $65 per cubic meter for Russian
gas, and between $44 and $50 per cubic meter for Turkmen gas, as it did
in 2005, Ukraine would pay $95 for a mixture of these, plus possibly
some additional supplies from Uzbekistan and Kazakhstan.

Soon it became clear, however, that the actual document differed in
some ways from the information provided at the celebratory press
conference.  Most importantly, it provided only limited guarantees for
Ukraine.

On 5 January, former Prime Minister and Orange Revolution leader Yulia
Tymoshenko released a copy of the gas agreement at a press conference,
and made it, as well as several other related documents, available on
her political party’s website.   The press conference and contents of
the agreement were discussed extensively on all major Ukrainian media,
and Tymoshenko announced plans to contest the document in court, while
calling for the dismissal of those who stood behind it.

Of particular interest was the lack of any set price – or even
guaranteed gas volumes — for Central Asian gas.  “The sides shall sign
appropriate agreements and contracts,” the document reads, “with the
aim of forming, starting from 1 January 2006, an annual gas balance of
the RosUkrEnergo company in the following volumes .”  No actual
guarantee is given for any volumes listed.

The document sets a price, of sorts, for the Russian gas that will be
sold by Gazprom to  RosUkrEnergo for use in Ukraine.  It states, “Up to
17 Billion cubic meters of Russian gas to be bought from . Gazprom at a
price to be set by a formula, proceeding from the basic gas price (PO =
230 dollars per 1,000 cubic meters).”

Later in the document, RosUkrEnergo pledges to sell to Ukraine “in

2006 – 34 billion cubic meters of gas to be sold at the price of 95 US
dollars per 1,000 cubic meters which is in force in the first six
months of 2006.”  No mention is made of the second half of 2006.
Additionally, while the document notes that RosUkrEnergo will sell gas
to Ukraine at an unspecified price in 2007, the agreement makes no
mention of the years 2008-2010, calling into question statements that
it is a “five-year” agreement. (6)

At her press conference, Tymoshenko objected not only to the lack of
guarantees of price and gas quantity to Ukraine, but also to the
involvement of the gas intermediary company, RosUkrEnergo.  During
her tenure as premier, the company was investigated by Ukraine’s Secret
Service for money laundering and ties to organized crime. Following her
dismissal, the investigation apparently was shelved, although it is
unclear if this was done for lack of evidence or for political
expediency.

Tymoshenko noted that Gazprom owns 50% of RosUkrEnergo,
while the other 50% is owned by a subsidiary of Austria’s Raiffeisen
Investment.  Raiffeisen claims to merely manage the activities of the
company on behalf of individuals who do not want their identities
disclosed.

Tymoshenko has charged that these individuals are politically
well-connected Ukrainians enriching themselves through RosUkrEnergo’s
deals.  “It is a front company, an artificially created company, so
that gas coming to Ukraine comes through a filter that will catch a
significant amount of money,” she told the New York Times. (7)

Speaking on “Freedom of Speech,” a live Ukrainian debate program, she
further pointed out that the 4 January document commits Ukraine’s
Naftohaz to create a corporation with RosUkrEnergo for distribution of
gas internally to Ukrainian customers.  This, she charged, placed the
management of, and profits from, Ukraine’s gas transport and storage
facilities in doubt.

During the program, representatives of Yushchenko and Yekhanurov’s
political party, Our Ukraine, vigorously denied that the joint venture would
lead to loss of control over any of Ukraine transport or storage facilities.
(8) However, point 3 of the agreement does, in fact, announce the creation

of a joint venture, “whose authorized capital shall be formed by contributing
cash and bringing in other assets.”

Charles Tannock, a British Conservative member of the European
Parliament, echoed the concerns about RosUkrEnergo, during a
discussion of the gas deal by the European Commission’s delegation for
Ukraine.

He noted the “very opaque” nature of RosUkrEnergo, suggesting its
ownership structure leaves it open to “allegations by minority
shareholders in Gazprom and the Western political classes that there is
a possibility of political corruption here as a result of this secret
deal.”  (9)

President Yushchenko has denied vigorously the charges about
RosUkrEnergo, suggesting that he is prepared to investigate any
corruption allegations.  But he says that he has seen no evidence of
wrongdoing.

However, during an interview with Great Britain’s Channel 4 news, the
president was, according to reporter Jonathan Miller, “at a loss for
words” when asked who profits from RosUkrEnergo’s business.  After
a long pause, Yushchenko answered, “I don’t know.  They may be
Ukrainians, but I really don’t know who these people are.” (10)  In
spite of this, according to Prime Minister Yekhanurov, Ukraine was
forced to make the deal with RosUkrEnergo.

“It is not that we were not aware of what RosUkrEnergo is and so on,”
he said during a television interview.  “We have no alternative. The
Russian side offered a company. We have no proof [of RosUkrEnergo’s
alleged shady deals]. Neither our security agencies nor our commercial
partners have any official proof of lack of transparency in the
operation of that company.”

Moreover, “The thing is that whole of the pipeline extending from the
Turkmen-Uzbek border to the Russian-Ukrainian border at Novopskov
is filled [with gas] by Gazprom’s contractor RosUkrEnergo, and we were
offered a choice: either this [work with RosUkrEnergo] or ship gas by
train. So, we had no choice.” (11)

And what of the price for gas?  It appears that under the new
agreement, Ukraine will have limited choice in this area also.  When
asked about the price Ukraine will pay for gas in the future, Ukrainian
Economic Minister Arseniy Yatsenyuk said, “This is an extremely
difficult question.  The 95 dollar price depends on how the venture is
to be created and what contracts it will sign thereafter.”  (12)

Further, Ukrainian Defense Minister Anatoliy Hrytsenko said last week
that “most members of the government do not know what was actually
signed in Moscow on 4 January.”  He suggested, “Information published
in the press leaves a lot of unanswered questions.  To what level will
the private middleman raise the price in the second half of the year –
to 130, 230, 330, 530 dollars?  . Who now will guarantee Ukraine a
balance of gas for the whole year?  Today I don’t know the answer to
these and many other questions.”  (13)

As a result of the level of criticism of the deal, and questions about
Ivchenko’s right to sign the document on Ukraine’s behalf, officials
have now publicly downgraded the document from a “long-term contract”
to a “protocol of intent.”

It appears that Ukrainian negotiators may have hoped to conclude
supplementary intergovernmental agreements before specific information
about the 4 January document was released.  Given the ease with which
documents were kept out of the public eye throughout President Leonid
Kuchma’s administration, this hope was not unfounded.

However, despite questions about the current government’s commitment
to rooting out corruption entirely, Ukraine is no longer Kuchma-land.
The press is no longer muzzled.  The political opposition is no longer
oppressed. Yulia Tymoshenko is no longer denied access to the airwaves.

It very well may be that the government’s continuing negotiations with
Russia will close the holes noted above.  However, Tymoshenko is
calling on Ukraine to reject all the terms in this deal, suggesting
that the country should depend on an already existing agreement signed
in 2004.   What Russia’s response to this suggestion would be, during
one of the coldest winters in Ukraine in over 20 years, is unknown.

But, no matter what the result of any new negotiations, the initial
misdirection surrounding the “deal” provided effective fodder to the
government’s opponents, who, just two months before the parliamentary
election, set their sights on the cabinet.

                 GOVERNMENT? WHAT GOVERNMENT?
On 10 January, after days of building questions, and increasing attacks
from political parties vying for places in the election, parliament
voted to dismiss the government of Prime Minister Yuriy Yekhanurov.

Support for the dismissal came from a disparate a group of parties.
The Yulia Tymoshenko Bloc joined with Parliamentary Speaker Volodymyr
Lytvyn’s People’s Party, the Communists, the former Kuchma-allied Ne
Tak Bloc and Viktor Yanukovich’s Party of Regions.  Although a number
of charges were leveled at the Prime Minister, the primary
justification given was that the gas agreement with Russia violated
Ukraine’s national interests.  The fact that the members of these
parties largely see themselves as having been wronged in some way by
the president and government probably also was not an insignificant
point.

The vote came as something of a surprise even to many deputies, since
no confidence votes are generally announced at least four days in
advance, and constitutionally can only be held after a written request
for a vote by one-third of the members of parliament.  (14) Because
these provisions were not met, President Yushchenko immediately called
the vote “unconstitutional,” “incomprehensible and illegitimate,” and
refused to recognize it.  (15)

However, according to the official Decision of the Verkhovna Rada
(parliament), the vote to dismiss the government was based upon a
constitutional amendment that came into effect on 1 January, and that
appears to give the parliament an extraordinary ability to dismiss the
government with no cause.  Article 85 of the amended constitution says:
“Powers of the Verkhovna Rada shall include:

(12) Appointing to office – upon the submission by the President of
Ukraine – the Prime Minister of Ukraine, .; appointing to office – upon
the submission by the Prime Minister of Ukraine – other members of the
Cabinet of Ministers of Ukraine, .; dismissing from office the
officials mentioned above; deciding on the resignation of the Prime
Minister of Ukraine and of members of the Cabinet of Ministers of
Ukraine.”

The Constitution gives no criteria on which the parliament should base
a decision to “dismiss from office the officials mentioned above,” and
no corresponding legislation or procedures appear to supplement this
article.  Furthermore, the article does not clearly state that a
dismissal results in the resignation of the cabinet (as is specifically
stated in the article outlining the criteria for a no confidence vote).

The questions surrounding the implementation of this constitutional
article has led to paralysis in many areas of the government’s work.  A
curious additional vote by parliament to dismiss, once again, the
Justice and Fuel and Energy Ministers – but this time individually –
added further confusion, as did a vote demanding that the government
reconsider the gas protocol.   Finally, the fact that Ukraine’s
constitution does not allow a new government to be formed until after
the election underscores the uncertainty over this move in Ukraine.

Because of these constitutional questions, (Acting) Prime Minister
Yekhanurov recently announced that plans to sign supplemental
intergovernmental agreements with Russia are on hold, suggesting that
Ukraine was “unable to prepare the documents.” (16)  The Head of the
Presidential Secretariat, Oleh Rybachuk, explained, “Lawyers are
working to confirm the authority of each of the cabinet ministers in
order to remove any doubt about their right to sign [international
documents].”  (17) Ukrainian media have reported also that plans to
create the Naftohaz – RosUkrEnergo joint venture, for the moment, are
stalled.

                   THE POLITICAL REVERBERATIONS
While the primary effect of the parliament’s vote has been to undermine
the government’s ability to work, the political effects are more
difficult to assess.  Most analysts suggest that voting on the same
side as the stigmatized Viktor Yanukovich will weaken support for the
Yulia Tymoshenko Bloc in the upcoming election.  There was, indeed, a
backlash against the move in certain areas of Ukraine.

A poll conducted from 12-17 January by the Razumkov agency found that
Yushchenko and Yekhanurov’s Our Ukraine had received a small bump in
its support following the gas confrontation with Russia, from around
13% to 15%, while Tymoshenko’s poll numbers have remained even at
around 12%.  It is difficult to know, however, if those numbers will
hold as questions about the gas agreement linger.

Additionally, talk of a public “coalition” between Tymoshenko and
Yanukovich seems far-fetched, and Tymoshenko has begun attempting
to dispel this idea by returning to her Bloc’s historical anti-corruption,
oligarch-bashing roots.

On 20 January, the Bloc released transcripts of a Secret Service
interrogation of  Mykhailo Chechetov, the head of the State Property
Fund under President Kuchma.  The transcripts, which later were
confirmed as authentic by Interior Minister Yuriy Lutsenko, are filled
with accusations of wrong-doing in the privatization sphere not only by
President Kuchma but also then-Prime Minister Viktor Yanukovich.

On the final day of the parliament’s session, the Tymoshenko Bloc was
joined by the Socialist Party and the Reforms and Order Party (both of
which opposed the dismissal of the government) in calling on the
president to take action regarding these accusations.  The vote failed,
after being opposed by both the current “opposition” and the majority
of Our Ukraine.

For his part, Yushchenko this week reiterated his call for a public
referendum – possibly as early as late April or May – on the changes to
the constitution that allowed the parliament to vote to dismiss the
government.  (18)

It appears that, as Ukraine heads into the height of its parliamentary
election campaign, the only aspects that are absolutely clear are that
democracy and free speech are painfully but vigorously growing,
political “coalitions” are fluid, personal grudges are rampant, and the
constitutional crisis likely will not end with the campaign. -30-
———————————————————————————————
                                     SOURCE NOTES:
(1) “Russia and Ukraine reach complex deal,” International Herald
Tribune, 4 Jan 06.
(2)  NTN TV, 1700 GMT, 6 Jan 06; BBC Monitoring, via Lexis-Nexis.
(3) RTR Russia TV, 0800 GMT, 4 Jan 06; BBC Monitoring, via
Abdymok.
(4) NTN, Op. Cit.
(5) RTR Russia TV, Op. Cit.
(6) “Soglashenie ob urehulyrovaniy otnoshenii v gazoboi sfere,” Bloc
of Yulia Tymoshenko Website, 5 January 2006, in Russian,
(http://www.byut.com.ua/ukr/publications/documents-7), and “Agreement
on settling relations in the gas sphere,” UNIAN News Agency, 1551 GMT,
5 January 06, in English, (www.unian.net).
(7) “Ex-Premier of Ukraine Attacks Gas Price Deal,” New York Times, 6
Jan 06.
(8) Svoboda Slova (Freedom of Speech), ICTV, 20 Jan 06; video via
(www.tymoshenko.com.ua).
(9) “EU: Questions Linger about Russian-Ukrainian Gas Deal,” RFE/RL,
12 January 06.
(10)  “Ukraine’s Gas Deal for Europe,” Channel 4 News, 19 Jan 06; via
(www.channel4.com/news/).
(11)  TV 5 Kanal, 1800 GMT, 12 Jan 06; BBC Monitoring, via Lexis-Nexis.
(12)  One plus One TV, 1730 GMT, 22 Jan 06; BBC Monitoring, via
ProQuest.
(13) “Interview with Ukrainian Defence Minister Anatoliy Hrytsenko,”
Fakty i Kommentarii, 19 Jan 06; BBC Monitoring, via The Action
Ukraine Report (AUR).
(14) Constitution of Ukraine, Article 87.
(15) Agence France Presse, 10:25 GMT, 12 Jan 06; via Lexis-Nexis, and
Agence France Presse, 5:10 PM GMT, 10 Jan 06; via Lexis-Nexis.
(16) UNIAN News Agency, 21 January 06; via ForUM, 23 Jan 06.
(17)  Interfax-Ukraine, 1227 GMT, 22 Jan 06; BBC Monitoring, via
Lexis-Nexis.
(18) Website of President Viktor Yushchenko (www.president.gov.ua),
23 Jan 06.
——————————————————————————————–
The author may be contacted at tammymlynch@yahoo.com
———————————————————————————————

[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
3.       GAS INTERMEDIARY: RosUkrEnergo (RUE) – Q&A

By Roman Kupchinsky, Investigative Journalist and Analyst
Prague, Czech Republic, Thursday, January 26, 2006

Q. What physical property does the Swiss company RosUkrEnergo (RUE)
own? Does it own any gas fields in Russia or Central Asia, or any pipelines
in the former Soviet Union? What services does RUE provide?

A. RosUkrEnergo does not own any property except a few bank accounts,
pens, pencils, a few computers and some very expensive Mercedes sedans.

Most gas fields in Russia belong to Gazprom which owns the licenses to
extract gas from these fields. According to Russian law, only Gazprom is
allowed to sell Russian gas outside the borders of the former Soviet Union.

In Central Asian countries, gas fields are owned by those countries. None
of these fields are leased to RUE in either Russia or Central Asia.

The pipeline from Central Asia is called the “Center” pipeline. It
transverses Turkmenistan, Uzbekistan, Kazakhstan and Russia to the
Ukrainian border and is owned respectively by the countries it goes through.

RosUkrEnergo does not own any length of this pipeline or the compressor
stations which pump the gas through the “Center” pipeline. RUE merely
manages the transport of gas going through the pipeline until it reaches
Ukraine.

The services which RosUkrEnergo performs is to sign transit documents
and customs declarations and send bank transfers to pay those countries the
customs fees and for the cost of the work they perform in pumping gas (the
transit fee). RUE does not have any technicians, any repair men or
technicians to operate the compressor stations. .

Q. How is RUE paid for signing these documents and paying bills?

A. The payment details for RUE were NOT included in the copy of the
4 January “agreement” which was released by Yulia Tymoshenko to the
press so all I can base my answer on is the old Eural Trans Gas agreement
I have a copy of and media reports.

I say “agreement” because it is not a contract and does not contain any
contractual obligations by either side. It is an expression of intent and
nothing more.

The original contracts between RUE and Gazprom and Naftohaz Ukraine,
signed in 2004, were never made public despite numerous vows on the part
of Putin, Kuchma, Yuriy Boyko, the head of Naftohaz Ukraine and Alexei
Miller, the head of Gazprom, that RUE was as pure and transparent as
mothers milk.

According to media reports, RUE is to be paid in the same manner as its
predecessor, Eural Trans Gas was paid – the Ukrainian side will give RUE
13 (or possibly 15) billion cubic meters of gas which RUE will then sell to
Europe using the services of Gazexport, the foreign sales subsidiary of
Gazprom. RUE will make a profit of close to $2 billion by reselling the gas.
This is a very hefty fee for signing documents.

Since RUE is registered in a Swiss Canton, it will only pay an agreed upon
amount of taxes to the Canton. The Russian treasury will not see a penny in
taxes from this deal.

Q. Why did Russia give RUE exclusive rights to be the sole supplier of gas
to the Ukrainian border? Was there a tender?

A. There was no tender when RUE, or its predecessor, Eural Trans Gas,
were given exclusive rights to be the middleman in this arrangement.
Gazprom simply decided on what type of  company it wanted, formed
the company, and signed an agreement with it.

It is not clear if RUE pays Gazprom for this exclusive right. In the Eural
Trans Gas contract there was no mention of any fee paid to Gazprom for
this right. In reality however, part of the huge fees which RUE is paid by
Ukraine might go back to the Russian side – but to whom and how much
is a Russian (and apparently an Austrian) state secret.

Q. Could not Gazprom or Naftohaz Ukraine have performed the same
services which RUE performs and saved a lot of money?

A. Yes, that is the main point of contention. Of course Gazprom could have
done this without RUE as well as Naftohaz Ukraine.  There was no need to
have a company registered in Zug (RUE) and two other companies registered
in Austria (Arosgas Holdings and Centragas Holdings) and an Austrian
Investment company which does nothing except hold bearer bonds and make
a lot of noise about its suspiciously clean bill of health.

There was no need to set up Eural Trans Gas in 2002 in a forlorn town
outside of Budapest, owned by an unemployed Romanian actress and a young
Romanian married couple who could not pay their own gas bills and a lawyer
in Tel Aviv who represented Semyon Mogilevich to be the owner of the
company and to have Dmytro Firtash ask this lawyer to please, do us a favor
this one time and help us transport Turkmen gas to Ukraine.

Q. What value does RUE add to the Ukrainian-Russian gas deal?

A. None. All it does is act as a transmission belt for huge sums of money
and a tax shelter for Russia’s finest. Its main assets are its bank accounts
and close contacts to the Russian elite. RUE in reality is the alter ego of
Gazprom.  -30-
———————————————————————————————
NOTE: Roman Kupchinsky is the organized crime and terrorism analyst
for RFE/RL Online and the editor of “RFE/RL Organized Crime and
Terrorism Watch.” He was director of the RFE/RL Ukrainian Service
for 10 years. Contact: KupchinskyR@rferl.org
——————————————————————————————–
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]

========================================================
4.      YEKHANUROV AND THE ROSUKRENERGO ENIGMA
                      “The key gas person in Ukraine is the president.”
The magnificent eight: Yuriy Komarov, Andrey Akimov, Alexander Medvedev,
& Alexander Riazanov; & the following members nominated by Centragas AG:
   Yuriy Boiko, Ihor Voronin, Wolfgang Putcheck, & Robert Shelter-Jones
         Represent the ultimate owners of RusUkrEnergo, the beneficiaries

ANALYSIS & COMMENTARY: By Yulia Mostovaya
Zerkalo Nedeli On The Web (ZN), Mirror-Weekly, No 3 (582)
International Social Political Weekly
Kyiv, Ukraine, Saturday, Sat 28 Jan – 3 Feb 2006

Strange as it may seem, Ukraine’s Prime Minister Yuriy Yekhanurov had
very little to do with the Ukrainian-Russian gas negotiations and agreement
reached on 4 January 2006. According to MP Vira Ulyanchenko, “the key
gas person in Ukraine is the president,” and the negotiating team that he
personally oversees is closed to any outside interference.

Yuriy Yekhanurov realized the true implications of the agreement signed by
Olexiy Ivchenko post factum from personal contacts with gas experts,
oligarchs, economists, industrialists, and from the press.

The signing of statutory documents of a joint venture to be established by
RosUkrEnergo and NJSC Naftogas Ukrainy pursuant to the 4 January
agreement has been delayed several times. There are rumors of silent
bureaucratic sabotage of the joint venture’s incorporation.

Officials in the Ministry of Foreign Affairs, Ministry of Economy, Ministry
of Finance, and other governmental agencies seem to have been taken aback
by the joint venture’s draft statute proposed by their Russian counterparts.

Moscow suggests including in the statute every minute detail, such as
management and maintenance of the gas transportation system. Our
government is not prepared to go as far as that, therefore the Ukrainian
party is trying to curtail the joint venture’s mandate and reduce its
functions to trade in gas, as envisioned in the 4 January agreement.

BREAKTHROUGH & HUGE SUCCESS AS YUSHCHENKO CLAIMED?
The impression is that the prime minister of Ukraine, having lost some of
his earlier illusions, opposes the officially adopted line of behavior and
interpretation of the gas agreement between Moscow and Kyiv as a
“breakthrough and huge success” that Viktor Yushchenko claimed in his
article published in The Wall Street Journal.

Yekhanurov, alongside the Antimonopoly Committee, is perplexed and
bewildered by the involved parties’ unwillingness to produce a package of
documents with the necessary and sufficient data on RosUkrEnergo, the
company likely to become a sole supplier of gas to Ukraine. Under the
circumstances, it takes a lot of courage for the Ukrainian premier to insist
on this lawful requirement.

YEKHANUROV MADE STATEMENTS HE SHOULD NOT HAVE MADE
At the same time, Yuriy Yekhanurov has made a series of statements that he
never should have made. For instance, at a press conference on 25 January,
Yekhanurov said that Deputy Chairman of the Board of the NJSC Naftogas
Ukrainy Ihor Voronin and former Chairman of the Board of Naftogas Yuriy
Boiko had, indeed, been members of the RosUkrEnergo Coordination
Committee but recently left it.

He also said he was in possession of documents that testify “in October
2004, the NJSC Naftogas Ukrainy Collegium decided to delegate Boiko and
Voronin to the Coordination Committee.” According to Yekhanurov, Ihor
Voronin provided a certificate bearing the RosUkrEnergo seal and confirming
that Voronin was no longer a member of the company’s Coordination
Committee.

“I was told,” continued the prime minister, “that there is a similar letter
concerning Boiko, but I did not see it.” The key phrase here is “I was
 told.” Some time ago, Yuriy Yekhanurov asked journalists to investigate the
RosUkrEnergo company’s activities.

In our opinion, recent ZN publications were informative enough for an
intelligent reader to understand what kind of a company it is.

If the head of government still has his doubts, why doesn’t he ask a couple
of questions of those who told him?

[1] Question one: Do the premier’s sources know that the NJSC Naftogas
Ukrainy has no Collegium, but rather has a Board of Directors instead?

[2] Question two: Why wasn’t the prime minister shown the minutes of the
RosUkrEnergo general meeting on the establishment of the Coordination
Committee? The people responsible for duly and timely informing the
country’s top executive official have those minutes at their disposal.

BOIKO & VORONIN REPRESENTED RUSUKRENERGO SHAREHOLDERS
Had Yuriy Yekhanurov leafed through them, he would have noticed it was not
Naftogas Ukrainy that “delegated” Yuriy Boiko and Ihor Voronin to the
Coordination Committee. The two men represented the RosUkrEnergo
shareholders who set up the Centragas Holding.

Moreover, the head of the cabinet would have never overlooked a difference
in the dates: he told the press the NJSC Naftogas Ukrainy Collegium had made
its decision in October 2004, whereas the decision to found the Coordination
Committee and designate Yuriy Boiko and Ihor Voronin as its members is
spelled out in the minutes of the RosUkrEnergo general meeting dated 29 July
2004. Wasn’t the premier told whom these two gentlemen were representing in
Vienna for over two months?

Furthermore, in an interview to the NTN TV Channel, Yuriy Boiko argued that
“the coordination board is something like a supervisory council in a
Ukrainian JSC.” Had the supervisory council in a Ukrainian JSC had such
functions, who would have needed a board?

The minutes of the RosUkrEnergo AG general meeting read quite clearly: “Mr.
Shmeliov opened the meeting and explained that its aim was to found and
appoint members to the Coordination Committee, the company’s corporate
body that would meet on a regular basis, exercise supervision over the
company business management by the CEOs and Board of Directors, and
serve as a forum for the company’s ultimate owners to discuss and resolve
the company business issues outside the general meeting.

This general meeting has thus formed the Coordination Committee to consist
of the following members appointed by Arosgas AG: Yuriy Komarov, Andrey
Akimov, Alexander Medvedev, and Alexander Riazanov; and the following
members nominated by Centragas AG: Yuriy Boiko, Ihor Voronin, Wolfgang
Putcheck, and Robert Shelter-Jones.

The meeting resolved that the Coordination Committee’s decisions should not
be valid unless made unanimously, provided that at least two persons
nominated by each company shareholder were in attendance at the committee
session.

The minutes read: “The Coordination Committee can make decisions with due
regard of its absent members’ votes, which decisions should be valid if
supported by at least two members nominated by each company shareholder.”

                        THUS, THE MAGNIFICENT EIGHT
Thus, the magnificent eight, including Messrs Boiko and Voronin, represent
ultimate owners of RosUkrEnergo, the beneficiaries, i.e. all those whose
names remain an enigma to a number of investigative agencies and Ukrainian
negotiators. It is in the ultimate owners’ interests that the Coordination
Committee “exercises supervision and makes business decisions.”

Hence the next question: whom did the Ukrainian high-ranking officials
represent in the committee given that the NJSC Naftogas Ukrainy is not a
shareholder of RosUkrEnergo? And why were they “delegated,” as
Yekhanurov puts it, to the Coordination Committee if the Ukrainian JSC
holds no shares in RosUkrEnergo?

There are other questions worth asking of those who “told” things to the
prime minister. Suppose the document dated October 2004 does exist. In
this case, did Voronin and Boiko produce it at their meetings with the SBU
investigators?

If it really confirms that Naftogas delegated its representatives to the
RosUkrEnergo Coordination Committee, it could have spared them many
problems last spring. Did they deny any involvement with RosUkrEnergo?
Why did they conceal their activities in Vienna until now?

If the NJSC Naftogas Ukrainy nominated Voronin and Boiko to the Coordination
Committee, why then did RosUkrEnergo release them? Did it have the relevant
powers? Does it mean that they were replaced with the new Naftogas Ukrainy
managers? If not, why?

At the time of their appointment to the Coordination Committee, both Boiko
and Voronin were public servants. Who gave directions to Boiko, then
Chairman of the Board of the NJSC Naftogas Ukrainy, in respect of voting at
the Coordination Committee sessions? President Kuchma? Prime Minister
Yanukovych? Minister of Fuel and Energy Tulub?

Can Boiko present copies of those directives or official documents
describing the purposes of his business trips to attend the RosUkrEnergo
Coordination Committee sessions? Did the Ukrainian public servant get any
remuneration from RosUkrEnergo, and who paid for their trips to Vienna?

             THERE IS NO RULE OF LAW IN THIS COUNTRY
Even if the answers to the above questions imply unpleasant consequences
for Boiko and Voronin, there is no need for them to worry: there is no rule
of law in this country.

That is why Voronin could make plans for heading the Ukrainian-Russian
joint venture that is being born in the throes, and Boiko could hope to take
over the helm at Naftogas Ukrainy after the elections.

Yet why should the leader of the Our Ukraine election bloc be trying to
shield a representative of the opposing bloc?

Yekhanurov should do his best to keep his image untarnished by the new
administration’s controversial acts, but he tries to whitewash the old
regime instead. Why? It is yet another question to those who “told him.”
—————————————————————————————————-

NOTE:  Subheadings inserted editorially by The Action Ukraine Report.
http://www.mirror-weekly.com/ie/show/582/52447/?429496729=b24c19fc88dc3be10b77b095bf5375f7
———————————————————————————————————————————
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
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========================================================
5.  NAFTOGAZ UKRAINY DENIES FACT OF SIGNING DOCUMENTS
  WITH ROSUKRENERGO ON ESTABLISHMENT OF JOINT VENTURE

Ukrinform, Kyiv, Ukraine, Monday, January 30, 2006

KYIV – The national joint-stock company NaftoGaz Ukrainy didn’t sign any
constituent documents with the RosUkrEnergo company (Switzerland) on
establishment of a joint enterprise for realization of natural gas to
Ukrainian consumers, the NaftoGaz Ukrainy press center said, by way of
commenting on ex-Prime Minister Yuliya Tymoshenko’s statement regarding
the documents were allegedly signed in the January 27/28 night.

As leader of the “Batkivshchyna” party Yuliya Tymoshenko said on Sunday
evening air of the NTN Ukrainian tv channel, the NaftoGaz Ukrainy and the
RosUkrEnergo signed an agreement of establishing the joint venture, which is
provided by the Ukrainian – Russian gas agreement of January 4, 2006.

“We have an information that the relevant agreement was signed at 3 a m,
with which the NaftoGaz Ukraine fully surrendered the internal gas market

of Ukraine to the RosUkrEnergo”, Mrs Tymoshenko said.

The NaftoGaz Ukrainy press service circulated a press release stating that,
as of January 30, 10 a m, the company kept on negotiating with the
RosUkrEnergo toward concluding the agreement on establishment of the joint
venture for realization of natural gas on the territory of Ukraine. The date
and place of the agreement signing will be reported additionally.

The establishment of the joint venture of the NaftoGaz Ukrainy and the
RosUkrEnergo is envisaged in the agreement of regulation of gas relations,
which was signed in Moscow on January 4, 2006. The RosUkrEnergo, which
was defined as supplier of Russian and Central Asian natural gas to Ukraine,
may supply up to 34 billion cubic meters of gas in 2006 and starting from
2007 up to 58 bn. cu. m. of gas.  -30-
——————————————————————————————–

[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================      
6. UKRAINE’S NOFTOGAZ SEES ROSUKRENERGO JV DEAL TUES

By Geoffrey T. Smith, Dow Jones Newswires
Moscow, Russia, Monday, January 30, 2006

MOSCOW — Ukrainian state oil and gas company Naftogaz Ukrainy

(NGAZ.YY) expects to finalize on Tuesday details of a joint venture to import
gas from Russia and Central Asia, a spokesman told Dow Jones Newswires
Monday. “The talks haven’t been concluded yet, but it is expected they will
be Tuesday,” he said.

Earlier Monday, former Prime Minister Yulia Timoshenko said Naftogaz had
already agreed the terms of a joint venture with RosUkrEnergo, which is
itself a 50-50 joint venture between Russian gas monopoly OAO Gazprom
(GSPBEX.RS) and unidentified parties.

RosUkrEnergo is responsible for importing natural gas to Ukraine from Russia
and the Central Asian states of Turkmenistan and Kazakhstan [under special
rights given to it by Gazprom].

Under a recent makeshift compromise agreed three weeks ago, RosUkrEnergo

is to sell gas to Ukraine at a price of $95 per thousand cubic meters until the
end of the month. Gazprom says that it will sell its gas to RosUkrEnergo at
$230 per thousand cubic meters.

Numerous Ukrainian politicians have called for Naftogaz to take a more
active role in gas importing, rather than have the task done by
RosUkrEnergo, a privately-held company that discloses no financial
information and whose ownership structure is a closely-guarded secret.

The Naftogaz spokesman said it is unlikely that Naftogaz will get immediate
knowledge of RosUkrEnergo’s owners as a result of the deal.

He also noted that it was still unclear whether Naftogaz itself, or its
100%-owned domestic gas supply unit Gaz Ukrainy would be RosUkrEnergo’s
partner in the joint venture.  Company Web site: http://www.naftogaz.com
————————————————————————————————–
By Geoffrey T. Smith, Dow Jones Newswires (+7 095) 974 8055;
geoffrey.smith@dowjones.com
——————————————————————————————–
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
7.        RUSSIA’S GAS DIPLOMACY FUELS REALIGNMENT

                                 OF FORMER SOVIET BLOC

By Marc Champion in Davos, Switzerland & Guy Chazan in Moscow
Staff Reporters of The Wall Street Journal
The Wall Street Journal, New York, NY, Monday, January 30, 2006

Russia’s natural-gas diplomacy is driving some of its former satellites to
look elsewhere for energy supplies but is drawing others closer to Moscow’s
orbit, reshaping economic dependencies and stirring deep unease in the
region.

The Republic of Georgia, a new democracy just across the Caucasus

mountains from the Russian region of Chechnya, is moving as fast as it can
to find other energy sources after pipeline explosions earlier this month cut
off its supplies of Russian gas. Islamic separatists in Chechnya have been
battling Moscow for over a decade. Russia, which has the world’s largest
gas reserves, has blamed the Jan. 22 pipeline blasts on unidentified
terrorists.

The disruption came amid a continuing clash between Russia and Ukraine, a
country of 50 million people, over the price of the gas Moscow ships there.
At one point, the dispute led to a brief shutoff of supplies, also reducing
deliveries to Western Europe, which gets most of its Russian gas through
pipelines across Ukraine. Neighboring Moldova, too, saw its gas supplies
cut before signing a deal to pay higher prices to Russia’s gas monopoly,
OAO Gazprom.

Russian officials say they are simply shifting to market-based prices for
fuel, ending a Soviet-era practice of subsidized gas sales to their
neighbors. But the abruptness of the shift and Moscow’s high-handed
behavior toward pro-Western governments such as Georgia’s has added to
worries that the Kremlin is using Russia’s vast energy reserves as a
political lever. They fear that gas has become a means for Russia to reward
regimes it views as loyal and punish those it views as too independent.

In an interview at the World Economic Forum in Davos, Switzerland,

Georgian  President Mikheil Saakashvili said Moscow’s response to the
pipeline explosions — including unreturned phone calls and slow repairs —
highlighted the need to find alternative sources of energy. “We knew we
were in trouble, but this has accelerated things,” he said.

Mr. Saakashvili said he believes Russia’s handling of the explosions that
hit the gas pipeline to Georgia was part of “Soviet”-style efforts by
Moscow to destabilize his pro-Western government.

On Friday, other former Soviet satellites farther West, including Poland
and Romania, called for construction of new liquefied-natural-gas terminals
to receive fuel shipments, and urged that construction of a gas pipeline
from Turkey to Austria be speeded up, to reduce their dependence on Russia.

Russian officials have reacted angrily to Georgia’s assertions and its
criticism of their response to the pipeline blasts, contending that crews
worked around the clock to restore supplies. Yesterday, Gazprom turned
Georgia’s gas back on. But repairs that were supposed to take just a few
days dragged on for a full week, leaving many Georgians without fuel

during a cold snap.

The energy tensions come as Western capitals have watched with growing
alarm as Russian President Vladimir Putin has further tightened political
control at home, undermining democratic institutions and warning that
foreign agents are trying to destabilize his country.

Georgia’s Mr. Saakashvili has all but accused Russia of causing the
explosions, comments that the Russian authorities have dismissed as
“hysteria” and “bacchanalian.”

“It’s ridiculous to accuse Russia of blowing up its own pipeline,” said
Sergei Mikheyev, a foreign-affairs analyst at the Center for Political
Technologies, a Moscow think tank.

Mr. Saakashvili said he wasn’t saying he had proof of Russian
responsibility, but that he was most concerned about the way Russia
responded once the gas was cut. He said some in Moscow wanted to

punish Georgia for turning West, to use TV footage of “miserable”
Georgians to demonstrate that democracy doesn’t work and to turn
Georgians against his government.

Mr. Saakashvili said Georgian officials immediately called Russian Prime
Minister Mikhail Fradkov after the explosions and that Mr. Fradkov told
them he would call back in one to two days once the situation was clearer.
“He never called,” Mr. Saakashvili said. Calls to Gazprom also went
unreturned, he said. Only once he began giving interviews to CNN and the
BBC did Moscow begin to respond, he added.

Although Gazprom then said the company had arranged for extra gas to

pass to Georgia through a pipeline in Azerbaijan, that lasted only briefly.
Russian officials blamed a failed compressor station on the line.

“In a way it was a blessing, because we are looking for other alternatives
now,” Mr. Saakashvili said. Rather than wait for Gazprom to fix the
pipeline, Georgia announced on Friday a deal to import emergency supplies
of gas from Iran via Azerbaijan, which borders both countries.

Beyond looking abroad for new sources of energy, Mr. Saakashvili said he

is accelerating plans to build hydroelectric plants, continuing a process that
has seen Russia’s share of electricity supplies to Georgia drop to 30%
currently from 80% in 2003. A new pipeline due for completion in the autumn
from the Shakh Deniz field in Azerbaijan will let Georgia cut its complete
dependence on Russian gas to about half, Mr. Saakashvili said.

Mr. Saakashvili also said he is planning to invite energy ministers and
companies from around Europe to a meeting in Georgia this summer to

figure how best to diversify energy supplies in the region.

Russia’s recent energy disputes with its neighbors mostly involve Gazprom’s
efforts to force gas importers in Russia’s so-called “near abroad” — the
former Soviet republics — to start paying market prices for gas, rather
than the heavily discounted prices they have enjoyed until now.

Belarus, a close ally of Moscow that ceded ownership of key export channels
to Gazprom, has so far been allowed to keep a gas price of less than $50
per 1,000 cubic meters, compared with the market price of more than $230.
Ukraine, Georgia and others have said they are prepared to pay more, but
that the transition should be staggered. Georgia reached a deal late last
year to double the price it pays for Russian gas to $110 per 1,000 cubic
meters.

The U.S. and European Union have expressed concern over Russia’s tough
energy tactics — especially when Gazprom’s tussle with Ukraine caused gas
pressure to fall in pipelines transiting Ukraine to Western Europe — but
they have limited leverage. Russia is currently the linchpin, for example,
in bringing diplomatic pressure to bear on Iran over its alleged
nuclear-weapons program.

Even as former Soviet satellites try to find sources of energy outside
Russia, Russian diplomats and gas executives have been working hard to
reinforce their dominant positions in the energy-rich former Soviet states
of Central Asia.

Uzbekistan, isolated internationally after its brutal suppression of
protests in the town of Andijan in May, last week joined a Moscow-led bloc
of former Soviet states, the Eurasian Economic Community. That followed
Uzbek President Islam Karimov’s decision to kick out a U.S. military base
and the signing of a $1.5 billion deal between Gazprom and Uzbekistan’s
state oil and gas company to jointly develop some of the country’s gas
fields. That deal would give Gazprom complete control over Uzbekistan’s

gas exports.

On Friday, Gazprom CEO Alexei Miller also visited impoverished

Kyrgyzstan, pledging “hundreds of millions of dollars” to help it explore
and develop its oil.

The countries hardest hit by Russia’s gas negotiations have tended to be
those that have started looking West. Mr. Saakashvili is scheduled to
travel to Germany this week, where he expects to meet Chancellor Angela
Merkel and to discuss energy diversification. Germany buys the largest
proportion of its gas from Russia of any Western European nation and is
planning to build a pipeline direct to Russia under the Baltic Sea.

“If these things are possible in the direction of Georgia, then they are
possible in every direction,” Mr. Saakshvili said of the Russian supply
disruptions. “Everyone’s policy should be to diversify.”  -30-

——————————————————————————————–
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========================================================
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========================================================
8.  UKRAINIAN OPPOSITION RUNS TELEVISION ADVERTISING

          ON SPECIAL TIES TO AND RELATIONS WITH RUSSIA
 
UT1State TV, Kiev, in Ukrainian 1850 gmt 28 Jan 06
BBC Monitoring Service, UK, Saturday, January 28 2006

The state-owned UT-1 television channel ran an election advertisement

of the opposition Party of Regions on 28 January.

A male voice-over says: “The gas crisis has emerged because of an
unnecessary conflict with Russia. And now there is a dirty deal which will
push gas prices up to the extent that this will bankrupt enterprises and
raise heating bills excessively. The Party of Regions is a strong
administration, which will build special relations with Russia, solve the
gas crisis and make heating and gas bills affordable again.”

Video shows newspaper headings in Russian: “Ukraine initiates the creation
of a gas consortium”, “Oil prices are rising”, “No fuel to warm private
homes in Kharkiv”. Words “Party of Regions” are shown at the bottom of

the screen.

Video also shows blue and white banners (campaign colours of the Party of
Regions), Viktor Yanukovych smiling, and people carrying slogans “For the
Party of Regions!”.

The last video picture shows the Party of Regions’ top election candidates
Rinat Akhmetov, Taras Chornovil, Viktor Yanukovych, Yevhen Kushnaryov

and Nina Karpachova standing together. An inscription is run on the
foreground: “The Party of the Regions and Viktor Yanukovych. Improving
your life now!”.

The voice-over says: “The Party of the Regions and Viktor Yanukovych.
Improving your life now!”.  -30-

——————————————————————————————-
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
9.                                    GASSIFIED RUSSIA
          The Russian-Ukrainian gas conflict and its broader implications
            The lost benefit of Gazprom being simultaneously profit of
          RosUkrEnergo will amount to $4 billion a year or $20 billion in
               five years in the framework of the new trading scheme. 
        
ANALYSIS & COMMENTARY:
By Stanislav Belkovsky and Vladimir Golyshev
Zavtra, No. 4. Moscow, Russia, Wed, January 25, 2006

The recent gas conflict with Ukraine offers some insight into the
methods and priorities of Putin’s ruling corporation. Contrary to
the Kremlin’s propaganda, Russia did not win the gas pricing
dispute. The whole saga demonstrates that Russia is becoming a
colony.

On January 10, 2006, the Supreme Rada (parliament) of Ukraine
voted to dismiss the Yekhanurov government – supposedly, for
betraying national interests by signing the new gas agreement with
Russia.

The monarch’s dream-interpreters in the Kremlin and
elsewhere, erroneously described as “politicians” or “analysts,”
hastened to inform the story-starved January media of the good
news: look, didn’t we tell you that the famous protocol of January
4 is good for Russia rather than Ukraine? We’ve won, damn it!
This is a bluff, of course; blatant and clumsy, like all the
Kremlin’s propaganda over the recent non-election years. The
evidence, meanwhile, speaks of an indisuptable success for
Ukraine, President Viktor Yushchenko, and Prime Minister Yuri
Yekhanurov in their gas conflict with the grim Great Russian
supplier. From the standpoint of Gazprom, its broad and snow-
covered majority shareholder (commonly known as Russia), and
its credulous minority shareholders, the results of this widely-
publicized conflict seem very odd, to put it mildly.
In reality, the results are as follows.
Gazprom no longer supplies natural gas to fraternal Ukraine.
RosUkrEnergo becomes the exclusive supplier for the next few
years. Notorious Semen Mogilevich participated in establishment of
this company in 2004. This company is a much more serious market
player than it may seem at first glance. Founders are its main
asset. RosUkrEnergo belongs by 50% to Gazprombank, which will in
turn become property of Dresdner Bank, one of the most influential
business partners of President Vladimir Putin, by 2007. The other
half of RosUkrEnergo is controlled by Raiffeisen Investment A.G.,
a semi-offshore company registered in comfortable Switzerland.
Composition of the real owners and beneficiaries of this small and
shady joint stock company changed a few times when old persons
responsible for Russian-Ukrainian gas trade left the political
arena and new persons appeared on it. Now there are reasons to
believe that the private individuals on which the price of Russian
gas finally depends and their German cronies are standing behind
Raiffeisen. Thus, henceforth gas supplies to Ukraine will be
guaranteed not by loose Gazprom that always covers its tracks in
non-transparent blue streams but a company of very solid men
willing to remain prominent energy businessmen after 2008 and
forever.
Ukraine is no longer buying Russian gas. These 17 billion cubic
meters that obedient RosUkrEnergo buys from proud Gazprom
for advertised enormous $230 are exported to Western Europe in
reality. The entire gas due to Ukraine under the contract is
bought by RosUkrEnergo from Turkmenistan, Uzbekistan and
Kazakhstan at $45-60 and is supplied to Ukraine at $95.
The lost benefit of Gazprom being simultaneously profit of
RosUkrEnergo will amount to $4 billion a year or $20 billion in
five years in the framework of the new trading scheme. If we read
attentively the notorious protocol of January 4 we can make sure
that RosUkrEnergo also receives more than 20 billion cubic meters
of gas already bought by Gazprom dirt-cheap (at $65 per 1,000
cubic meters) from Russia.
 
The offshore company from Switzerland will also export this gas at
the most predatory West European price. Rumbling through the
rough fabric of crooked figures it is possible to find the real meaning:
Gazprom has presented a significant part of its revenues to an
immodest intermediary for which these revenues are evidently more
necessary.
Gazprom ceased being the monopoly exporter of Russian gas to
the European Union. Moreover, it acquired a competitor on the
European spot gas market in the form of RosUkrEnergo that it
itself had born. Taking into account raising of the transit tariff
by Ukraine from $1.09 to $1.60 for transportation of 1,000 cubic
meters by 100 kilometers the gas conflict looks totally lost by
the Russian monopoly and hence the Kremlin standing behind.
 
In such situation these should be Russian elites who worry and demand
report (if not dismissal) of the Russian government and management
of Gazprom. However, nobody worried because Russian elite is not
of the kind to think about trifles like $20 billion stolen from
Russia. Everyone steals. There is nothing surprising and blamable
in this.
What made Vladimir Putin who at the end of 2005 declared
himself nearly the future energy emperor of Eurasia and vicinity
agree with such astonishing deal?
[1] FIRST, these were primitive private interests. Who has said
that $20 billion on quiet accounts in toy Liechtenstein look worse
than in the corporate treasury of vast Gazprom?! As long as
progressive political humanity does not finally understand that
first of all Putin is a businessman motivated by healthy marketing
greed and only after that a politician the logic and motivation of
the Kremlin will keep generating hundreds of questions being
equally simple and confused.
[2] SECOND, Putin was frightened by the menacing shout from
Brussels. On January 3, the Russian President learned that on
January 4 the energy commission of the European Union would
condemn Russia in Brussels and would demand Gazprom to supply
gas unconditionally to Ukraine that was preparing to freeze for the
sake of independence.
 
Vladimir Putin, the best friend of the European gas consumers, could
not allow such scenario. That is why Putin ordered Gazprom to reach
an agreement urgently until the fatal morning of January 4.
The top management of Gazprom did not have time enough to
bargain with Alexei Ivchenko, leader of the congress of Ukrainian
nationalist and incumbent CEO of the Ukrainian state-run company
Neftegaz Ukrainy. The final figure of $95 was almost 60% less than
it had been demanded before. As to the virtual $230 for
RosUkrEnergo, everything was clear about this figure a long time
ago.
 
Equally well Gazprom could sign a contract with its Sibneft
subsidiary for supplies of gas of especially rare kind at $500 per
1,000 cubic meters and to tell the whole world about the “new
marketing reference points.” This was not incidental that already
on January 5 and 6 Romania and Moldova inspired by the Ukrainian
example demanded lowering of the gas price for them, obedient and
poor, too.
All in all, the outcome was bad only for Gazprom and for
Russia. For the top managers of these two commercial entities and
for the friendly state of Ukraine everything was well. There are
no reasons for alarm.
Why does the Ukrainian opposition feel such unhidden rage?
Why did 250 parliament members of the 450 possible (along with 226
necessary) supported the vote of no confidence in the cabinet of
Yuri Yekhanurov?
This happened because Victor Yanukovich, Yulia Timoshenko and
other lower-rank opposition members are motivated by the real
offence not at Yushchenko and Yekhanurov and even not nationalist
Ivchenko but at excellent Vladimir Putin.
Back in autumn of 2005, Yanukovich and Timoshenko reached an
agreement on everything with the Kremlin. By February of 2006, the
gas crisis had to reach its apogee including empty underground
reservoirs, dead plants and mines, infuriated Ukrainian people and
fuel Maidan brandishing pieces of the sacred gas pipeline. At that
moment opposition leaders had to come to the stage undertaking a
high intermediary mission and reaching a happy agreement on
everything. This meant that they would win the parliamentary
elections scheduled for March 26 easily.
Whereas Yanukovich claimed mostly political mediation
Timoshenko was also going to become a gas master establishing a
new market operator to replace RosUkrEnergo that had grown old.
 
In alliance with semi-forgotten ITERA (this company was allied with
former CEO of Gazprom Rem Vyakhirev and had friendly relations
with Timoshenko back in the mid-1990s when the future orange
princess was head of the trader company United Energy Systems of
Ukraine) the former Prime Minister of Ukraine was going to supply
Central Asian gas to Ukraine at $115-120. The generous Kremlin
promised to arrange reliable transit. This was not incidental that
all criminal proceedings were dropped when the gas crisis was in
full swing because there was no need for legal actions anymore.
In any case, in the morning of January 4 both most prominent
opposition politicians of Ukraine woke up with a feeling that kind
uncle Putin “let them down.” They did not take into account that
for a businessman of Putin’s kind a wish to punish damned
Yushchenko was nothing in comparison to stability of gas revenues
and delicate financial schemes. Then Timoshenko and Yanukovich
decided to stake their all, to announce Yekhanurov’s $95 a defeat
and a treachery. Well, at elections of March 26 it will be clear
to which extent this tactic is justified and successful.
The ended “war” gives us a right to once again to look into
the corpulent self-complacent face of the Putin’s ruling
corporation.
The odd finale of the Russian-Ukrainian conflict has shown
evidently that:
      [1] Putin’s team is entirely dependent, both politically and
psychologically, on external forces, primarily the European Union
and the United States;
      [2] for these people their own private economy is much more
important than general state policy;
      [3] they are unable to compete seriously in a really
competitive environment.
With such brave guys in charge, it is impossible to build an
empire, even a gas empire. It is only possible to build a colony.
This is a colony where authorities steal from 50% to 100% of
everything that can be stolen, people drink cheap vodka in
hopeless misery and foreign corporations methodically achieve
their goals through bribes and moderately cynical attitude to the
silent colonial population.
 
This is the gasified Russia prepared for us by the Kremlin.
(Translated by Pavel Pushkin)
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10. PRES BLAMES LOCAL OFFICIALS FOR WEEK LONG HEATING
         OUTAGE IN EASTERN UKRAINIAN CITY OF ALCHEVSK

Associated Press, Kiev, Ukraine, Monday, January 30, 2006

KIEV – Ukrainian President Viktor Yushchenko Monday blamed local

officials in an eastern Ukrainian city for mismanagement that left tens of
thousands of residents shivering in unheated apartments during last week’s
record-breaking cold spell.

“These people don’t deserve respect, they deserve to be sacked,” Yushchenko
said, referring to local officials in Alchevsk in the Luhansky region. Some
60,000 people have been without heat for more than a week in the city.

The shutdown occurred Jan. 22 when one of the main pipes pumping hot water
from a central boiler into apartment houses, schools and other municipal
buildings froze and broke down. Yushchenko called for a criminal
investigation, and pledged that his government would do whatever it took to
get the heat flowing again.

“For a week already, Alchevsk…resembles the frozen side of the moon,”
Ukraine’s Gazeta Po-Kievskiy declared. Ukrainian media broadcast images of
residents sitting around kitchen tables bundled up in winter hats, coats and
gloves.

Ihor Krol, spokesman for the Emergency Situations Ministry, said that some
3,600 workers from across the country had been dispatched to Alchevsk to
restore the heating supply. Gradually, buildings were being hooked up to the
system.

A first allotment of $494,000 was being sent to the city to fund repairs,
Yushchenko’s office said. He said that a special emergency headquarters

was now in charge in the city, Ukraine’s Unian news agency reported.

Last week’s cold snap caused a record jump in gas consumption in Ukraine

and led to the deaths of some 220 people as this country’s aging and inefficient
heating systems struggled to cope. Most of the deaths occurred in the
Luhansky region; the Health Ministry has said many were homeless and
intoxicated people. Temperatures have since risen to more normal winter
levels in Ukraine.  -30-
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11. UKRAINE: GAS CRISIS EASES MINER’S GREAT DEPRESSION
      Huge coal reserves could help build energy independence for Ukraine

New Trade Union World Briefing – Ukraine
International Confederation Of Free Trade Unions
ICFTU OnLine, Brussels, Belgium, Tuesday, 31 January 2006

BRUSSELS – The cut off in the supply of Russian gas to Ukraine on 1
January 2006 has reopened the debate on the country’s energy

independence. Could the huge coal reserves in Ukraine’s subsoil help to
build this independence?

Ukraine’s mining trade unions believe so, but are also well aware that most
of the mines are in a growing state of disrepair and require massive
investment.

Their dilapidation – the result of bad management of the State mines and the
machinations of oligarchs bent on making a quick fortune – has also
contributed to making Ukrainian mines amongst the most dangerous in the
world.

In 2005, 157 workers died as a result of accidents in Ukrainian mines, 7768
were injured. Thousands of retired miners continue to toil in the pits, as
their pensions are too low to provide them with a decent standard of living.
Women and children are working in the clandestine mines that are
proliferating wherever coal can be found close to the surface.

All of this under the gaze of the unscrupulous businessmen who have become
powerful “oligarchs” by exploiting the numerous flaws in the Ukrainian
authorities’ management of the mines. Having made their fortunes, they are
now investing in their own businesses, such as football clubs.

Entitled “Ukraine: the miners’ great depression”, this Trade Union World
Briefing released today by the ICFTU sheds light on the disastrous social

situation in the coalmining region of Donbass in southeast Ukraine.

Its towns and cities are now referred to as “depressed”, having lost their
economic heart with the closure of the coalmines and the subsequent sharp
decline in social services, which had until then been provided by the mine
(such as road maintenance, funding for schools and nurseries, etc.). There
were 1.2 million mining jobs in Ukraine when it became independent in 1991.
Today, there are only around 300,000. Many ex-miners have had to resort to
leaving the country.

The Ukrainian government wants to privatise all the coalmines still in
operation, to the great dismay of the mining unions, who consider the public
authorities to be the only viable investor, given the massive injection of
funds needed to renovate the mines, which will only start to make a profit
after several years.

For the unions, the authorities’ bad management is responsible for the
growing dilapidation of most of the State mines, and their consequent lack
of profitability. The corruption of all too many bureaucrats at all levels
has allowed oligarchs to amass fortunes at the expense of the mines and
their workers.

“Some privatisations were handled by groups of people in power who
considered the State budget to be a supplement to their own businesses,”
affirms Volodymir Novikov, Ukraine’s deputy minister of fuel and energy.
Only 10 out of 167 mines, that is, those requiring very little investment to
become profitable, are currently in the hands of serious private investors.

This new Trade Union World Briefing also raises the question of Ukraine’s
energy independence. Following Russian gas giant Gazprom’s suspension,

on 1 January, of its supplies to Ukraine, owing to disagreement over prices,
the Ukrainian energy ministry notified three power stations of the need to
replace part of the gas with coal.

Although a solution has, in the meantime, been found to this crisis in
relations between Russia and Ukraine, the episode has rekindled hopes in the
Donbass region, where the mining unions believe that Ukraine has sufficient
coal reserves to be energy independent. Major economic and ecological
challenges will nonetheless have to be taken up if the Ukrainian government
commits to this path.  -30-
————————————————————————————————-

NOTE: You can read the entire Trade Union World Briefing: “Ukraine:
the miners’ great depression” by clicking on the following link:
http://www.icftu.org/displaydocument.asp?Index=991223357&Language=EN

The ICFTU represents 155 million workers in 236 affiliated Organizations in
154 countries and territories. ICFTU is also a member of Global Unions:
http://www.global-unions.org
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========================================================

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========================================================
12. CENTRAL EUROPE SEEKS EU HELP OVER RUSSIAN GAS SUPPLIES 

By Christopher Condon in Budapest
Financial Times, London, UK, Saturday, January 28 2006

BUDAPEST – Eight central and east European countries yesterday appealed

for financial help from Brussels to help reduce their region’s dependence on
Russian gas.

Meeting in Budapest, representatives from Poland, the Czech Republic,
Slovakia, Austria, Hungary, Slovenia, Croatia and Romania agreed to a

broad plan that would leave them less vulnerable to sudden cuts in Russian
gas due to political disputes or technical problems.

The plan calls for the construction of shared gas storage facilities,
acceleration of the Turkey-to-Austria Na-bucco pipeline project, and the
building of smaller intra-regional pipelines and two terminals for receiving
liquefied natural gas (LNG) in Croatia and Poland. Janos Koka, Hungary’s
economy minister, said the group also agreed to urge Brussels to step up
talks with Russia on guaranteeing stable supplies of gas.

The request came as Andris Piebalgs, the EU’s energy commissioner, speaking
at the World Economic Forum in Davos, said he believed Russia would be a
reliable energy supplier to Europe in the long term.

In Budapest, however, Mr Koka stressed that central and east Europe’s energy
supplies were at risk not merely because of political factors, but also for
technical reasons.

The region has been struggling to cope with lower than normal supplies and
near record demand because a week-long cold snap sent temperatures below
freezing as far south as Greece and killed more than 100 people.

The cold snap follows a price row between Russia and Ukraine at the
beginning of January that caused Gazprom, the Russian gas supplier, to cut
supplies. Several of the countries present at yesterday’s meeting receive
Russian gas via Ukrainian pipelines.

On Thursday, the Croatian and Hungarian governments agreed to co-operate

in building an LNG terminal at Croatia’s Krk island and a 340km pipeline
linking the terminal to Hungary. Ivo Sanader, Croatia’s prime minister, said
the LNG terminal would cost about Euro 1bn ($1.2bn, £685m). Poland would
like to build an LNG facility on the Baltic Sea and increase its access to
Norwegian gas.

The Group of Eight countries, which will be expanded at future meetings to
include the three Baltic countries, Serbia and Bosnia, wants the EU to
promise financial support and to endorse tighter energy policy co-operation
at an energy summit to be held in March.

The group agreed to finalise by next Wednesday a set of written proposals
that would be presented to Mr Piebalgs, who is working on a proposed

common EU energy policy ahead of the March meeting. (Additional reporting
by Reuters)  -30-
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========================================================
13.                 MINSK DISPATCH: DADDY’S SOURCE
       Politicians & journalists have been imprisoned, killed, or disappeared
     The Ukrainian gas crisis threw light upon Russia’s fuelling of Alexander
           Lukashenko’s despotic Belarussian regime, writes Tom Parfitt

Tom Parfitt, The Guardian, London, UK, Monday January 30, 2006

A crust of blood had already formed on Vassily Grodnikov’s crushed skull
by the time his brother broke down the door of his cottage and found his
corpse.

The 67-year old writer had got drunk and fallen on his head, prosecutors
in Belarus later concluded. “It’s absurd,” says Mr Grodnikov’s brother,
Nikolai, who shakes with fear at speaking openly for the first time about
the death. “The postmortem showed there wasn’t a drop of alcohol in his
body.”

As Europe wakes up to the Kremlin’s stranglehold on its natural gas
supplies, a stark light has been shone on how the Russian president,
Vladimir Putin, does business with the other independent states that once
made up the Soviet Union.

Moscow’s demand for Ukraine to pay a fivefold increase for deliveries of
Russian gas earlier this month was widely seen as punishment for Kiev’s
push to join the European Union and Nato since its “orange revolution”
last winter.

What is less known is the flip side to this gritty political game: the
Kremlin is propping up a despotic pro-Moscow regime on the edge of
Europe that only survives because it gets extremely cheap gas from Russia.

Belarus – wedged between its giant neighbour and Poland – looks and feels
like a microcosm of the old Soviet Union, complete with bad suits, big
squares and ruthless KGB oppression. It is run by President Alexander
Lukashenko, a paternalistic hardliner who brooks no dissent.

“Lukashenko has put fear into this country in a way that hasn’t been seen
since Stalin,” says the Belarussian opposition leader, Alexander
Milinkevich, a physicist who plots strategy against his nemesis in a
mouldering apartment in the suburbs of the capital, Minsk. “He wouldn’t
last a month without Putin giving him cheap energy.”

Lukashenko uses the crushing weight of an 80% state-run economy to exert
almost total control, says Milinkevich. Gas supplies from Russia at $47 per
1,000 cubic metres (compared to the $230 market price that Moscow
demanded from Ukraine) keep Soviet-era factories creaking along. And there
are no inconvenient oligarchs to fund the opposition.

But while Belarus’s GDP is on the rise, the eerily spotless streets and
facades of Minsk conceal a dirty underworld of persecution, killings and
disappearances.

Mr Grodnikov’s alleged murder comes as Lukashenko’s hardline regime

twists a tourniquet on the slightest sign of dissent in the run up to
presidential elections on March 19.

The writer’s body was discovered recently at the cottage outside Minsk

where he wrote articles about state corruption for Belarus’s last surviving
daily independent newspaper, Narodnaya Volya (People’s Will).

His brother, Nikolai, thinks he knows why he died. “They killed him

because they are terrified of a revolution, and he found out about their
plans to squash any protest,” he said.

Guardian Unlimited has learned Mr Grodnikov was investigating rumours
of police plans to secretly detain opposition activists at a dacha
settlement for senior interior ministry officials near the capital. He died on

the day he planned to go to the settlement. State prosecutors refused to
investigate.

Since Lukashenko – who is known as Batka (Daddy) – came to power in
1994, a series of politicians and journalists have been imprisoned, killed,
or simply disappeared.

As a result, the United States and European Union countries are trying to
crank up pressure on Lukashenko ahead of the presidential poll in March.

The US secretary of state, Condoleezza Rice, has called for Belarus “to
throw off the yoke of tyranny” and Britain is taking a confrontational
stance, with ambassador Brian Bennett accusing Lukashenko of leading “a
slide into dictatorship”.

One senior western diplomat in Minsk confirmed that foreign experts are
being drafted in to “help [opposition] parties with their organisation, and
showing them how democracy works, how to get in touch with the people”.

It is a tricky pursuit, as paranoia grows in Russia and Belarus about
western “meddling” in their internal affairs. The two countries have a union
with each other, military cooperation is strong and their peoples are
practically inseparable in terms of national identity. Moscow supports the
Minsk regime because it wants to preserve it as a buffer zone against Nato
encroachment.

Lukashenko, meanwhile, has warned foreign states to keep their noses out
of the election.

Last month, his simpering “parliament” made it a crime to discredit the
country by passing “false information” to a foreign state or organisation
about its political, economic or legal situation. The popular uprisings in
other former Soviet states were “simple banditry, deftly carried out with
western money”, Lukashenko claims.

Observers say the president was rattled by the rose revolution in Georgia in
2003 and the orange revolution in Ukraine in 2004. “He’s worried,” said the
diplomat. “He knows he can engineer 80% of the vote in his favour, but he’s
forming special police units to break up crowds, just in case.”

The opposition faces a huge task to oust Europe’s pariah. Anti-Lukashenko
parties have not a single seat in parliament and most have been denied
registration. Independent press is being hounded out of existence. And
because of his grip on the state-run economy, Lukashenko’s opponents can
be cowed with threats of being sacked and never working again.

Milinkevich, the opposition leader who is due to meet senior EU officials
today, is seen as the only hope for change, but his profile is low because
he is denied exposure in state media.

“I’m placing my hopes in the younger generation,” says the scientist, who
heads a loose coalition of democratic forces and will stand for the
presidency. Underground youth movements like Zubr (Bison) are small, but
their numbers are swelling as increasing numbers of students are expelled
from university for dabbling in politics.

“If the presidential election is falsified, we will go the streets to
protect our rights,” says Nikita Sasim, 21, a Zubr leader who says he was
hospitalised with concussion after police beat him at a recent protest.

Yet the opposition know its chances are slim. Lukashenko dominates
television broadcasts and is riding high in official polls with an almost
trance-like power over many of his compatriots.

“He is an excellent example in all areas,” says Sergei Yuran, 45, an
engineer, shuffling through snow in central Minsk. Ludmila Yolkina, a music
teacher, says: “We don’t want all that civil unrest like in Ukraine. Look at
our ordered city and nice clean streets.”

The gas crisis made western Europe question President Putin’s democratic
credentials as he took over the presidency of the G8. His support for Batka
could be the next big point of confrontation.  -30-
————————————————————————————————-
Email tom.parfitt@guardian.co.uk
http://www.guardian.co.uk/elsewhere/journalist/story/0,,1698153,00.html?gusrc=rss
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14.    PAINTING BY FAMOUS UKRAINIAN KAZILMIR MALEVICH
                           REPORTEDLY FOUND IN UKRAINE
               Painting to be displayed Wednesday, Feb 1 in Chernovtsy

RIA Novosti, Moscow, Russia, Monday, January 30, 2006

KIEV – An artist from western Ukraine said he had found a painting by
Ukrainian-born Kazimir Malevich, a leading figure in the Russian
Avant-Garde, or by one of his students.

Anatoly Fedirko, known in his home town of Chernovtsy for his uncommon
artistic enterprises, said experts had confirmed the picture could have been
painted by Malevich, a pioneer of geometric abstract art and the founder of
Suprematism in Russia, or one of his students.

The painting will not be less valuable if the latter version is confirmed.
Experts said it dated back to the early 20th century and mimicked the
artist’s legendary style.

The finding is currently being kept in a Kiev bank. Fedirko said he would
display the painting in Chernovtsy February 1.

Malevich is best known for his works “Black Square” (1915) and “Black
Cross” (1916-1917), renowned for their previously unseen geometrical
simplicity.

Malevich, who studied art in Kiev and Moscow and experimented with
various modernist styles, including Cubism and Futurism, turned to teaching
in 1922 in Petrograd (later Leningrad and now St. Petersburg).

Under Stalin, Malevich was sent to a prison camp because his work was in
opposition to official ideology at the time. He died in poverty in Leningrad
in 1935.  -30-
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LINK: http://en.rian.ru/russia/20060130/43249704.html
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15. UKRAINE MARKS 88TH ANNIVERSARY OF KRUTY TRAGEDY

Ukrinform, Kyiv, Ukraine, Monday, January 30, 2006

KYIV – President Viktor Yushchenko called on Ukrainians to honor the

Kruty heroes, three hundred young Ukrainians, who perished on January
29, 1918 defending Kyiv and the Ukrainian People’s Republic from
Bolsheviks, led by Muravyov, attacking.

The President is convinced that January 29, 1918 was a unique page of
Ukrainian history “which bears a colossal emotional and historic load.”

He urged on the Government and the people together to defend Ukraine’s
national interests and on politicians to be tolerant and asked citizens to
be wise. “Our unity gives us might,” he concluded, having reminded that
controversies in the Ukrainian People’s Republic ruling caused weakening
positions of the Ukrainian independent state and its further invasion by the
bolshevist Russia.

On January 21, 2006 President Viktor Yushchenko signed a resolution on
commemoration of the memory of Kruty Heroes in connection with the 88th
anniversary of their deed.

Under the document, memorial places lengthwise the Kyiv – Moscow railroad
and at the Kruty station, where some 300 cadets were atrociously killed, as
well as the Kyiv Dnieper slopes at the Askold Sepulchre in Kyiv, where due
to efforts by the Union of Ukrainian Youth bodies of 27 heroes were buried
in 1991 and a cross erected, will be made orderly.

In the Soviet time the Kruty tragedy was concealed by historians and the
burial place was leveled to the ground.  -30-

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16.  CHERNOBYL OVERSHADOWS PUSH FOR NUCLEAR POWER

By Jonathan Gorvett in Pripyat, Ukraine
Aljazerra.net, Doha, Qutar, Thursday 26 January 2006

As Ukraine looks to nuclear power to fuel its increasing energy needs,
critics have warned that the lessons of the 1986 Chernobyl reactor
meltdown may have gone unheeded.

Ukraine’s dispute with Russia over gas supplies in early January caused
panic in Europe – and even the eventual defeat of the government in Kiev.

With high oil prices and increased demand continuing to dominate
international markets, interest in nuclear power has resurged as securing
energy sources becomes a key issue for many European countries.

Ukraine is planning to boost its nuclear sector, and Viktor Yushchenko, the
president, has even floated the idea of using the old Chernobyl site as a
new dump for nuclear waste

Paulius Kuncinas, a Kiev-based energy analyst, says: “In 2004, Ukraine
commissioned two large new reactors.

“The government plans to build up to 11 new reactors by 2030. The

rationale is that it is a cheap way to replace gas. Ukraine also has large
uranium deposits.” But the move towards nuclear energy may be lingering
in Chernobyl’s shadow.
                                      FATAL MELTDOWN 
The result of an experiment that went horribly wrong, the Chernobyl nuclear
plant’s reactor number four exploded on 26 April 1986, releasing large
amounts of radioactivity into the atmosphere. A radioactive cloud affected
people as far away as Scotland.

The nuclear sector in Europe took a plunge in the wake of the disaster.
Many countries moved to decommission existing nuclear power stations and –
except in France and Finland – cancelled plans for new ones. Low oil prices
and fears over nuclear safety were key factors in this loss of public trust.

Today, the reactor sits at the heart of a 30km exclusion zone, an area still
dangerous for visitors.

“It’s something of a wildlife sanctuary,” says Maxime Orel of the Ukrainian
Ministry of the Catastrophe, a special government unit set up to manage and
monitor disaster relief at the site.

“The reason is that hunting is banned, because the animals are laced with
Strontium 90, a deadly radioactive isotope. They get it from eating the
plants, which are also radioactive.”

Nobody knows how many people died in the disaster, particularly as effects
such as cancers may not appear for years. Official estimates, which are
widely disputed, from the three former Soviet countries affected – Ukraine,
Belarus and Russia – say about 25,000 had died by the year 2005.

“At the time, no one wanted to believe this disaster had happened,” explains
Orel. The Soviet authorities covered up much of what had happened.
                                         GHOST TOWNS 
We are walking in the abandoned city of Pripyat, 1km from the reactor and
once a home to more than 40,000 people.

“The residents of Pripyat say they heard only a small noise when the reactor
blew – a hand clap, nothing else – at about 2am,” continues Orel. “The
following morning, people, mothers with children, went about their daily
business. No one told them what had happened, but the radiation level was
already extremely high. There was radioactive dust in the air and it covered
all the buildings and streets.”

The entire town was evacuated some days later. Because residents were told
they would return in three days, they left clothes, furniture and pets
behind. “When they came back, all the pets were dead,” Orel told
Aljazeera.net.

Now the town stands deserted, its miles of apartment blocks, shopping
centres, wide boulevards and amusement parks too radioactive to be lived in
again. With the wind and snow, followed by spring rains and summer heat, the
concrete buildings will likely have long since cracked and eroded away
before the radiation levels become safe.

Yet this natural process of decay is also a growing cause for alarm.
                                       GROWING ALARM 
“Chernobyl is one of the most complex sites, geologically, of any nuclear
power station,” says Jan Vande Putte, the nuclear campaigns coordinator for
environmental activists Greenpeace International.

“Several million cubic metres of radioactive waste were dumped around the
reactor in ditches, most of it in the 12 months after the disaster and in an
emergency situation. They did this next to a river which regularly floods.”

The fear is that radioactive material could get into the water table and
seep down river into the Kiev Reservoir, which lies north of Ukraine’s
capital. Kiev lies two hours’ drive downstream from Chernobyl.

In the immediate aftermath of the 1986 explosion, thousands of soldiers,
firemen and rescue workers – known as liquidators – also rushed to the site
to pour thousands of tons of lead and sand around the reactor. Many of them
died or received severe radiation burns in the process, but eventually they
contained the reactor in what has since become known as “the sarcophagus”.
Yet this structure too is now causing alarm.

“Inside the sarcophagus, in one second you can take a fatal dose of
radiation,” says Orel. “Yet its north wall is unstable. Ground water is
undermining the cement and sand dropped by the helicopters during the
emergency, it’s a mess. Highly polluted and very unstable.”
                                       CONTAINMENT HOPES 
French company Framatom is working fast onsite to build a new sarcophagus

to contain the old one. Orel hopes it will be completed as soon as possible.

Nuclear sector companies have been busy recently elsewhere in Ukraine too.
Reactor number four was just one of several at Chernobyl, yet all these have
been closed since 2000.

To compensate for the loss, the Ukrainian government commissioned two new
Russian designed reactors, Khmelnitsky 2 and Rivne 4, and received financial
backing from a string of European, US and Russian authorities.

“There is pressure on the Ukrainian government to find new energy
resources,” Kuncinas told Aljazeera.net.

“Coal-fired power plants and nuclear plants are the two options being
considered. Coal is not very popular as it enjoys little support outside
Ukraine.”
                             CHEAP ENERGY PRODUCTION 
Tony Blair, the British prime minister, announced late last year that his
government would be reviewing “the development of a new generation of
nuclear power stations”.

Elsewhere, countries from Lithuania to China have also announced nuclear
plans. Advocates argue that it is a way of producing cheap energy that does
not harm the environment by producing greenhouse gases.

A return to nuclear power has also been welcomed by Western business
groups. They fear that uncertainty over energy supplies – such as that
recently shown in Russia’s spat with Ukraine – coupled with rising gas and

oil prices will have a major impact on their future competitiveness.

Yet back in the snows of Pripyat, such considerations seem a long way away.
“Once, they thought of this as a paradise,” says Orel. “The people who lived
and worked here at the reactor were all young – the average age was 25. They
were paid much more than normal Soviet citizens and had everything they
wanted. Now who knows how many are still alive.”
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http://english.aljazeera.net/NR/exeres/A99CD701-62E9-47BF-93AA-B3A8BF51E147.htm

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AUR#650Last Strategic Nuclear Bomber Scrapped; US Political Consultants Work For Opposition; Pinchuk’s Davos Lunch; Two Languages – One People

 
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 650
Mr. E. Morgan Williams, Publisher and Editor  
Washington, D.C., Kyiv, Ukraine, MONDAY, JANUARY 30, 2006
                           ——–INDEX OF ARTICLES——–
         Clicking on the title of any article takes you directly to the article.               
Return to the Index by clicking on Return to Index at the end of each article
1.     UKRAINE SCRAPS LAST STRATEGIC NUCLEAR BOMBER
Inter TV, Kiev, in Russian 1800 gmt 27 Jan 06
BBC Monitoring Service, UK, in English, Friday, Jan 27, 2006

2UKRAINE: LAST TU-22M STRATEGIC BOMBER ELIMINATED
            Under U.S.-Ukraine Program to Reduce Common Threats
Public Affairs Section, U.S. Embassy, Kyiv, Ukraine, Fri, Jan 27, 2006

3AMERICAN POLITICAL CAMPAIGN EXPERTS WORKING FOR
                    SDPU(o), PARTY OF REGIONS AND PORA
      Paid by Victor Medvedchuk, Victor Yanukovych, Rinat Akhmetov
Glavred.Info, Kyiv, Ukraine, Wednesday, January 18, 2006

4UKRAINIAN BILLIONAIRE VIKTOR PINCHUK’S DAVOS LUNCH 
     With George Soros, Strobe Talbott, Arseniy Yatsenyuk, Jean Lemierre
                 A separate discussion was held later on Russia’s future
By Lynn Berry, Staff Writer, The Moscow Times
Moscow, Russia, Monday, January 30, 2006. Page 1.

5   SEVEN UKRAINIAN BUSINESS TYCOONS LISTED AMONG
              CENTRAL, EAST EUROPE’S 100 MOST AFFLUENT
Ukrinform, Kyiv, Ukraine, Friday, January 27, 2006

6UKRAINE: NO LEGAL GROUNDS TO DISQUALIFY OPPOSITION
     LEADER YANUKOVYCH FROM PARLIAMENTARY ELECTION
       Court ruling quashing Yanukovych’s convictions had been forged
ICTV television, Kiev, in Ukrainian 1105 gmt 29 Jan 06
BBC Monitoring Service, UK, in English, Sunday, Jan 29, 2006

7.   WILL THE INTERIOR MINISTRY BECOME AN APPENDAGE
                    OF THE SOCIALIST PARTY OF UKRAINE?
ANALYSIS & COMMENTARY: By Serhiy Porytskyy
Glavred, Kiev, Ukraine, in Russian 0000 gmt 23 Jan 06
BBC Monitoring Service, UK, in English, Saturday, Jan 28, 2006

8UKRAINE OPPOSITION PARTY’S ELECTION AD SUPPORTING
      RUSSIAN AS SECOND OFFICIAL LANGUAGE IN UKRAINE
                               Two languages – one people!
Ukrayina TV, Donetsk, in Ukrainian 1857 gmt 27 Jan 06
BBC Monitoring Service, UK, in English, Saturday, Jan 28, 2006

 
Ukrayinska Pravda On-line, Kyiv, Ukraine, Monday, January 30, 2006

10YUSHCHENKO DECLARED WAR FOR THE SAKE OF PEACE
             Ukrainian president hints at abolishing constitutional reform
ANALYSIS & COMMENTARY: By Oleksandr Mikhelson
Glavred, Kiev, Ukraine, in Russian 0000 gmt 24 Jan 06
BBC Monitoring Service, UK, in English, Friday, Jan 27, 2006

11.   HEAD OF US CONGRESS UKRAINIAN CAUCUS PROMISES
                  TO SUPPORT UKRAINE IN BIPARTITE ISSUES
Natalia Bukvich, Ukrinform, Kyiv, Ukraine, Friday, January 27, 2006

12UKRAINIAN AMBASSADOR TO USA PRESENTS MERITORIOUS
       BADGE TO US ARMY RETIRED COLONEL STEPAN OLIYNYK
                       Born in Lviv region of Ukraine in July of 1930
Nataliya Bukvych, Ukrinform, Kyiv, Ukraine, Sat, January 28, 2006

13.               AN OPPORTUNITY IN UKRAINIAN OIL & GAS?
ANALYSIS: By Stephen Clayson, Correspondent, London
ResourceInvestor.com, Miami, Florida Tuesday, 24 Jan 2006

14INTERNATIONAL INTELLECTUAL PROPERTY ALLIANCE (IIPA)
SUPPORTS US DECISION TO RESTORE TRADE BENEFITS: UKRAINE
ag-IP-news Agency website, Friday, January 27, 2006

15.     UKRAINIAN NATIONAL COMMITTEE OF INTERNATIONAL
CHAMBER OF COMMERCE OPENS OFFICE IN TORONTO, CANADA
Ukrinform, Kyiv, Ukraine, Friday, January 27, 2006

16.              UKRAINE AND CANADA AIMING TO DEVELOP
                       INTER-PARLIAMENTARY COOPERATION 

Ukrainian News Agency, Kyiv, Ukraine, January 28, 2006

17VOLYN REGION SAID TO BE UKRAINE’S MOST ATTRACTIVE
    REGION FOR FOREIGN INVESTORS BY SWISS ORGANIZATION
                    Zhytomyr, Rivne and Poltava regions also attractive
Ukrinform, Kyiv, Ukraine, Saturday, January 28, 2006

18.    CZECH ENERGY GROUP CEZ INTENDS TO ACQUIRE SIX

                    UKRAINIAN ELECTRIC POWER COMPANIES
Ukrinform, Kyiv, Ukraine, Friday, January 27, 2006

19.     UKRAINIAN OPPOSITION LEADER YANUKOVYCH SAYS

                            RUSSIA’S GAS POLICY WRONG 
UNIAN news agency, Kiev, in Ukrainian 1231 gmt 28 Jan 06
BBC Monitoring Service, UK, in English, Saturday, Jan 28, 2006

20RUSSIA VS UKRAINE-MORE THAN AN ECONOMIC DISPUTE
ANALYSIS & COMMENTARY: Electricity4Business, PrWeb.Ccm
London, United Kingdom, Sunday, January 29, 2006

 
21.                          RISKING ANOTHER SLAVIC WAR
OP-ED: by Masha Lipman, Columnist
The Washington Post, Washington, D.C.
Monday, January 30, 2006; Page A17
 
              Conference: Ukrainian Research Institute, Harvard University
                     Sunday, February 5 and Monday February 6, 2006
Ukrainian Research Institute, Harvard University
Cambridge, MA, Friday, January 27, 2006
 
23.            AUSTRIA CONVERTS ITS BIOMASS TO ENERGY
By Delphine Strauss, Financial Times, Lonon, UK. Mon, Jan 30 2006
24.                             THE MUSHROOM CLOUD
Ruadhan Mac Cormaic, Irish Times, Dublin, Ireland, Sat, Jan 28, 2006
Natalie Kononenko, Kule Chair of Ukrainian Ethnography
University of Alberta, Modern Languages and Cultural Studies
Edmonton, Alberta, Canada, Mon, 23 Jan 2006
========================================================
1
UKRAINE SCRAPS LAST STRATEGIC NUCLEAR BOMBER

Inter TV, Kiev, in Russian 1800 gmt 27 Jan 06
BBC Monitoring Service, UK, in English, Friday, Jan 27, 2006

[Presenter] The last Tu-22 heavy bomber was scrapped in Poltava today.
Ukraine thus accomplished all the terms of its agreement with the USA on
destroying strategic nuclear weapons and preventing their dissemination.

About 11m dollars have been spent for the scrapping. Three Tu-22 aircraft
and seven hulls of X-22 cruise missiles will continue their lives at
museums. Our correspondent Hanna Onishchuk has just returned from

Poltava.

[Correspondent] The last Tu-22M3 bomber from the dead list is considered
scrapped. Now Ukraine has nothing left from its former nuclear arsenal. Ten
years ago Ukraine had the world’s third biggest nuclear arsenal.

Unlike Russia and the USA, it lacked only aircraft carriers and nuclear
submarines. It cost colossal amounts of money to maintain. But in the Soviet
Union there was no lack of funding for the defence sector. The nuclear
arsenal turned out to be heavier than Ukraine could bear.

[Oleksandr Kuzmuk, former defence minister, in Ukrainian] Keeping and
maintaining strategic offensive nuclear weapons was the most costly and
science-dependent area.

[Correspondent] It was heavy to carry, but it was a pity to drop. However,
economic issues were not decisive for taking a political decision. Many are
saying now that Ukraine made a mistake when it believed the promises made

by Russia and the USA and gave up its nuclear weapons.

[Yevhen Marchuk, former defence minister and secretary of the National
Security and Defence Council, in Ukrainian] The question is whom are we
going to attack? In addition, we would keep the world strained. We would
look a little bit silly – more than a half of Ukrainians are below the
poverty line but the country possesses nuclear weapons.

[Correspondent] But it was as hard to get rid of the nuclear arsenal as to
maintain it. There was time, money and nerves spent. There were tears.

The Ukrainian army was constantly cutting, destroying, scrapping.

First, all nuclear warheads were transferred to Russia. Ukraine received
nuclear fuel in return. Then intercontinental ballistic missiles were
scrapped and all missile silos were blown up. It was more complicated

with the aircraft.

They rusted with time and turned into scrap metal. However, Ukraine

managed to cover its gas debt to Russia with 11 bombers and 487 cruise
missiles. So, it is finished with the hardware now. It is only people who
are left now with their unsolved problems.   -30-
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[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
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2.  UKRAINE: LAST TU-22M STRATEGIC BOMBER ELIMINATED
            Under U.S.-Ukraine Program to Reduce Common Threats

Public Affairs Section, U.S. Embassy, Kyiv, Ukraine, Fri, Jan 27, 2006

POLTAVA, Ukraine – The last Tu-22M strategic bomber was eliminated

January 27 at Poltava Air Base under the Cooperative Threat Reduction
(CTR) program.

“I think we can all agree that, through our cooperative efforts, the CTR
Program has enjoyed considerable success here in Ukraine, ” stated U.S.
Ambassador to Ukraine John E. Herbst during the elimination ceremony in
Poltava.

“But, these combined efforts have accomplished much more than just the
elimination of weapons, delivery systems, and infrastructure.  They have
clearly demonstrated Ukraine’s commitment to international peace and
stability and enhanced Ukraine’s standing as a nation willing to play its
part in the global war on terrorism and as a reliable partner in arms
control efforts, ” the Ambassador said.

At a press conference commemorating this event, Doug Englund, the acting
deputy assistant secretary of defense for chemical demilitarization and
threat reduction programs, commended Ukraine for its steadfast support of
this and the other strategic nuclear arms elimination programs.

“The elimination of the last Tu-22M Backfire bomber represents a significant
milestone in both the relationship between Ukraine and the United States and
in the elimination of a weapon of mass destruction,” Englund said.

In October 1993, the United States and Ukraine signed the CTR Umbrella
Agreement for the elimination of strategic nuclear arms.  Sixty bombers have
been eliminated under this $12 million program since January 2001.

Using elimination methods specified in the Conventional Forces in Europe
arms control treaty, high speed saws cut off the nose of the bomber and
hydraulic shears cut through the tail.  The metal is cut into smaller pieces
and sold as scrap metal, and the equipment is sent to another military base
where the precious metals are recovered and sold.  All funds received from
these activities are used by Ukraine to provide housing for retired military
officers.

Through the CTR program, the Department of Defense is assisting the Ministry
of Defense and the National Space Agency of Ukraine with the elimination of
strategic aircraft and air-to-surface missiles and with the storage of SS-24
intercontinental ballistic missile solid propellant rocket motors.

The Defense Threat Reduction Agency implements the CTR program which
prevents the proliferation of weapons of mass destruction (WMD) and related
materials, technologies and expertise from former Soviet Union states. This
includes providing for the safe destruction of Soviet era WMD, associated
delivery systems and related infrastructure.  -30-
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http://kiev.usembassy.gov/infocentral_eng.html; info@usembassy.kiev.ua
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[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
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3. AMERICAN POLITICAL CAMPAIGN EXPERTS WORKING FOR
                 SDPU(o), PARTY OF REGIONS AND PORA
 Working for Victor Medvedchuk, Victor Yanukovych, Rinat Akhmetov

Glavred.Info, Kyiv, Ukraine, Wednesday, January 18, 2006

KYIV – In the past, the pro government politicians used Russian political
technologists after they renamed themselves opposition, SDPU(o) and

Party of Regions have started using political technologists.  For example, a
former director of NDI, Andreas Katsouris, in the meantime is a consultant to
former head of pres admin and now head of SDPU(o) Victor Medvedchuk.

Incidentally, NDI gets its funding from American taxpayers “to further
democracy” in Ukraine.  It’s not clear how Mr. Katsouris manages to divide
his time between the Hotel Radisson on Yaroslviv Val where he currently
lives and the NDI Kyiv offices, where he appears regularly, and the SDPU(o)
headquarters.

It is also not very difficult to establish that Mr. Katsouris works for
Aristotle, Inc. and SDPU(o) is a client of that company.  What concerns NDI
ties with other political parties, back on March 2, 2004, press service of
the party of Regions sent out a notice about a meeting between head of the
Party of Regions Yanukovych with the current director of NDI, David

Dettman.

At that time, Dettman offered to the leader of the Party of Regions, whom he
considers “a strong opposition leader” (as was quoted by Party of Regions
website), he offered help in developing the new opposition in Ukraine.

Sidebar: “In the US, the network of the National Democratic Institute is
headed by former Secretary of State Madeline Albright.

Last Tuesday, January 10, 2005, the influential American newspaper Wall
Street Journal reported that one of the richest Ukrainian oligarchs hired
American political consultant and veteran of “dirty tricks”, Paul Manafort,
for consulting on the election campaign for the Party of Regions.  According
to our information, Manafort did not sign a contract with Victor Yanukovych,
rather he signed on with Rinat Akhmetov.

Which concerns the persona of Manafort is known that he is a partner of

the company “Davis Manafort & Freeman, Inc.”.  This lobbying firm is also
known to cooperate with Kremlin technologists.  For example, Vyacheslav
Lyazlov, a political consultant from Moscow, who works in the Kremlin. 
Today he is responsible for the Party of Regions voter turnout in program
in Zaporizhiya and Dnipropetrovsk.

Regarding Manafort himself, he is credited with “victory” over Ferdinand
Marcos in the Philippines.  According to western press, that election was
marred by total fraud, voter intimidation, problems with voter lists and
irregular vote counts.  Among clients of Manafort’s “business” are also
governments of Kenya, Somalia, Zaire, National Union for Angola’s
Independence and others.

According to rumors, earlier American Lee Avrashov, a Russian immigrant
who earlier imported American chicken thighs to Russia, and Brian
Christenson, a Republican politicians, helped out on the project earlier but
seemed to have quit because of disagreements with Manafort.

Manafort himself rarely visits Ukraine, but meets with Akhmetov in Paris.
But according other sources, Rinat Leonidovych (Akhmetov) prefers to
conduct all negotiations on the territory of Monaco.

However, Manafort if not the only consultant for the Party of Regions.
Another American, former director of the office of the International
Republican Institute in Moscow, Phillip Griffin, who was fired from IRI
many years ago, is currently also a consultant to the Party of Regions.

There is also information that the business partner of Manafort, Rick Davis,
is also helping out with the strategy of Party of Regions election campaign.

He works in close contact with Kremlin political consultants. Office of
Davis Manafort & Freeman, Inc, is currently located in Kyiv on Sofievska
Street across from the building of the company of Golden Telecom.

Sources in Washington state that the most famous client of Mr. Davis is
American Senator John McCain, who may be the next rival of Bush for the
next presidential election in the US.  Incidentally, McCain heads the
International Republican Institute [IRI] which, as well as the National
Democratic Institute [IRI], has an office in Kyiv.

According to the information that we possess, Robert Dahl, former advisor to
the Speaker of the House of Representative, Newt Gingrich, is also involved
in the Party of Regions election campaign.  Dahl was also a consultant to
the well known international organization IFES, and participated in the Bush
election campaign during the controversial vote recount in Florida in 2000.

According top some information, Dahl earns around $40,000 per month for

his consulting and establishing of ties between Party of Regions and
Washington Republicans.

In fairness, it should be noted that the Regions established contacts with
the US relatively long ago.

Earlier, “Ukrainskiy Pravda” published a list of PR companies that worked to
create a positive image for Victor Yanukovych in the US. Among them, were
the following; Venable L.P.; Potomac Communications Strategies, Inc;
Creative Response Concepts; DB Communications, L.C.; JWI, L.C.; and
Alexiy Kiselev.

And the president of a PR company “which presented itself as a sociological
research firm” Whitman Insight Strategies, Bernard Whitman, during the
presidential election of 2004, personally visited Kyiv to present the
results of Victor Yanukovych’s high rating.

To be fair, it should be noted that not only opposition parties have access
to the US government resources.  For example, one of the high ranking
Ukrainian employees of the National Democratic Institute office, Tetiana
Soboleva, who has worked for NDI for ten years, is currently a candidate in
the political party PORA-PRP.  She is #64 on the party list for parliament.

At the same time, she continues to receive an NDI salary (money of the
aforementioned American taxpayers).  Of course, there is no evidence that
uses NDI resources for promoting her political party.  But the question
remains open.

PS – Glavred, for several days, tried to contact the representatives of the
mentioned parties to receive an official answer regarding participation of
the former or current technologists from the US.  But we received no answer.
Well, we will have the wait. (Original article translated into English)   -30-
————————————————————————————————
LINK: http://glavred.info/archive/2006/01/18/181126-6.html
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[return to index] [The Action Ukraine Report (AUR) Monitoring Service]

========================================================
4. UKRAINIAN BILLIONAIRE VIKTOR PINCHUK’S DAVOS LUNCH 
     With George Soros, Strobe Talbott, Arseniy Yatsenyuk, Jean Lemierre
              A separate discussion was held later on Russia’s future

By Lynn Berry, Staff Writer, The Moscow Times
Moscow, Russia, Monday, January 30, 2006. Page 1.

DAVOS, Switzerland — The World Economic Forum is a strange place,
where members of an elite but eclectic global club meet for five days in a
Swiss ski resort to hold structured discussions on high-minded topics and,
of course, to schmooze.

These discussions, sometimes over lunch or dinner, bring together people
who might otherwise never meet. And sometimes they encourage people
with low public profiles but high-impact jobs to express their ideas. The
results are often surprising, which presumably is the point of the whole
expensive exercise.

But for people from our part of the world, two events this weekend in
Davos stood out.

On Friday, Viktor Pinchuk, a Ukrainian billionaire on the losing side of the
Orange Revolution, put on a private lunch with such an assortment of guests
and speakers that you wondered how he got them all into the same room.

With George Soros, Strobe Talbott and Pinchuk’s wife, who is former
President Leonid Kuchma’s daughter, seated at the head table and some of
Russia’s biggest businessmen at the table all the way in the back, Pinchuk
introduced the main speaker, former Polish President Aleksander
Kwasniewski, and noted the important role he had played in “our Orange
Revolution.”

Two Cabinet ministers from the ousted government joined the current
economy minister and TNK-BP CEO Robert Dudley in making short
remarks.

Then on Saturday morning, some of Russia’s most successful young
business leaders engaged in a lively discussion on Russia’s future, at times
taking opposing views.

The discussion on Saturday centered around three scenarios for Russia
developed by the forum and presented by Angela Stent, a professor at
Georgetown University who until recently was on the U.S. National
Intelligence Council; Lilia Shevtsova, an expert on Kremlin politics from
the Carnegie Moscow Center; and Olga Dergunova, chairman of
Microsoft in Russia.

It fell to Dergunova to present the rosiest scenario, in which oil prices
decline and in the ensuing turmoil an exceptionally wise president is
democratically elected and implements a series of bold reforms.

Alexander Izosimov, CEO of VimpelCom, stood up to take issue with the
premise that high oil prices are holding Russia back. He made the case that
high oil prices bring a sense of stability, reduce the risk of borrowing
money and thus allow other sectors that require significant outlays of
capital, such as telecommunications, to grow.

“Look at the amount of money being borrowed in the West,” Izosimov said,
expanding on his remarks after the conclusion of the session, which like
most sessions at Davos is off the record unless the speaker explicitly
agrees to be quoted. “The accessibility of international money would not
happen if Russia were not perceived as stable.”

He was joined by Alexei Mordashov, head of Severstal, who said that in
addition to creating stability, high oil prices generated demand and allowed
for increases in public sector wages.

Dergunova shot back that their arguments were based on the notion that oil
revenue was being distributed through society — and indeed, the figures
show a widening disparity between rich and poor in Russia.

This recalled a discussion the day before at a session on how countries
should spend their oil revenues and the conclusion that rising prices carry
very real dangers for petro-states such as Russia.

At the session, Ngozi Okonjo-Iweala, the finance minister of Nigeria,
described an effort to fight her country’s notorious corruption by
publishing information in the newspapers on how the oil revenues are
distributed. H.E. Sheikha Lubna Al Qasimi, the economy and planning
minister of the United Arab Emirates, made the point that the oil industry
does not produce jobs; it is what is done with the revenues that matters.

The arguments of these two accomplished, Western-educated women seemed
to have given Dergunova food for thought. She said the problem in the
Russian oil industry was that the surplus revenues were “badly managed,
poorly distributed and there was no transparency. “Revenue distribution
creates room for corruption when there is no civil control,” she said.

Economic Development and Trade Minister German Gref also participated in
the Friday morning session on oil revenues, where he was asked to explain
the gas dispute with Ukraine. He reiterated Gazprom’s position that the
demand for Ukraine to pay a higher price for gas was not based on politics
and that the company had a responsibility to its shareholders to sell to all
its customers at market prices. “I’ll repeat that it relates not only to
Ukraine, but in Ukraine, because of political developments, it was over-

politicized,” Gref said.

The gas dispute was also a main topic of discussion at the lunch hosted by
Pinchuk. Arseniy Yatsenyuk, the economy minister, reiterated that questions
over the ownership of Rosukrenergo were the main stumbling block to the
signing of a gas deal initialed on Jan. 4. The deal has a signing deadline
of Feb. 1.

He said that under Ukrainian anti-monopoly legislation, before the joint
venture could be registered, Rosukrenergo had to disclose information on its
shareholders. Asked whether the Ukrainian government knew who owned
Rosukrenergo, he said, “The minister of economy doesn’t know.”

He denied the Russian claim, repeated here by Gref, that Rosukrenergo was
brought into the deal at the insistence of the Ukrainian side. “The
Ukrainians say it was the Russians, the Russians say it was the Ukrainians.”

He said he had met with Gref earlier Friday and on Thursday. He predicted
that President Vladimir Putin and President Viktor Yushchenko would have to
step in to break the deadlock before Wednesday’s deadline. “It depends on
the political willingness, but probably the two presidents have to
reconcile. They are the best negotiators.”

Pinchuk’s lunch was moved to a bigger restaurant because so many people
wanted to come. Among the 100 guests were Soros, a financier who supported
the Orange Revolution; Talbott, president of the Brookings Institution who
was former U.S. President Bill Clinton’s point man on Russia; and Jean
Lemierre, president of the European Bank for Reconstruction and

Development [EBRD].

The Russia dinner that night, which was part of the official forum program
and thus open to everyone, was less of a draw. There was an embarrassing
number of empty seats at the tables.

Dudley said TNK-BP, in addition to expanding in Ukraine, was showing its
confidence in Russia by planning to increase its capital investment in
Russia by another 30 percent this year, from just under $2 billion in 2005
to up to $2.5 billion. This was also part of its protection plan in a
country where the state is increasingly jealous of its energy resources, he
said.

“As long as we continue to do the things we said we’d do, which is continue
to increase investment, bring lots and lots of new technology into the
country through people and expertise, and put in place programs around
developing people, training, and we’re very, very open about what we do, I
think we’re a good citizen and I think the government looks at us that way,”
he said following the Ukrainian lunch.

“We’re in competition with many other companies, including some state
companies in the oil and gas industry, so there’s a normal healthy
competition,” Dudley said. “But we do not feel pressure that makes me
stay awake at night.  -30-
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LINK: http://www.themoscowtimes.com/stories/2006/01/30/002.html
——————————————————————————————–

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5.   SEVEN UKRAINIAN BUSINESS TYCOONS LISTED AMONG
            CENTRAL, EAST EUROPE’S 100 MOST AFFLUENT

Ukrinform, Kyiv, Ukraine, Friday, January 27, 2006

KYIV – According to the Polish magazine Wprost, seven Ukrainians are

listed among Central and East Europe’s 100 most affluent persons.

[1] Igor Kolomoiskiy, co-owner of the Privat group, has been placed in the
twelfth position to top the list of Ukrainian tycoons. His fortune is
estimated at 2.8 billion dollars. According to the magazine, in 2005 Igor
Kolomoiskiy’s capital increased by over 500 M. USD.

[2] Rinat Ahmetov, president of the Shakhtar football club, and Viktor
Pinchuk, former president Kuchma’s son-in-law and Interpipe group founder,
lost one billion dollars in 2005. Rinat Ahmetov a year ago topped the Polish
magazine’s list of most affluent Ukrainians. He has been placed in the 15th
position. His fortune is evaluated at 2.1 bn. USD.

[3] Serhiy Taratuta, ISD (Industrial Union of Donbass) chairman, has been
placed in the 13th position, with his fortune estimated at almost 2.5 bn.
USD.

[4] Viktor Pinchuk’s fortune shrank in 2005, as well. He has been placed in
the 27th position. His fortune is evaluated at 1.5 bn. USD, one billion less
than in 2004.

According to the magazine Wprost, other rich Ukrainians are [5] Fedir Shpyk
(Aval bank owner, 51st), [6] Oleksandr Yaroslavskyi (UkrSibBank owner,
62nd), [7] NSDC ex-secretary Petro Poroshenko (95th). The Wprost

appraises Petro Poroshenko’s capital at 300 M. USD.  -30-
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========================================================      
6. UKRAINE: NO LEGAL GROUNDS TO DISQUALIFY OPPOSITION
      LEADER YANUKOVYCH FROM PARLIAMENTARY ELECTION
        Court ruling quashing Yanukovych’s convictions had been forged

ICTV television, Kiev, in Ukrainian 1105 gmt 29 Jan 06
BBC Monitoring Service, UK, in English, Sunday, Jan 29, 2006

Ukrainian Interior Minister Yuriy Lutsenko has said that opposition leader
Viktor Yanukovych cannot be disqualified from the parliament election race,
even though his criminal convictions were quashed unlawfully.

Speaking live during the talk show called “In detail with Dmitriy Kiselev”
on the ICTV commercial TV channel, Lutsenko said that Yanukovych’s
convictions are considered quashed under the statute of limitation.

“I can clarify this issue today. On the one hand, every man who has served
his sentence is considered to be without convictions after some period of
time. Depending on the nature of the crime committed, this happens in three,
six of eight years.

Mr Yanukovych’s last conviction was in 1970. At any rate, at present he is
the person with quashed convictions due to the statute of limitation. On the
other hand he committed crimes for which he served his prison term,”
Lutsenko said.

Lutsenko produced documents in the studio, which, he said, show that the
court ruling quashing Yanukovych’s convictions had been forged. “Currently
an expert examination has unequivocally established that the ruling by the
court of appeals to the effect that Yanukovych had no criminal convictions
and committed no crimes was forged.

The investigation has failed to identify the people who did this because the
people have stopped turning up for questioning and are at large. But this
does not mean that Mr Yanukovych can be disqualified from the election race.
Due the fact that very much time has passed since his last prison term in
1970, this conviction has been quashed automatically. That is it,” Lutsenko
said.

Lutsenko also said that the police have information that some candidates are
running for parliament in breach of Ukraine’s laws. He added that he is
obliged to share these concerns with the public. “Under the law on the
police, I, as a state servant, should inform the public about the criminal
situation.

Therefore, I am informing of the criminal situation in some election lists.
I mean people at the centre of attention from the police and law-enforcement
agencies. We have evidence and have grounds to suspect these people of
involvement in crime,” Lutsenko said.

As an example, Lutsenko mentioned a candidate running for parliament on

the election list of former Prime Minister Yuliya Tymoshenko’s bloc: “In
November last year, he was a citizen of the African republic Cape Verde. We
have checked this, and he received his Ukrainian passport unlawfully, in
breach of the appropriate mechanism.”

“Well, this does not mean that he is suspected of any wrongdoing. But he
received Ukrainian citizenship unlawfully in November last year, and the
Central Electoral Commission will face a dilemma: to register or to
disqualify him,” Lutsenko said.

“Two people, who are on the international wanted list, are also on
[opposition Progressive Social Party leader] Nataliya Vitrenko’s list,”
Lutsenko went on.

“I do not know if this is good or bad. Probably, some people will like it
and definitely vote for them. These are two people wanted internationally by
Interpol. Some may not like this. Let people decide. I am not canvassing for
anyone, but providing information,” Lutsenko said.

Apart from election-related matters, Lutsenko also talked about the reform
of the traffic police and the police’s priorities in this year, including
fighting crime and corruption.  -30-
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7.   WILL THE INTERIOR MINISTRY BECOME AN APPENDAGE
                    OF THE SOCIALIST PARTY OF UKRAINE?

ANALYSIS & COMMENTARY: By Serhiy Porytskyy
Glavred, Kiev, Ukraine, in Russian 0000 gmt 23 Jan 06
BBC Monitoring Service, UK, in English, Saturday, Jan 28, 2006

The Ukrainian Interior Ministry appears to be coming under the influence of
one political party, a website has said. The author said that Interior
Minister Yuriy Lutsenko, a member of the Socialist Party of Ukraine, is
changing priorities in the ministry giving much more power to the Department
of Public Relations.

The author said an internal instruction from Lutsenko means all information
must be filtered through the Department of Public Relations before reaching
the outside world.

The author said the former Socialist Party press secretary [Inna Kysil] now
in charge of the department is disliked for “incompetence” in police affairs
and added that even generals in the ministry are afraid to cross her path as
“it could cost a job”.

The following is the text of the article by Serhiy Porytskyy, entitled “Will
the Interior Ministry become an appendage of the Socialist Party of
Ukraine?”, published on the Ukrainian website Glavred on 23 January;
subheadings have been inserted editorially:

The one-year anniversary of Yuriy Lutsenko becoming the interior minister

of Ukraine is just around the corner. Has it been possible to de-politicize
this police agency and make it “open and transparent”?

The head of the ministry never tires of repeating – yes. At least that
achieving the goal is very close. But that is simply his own particular
opinion. We will be bold enough to express a bit of doubt on this issue.

And here’s why.
                               A CHANGE IN PRIORITIES
First, it looks like the law enforcement institution has undergone a change
of priorities. There is a strong feeling that many of the what would seem to
be the most important units – for example, the investigative department, and
the department of searches and so on – are gradually giving up the leading
positions…[ellipsis as published] to the Internal Ministry’s Department of
Public Relations.

This sector, which is in no way linked to operations or investigative work,
is gradually becoming the main body in the ministry structure. And these are
not simply unsubstantiated assertions.

Glavred has possession of a curious document – a copy of a service
instruction signed by Minister Lutsenko [who is also a member of the
Socialist Party of Ukraine].

It reads: With the goal of coordinating the activities of sub-departments of
bodies under the Internal Ministry…[ellipsis as published] to establish
the following order of preparing and presenting material to the mass media:

To the leaders of structural sub-units of the ministry: Materials prepared
for the media must be agreed with the Department of Public Relations (DPR).

DPR (Kysil I.V.) Interior Ministry of Ukraine: [is instructed] to coordinate
the activity of sub-units of agencies of internal affairs in carrying out
the unified informational policy of the ministry and to organize operative
and objective informing of society through the media of the activities of
the police.
                       A FILTER FOR OUTSIDE WORLD
This instruction could mean that the Internal Ministry has set up a single
powerful information “filter”, without the sanction of which not only
press-officers, but not even a single general can “talk openly” with a
journalist.

That, by the way is about “openness and transparency”. Such “acts” were
unknown even during the Kuchma era. Yes, the old regime once tried to instil
such a means of “communicating” with the press. But then the attempt ended
in a complete fiasco.

What is the reason for giving the DPR such wide-ranging authority? “To
strengthen the image of the minister” – that is a version frequently found
in the press. In our opinion, the reason is deeper and its roots lie in the
ideological sphere. Just like in communist times: ideology is supreme.

It’s just that in this case, the DPR is responsible for the functions of the
Interior Ministry’s political department. Which strongly resembles an
ideological centre, the work of which is permeated by a quite specific
“political spirit”.
                              WHICH SPIRIT EXACTLY?
Here is a small episode which is quite telling. Glavred is in privy to
information that at the congress of the Socialist Party of Ukraine [SPU],
which took place in December, a cameraman from the Interior Ministry DPR

was “delegated” – to film. It is not likely that the DPR employee came on his
own initiative. So one asks the big question: why the sudden disposition to
one particular party?

More than once criticism has sounded against Yuriy Lutsenko for
professionals leaving the police. As one example, people mention the
resignation of deputy chief of police of Kiev Region, Ivan Proshkovskyy.

And we recall another man – Hennadiy Moskal, recently appointed governor
of Luhansk Region.

There are many rumours about why he “was taken out” of the Interior Ministry
ranks. Most of them come down to politics being involved. It is very hard
not to agree with this. What other reasons can explain the dismissal of a
deputy minister with whom few can compare in terms of professionalism?

Meanwhile, our suppositions on the “political priorities” of the uniformed
ministry are to a certain extent strengthened by Yuriy Lutsenko himself. On
20 January, the chief of the Interior Ministry stated his readiness to run
for the Rivne Regional council from the SPU. How can one keep from

recalling the old saying: “Is the congregation just like the pope?”

That, by the way, is about de-politicizing the police. As one bureaucrat in
the ministry expressed in a private conversation, bit-by-bit the Interior
Ministry is becoming an arm of the SPU. One hopes that this is not yet the
case. On the other hand – facts are stubborn things.
                  GENERALS AFRAID FOR THEIR JOBS
Getting back to that wonderful instruction from the chief of the Interior
Ministry, we draw attention to the last point. It is far more important than
it may appear to be. In light of the role now given to the DPR, a “random
person” is not going to turn up at the wheel. One must suppose that Inna
Kysil had no competition for this post.

We remind our reader that in the not-too-distant past she worked as the
press secretary of the leader of the SPU, Oleksandr Moroz, and then for
Yuriy Lutsenko himself. Many complaints have been voiced in the press

about the 23-year old girl.

Foremost, about her – to put it mildly – not-too-high level of competency in
issues of the activity of law enforcement agencies. Nevertheless, the
minister is prepared to stand up for her. “Maybe there are some who like the
former press secretary with a general’s rank? I had hoped one could find
more substantial things to criticize”. That is exactly how Lutsenko parried
unflattering comments about his subordinate during a recent Internet chat.

And it seems no-one cares much that the current leader of the DPR has got
authority that the “general” never even dreamed of.

The situation is bordering on the absurd: police chiefs with big stars who
have more than once looked fatal danger in the eye, literally shake at the
mention of the name of the young boss of the DPR. “God forbid a conflict
with her! It is very easy to lose your position”, a fairly high-ranking
person in the ministry told us, as if excusing himself.

His colleague – also high-ranking – nodding his head in the direction of the
chief of the DPR, said painfully: “Unfortunately, every revolution has its
costs”. We suppose that many publications in general – and journalists in
particular – could join in drawing such conclusions.

Why hide the sin – the possibility of a correspondent “getting in” to any
particular Interior Ministry event depends directly on the “sympathy or
antipathy” towards you on the part of the DPR. Although, it may be better
here to say “loyalty”.

As one source in the ministry told us, the existence of a “black list”
cannot be ruled out. If that is really so, then it is easy to explain the
“green light” for some – chosen – media, and the “red light” for the rest.
For example, I wonder how the Internal Ministry will react to this article?

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8. UKRAINE OPPOSITION PARTY’S ELECTION AD SUPPORTING
      RUSSIAN AS SECOND OFFICIAL LANGUAGE IN UKRAINE
                                Two languages – one people!

Ukrayina TV, Donetsk, in Ukrainian 1857 gmt 27 Jan 06
BBC Monitoring Service, UK, in English, Saturday, Jan 28, 2006

DONETSK – [Male voice-over, in Russian] For the first time in Ukraine!

The Party of Regions presents a short-text-message referendum in favour
of the Russian language.

To take part in the referendum, it is necessary to send a short text message
with figure 2 if you support granting the Russian language the status of
second official language in Ukraine, or with figure 1 if you are against, by
dialling a short number – 7757, which is the same for all national
operators.

The price of a short text message is standard for subscribers’ tariff
packages.

The Party of Regions. [Switches to Ukrainian] Two languages – one people!

[This advertisement has been run ahead of the evening news bulletin. Video
shows a map of Ukraine divided horizontally into the blue (upper) and yellow
(lower) parts – the colours of the Ukrainian state flag. Video also shows
words “Ukraine” and “the Party of Regions” in the top right corner of the
screen, and the above text in the form of short messages written on blue
envelopes.

The same text is shown in Ukrainian – white letters against a blue
background – at the bottom of the screen. The last picture shows the Party
of Regions’ top election candidates Rinat Akhmetov, Taras Chornovil,

Viktor Yanukovych, Yevhen Kushnaryov and Nina Karpachova standing
together, with an inscription in Russian: “Two languages – one people!” and
the same but smaller inscription in Ukrainian at the bottom of the screen.]
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9. TYMOSHENKO UNCOVERED CONSPIRACY OF YUSHCHENKO
      AND YEKHANUROV WITH FORMER PRESIDENT KUCHMA 

 
Ukrayinska Pravda On-line, Kyiv, Ukraine, Monday, January 30, 2006

BYuT leader Yulia Tymochenko is certain that president Yushchenko issued
security guarantees for ex-president Kuchma.

“It is dead certainty”, she said on Sunday on NTN air answering the question
whether there was an agreement between Yushchenko and Kuchma.

“Absolutely ignoring the opinion of general public, just behind everyone’s
back they agreed that peaceful existence is guaranteed for everyone”, – she
is certain.

According to Tymoshenko, the fact that the partnership memorandum was

signed by Yushchenko and Yanukovich, and Kuchma’s son-in-law Pinchuk
had voted for Yekhanurov to become prime minister are strong evidence of
such conspiracy.

“Today Yekhanurov gave back thousands of hectares of land in Borispol

which where given to Pinchuk by Kuchma. Back in possession of Kuchma’s
family.”, stated Tymoshenko.

“Today even Supreme Courts rulings regarding returning of the strategic
objects, which were given to Pinchuk’s during Kuchma’s days in office, into
the state ownership, were suspended”, she said.

According to Tymoshenko’s statement “Yekhanurov and president’s team,
everyone has appeased with Kuchma and his team and they have establish

this kind of happy mutual co-existence.”

“Despite the fact that I have cancelled the directive for his (Kuchma)
government provision, today he carries on living on government dacha, he is
being served by a great number of domestics who are being paid from the
state budget, loads of bodyguards who guard him are also on government
 wages”, said Tymoshenko.   -30-

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10.  YUSHCHENKO DECLARED WAR FOR THE SAKE OF PEACE
              Ukrainian president hints at abolishing constitutional reform

ANALYSIS & COMMENTARY: By Oleksandr Mikhelson
Glavred, Kiev, Ukraine, in Russian 0000 gmt 24 Jan 06
BBC Monitoring Service, UK, in English, Friday, Jan 27, 2006

Ukrainian President Viktor Yushchenko has not given up the idea of
abolishing constitutional reform reducing his powers, which came into

force on 1 January, a Ukrainian web site has said.

In his televised address on the first anniversary of his inauguration,
Yushchenko failed to admit his fault for mistaken personnel decisions

and his programme for 2006 is merely declarative, it said.

The following is the text of the article by Oleksandr Mikhelson entitled
“Yushchenko declared war for the sake of peace” posted on the Glavred
website on 24 January; subheadings have been inserted editorially:

The president’s [Viktor Yushchenko] address to the nation dedicated to the
anniversary of his inauguration has demonstrated: Yushchenko agrees to

be an English queen, but not Queen Victoria.

[Epigraph] All 10,000 grasses blossom out before the sovereign’s eyes, and
trees change their foliage on his order. ([Russian journalist and writer]
Yuliya Latynina, “100 fields”)
                     PECULIARITIES OF PRESENTATION
On Monday [23 January], on the anniversary of his inauguration, Viktor
Yushchenko made another address to the nation. There were at least three
pleasant things in this address.

[1] First, the president abandoned his habitual armchair and stood up before
the nation.
[2] Second, the head of state was likely to have become the first person in
this country to make a public statement “Ukraine above all” [corresponding
to the first line of the German anthem “Germany above all”] (associations
can be different, but is not it present-day pragmatism?).
[3] Third, Yushchenko said everything he wanted without redundant wording.

While the shorter initial part of his address in which Yushchenko enumerated
accomplishments of his administration is quite controversial, one can hardly
argue the rest of theses. This is because they are not subject to
discussion: they are subject to fulfillment.
      CONTROVERSIES IN ASSESSING ACCOMPLISHMENTS
However, there were also some significant points in the “praising” part. [1]
For example, having said that the authorities should draw conclusions of
their own mistakes, Yushchenko emphasized: “All those who stood close to me
on Maydan [central square in Kiev, venue of Orange Revolution] a year ago
received a chance to work in Yushchenko’s team. Unfortunately, sometimes
personal ambitions took precedence.”

These words have more in common with recognition of his own mistakes, in
particular those on personnel issues, but not with another criticism of his
staff members, of course, the former ones.

[2] Second, the president said for the first time that retaining our gas
transportation system in Ukraine’s ownership is an important result of gas
agreements with Russia, the same way as the gas price being “lowest in
Europe” (according to the president).

Being a liberal, Yushchenko surely understands that, as long as we have this
cheap gas, our way to different kinds of EU and WTO is closed. However, what
can be done: the election is coming, and one should speak about good things.

This is the reason of the statement that passage of gas transportation
system to foreign hands is “out of the question” in future as well. One
should understand that this is in case the incumbent authorities remain
intact.

The statement “the cabinet did not increase gas prices for ordinary people,
as it promised” is a different thing, as there is great different between
“did not increase” and “will not increase”, especially in the current
situation… [ellipsis as published]

             PRIORITIES FOR 2006: NO CONCRETE PLANS,
                         LEGISLATION TO BE ADOPTED 
But let’s return to instructions. Actually, there were two “packages of
instructions” in the president’s address. The first one is designated for
quoting in printed media and on TV under the heading “The president
announced the authorities’ priorities for 2006″.

There are five of them: “Health of the Nation”, upgrading the education
system, rural development programme, diversification of Ukrainian energy
market, and finally, judicial reform.

The interesting point was that concentration of concrete points of the
president’s plans in his address dropped from the first sentence to the last
one. Speaking about medical service, the president named the programmes

of fighting AIDS, tuberculosis, etc. personally supervised by him.

Speaking about the energy market, he promised “at least a 10 per cent”
reduction of energy consumption this year; obviously, fighting for Ukraine’s
independence in energy in 2006 ends with this. Finally, while speaking about
the most imminent reform of the third [judicial] branch of power, Yushchenko
did not specify the ways of trying to implement it.

However, there was no special need to give clear interpretations if we take
into account the fact that the priorities announced by Yushchenko seem to
have been copied from the electoral programme of one of the parties. Can you
guess which one? [propresidential Our Ukraine People’s Union Party]

The second “package” is a different thing. By the way, passage to it was
composed quite successfully, the same way as the whole address: dear
Ukrainians, EU remains our strategic priority this year, therefore we should
adopt laws on WTO as soon as possible; by the way, let us speak about laws.
                             DECREE ON FAIR ELECTIONS
Yushchenko made many signals here. First, Yushchenko will observe laws

with all his might and will force others to do so. In particular, it concerns
election laws. For this purpose, the president even signed a decree on fair
elections which he promised long ago.

Those who have read the decree and have reached its final provision paid
attention to the presidents directive to the Interior Ministry, Security
Service of Ukraine and local authorities “to take measures for non-admission
of spreading calls to liquidation of Ukraine’s independence, changing the
constitutional system by forcible means, violation of the country’s
sovereignty and territorial integrity, unlawful usurpation of state power,
propaganda of war and violence, stirring up inter-ethnic, racial, religious
and other kinds of hostilities, infringing of human rights and freedoms and
people’s health, along with materials containing these calls, slanderous
information about political parties, their leaders, election blocs and
candidates during the election campaign in any form.” Unquote.

There are suspicions that the whole decree has been written exactly for the
sake of this provision. Yushchenko confirmed this suspicion in his address.
“I will not allow a single political force to divide the country, speculate
on language, religion, federalism or separatism”, he said.

Undoubtedly, this is the warmest regard to those parties which have included
federalism in their election programmes. If [former President Leonid] Kuchma
had once made this kind of statement, all papers would have written next day
about withdrawal of the criticized parties from the election.
     HARDER LINE ON “DESTABILIZATION OF SITUATION’
There is even more interesting point: “I consider it necessary to introduce
a moratorium on any decision or action by the executive or the legislature
which may destabilize the situation in Ukraine.”

To put it mildly, it sounds enigmatically. How is it related to moratorium,
which means a temporary ban of something? There should not be any actions

of the authorities at all which can result in destabilization, and for this one
should just observe laws and principles of morality.

If it is not done, no decrees and agreements on fair election will help. But
the logic seems to be lying in something else: political justification of
the president’s side in its actions, in particular, with regard to
parliament.

It is not the only point. Speaking briefly, the president made a demand to
harden the line of fighting against “bad guys”. One of them was recently
detained by [Interior Minister Yuriy] Lutsenko.

So, the main essence of this part of Yushchenko’s address means that
“Lutsenko’s line” should be continued and enforced. Let [opposition leader
and former Prime Minister Viktor] Yanukovych visit Brussels to complain…
[ellipsis as published]
            FUTURE LEGISLATION TO IMPLY ABOLITION OF

                              CONSTITUTIONAL REFORM
There is one more point. Yushchenko flatly instructed parliament to swear in
the Constitutional Court judges, but he did not mention that it would be
nice to appoint the parliament’s share of the court. He said that he would
initiate formation of a working group with equal presidential, parliamentary
and government representation to develop “proposals on harmonizing the work
of the branches of power”.

He also emphasized that the laws on the president, the Cabinet of Ministers,
opposition and – attention! – all-Ukrainian referendum should be urgently
adopted.

It means that the president does not abandon the idea of abolishing the
amended constitution. He honestly said this: “I recognize that from 1
January 2006, in accordance with Supreme Council’s [parliament] decision, a
new constitution has come into force in Ukraine (as if it needs this kind of
recognition – Author’s note). But I do not believe that this constitution is
ideal.”

It should be abolished through a referendum or with the help of the
Constitutional Court, and it would be nice to drag down appointment of its
judges from parliament’s quota (it had been successfully done by
propresidential factions until recently), or with the help of both ways:
anyway, in general.

At the same time, Yushchenko intends to take any opportunity to level
enforcement of the political reform with the help of the aforementioned
laws, and probably, not only with them: with the ones drafted by a group
with “parity participation” of representatives of the President, Cabinet of
Ministers and Supreme Council; in other words, with Yushchenko’s majority.

Therefore, after one year the president began doing the thing we was
supposed to do from the very beginning: strengthening his power. But will
the president succeed in making the phrase quoted in the epigraph to this
article not sound ironically in relation ho him in present situation?
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11. HEAD OF US CONGRESS UKRAINIAN CAUCUS PROMISES
               TO SUPPORT UKRAINE IN BIPARTITE ISSUES

Natalia Bukvich, Ukrinform, Kyiv, Ukraine, Friday, January 27, 2006

WASHINGTON, DC – Ukrainian Ambassador to USA Oleh Shamshur
met with Head of the Congressional Ukrainian Caucus Curt Weldon,
Ukrainian Embassy sources told Ukriform correspondent. The meeting
dealt with the current state of Ukrainian – American relations, which are
gaining traits of real strategic partnership.

The parties to the meeting also discussed a series of projects of bipartite
cooperation in 2006. Curt Weldon reassured the Ukrainian Ambassador
to the USA of the Congressional Ukrainian group’s promoting these.

Congressman Weldon noted, after the Orange Revolution, the group
increased almost twofold. Now, it is a weighty political force ready to
solve current issues of bilateral relations. Among these, he named the
revocation of the Jackson – Vanik amendment.   -30-
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12. UKRAINIAN AMBASSADOR TO USA PRESENTS MERITORIOUS
       BADGE TO US ARMY RETIRED COLONEL STEPAN OLIYNYK
                       Born in Lviv region of Ukraine in July of 1930

Nataliya Bukvych, Ukrinform, Kyiv, Ukraine, Sat, January 28, 2006

WASHINGTON, DC – US Army Colonel (ret), holder of the Order Of Merit

3d Grade PhD Stepan Oliynyk has been decorated with the Meritorious Badge
by the Defense Ministry of Ukraine, in view of his personal contribution to the
Ukrainian Armed Forces’ establishment and development.

The award was presented to Stepan Oliynyk by Ukrainian Ambassador to the

USA Oleh Shamshur. Speaking on behalf of the Ukrainian Government, Oleh
Shamshur thanked Stepsn Oliynyki for his years-long work toward promoting
American – Ukrainian bilateral relations and military cooperation.

Stepan Dmytrovych Oliynyk was born in the Lviv region on July 18, 1930. He
came to America after WWII. His military career lasted for as long as 35
years. As a US Army officer he served with the US Army Headquarters, with
the JCS. After retirement in the rank of Colonel he engaged in research work
in matters of national security with the DOD.

Since 1992 Stepan Oliynyk has been working as a consultant, senior
counsellor for national security with the Consultative-Advisory Council
under the Verkhovna Rada of Ukraine and the Defense Ministry for matters

of mobilization readiness.

He is often invited to lecture at the Ukrainian Armed Forces Academy and for
the editorial board of the journal Viysko Ukrainy (“Ukraine’s Army”). Stepan
Oliynyk also participated in activities of  the International Institute for
Global and Regional Security, the Taras Shevchenko Scientific Society, other
professional societies and organisations both in Ukraine and the USA.

Stepan Oliynyk is the author of many scientific papers and books on
military, literary and historic subjects. He has been awarded the Ukrainian
Education & Science Ministry’s honorary diploma.  -30-
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13.            AN OPPORTUNITY IN UKRAINIAN OIL & GAS?

ANALYSIS: By Stephen Clayson, Correspondent, London
ResourceInvestor.com, Miami, Florida Tuesday, 24 Jan 2006

LONDON – Although Ukraine’s oil & gas requirements have only been thrust
to prominence by recent upsets, Cardinal Resources [AIM:CDL] has been
active in the sector for some time.

Cardinal shares have found their natural home here in London, where, as a
rule, investors are more comfortable appraising risky investments in distant
places; the company having grown out of and superseded the defunct,
formerly Toronto listed Carpatsky Petroleum and deliberately switched to
a London listing on account of its greater suitability.

According to Cardinal’s Chairman & CEO Robert Bensh, the outfit has
been operating in Ukraine long enough, since 1995 to be specific, to have
acquired a useful array of contacts across the country’s oil & gas sector,
which is dominated by the state controlled NAK Naftogaz Ukrainy. This
established presence may assist the company in ameliorating some of the
trickiness associated with such an operating environment.

Back when Cardinal was known as Carpatsky though, less was achieved than
would have ideally been so. Bensh imparts that in essence “everything was
wrong with Carpatsky”; he was in fact hired in 2000 to try and sort things
out, the most significant single issues being Carpatsky’s chronic shortage
of funds and that it suffered from the poor quality of certain of its
business relationships in Ukraine.

So, following a long restructuring, Cardinal debuted on AIM in April 2005,
raising GBP10.6 million in the process. Since then its shares have traded
somewhat erratically, and today stand at 28 pence, compared with a placing
price at listing of 32 pence.

The company has recently emplaced a $38 million bridge loan facility, which
was put up by a U.S. hedge fund, and is seeking an additional $10-15 million
in order to satisfy the requirements of its growth plans.

Although Cardinal has producing assets, it does not expect to be a cash
positive concern until 2008 or 2009, owing to high levels of planned
expenditure. If all goes as the company expects, then the funding scheme
just outlined should carry it to this point.

Part of Cardinal’s development expenditure will redress damage done to its
business position by past underfunding, the best example of this damage
being the significant dilution of its profit interest in the producing
Rudivsko-Chernovozavodske (RC) field in the east of Ukraine.

Cardinal now intends to earn its way up to a 45% revenue interest in the RC
field, building from the 14.9% level down to which it has been diluted. The
RC field is a joint venture with Ukranafta, an affiliate of NAK Naftogaz
Ukrainy. At the moment, the RC field can be regarded as the Cardinal’s most
substantial asset, even though 45% is the maximum stake that the company
can hold under the joint venture agreement as it stands.

The field’s original gas in place amounted to 1.5tcf and it presently
supports five producing wells, with significantly greater production
capacity expected to come on stream following a programme of workovers
and new drilling.

A mix of workovers and new drilling is characteristic of Cardinal’s
development plans for its various assets across Ukraine. Many of the
country’s existing oil & gas wells are poorly completed and can often

benefit from workovers either to restore production where total failures
have occurred, or to raise output levels where these sit below their potential.

Cardinal uses mostly Ukrainian equipment hybridised with certain Western
components, which keeps costs lower than would otherwise be the case and
should improve effectiveness, as local equipment tends to be outdated and
ill constructed. However, given the absence of Western oil & gas service
companies in Ukraine, use of adapted local equipment is a convenient option
for Cardinal.

The omens in the Ukrainian gas markets are, to an extent, good from a
producer’s point of view. Ukrainian gas prices have been illustrated to be a
bit of a contentious subject by recent events, but the Ukrainian government
is thought to be moving towards letting prices rise closer to E.U. levels in
order to promote efficiency and because of the difficulty of keeping prices
depressed without Russian support, which has now been conspicuously
withdrawn.

Cardinal already receives world prices for its oil output, a barrel of which
sells at a $3 discount to a barrel of Russia’s Urals blend, which itself
changes hands at a small discount to Brent. The company currently gets an
average price for its gas of around $2.20/mcf; rather low next to current
E.U. prices of $12-15/mcf, making it easy to understand the arguments for
convergence.

Cardinal’s focus is decidedly on production rather than exploration, though
this will not preclude it from some involvement in the latter activity if it
espies the right opening. The company is on the look out for acquisition
opportunities, Bensh seeing a 12-18 month window of opportunity, starting
around now, within which some plum targets may become available before
the competition for Ukrainian oil & gas assets becomes too heated.

Cardinal anticipates this growth in competition as a corollary of its
expectation of improving Ukrainian gas market conditions and of an increase
in the transparency of the nation’s business & government, but the company
feels that its in-country connections will give it an edge. Investors will
hope so, just as they will hope that Ukrainian gas prices are indeed allowed
to track closer to E.U. levels.  -30-
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LINK: http://www.resourceinvestor.com/pebble.asp?relid=16397
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14. INTERNATIONAL INTELLECTUAL PROPERTY ALLIANCE (IIPA)
SUPPORTS US DECISION TO RESTORE TRADE BENEFITS: UKRAINE

ag-IP-news Agency website, Friday, January 27, 2006

WASHINGTON, DC – The International Intellectual Property Alliance (IIPA),
an alliance of seven US copyright-based trade associations comprising over
1,900 companies, announced on Thursday its support for the decision by the
United States Trade Representative (USTR) to restore Ukraine’s eligibility
for benefits under the Generalized System of Preferences (GSP) trade
program.

According to a press release by the Alliance, GSP is a provision of US trade
law that unilaterally grants duty-free trading benefits to certain products
from eligible beneficiary countries from the developing world, conditioned
in part on each beneficiary providing “adequate and effective” protection of
intellectual property rights (IPRs).

GSP benefits in Ukraine were suspended in 2001 based upon a petition filed
by the IIPA (in 1999) because of the then rampant and unregulated optical
disc production and distribution of music, film, business and entertainment
software materials in Ukraine for sale locally and exported for sale in many
other countries. In 2005, Ukraine adopted legal reforms aimed at curbing
this piracy.

IIPA Vice President, Eric J. Schwartz, said, “IIPA supports the US decision
to restore trade benefits to Ukraine. After several years of hard work by
the government of Ukraine in conjunction with US government officials,
Ukraine adopted significant improvements in its optical disc laws in 2005.

These new laws, as well as an agreement by the Ukraine government to
participate cooperatively with the copyright industries in Ukraine on
enforcement, should result in significant improvements in Ukraine.”

Schwartz added, “If fully implemented, these changes will properly regulate
the legal production and distribution of optical media material in Ukraine.

We applaud the combined efforts of the Ukraine and US governments to
make this happen. That said, the government of Ukraine must fulfill its
obligations and remain vigilant on its pledges of cooperative enforcement in
order to improve on-the-ground efforts.”

IIPA notes that there are several steps that the government of Ukraine must
immediately undertake to ensure proper implementation of the new laws.

 
These include the adoption of regular surprise plant inspections; the creation
of an “evidence repository” of the master materials used to produce optical
disc materials in Ukraine; and, the proper prosecution and imposition of
deterrent sentences against commercial pirates of optical disc and other
copyright materials.

If these steps are taken, then Ukraine will go a long way towards improving
its copyright enforcement regime for the betterment of the local economy
and the protection of domestic and foreign copyright owners.

The International Intellectual Property Alliance is a coalition of seven
trade associations formed in 1984 to represent the US copyright-based
industries in bilateral and multilateral efforts to improve international
protection of copyright materials, and to open up foreign markets closed
by piracy and other market access barriers.  -30-
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LINK: http://www.ag-ip-news.com/GetArticle.asp?Art_ID=2599&lang=en

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15.   UKRAINIAN NATIONAL COMMITTEE OF INTERNATIONAL
CHAMBER OF COMMERCE OPENS OFFICE IN TORONTO, CANADA

Ukrinform, Kyiv, Ukraine, Friday, January 27, 2006

KYIV – The Ukrainian National Committee of the International Chamber of
Commerce (ICC Ukraine) opened its office in Toronto (Canada), which is
11th office abroad. The ICC Ukraine will proceed to opening its offices in
the countries, where the Ukrainian Foreign Ministry doesn’t suppose
commissioning diplomatic missions so far.

The ICC Ukraine doesn’t rule out that its offices may in some time become
a basis for embassies or consulates. Prime Minister Yuriy Yekhanurov
charged the Ukrainian Foreign Ministry to tackle this likelihood with the
ICC Ukraine.

As ICC Ukraine President Volodymyr Shchelkunov noted, this initiative is
aimed at making Ukraine’s external relations more economically oriented.

“More concrete affairs and investment projects, stronger protection of
domestic businesses abroad and more world business in Ukraine – that is
how it works in the countries, where the ICC Ukraine runs its offices”, he
stressed.

While opening the office in Toronto, the ICC Ukraine delegation met with
Canada’s business circles. There are preliminary agreements on Canada’s
investments in building in Ukraine with using newest, so said building block
technologies.

Canada is a leader in building cheap dwellings undertime. Introduction of
similar technologies in Ukraine could make dwellings in Ukraine
significantly cheaper.

Canadian business execs also proposed to establish joint ventures in
engineering, rocketry – space and energy spheres, including in fuel,
processing industries and agricultural produce conservation branches.
The talks also dealt with likely exports of Ukrainian pipes and metal-roll
to Canada.

The Ukrainian National Committee of the International Chamber of
Commerce, headquartered in Paris, was established in 1998. The National
Committee is an NGO and registered as the Association of Enterprises.

The ICC Ukraine is mainly meant for creating efficient national system of
intellectual property protection in Ukraine, grating a certificate of
partnership reliability, which is recognized in 93 countries of the national
committee network.  -30-
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16.            UKRAINE AND CANADA AIMING TO DEVELOP
                     INTER-PARLIAMENTARY COOPERATION 

Ukrainian News Agency, Kyiv, Ukraine, January 28, 2006

KYIV – Ukraine and Canada are aiming to develop inter-parliamentary
cooperation. The press service of the Ukrainian Foreign Affairs Ministry
disclosed this to Ukrainian News, citing a meeting between Ukraine’s
Ambassador to Canada Mykola Maimeskul and Canada’s Senate Speaker

Daniel Hays on January 26.

Maimeskul thanked Hays for his interest in events in Ukraine and support

for the democratic changes in the country.
As an example of Canada’s friendly attitude to Ukraine, Hays cited the
Senate’s approval of a special resolution on recognition of the 1932-1933
famine in Ukraine as genocide and the holding of Senate hearings on the
events that took place in Ukraine in late 2004.

Maimeskul and Hays stressed the prospects for deepening inter-parliamentary
cooperation between the two countries and expressed hope for its further
development. The meeting took place as part of events connected with the
completion of Maimeskul’s diplomatic mission.

Maimeskul also met with the Canadian prime minister’s chief adviser on
foreign policy, Jonathan Fried, and the director-general of the Bureau for
Eastern and Central European Countries at the Canadian department of

Foreign Affairs, Tom MacDonald.

They discussed ways of accelerating Ukrainian-Canadian political dialogue,
particularly within the context of exchange of high-level visits.As
Ukrainian News earlier reported, Canada plans to continue supporting

Ukraine in the implementation of political and economic reforms.

Ukraine and Canada are interested in deepening of bilateral trade and
economic cooperation, as well as development of cooperation in the sphere

of defense and environmental protection.  -30-
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17. VOLYN REGION SAID TO BE UKRAINE’S MOST ATTRACTIVE
    REGION FOR FOREIGN INVESTORS BY SWISS ORGANIZATION
                    Zhytomyr, Rivne and Poltava regions also attractive

Ukrinform, Kyiv, Ukraine, Saturday, January 28, 2006

KYIV – The Volyn region in West Ukraine is Ukraine’s most attractive region
as offering best conditions for foreign investors’ operations.  An opinion
to the above effect was stated by Ariana Bauer, a representative of the
Swiss Organisation for Facilitating Investments (SOFI), while on a visit to
Lutsk, the Volyn region’s administrative center.

The SOFI official also mentioned Zhytomyr, Rivne and Poltava regions as
investment-attractive. The Volyn region occupies a 20,200 sq. km. territory,
populated by slightly over a million inhabitants. Its geographic position is
favorable as the Volyn region borders on the EU.

The region maintains trade-economic relations with over 60 European,
Asiatic, American and African nations. Polish, German, British, other
foreign companies are operating in the region, including the
Switzerland-based Nestle. The Volyn region is among Ukraine’s leaders

in terms of industrial production growth rates.
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18.     CZECH ENERGY GROUP CEZ INTENDS TO ACQUIRE SIX
                    UKRAINIAN ELECTRIC POWER COMPANIES

Ukrinform, Kyiv, Ukraine, Friday, January 27, 2006

KYIV- The Czech energy group CEZ is contemplating to buy six Ukrainian
regional electric power companies (OblEnergos) in 2006. Speaking in an
interview to the newspaper Ekonomicheskiye Izvestiya, Vladimir Schmalz, CEZ
director for mergers and takeovers, said the CEZ had received a principled
consent to wrap up a relevant deal from the VS Energy company, which
controls the OblEnergos.

According to Mr Schmalz, the Credit Suisse First Boston (CSFB, Switzerland)
poses as the deal’s consultant. Besides, the CEZ is interested to buy two
other Ukrainian OblEnergos, Vladimir Schmalz further disclosed, which belong
to the company AES Energy.

The CEZ is contemplating to acquire energy assets in Bosnia, Ukraine and
Bulgaria, which will cost around 3 bn. euros, of which 1.5 bn. euros will be
spent on buying energy assets in Ukraine and Bulgaria.

In 2005 the CEZ bought the Romanian distribution company Oltenia for 151

M. euros and three Bulgarian distribution companies for 281.5 M. euros.
                                      UKRINFORM NOTE:
The Netherlands-based VS Energy International N.V. (a daughter-company of
the Slovakia-based Vychodoslovenske Energeticke Zavody S.P, or VSE) owns
stakes in the public joint-stock company SevastopolEnergo (95.18 percent),
KhersonOblEnergo (94.51 percent), KirovogradOblEnergo (94 percent),
ZhytomyrOblEnergo (75.56 percent), OdesaOblEnergo (20.36 percent),
ChernivtsiOblEnergo (21.98 percent), KhmelnytskOblEnergo (11.79 percent),
TranscarpathiaOblEnergo (10.53 percent).

In October 2005 the VS Energy International N.V. refuted media reports about
the company’s alleged intention to sell its parcels in several Ukrainian
energy companies. According to the reports, the auditing company Deloitte &
Touche was carrying out audits of these companies, with a view of evaluating
their assets.

As VS Energy International N.V. representatives stressed, the company
annually hires the Deloitte & Touche and KPMG to carry out audits of the
Ukrainian energy companies.

The company AES Washington B.V. BN (a daughter-company of the US-

based AES Corporation) holds 75 percent plus one share stakes in the
AES-RivneEnergo, AES-KyivOblEnergo.  -30-
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19.   UKRAINIAN OPPOSITION LEADER YANUKOVYCH SAYS
                            RUSSIA’S GAS POLICY WRONG 
UNIAN news agency, Kiev, in Ukrainian 1231 gmt 28 Jan 06
BBC Monitoring Service, UK, in English, Saturday, Jan 28, 2006

DONETSK — The [opposition] Party of Regions leader, Viktor

Yanukovych, has said that Russia’s “wrong” gas policy is disastrous
for the Ukrainian economy.

Speaking at a Party of Regions conference in Donetsk today, Yanukovych
said: “Gas price hikes are disastrous for the Ukrainian economy. We

believe that this position in relations with Ukraine is wrong.”

He stressed that the Party of Regions does not support “this position of
Russia”. “We do not support this position of Russia, we believe that this
position of Russia is not promising in relations with Ukraine,” Yanukovych
said.

He said that “Russia took advantage of the weakness of the authorities

and government ministers involved in the talks”. “On the other hand, we
understand very well that all participants in the talks were cornered at
the end of the last year,” Yanukovych said.

He said that gas talks should not stop. “We believe that this process
should never be stopped. I made it quite clear during my meeting with the
Russian Security Council secretary, Sergey Ivanov,” Yanukovych said. He
said that there are constructive forces on both sides which should develop
a long-term policy to satisfy the national interests of both Russia and
Ukraine.

Yanukovych also said that it is necessary “to develop a project of shifting
to market prices”. “We are confident that we should meet at the negotiating
table and hold a very serious discussion of this issue, to develop a
project of shifting to market prices, and, by the way, Russia should do
this as well,” Yanukovych concluded.
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20.  RUSSIA VS UKRAINE-MORE THAN AN ECONOMIC DISPUTE

ANALYSIS & COMMENTARY: Electricity4Business, PrWeb.Ccm
London, United Kingdom, Sunday, January 29, 2006

LONDON – The current crisis over the increase in gas prices from Russia
to Ukraine can be viewed differently depending on which side of the fence
you stand.

Many Ukrainians, including the present leader, believe that Russia is using
its economic strength to make a political point. Viktor Yushchenko’s
eventual victory in the election for a leader last year was not popular with
the Russians due to his leanings towards the West. It is thought that the
huge rises in gas prices is an attempt to destabilise the Ukrainian economy
and hence undermine the current leadership.

Those with Russian sympathies would argue that Yushchenko is turning it
into a political issue because of his and his government’s incompetence in
running the country since his election.

Whichever way it is viewed the problem is real and could escalate into a
crisis which affects the whole of Europe. Which is why the EC called a
crisis meeting to try to find a way to resolve the dispute.

For years now the rest of Europe has been urging Russia to raise the price
of gas to market rates. However, few would recommend that this is done in
one fell swoop as has been carried out in this case. The proposed rise is a
fourfold one, clearly too high for Ukraine to swallow – it should be noted
that Russia has been rather more lenient on some of the other nearby states
where price rises have been limited to 100%. This may give some credence
to Yushchenko’s argument -.

Negotiations have come to a stalemate with the Ukrainians refusing to pay
and the Russians carrying out their threat to cut off supplies on 1st
January.

Russia now accuses Ukraine of siphoning gas from the pipeline and this is
causing concern in Europe with a number of countries experiencing a
significant drop in supplies.
                         ELECTRICITY4BUSINESS’S VIEW
Without getting too embedded in the politics of the Eastern Bloc, we would
like to highlight the position of the UK should this dispute escalate,
either now or in the future.

[1] We have always questioned the wisdom of the UK government’s energy
policy in relinquishing control of its energy supplies to foreigners. This
dispute has exposed the vulnerability of the UK to the energy giants of
Europe, who when threatened by an interruption to their own supplies would
be expected to ration the movement of gas though the pipeline to the UK.

[2] Secondly, can we really rely on an energy policy which is crucially
dependent on Russian gas supplies when there is such a history of
instability in the region? Just remember that our existing energy policy
depends on future gas supplies from Russia to help replace our dwindling
reserves in the North Sea. Pressure should be exerted on the government to
consider this position in depth when carrying out the forthcoming energy
review.
                                             THE DEAL
Ukraine has until now been paying only $50 per 1000 cubic metres of gas
and even then, a deal was done to enable Ukraine to barter this for use of
its territory through which the pipeline passed. The new rate agreed is $230

per cubic metre – more than a fourfold increase.

However, this is the rate payable by RosUkrEnergo – a joint venture company
between the Russians and Austrians – who will in turn sell a combination of
Russian and Turkmen gas to the Ukrainians at $95 per 1000 cubic metres.
Complex or what? Talk about fudge!

In a related deal the transportation cost payable to the Ukraine for use of
its territory was set at $1.60 per for the transit of 1000 metres of gas
through each 100kms of its territory. This deal, double the previous amount,
has been fixed for a period of five years.

Electricity4Business’s opinion is that a deal has been thrashed out to save
face. Russia cannot be seen to back down on its original offer, however, it
has to protect as much as possible its position as a reliable international
gas supplier and since international supplies were being affected by the
dispute a compromise had to be found to resolve it. However, the
implications for future security of supply to Europe cannot be ignored.
     A RESOLUTION OR JUST A TEMPORARY REPRIEVE?
The news that a deal has been done between the Russian state-run Gazprom
and the Ukraine’s Navtogaz which will allow gas supplies to flow freely
through the European pipeline will bring a sigh of relief that Europe can at
least for the moment secure enough gas supplies to take it through a
predicted colder than average winter.
                             BUT WHAT OF THE FUTURE?
This deal is for five years only. Clearly, Europe’s energy policy must plan
much further ahead than the next five years. Also, Ukraine’s bargaining
power will be greatly reduced in 2010 when the North European Gas Pipeline
is expected to come into operation. This will by-pass Ukraine and other
former Soviet Bloc nations, connecting Gazprom’s Siberian gasfields directly
with Germany using a route that goes under the Baltic Sea.

Who knows what the relationship between Ukraine and Russia will be like in
2010 or how close Ukraine will be to the West? But simply the prospect of
further dispute is likely to have a significant effect on the European price
of gas.

The dispute has also had an effect on the oil price and the prospect of
persistent shortages in Gas is likely to result in a rise in price of
alternative fuels.

It’s worth noting that the Nuclear Lobby in the UK will have further
ammunition to make their case to the forthcoming energy review. The
wisdom of rushing to gas and the run down of nuclear plants may now

be put in question. The security of supply argument along with the
environmental impact of burning fossil fuels could well establish the
basis for a compelling case.
                    IMPACT ON BUSINESS ELECTRICITY
Although the government would like us to believe that the dispute will have
little effect on British gas and electricity supplies the reality is
different. Anything which has an impact on the wholesale price of gas, as
this dispute certainly has, will inevitably filter through to the final
customer. Unfortunately, businesses are always first to suffer the increases
and unlike the domestic customers, will bear the brunt of the full increase
at once.   -30-
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                                      EDITORS NOTES:
Electricity4business is Britain’s independent electricity retail company
specialising in the supply of electricity to small and medium sized
businesses. E4B’s aim is to cut the cost for British business by offering
lower prices.
Gazprom is the Russian state run gas giant. Its policies are very much tied
to the Russian government, hence its involvement in what is essentially a
political dispute.
The German energy giant E.ON has very close ties with Gazprom and
controls the infrastructure which distributes Russian gas throughout
mainland Europe.
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LINK: http://www.prweb.com/releases/2006/1/prweb338773.htm
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21.                         RISKING ANOTHER SLAVIC WAR

OP-ED: by Masha Lipman, Columnist
The Washington Post, Washington, D.C.
Monday, January 30, 2006; Page A17

MOSCOW — A group of young people carrying spades came together
recently where the isthmus connecting the Crimean Peninsula to the
Ukrainian mainland is narrowest. “Isolate the Crimea from Ukraine!” their
leader shouted in a mock military order, and then, as TV cameras recorded
it all, the group began to dig.

The Crimea is a Russian-speaking territory joined to Ukraine in 1954 by
Nikita Khrushchev as part of an administrative rearrangement within the
Soviet Union that is seen by many in Russia as unfair. The recent publicity
stunt with shovels, however unserious, is another example of growing
friction between Russians and Ukrainians that got the world’s attention last
month during a dispute over natural gas supplies. If tensions are further
inflamed, it will be an unpardonable consequence of Russia’s geopolitical
aspirations.

After Russia moved to raise the price of the natural gas it supplies,
Ukraine warned that it may revise the contract regulating rent paid by the
Russian government for the Black Sea Fleet bases in the Crimea. The Russian
defense minister, Sergei Ivanov, responded with a thinly disguised threat to
take the Crimea away from Ukraine. A revision of the rent contract, he said,
might lead to renunciation of the 1997 agreement by which Russia recognized
the 1954 borders of Ukraine.

Several Russian legislators chimed in, but unlike the defense minister, they
were quite explicit. “Sooner or later the Crimea will be reclaimed,” one
Russian Duma deputy said. “To make the Crimea again part of Russia will
be an absolutely right decision,” said another.

Those who live in the Crimea have long complained about forced
“Ukrainization.” Recently, the complaints have become more vocal: The
Crimean inhabitants claim that their last names have been changed in the
lists of registered voters to sound Ukrainian.

In mid-January Ukraine and Russia got involved in a dispute over control

of Crimean lighthouses. One lighthouse was seized by a group of Ukrainians
who barred access to anybody from the Russian Black Sea Fleet. The
Russian fleet commanders regard the lighthouses as part of their operation.
A Ukrainian ambassador said all of them are the property of Ukraine and
must be returned to it.

A Ukrainian foreign ministry spokesman said that with respect to the
lighthouses the actions of the Black Sea Fleet “border on interference with
the affairs of a sovereign state.” Ukrainian student groups picketed the
headquarters of the Black Sea Fleet in Sevastopol, demanding that the
lighthouses be returned to Ukraine, while their pro-Russian opponents
camped outside one of the lighthouses.

A dispute that broke out in 2003 over the border between Russia and Ukraine
in the Kerch Strait, which connects the Sea of Azov with the Black Sea, has
flared up again. And about 10 days ago Ukraine blamed Russia for giving
shelter and granting Russian citizenship to Ukrainian government officials
who were ousted in the country’s Orange Revolution and are under
investigation for alleged misconduct. (Russia also has barred all imports of
Ukrainian meat and dairy products, citing safety concerns that Ukraine
disputes.)

The gas conflict, which continues to pick up steam, has an obvious political
underpinning. Since the humiliating failure of Russia’s attempt to influence
the Ukrainian presidential election in late 2004, the Kremlin has sought
ways to recoup. The move to raise gas prices for Russia’s intractable
neighbor came three months before important parliamentary elections and was
clearly meant to cause maximum destabilization of Ukrainian politics. The
goal of Kremlin strategists appears to be a weak coalition government in
Ukraine that will be more vulnerable to Russian economic pressure.

This may or may not work. One thing is certain, though: Russia’s attempt
to cut gas to Ukraine led to a disruption of supplies to Europe, thus
undermining Russia’s reputation as a reliable economic partner.

There may be another consequence of Russia’s ambition to emerge as an
energy superpower. Political destabilization and the stirring up of
territorial disputes could provoke nationalist sentiment and anti-Russian

feelings in Ukraine, a country that is divided into mostly Russian-speaking
and mostly Ukrainian-speaking regions and is struggling to shape its
nationhood.

If this happens, anti-Ukrainian sentiment in Russia is also certain to grow.
People in Russia hardly differentiate between those of Russian and Ukrainian
ethnic origin, even though Ukrainian last names are easily recognizable. The
neighboring Slavic nations are blessed with good relations based on
historical, cultural and language kinship.

This is exactly why it would be unforgivable should the current conflict
lead to an accidental act of violence. After all, in recent times we have
seen Slavic nations in Yugoslavia with shared history and basically common
language engage in bloody warfare nobody had predicted.  -30-
———————————————————————————————-
Masha Lipman, editor of the Carnegie Moscow Center’s Pro et Contra
journal, writes a monthly column for The Post.
——————————————————————————————————————
http://www.washingtonpost.com/wp-dyn/content/article/2006/01/29/AR2006012900950.html
——————————————————————————————————————
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
22.  THE UKRAINIAN-RUSSIAN GAS CRISIS AND ITS AFTERMATH

       ECONOMIC, POLITICAL & INTERNATIONAL RAMIFICATIONS
               Conference: Ukrainian Research Institute, Harvard University
                       Sunday, February 5 and Monday February 6, 2006
 
Ukrainian Research Institute, Harvard University
Cambridge, MA, Friday, January 27, 2006
 
The Ukrainian Research Institute is pleased to invite the larger academic
community and general public to the following event of special interest:

PROGRAM: SUNDAY, FEBRUARY 5, 2006, 3:00–6:00 p.m.
Ukrainian Research Institute, Harvard University
1583 Massachusetts Ave., Cambridge, MA
WELCOME AND OPENING REMARKS —–
Michael S. Flier, Director, Ukrainian Research Institute
Lubomyr Hajda, Associate Director, Ukrainian Research Institute
 
SESSION 1. Economic Aspects of the Crisis: Players, Agendas, Outcomes
Chair: Margarita M. Balmaceda  (Associate Professor, John C. Whitehead

School of Diplomacy and International Relations, Seton Hall University,
and Associate, Ukrainian Research Institute and Davis Center, Harvard
University)
a. “Introductory Remarks: The Background to the Crisis”
Margarita M. Balmaceda, Associate Professor, John C. Whitehead
School of Diplomacy and International Relations, Seton Hall University
Associate, Ukrainian Research Institute and Davis Center for Russian
and Eurasian Studies
b. “Player One at the Table: Ukraine”
Oles Smolansky, University Professor of International Relations
(Emeritus), Lehigh University
c. “Player Two at the Table: Russia”
Marshall Goldman, Kathryn Wasserman Davis Professor of Russian
Economics (Emeritus), Wellesley College , Associate Director, Davis
Center for Russian and Eurasian Studies
d. “The Unexpected Guest:  RosUkrEnergo”
Roman Kupchinsky, Coordinator of Corruption Studies, RFE/RL,
Inc., Prague, Czech Republic
e. “The Ukrainian-Russian Gas Agreement: Analysis and Alternatives”
Ferdinand Pavel, Research Associate, German Institute for Economic
Research, Berlin, Member, German Advisory Group with the Ukrainian
Government, Kyiv
f. Commentator: Serhiy Teriokhin, former Minister of Economy of Ukraine
g. Rapporteur: Oleh Havrylyshyn, Deputy Director and Special Advisor,
Office of Internal Audit, International Monetary Fund
 
MONDAY, FEBRUARY 6, 2006, 12:00–2:00 p.m.
Case Study Room, Center for Government and International Studies
Harvard University, 1730 Cambridge St., Cambridge, MA
SESSION 2. The Political Fallout in Ukraine
Chair: Oxana Shevel (Assistant Professor of Political Science, Purdue
University, University and Eugene and Daymel Shklar Research Fellow,
Ukrainian Research Institute)

a. “Energy, Interest Groups, and Politics in Ukraine”
Margarita M. Balmaceda, Associate Professor, John C. Whitehead School

of Diplomacy and International Relations, Seton Hall University, Associate,
Ukrainian Research Institute and Davis Center for Russian and Eurasian
Studies
b. “The Political Context of the Crisis: The Split in the Orange Coalition,
Constitutional Reform, Parliamentary Election”
Gene Fishel, Acting Division Chief, Bureau of Intelligence and Research,
U.S. Department of State
c. “The Governmental Crisis: Kto kogo, or Who Is Getting Whom?”
Taras Kuzio, Visiting Professor,  Institute for European, Russian and
Eurasian Studies, Elliott School of International Affairs, George
Washington University
d. Commentator: Serhiy Teriokhin, former Minister of Economy of Ukraine
e. Rapporteur: Oleh Havrylyshyn, Deputy Director and Special Advisor,
Office of Internal Audit, International Monetary Fund (IMF)

MONDAY, FEBRUARY 6, 2006, 4:00–6:00 p.m.
Case Study Room, Center for Government and International Studies
Harvard University, 1730 Cambridge St., Cambridge, MA
SESSION 3. International Dimensions of the Gas Crisis
Chair: Lubomyr Hajda (Associate Director, Ukrainian Research Institute)
 
a. “Ukrainian-Russian Relations: Beyond the Gas”
Paul D’Anieri, Associate Professor of Political Science, and Associate

Dean, College of Liberal Arts and Sciences, University of Kansas
b. “Europe and the Ukrainian–Russian Gas Crisis: Political Lessons”
John Gillingham, Professor of History, University of Missouri-St. Louis
Senior Visiting Scholar, Ukrainian Research Institute
c. “Europe and the Ukrainian–Russian Gas Crisis: Economic Lessons”
Ferdinand Pavel, Research Associate, German Institute for Economic
Research, Berlin Member, German Advisory Group with the Ukrainian
Government, Kyiv
d. “The Central Asian Factor”
Carol Saivetz, Associate, Davis Center for Russian and Eurasian Studies
e. “The View from Washington”
Gene Fishel, Acting Division Chief, Bureau of Intelligence and Research,
U.S. Department of State
f. Commentator: Serhiy Teriokhin, former Minister of Economy of Ukraine
g. Rapporteur: Oleh Havrylyshyn, Deputy Director and Special Advisor,
Office of Internal Audit, International Monetary Fund
CONCLUDING REMARKS 
———————————————————————————————
PLEASE NOTE:  Registration is required.  Participants may register at the
door before the sessions.   Pre-registration is strongly encouraged. 
Pre-registration forms may be downloaded from the HURI web site at:  
——————————————————————————————–
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
23.            AUSTRIA CONVERTS ITS BIOMASS TO ENERGY

By Delphine Strauss, Financial Times, Lonon, UK. Mon, Jan 30 2006

Wood smoke curling from chimneys of an Alpine village encapsulates the
picture- postcard image of an Austrian winter. But the reality is fast
becoming more high-tech – sleek, smoke-free boilers burning wood pellets or
other biomass fuels to heat villages, factories and urban housing, with a
neutral impact on carbon emissions.

In 2003, nearly 70 per cent of Austria’s domestically produced power came
from renewable sources. Biomass fuelled 11.2 per cent of Austria’s total
primary energy supply and 21 per cent of heat production, according to
International Energy Agency (IEA) statistics. Not only do forests grow back,
they absorb carbon dioxide from the air as they grow.

As businesses in Europe struggle with mounting energy costs, worries over
supplies, and pressure to reduce carbon dioxide emissions, Austria’s biomass
proponents are keen to show that small-scale schemes offer an economic
solution. With almost half of Austria covered in forests, wood-fired heating
schemes have grown in popularity.

Even the fashionable Lech ski resort has a biomass plant that provides 90
per cent of its heat, and has spurred imitators as far away as the Canadian
Rockies.

Biomass energy is a growing business in Austria, sustaining a new market in
wood pellet supply, and building a technology cluster that increasingly
exports its services. Forestry, the second largest sector after tourism, has
a growing stock of wood and is keen to put by-products – chips, sawdust

and low-grade logs – to use.

It is no surprise, then, that the Austrian presidency of the EU has put
biomass high on its agenda. Wolfgang Schuessel, the Austrian chancellor,
told the European parliament on January 18 that Europe must diversify energy
supplies to reduce its dependence on imports, especially after Russia’s gas
dispute with Ukraine.

Austria’s commitment to biomass stems from concerns over energy security –
Austria relies on imports for two-thirds of its supply, and has banned
nuclear generation – as well as environmental targets and a wish to support
rural jobs.

The use of biomass energy “started as a grassroots movement”, says

Reinhard Madlener, a senior energy economist at the Swiss Federal Institute
of Technology.

Over time the design of plants that could be smelly and inefficient
improved, arousing the interest of mainstream energy suppliers. A new market
in wood pellets – compressed sawdust that is dryer, cleaner and easier to
transport than other biomass fuels – was key to the spread of domestic
biomass boilers.

Nonetheless, government support has been crucial to the development of an
industry where the start-up costs of buildingboilers are high, and
transporting fuel over long distances uneconomic.

It supports biomass through subsidies of up to 50 per cent of investment
costs, funding for research and development, and legislation matching a 4
per cent target for renewable electricity with a guaranteed price for
suppliers.

With these incentives, and new technology that can support larger projects,
big utility companies are starting to take an interest. Siemens’ power
generation division is building Europe’s largest wood-fired power plant in
Vienna, due to supply 5,000 households with electricity and 12,000 with
district heating from June.

EVN, the leading energy supplier in the country’s largest province of Lower
Austria, is building two biomass heat and power plants and says its
environmental business made up 14 per cent of total sales in 2005.

Taxes make natural gas more expensive than pellets in Austria, especially
after the recent surge in gas prices, but the cost of installing boilers has
raised doubts over the market’s ability to survive without subsidy.

Volatility in oil and gas prices and the stability of a local wood supply
could change this logic. For businesses investing in a system lasting 10-15
years, says Kasimir Nemestothy from the Austrian Energy Agency: “It makes
sense to reduce the risk by choosing the fuel with the least price
volatility.”

Less thickly-wooded countries are already exploring other options. Kerrin
Buckley, at the Bangor Centre for Alternative Land Use in Wales, says crops
such as willow and miscanthus could grow even in damp, isolated North

Wales.

So Austria’s support for biomass and its focus on localised heating schemes
could provide a template for other European markets too far from forests for
transporting pellets to be viable.

Its genesis in rural communities should appeal to European farmers seeking
more profitable non-food crops as Common Agricultural Policy subsidies are
separated from production.
———————————————————————————————

[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
24.                             THE MUSHROOM CLOUD

Ruadhan Mac Cormaic, Irish Times, Dublin Ireland, Jan 28, 2006

Many thousands of Latvians come to Ireland to work on mushroom farms.

A book by undercover reporter Laima Muktupavela about their lives,
working conditions and the land devastated by their departure, has become
a bestseller in her native Latvia, and would be an eye-opener for Irish
readers. She talks to Ruadhan Mac Cormaic.

On Christmas Day that year they were en route before sunrise. From the
three-bedroom house that the 12 Latvians shared to the mushroom farm where
they worked could have been no more than a few miles, though it felt longer
after a day’s exertion.

“I can still remember that Christmas Day,” says Laima Muktupavela. “We had
to start work at five o’clock in the morning. Between 5am and 7am we had to
prepare 200 boxes of mushrooms, ready to go to the shops. I asked could we
have more money for that work, but the owner said: ‘If you ask questions,
you can go home.’

“I remember another time when I found myself sweating all over. I had fallen
ill, and whatever I had brought out a rash and swelling on my skin. I asked
the owner if he could help me with some bandages or medicine. He replied
that he couldn’t be bothered with it. It wasn’t his problem, he said, and
walked away. I approached him again and said: ‘It is your problem. It’s a
big problem.’

“What I did was, I lay down and placed cabbage leaves over my skin to try to
relieve the pain and bring down the swelling. He was terrified when he saw
how bad the damage was. So he looked at me and said [giving an exasperated
wave of the arm]: ‘Go away! I don’t want to see you again today.’ “

Muktupavela laughs at the recollection. Her walk-on role in the drama of
Latvian migration was an ambivalent one from the start, she says, conceived
not of economic need but of a journalist’s hunch. As a newspaper reporter in
Latvia at the turn of the century, Muktupavela had increasingly found
herself as chronicler of an incipient trend, jotting down the impressions of
returning emigrants with greater frequency, if diminishing insight.

In all such conversations, she found, one could go so far before invariably
hitting the boundary of the emigrant’s need to rationalise his lot by
painting his experience in primary colours alone. “Yes, I thought they were
hiding something. They were holding back. They weren’t telling the absolute
truth. So I thought, I’ll go myself. I’ll find out.”

Leaving behind her partner and four children, Muktupavela travelled to
Ireland in 2001 and joined the group of 11 other Latvians working on a
mushroom farm in Co Meath. “We shared one house between 12 of us. There

were three bedrooms upstairs, and there was even a small kid in the house. I
fought for my own space. Physically! I didn’t tell anyone I was a journalist
but made a point of talking with everyone, trying to get to know their
characters, their attitudes, the way they interacted.”

A typical working day began at 6am and finished when they could no longer
see the mushrooms through the darkness. For this they each earned about
GBP125, or just under 160, a month. As the only member of the group with any
English, Muktupavela became its spokeswoman. “I asked the owner why Irish
people were getting better pay than Latvians. And do you know what he said?
‘You are different.’

“But at the end of the day he was good enough. He wasn’t the worst man.
There was a lady among us who was due to give birth, and he would bring

her to the hospital; he would look after her. I wrote that in the book: that we
were very grateful to him for that.”

When she returned home, the impressions Muktupavela had formed in Ireland
became the matter for her first book, and the questions raised by “The
Mushroom Covenant” were of such resonance that its first edition was briskly
followed by a second, then a third and a fourth.

It was awarded the Latvian National Literary Award in its publication year,
and its author’s voice radiated outwards like a bell; the work has been
translated several times, with an English version on the way. To most
Latvians, Muktupavela’s name is the standard gambit in debates on
emigration.

The book drew on the author’s experience to broach a broader set of
questions, most to do with the social ramifications of the exodus of young
Latvians seeking better-paid work in countries such as Ireland, Britain and
Sweden. Doing so, it tapped into deeply-held national misgivings that had
taken root by the time of its publication.

“When I came back from Ireland,” says Muktupavela, “I started to write about
the social problems this huge movement of people was having on Latvia –
about the break-up of families, marital separation. Just some journalism, at
first. What kind of life is it for a woman with children whose husband
leaves the country? How would they live? At first, people were angry with

me for bringing all of this up. But in general the book was received very
well.”

She likens it to “a Bible” on the bookshelves of those who have family
members working abroad. When she arrived in Dublin last week, an official

at the Latvian embassy told her that when he left home for this posting, his
family made sure to send him off with a copy of The Mushroom Covenant
under his arm.

Muktupavela was born in Rezekne, a town in the poor Latgale region, in
eastern Latvia. Built on seven hills close to the border with Russia, it is
a place of great lakes, bad roads and long memories. As an old geopolitical
pivot – Rezekne is where the Moscow-Riga and St Petersburg-Warsaw

railway lines intersect – the family trees of its 40,000 people are multi-ethnic
mosaics.

And the economic forces that here drew together Balts and Slavs and
Ugro-Finns, Polish landlords and Russian peasants, are today exerting the
same circular effects. Unemployment in Latgale is the highest in Latvia, and
since the country joined the EU, in May 2004, tens of thousands of the
region’s young have departed with the certainty of a better wage overseas.
Few homes in Latgale have not had a son or daughter emigrate to Ireland,
says Muktupavela.

Employers in the region now look to Ukraine and Belarus to fill their
vacancies, but the social collateral is heavier still: broken families,
orphaned children, desolate townships.

“We have very small salaries in Latvia, and these people left Latvia because
they need to have a normal life. Thank God that Ireland can help. But people
who go to Ireland, many don’t come back. We were the first wave of Latvians
[in 2001]. Now I see that Latvians are building the economies of other
countries, like Ireland.

Only now, after five years, has the Latvian government started to think
about this problem. Only now have they started to discuss it. Only now,

when 50,000 Latvians have left for Ireland.”

Muktupavela speaks English, but I have brought along an interpreter just in
case. Though skilled, he is more accustomed to legal translation, with a
spare style and an uncanny knack for rendering two minutes of Latvian

speech in three words of English. But he has been following the conversation
intently, and here he takes up Muktupavela’s argument. He has been in
Ireland for some time, he says.

His mother, who joined him two months ago, has found a job washing dishes

in the city. His father stayed at home; he is a foreman on a building site.
“Every time I call home, my father tells me how they have to finish a
building by such a time, but they can’t because they’re short of staff. All
they have is unqualified workers, because the qualified builders are earning
much more money abroad.”

Four years and five books have passed since that Christmas morning on the
mushroom field. Muktupavela, liberated from daily journalism by the
commercial success of The Mushroom Covenant, is now a full-time writer.

She has returned to Ireland with a television production team to prepare for
a full-length documentary and a 20-programme series based on the experience
of Latvians in Ireland.

The project, for which she is writing the script, will involve shuttling
between the two countries over the next three years. The job is a pleasure;
they need do no more than sit in a Dublin cafe to find their subjects, says
Muktupavela. The day after we meet, the production team hopes to track down
Jekabs Nakums, a Latvian Olympic athlete who announced on television last
November that he was leaving to go and wash cars in Ireland.

The project also gives Muktupavela the chance to indulge an abiding passion
for the country she is so closely identified with at home. A regular
visitor, she spent her last trip hitching around the west with her daughter,
and she has taken in much of the rest of the country over the years. “I have
thought about buying a house here,” she says.

“I have dreamed of it. In Co Mayo. Irish people always laugh when I tell
them that. Who would have believed five years ago that a Latvian would be
talking about buying a house in Ireland? I can’t explain my attitude to
Ireland. I cannot find words.”

She reverts to Latvian, smiles and fluently pours forth, her hands waving,
her voice halting once or twice while scouring for the right word, before
delicately nudging her head forward and conspiratorially imparting the final
clause in a whisper. When she has finished, we turn to the interpreter. He
raises his gaze slowly from the table. “Yes, she is happy.”
——————————————————————————————–
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
25.        UKRAINIAN FOLKLORE SOUND FILES ON LINE 

 
Natalie Kononenko, Kule Chair of Ukrainian Ethnography
University of Alberta, Modern Languages and Cultural Studies
Edmonton, Alberta, Canada, Mon, 16 Jan 2006
I am pleased to announce another exciting web page.  Please go to
http://projects.tapor.ualberta.ca/UkraineAudio/  From this page you will
be able to access all of the sound files that I recorded in Central Ukraine
between the years 1998 and 2000 or about 150 hours of sound. 
 
What makes this page special and ground breaking is that all of the sound
files are indexed, thanks to the careful and thoughtful work of our graduate
student, Svitlana Kukharenko.  Indexing means that you can find a topic on
our keyword list, click on the topic, and go directly to the sound recording
where that topic is being discussed.

The project for which the files were recorded had to do with family or life
cycle rituals: weddings, birth rites, baptisms, funerals.  At the same time,
all sorts of other material came up: personal recollections, stories about
house spirits or domovyky, stories about the unquiet dead and their return.
Our interviewees told me etiological and anecdotal narratives to educate me.
Since my field partner is interested in tales, a number of them are
included.

When you go to the TAPoR page, you will find a list of keywords.  Those

are the topics covered in the sound files indexed so far.  Click on the topic. 
You will see one or more recordings.  Click on the recording.

You will also find a list of the topics on the entire file that you have
pulled up. Should you want to listen to something you see on the list,

drag the pointer to the appropriate number of the file and click play.  If
this is not clear from my explanation, it will be when you see the website.

In addition to crediting Svitlana Kukharenko for her good work, I must

also credit Yue (Eric) Zhang, the programer at TAPoR, and Peter Holloway,
our resident digital expert.  They deserve the credit for the programming
behind the ground-breaking module.

Natalie Kononenko, Kule Chair of Ukrainian Ethnography
University of Alberta, Modern Languages and Cultural Studies
200 Arts Building, Edmonton, Alberta, Canada T6G 2E6
Phone: 780-492-6810, nataliek@ualberta.ca
Web: http://www.arts.ualberta.ca/uvp/
——————————————————————————————-
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AUR#650Last Strategic Nuclear Bomber Scrapped; US Political Consultants Work For Opposition; Pinchuk’s Davos Lunch; Two Languages – One People

 
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 650
Mr. E. Morgan Williams, Publisher and Editor  
Washington, D.C., Kyiv, Ukraine, MONDAY, JANUARY 30, 2006
                           ——–INDEX OF ARTICLES——–
         Clicking on the title of any article takes you directly to the article.               
Return to the Index by clicking on Return to Index at the end of each article
1.     UKRAINE SCRAPS LAST STRATEGIC NUCLEAR BOMBER
Inter TV, Kiev, in Russian 1800 gmt 27 Jan 06
BBC Monitoring Service, UK, in English, Friday, Jan 27, 2006

2UKRAINE: LAST TU-22M STRATEGIC BOMBER ELIMINATED
            Under U.S.-Ukraine Program to Reduce Common Threats
Public Affairs Section, U.S. Embassy, Kyiv, Ukraine, Fri, Jan 27, 2006

3AMERICAN POLITICAL CAMPAIGN EXPERTS WORKING FOR
                    SDPU(o), PARTY OF REGIONS AND PORA
      Paid by Victor Medvedchuk, Victor Yanukovych, Rinat Akhmetov
Glavred.Info, Kyiv, Ukraine, Wednesday, January 18, 2006

4UKRAINIAN BILLIONAIRE VIKTOR PINCHUK’S DAVOS LUNCH 
     With George Soros, Strobe Talbott, Arseniy Yatsenyuk, Jean Lemierre
                 A separate discussion was held later on Russia’s future
By Lynn Berry, Staff Writer, The Moscow Times
Moscow, Russia, Monday, January 30, 2006. Page 1.

5   SEVEN UKRAINIAN BUSINESS TYCOONS LISTED AMONG
              CENTRAL, EAST EUROPE’S 100 MOST AFFLUENT
Ukrinform, Kyiv, Ukraine, Friday, January 27, 2006

6UKRAINE: NO LEGAL GROUNDS TO DISQUALIFY OPPOSITION
     LEADER YANUKOVYCH FROM PARLIAMENTARY ELECTION
       Court ruling quashing Yanukovych’s convictions had been forged
ICTV television, Kiev, in Ukrainian 1105 gmt 29 Jan 06
BBC Monitoring Service, UK, in English, Sunday, Jan 29, 2006

7.   WILL THE INTERIOR MINISTRY BECOME AN APPENDAGE
                    OF THE SOCIALIST PARTY OF UKRAINE?
ANALYSIS & COMMENTARY: By Serhiy Porytskyy
Glavred, Kiev, Ukraine, in Russian 0000 gmt 23 Jan 06
BBC Monitoring Service, UK, in English, Saturday, Jan 28, 2006

8UKRAINE OPPOSITION PARTY’S ELECTION AD SUPPORTING
      RUSSIAN AS SECOND OFFICIAL LANGUAGE IN UKRAINE
                               Two languages – one people!
Ukrayina TV, Donetsk, in Ukrainian 1857 gmt 27 Jan 06
BBC Monitoring Service, UK, in English, Saturday, Jan 28, 2006

 
Ukrayinska Pravda On-line, Kyiv, Ukraine, Monday, January 30, 2006

10YUSHCHENKO DECLARED WAR FOR THE SAKE OF PEACE
             Ukrainian president hints at abolishing constitutional reform
ANALYSIS & COMMENTARY: By Oleksandr Mikhelson
Glavred, Kiev, Ukraine, in Russian 0000 gmt 24 Jan 06
BBC Monitoring Service, UK, in English, Friday, Jan 27, 2006

11.   HEAD OF US CONGRESS UKRAINIAN CAUCUS PROMISES
                  TO SUPPORT UKRAINE IN BIPARTITE ISSUES
Natalia Bukvich, Ukrinform, Kyiv, Ukraine, Friday, January 27, 2006

12UKRAINIAN AMBASSADOR TO USA PRESENTS MERITORIOUS
       BADGE TO US ARMY RETIRED COLONEL STEPAN OLIYNYK
                       Born in Lviv region of Ukraine in July of 1930
Nataliya Bukvych, Ukrinform, Kyiv, Ukraine, Sat, January 28, 2006

13.               AN OPPORTUNITY IN UKRAINIAN OIL & GAS?
ANALYSIS: By Stephen Clayson, Correspondent, London
ResourceInvestor.com, Miami, Florida Tuesday, 24 Jan 2006

14INTERNATIONAL INTELLECTUAL PROPERTY ALLIANCE (IIPA)
SUPPORTS US DECISION TO RESTORE TRADE BENEFITS: UKRAINE
ag-IP-news Agency website, Friday, January 27, 2006

15.     UKRAINIAN NATIONAL COMMITTEE OF INTERNATIONAL
CHAMBER OF COMMERCE OPENS OFFICE IN TORONTO, CANADA
Ukrinform, Kyiv, Ukraine, Friday, January 27, 2006

16.              UKRAINE AND CANADA AIMING TO DEVELOP
                       INTER-PARLIAMENTARY COOPERATION 

Ukrainian News Agency, Kyiv, Ukraine, January 28, 2006

17VOLYN REGION SAID TO BE UKRAINE’S MOST ATTRACTIVE
    REGION FOR FOREIGN INVESTORS BY SWISS ORGANIZATION
                    Zhytomyr, Rivne and Poltava regions also attractive
Ukrinform, Kyiv, Ukraine, Saturday, January 28, 2006

18.    CZECH ENERGY GROUP CEZ INTENDS TO ACQUIRE SIX

                    UKRAINIAN ELECTRIC POWER COMPANIES
Ukrinform, Kyiv, Ukraine, Friday, January 27, 2006

19.     UKRAINIAN OPPOSITION LEADER YANUKOVYCH SAYS

                            RUSSIA’S GAS POLICY WRONG 
UNIAN news agency, Kiev, in Ukrainian 1231 gmt 28 Jan 06
BBC Monitoring Service, UK, in English, Saturday, Jan 28, 2006

20RUSSIA VS UKRAINE-MORE THAN AN ECONOMIC DISPUTE
ANALYSIS & COMMENTARY: Electricity4Business, PrWeb.Ccm
London, United Kingdom, Sunday, January 29, 2006

 
21.                          RISKING ANOTHER SLAVIC WAR
OP-ED: by Masha Lipman, Columnist
The Washington Post, Washington, D.C.
Monday, January 30, 2006; Page A17
 
              Conference: Ukrainian Research Institute, Harvard University
                     Sunday, February 5 and Monday February 6, 2006
Ukrainian Research Institute, Harvard University
Cambridge, MA, Friday, January 27, 2006
 
23.            AUSTRIA CONVERTS ITS BIOMASS TO ENERGY
By Delphine Strauss, Financial Times, Lonon, UK. Mon, Jan 30 2006
24.                             THE MUSHROOM CLOUD
Ruadhan Mac Cormaic, Irish Times, Dublin, Ireland, Sat, Jan 28, 2006
Natalie Kononenko, Kule Chair of Ukrainian Ethnography
University of Alberta, Modern Languages and Cultural Studies
Edmonton, Alberta, Canada, Mon, 23 Jan 2006
========================================================
1
UKRAINE SCRAPS LAST STRATEGIC NUCLEAR BOMBER

Inter TV, Kiev, in Russian 1800 gmt 27 Jan 06
BBC Monitoring Service, UK, in English, Friday, Jan 27, 2006

[Presenter] The last Tu-22 heavy bomber was scrapped in Poltava today.
Ukraine thus accomplished all the terms of its agreement with the USA on
destroying strategic nuclear weapons and preventing their dissemination.

About 11m dollars have been spent for the scrapping. Three Tu-22 aircraft
and seven hulls of X-22 cruise missiles will continue their lives at
museums. Our correspondent Hanna Onishchuk has just returned from

Poltava.

[Correspondent] The last Tu-22M3 bomber from the dead list is considered
scrapped. Now Ukraine has nothing left from its former nuclear arsenal. Ten
years ago Ukraine had the world’s third biggest nuclear arsenal.

Unlike Russia and the USA, it lacked only aircraft carriers and nuclear
submarines. It cost colossal amounts of money to maintain. But in the Soviet
Union there was no lack of funding for the defence sector. The nuclear
arsenal turned out to be heavier than Ukraine could bear.

[Oleksandr Kuzmuk, former defence minister, in Ukrainian] Keeping and
maintaining strategic offensive nuclear weapons was the most costly and
science-dependent area.

[Correspondent] It was heavy to carry, but it was a pity to drop. However,
economic issues were not decisive for taking a political decision. Many are
saying now that Ukraine made a mistake when it believed the promises made

by Russia and the USA and gave up its nuclear weapons.

[Yevhen Marchuk, former defence minister and secretary of the National
Security and Defence Council, in Ukrainian] The question is whom are we
going to attack? In addition, we would keep the world strained. We would
look a little bit silly – more than a half of Ukrainians are below the
poverty line but the country possesses nuclear weapons.

[Correspondent] But it was as hard to get rid of the nuclear arsenal as to
maintain it. There was time, money and nerves spent. There were tears.

The Ukrainian army was constantly cutting, destroying, scrapping.

First, all nuclear warheads were transferred to Russia. Ukraine received
nuclear fuel in return. Then intercontinental ballistic missiles were
scrapped and all missile silos were blown up. It was more complicated

with the aircraft.

They rusted with time and turned into scrap metal. However, Ukraine

managed to cover its gas debt to Russia with 11 bombers and 487 cruise
missiles. So, it is finished with the hardware now. It is only people who
are left now with their unsolved problems.   -30-
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2.  UKRAINE: LAST TU-22M STRATEGIC BOMBER ELIMINATED
            Under U.S.-Ukraine Program to Reduce Common Threats

Public Affairs Section, U.S. Embassy, Kyiv, Ukraine, Fri, Jan 27, 2006

POLTAVA, Ukraine – The last Tu-22M strategic bomber was eliminated

January 27 at Poltava Air Base under the Cooperative Threat Reduction
(CTR) program.

“I think we can all agree that, through our cooperative efforts, the CTR
Program has enjoyed considerable success here in Ukraine, ” stated U.S.
Ambassador to Ukraine John E. Herbst during the elimination ceremony in
Poltava.

“But, these combined efforts have accomplished much more than just the
elimination of weapons, delivery systems, and infrastructure.  They have
clearly demonstrated Ukraine’s commitment to international peace and
stability and enhanced Ukraine’s standing as a nation willing to play its
part in the global war on terrorism and as a reliable partner in arms
control efforts, ” the Ambassador said.

At a press conference commemorating this event, Doug Englund, the acting
deputy assistant secretary of defense for chemical demilitarization and
threat reduction programs, commended Ukraine for its steadfast support of
this and the other strategic nuclear arms elimination programs.

“The elimination of the last Tu-22M Backfire bomber represents a significant
milestone in both the relationship between Ukraine and the United States and
in the elimination of a weapon of mass destruction,” Englund said.

In October 1993, the United States and Ukraine signed the CTR Umbrella
Agreement for the elimination of strategic nuclear arms.  Sixty bombers have
been eliminated under this $12 million program since January 2001.

Using elimination methods specified in the Conventional Forces in Europe
arms control treaty, high speed saws cut off the nose of the bomber and
hydraulic shears cut through the tail.  The metal is cut into smaller pieces
and sold as scrap metal, and the equipment is sent to another military base
where the precious metals are recovered and sold.  All funds received from
these activities are used by Ukraine to provide housing for retired military
officers.

Through the CTR program, the Department of Defense is assisting the Ministry
of Defense and the National Space Agency of Ukraine with the elimination of
strategic aircraft and air-to-surface missiles and with the storage of SS-24
intercontinental ballistic missile solid propellant rocket motors.

The Defense Threat Reduction Agency implements the CTR program which
prevents the proliferation of weapons of mass destruction (WMD) and related
materials, technologies and expertise from former Soviet Union states. This
includes providing for the safe destruction of Soviet era WMD, associated
delivery systems and related infrastructure.  -30-
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http://kiev.usembassy.gov/infocentral_eng.html; info@usembassy.kiev.ua
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3. AMERICAN POLITICAL CAMPAIGN EXPERTS WORKING FOR
                 SDPU(o), PARTY OF REGIONS AND PORA
 Working for Victor Medvedchuk, Victor Yanukovych, Rinat Akhmetov

Glavred.Info, Kyiv, Ukraine, Wednesday, January 18, 2006

KYIV – In the past, the pro government politicians used Russian political
technologists after they renamed themselves opposition, SDPU(o) and

Party of Regions have started using political technologists.  For example, a
former director of NDI, Andreas Katsouris, in the meantime is a consultant to
former head of pres admin and now head of SDPU(o) Victor Medvedchuk.

Incidentally, NDI gets its funding from American taxpayers “to further
democracy” in Ukraine.  It’s not clear how Mr. Katsouris manages to divide
his time between the Hotel Radisson on Yaroslviv Val where he currently
lives and the NDI Kyiv offices, where he appears regularly, and the SDPU(o)
headquarters.

It is also not very difficult to establish that Mr. Katsouris works for
Aristotle, Inc. and SDPU(o) is a client of that company.  What concerns NDI
ties with other political parties, back on March 2, 2004, press service of
the party of Regions sent out a notice about a meeting between head of the
Party of Regions Yanukovych with the current director of NDI, David

Dettman.

At that time, Dettman offered to the leader of the Party of Regions, whom he
considers “a strong opposition leader” (as was quoted by Party of Regions
website), he offered help in developing the new opposition in Ukraine.

Sidebar: “In the US, the network of the National Democratic Institute is
headed by former Secretary of State Madeline Albright.

Last Tuesday, January 10, 2005, the influential American newspaper Wall
Street Journal reported that one of the richest Ukrainian oligarchs hired
American political consultant and veteran of “dirty tricks”, Paul Manafort,
for consulting on the election campaign for the Party of Regions.  According
to our information, Manafort did not sign a contract with Victor Yanukovych,
rather he signed on with Rinat Akhmetov.

Which concerns the persona of Manafort is known that he is a partner of

the company “Davis Manafort & Freeman, Inc.”.  This lobbying firm is also
known to cooperate with Kremlin technologists.  For example, Vyacheslav
Lyazlov, a political consultant from Moscow, who works in the Kremlin. 
Today he is responsible for the Party of Regions voter turnout in program
in Zaporizhiya and Dnipropetrovsk.

Regarding Manafort himself, he is credited with “victory” over Ferdinand
Marcos in the Philippines.  According to western press, that election was
marred by total fraud, voter intimidation, problems with voter lists and
irregular vote counts.  Among clients of Manafort’s “business” are also
governments of Kenya, Somalia, Zaire, National Union for Angola’s
Independence and others.

According to rumors, earlier American Lee Avrashov, a Russian immigrant
who earlier imported American chicken thighs to Russia, and Brian
Christenson, a Republican politicians, helped out on the project earlier but
seemed to have quit because of disagreements with Manafort.

Manafort himself rarely visits Ukraine, but meets with Akhmetov in Paris.
But according other sources, Rinat Leonidovych (Akhmetov) prefers to
conduct all negotiations on the territory of Monaco.

However, Manafort if not the only consultant for the Party of Regions.
Another American, former director of the office of the International
Republican Institute in Moscow, Phillip Griffin, who was fired from IRI
many years ago, is currently also a consultant to the Party of Regions.

There is also information that the business partner of Manafort, Rick Davis,
is also helping out with the strategy of Party of Regions election campaign.

He works in close contact with Kremlin political consultants. Office of
Davis Manafort & Freeman, Inc, is currently located in Kyiv on Sofievska
Street across from the building of the company of Golden Telecom.

Sources in Washington state that the most famous client of Mr. Davis is
American Senator John McCain, who may be the next rival of Bush for the
next presidential election in the US.  Incidentally, McCain heads the
International Republican Institute [IRI] which, as well as the National
Democratic Institute [IRI], has an office in Kyiv.

According to the information that we possess, Robert Dahl, former advisor to
the Speaker of the House of Representative, Newt Gingrich, is also involved
in the Party of Regions election campaign.  Dahl was also a consultant to
the well known international organization IFES, and participated in the Bush
election campaign during the controversial vote recount in Florida in 2000.

According top some information, Dahl earns around $40,000 per month for

his consulting and establishing of ties between Party of Regions and
Washington Republicans.

In fairness, it should be noted that the Regions established contacts with
the US relatively long ago.

Earlier, “Ukrainskiy Pravda” published a list of PR companies that worked to
create a positive image for Victor Yanukovych in the US. Among them, were
the following; Venable L.P.; Potomac Communications Strategies, Inc;
Creative Response Concepts; DB Communications, L.C.; JWI, L.C.; and
Alexiy Kiselev.

And the president of a PR company “which presented itself as a sociological
research firm” Whitman Insight Strategies, Bernard Whitman, during the
presidential election of 2004, personally visited Kyiv to present the
results of Victor Yanukovych’s high rating.

To be fair, it should be noted that not only opposition parties have access
to the US government resources.  For example, one of the high ranking
Ukrainian employees of the National Democratic Institute office, Tetiana
Soboleva, who has worked for NDI for ten years, is currently a candidate in
the political party PORA-PRP.  She is #64 on the party list for parliament.

At the same time, she continues to receive an NDI salary (money of the
aforementioned American taxpayers).  Of course, there is no evidence that
uses NDI resources for promoting her political party.  But the question
remains open.

PS – Glavred, for several days, tried to contact the representatives of the
mentioned parties to receive an official answer regarding participation of
the former or current technologists from the US.  But we received no answer.
Well, we will have the wait. (Original article translated into English)   -30-
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LINK: http://glavred.info/archive/2006/01/18/181126-6.html
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4. UKRAINIAN BILLIONAIRE VIKTOR PINCHUK’S DAVOS LUNCH 
     With George Soros, Strobe Talbott, Arseniy Yatsenyuk, Jean Lemierre
              A separate discussion was held later on Russia’s future

By Lynn Berry, Staff Writer, The Moscow Times
Moscow, Russia, Monday, January 30, 2006. Page 1.

DAVOS, Switzerland — The World Economic Forum is a strange place,
where members of an elite but eclectic global club meet for five days in a
Swiss ski resort to hold structured discussions on high-minded topics and,
of course, to schmooze.

These discussions, sometimes over lunch or dinner, bring together people
who might otherwise never meet. And sometimes they encourage people
with low public profiles but high-impact jobs to express their ideas. The
results are often surprising, which presumably is the point of the whole
expensive exercise.

But for people from our part of the world, two events this weekend in
Davos stood out.

On Friday, Viktor Pinchuk, a Ukrainian billionaire on the losing side of the
Orange Revolution, put on a private lunch with such an assortment of guests
and speakers that you wondered how he got them all into the same room.

With George Soros, Strobe Talbott and Pinchuk’s wife, who is former
President Leonid Kuchma’s daughter, seated at the head table and some of
Russia’s biggest businessmen at the table all the way in the back, Pinchuk
introduced the main speaker, former Polish President Aleksander
Kwasniewski, and noted the important role he had played in “our Orange
Revolution.”

Two Cabinet ministers from the ousted government joined the current
economy minister and TNK-BP CEO Robert Dudley in making short
remarks.

Then on Saturday morning, some of Russia’s most successful young
business leaders engaged in a lively discussion on Russia’s future, at times
taking opposing views.

The discussion on Saturday centered around three scenarios for Russia
developed by the forum and presented by Angela Stent, a professor at
Georgetown University who until recently was on the U.S. National
Intelligence Council; Lilia Shevtsova, an expert on Kremlin politics from
the Carnegie Moscow Center; and Olga Dergunova, chairman of
Microsoft in Russia.

It fell to Dergunova to present the rosiest scenario, in which oil prices
decline and in the ensuing turmoil an exceptionally wise president is
democratically elected and implements a series of bold reforms.

Alexander Izosimov, CEO of VimpelCom, stood up to take issue with the
premise that high oil prices are holding Russia back. He made the case that
high oil prices bring a sense of stability, reduce the risk of borrowing
money and thus allow other sectors that require significant outlays of
capital, such as telecommunications, to grow.

“Look at the amount of money being borrowed in the West,” Izosimov said,
expanding on his remarks after the conclusion of the session, which like
most sessions at Davos is off the record unless the speaker explicitly
agrees to be quoted. “The accessibility of international money would not
happen if Russia were not perceived as stable.”

He was joined by Alexei Mordashov, head of Severstal, who said that in
addition to creating stability, high oil prices generated demand and allowed
for increases in public sector wages.

Dergunova shot back that their arguments were based on the notion that oil
revenue was being distributed through society — and indeed, the figures
show a widening disparity between rich and poor in Russia.

This recalled a discussion the day before at a session on how countries
should spend their oil revenues and the conclusion that rising prices carry
very real dangers for petro-states such as Russia.

At the session, Ngozi Okonjo-Iweala, the finance minister of Nigeria,
described an effort to fight her country’s notorious corruption by
publishing information in the newspapers on how the oil revenues are
distributed. H.E. Sheikha Lubna Al Qasimi, the economy and planning
minister of the United Arab Emirates, made the point that the oil industry
does not produce jobs; it is what is done with the revenues that matters.

The arguments of these two accomplished, Western-educated women seemed
to have given Dergunova food for thought. She said the problem in the
Russian oil industry was that the surplus revenues were “badly managed,
poorly distributed and there was no transparency. “Revenue distribution
creates room for corruption when there is no civil control,” she said.

Economic Development and Trade Minister German Gref also participated in
the Friday morning session on oil revenues, where he was asked to explain
the gas dispute with Ukraine. He reiterated Gazprom’s position that the
demand for Ukraine to pay a higher price for gas was not based on politics
and that the company had a responsibility to its shareholders to sell to all
its customers at market prices. “I’ll repeat that it relates not only to
Ukraine, but in Ukraine, because of political developments, it was over-

politicized,” Gref said.

The gas dispute was also a main topic of discussion at the lunch hosted by
Pinchuk. Arseniy Yatsenyuk, the economy minister, reiterated that questions
over the ownership of Rosukrenergo were the main stumbling block to the
signing of a gas deal initialed on Jan. 4. The deal has a signing deadline
of Feb. 1.

He said that under Ukrainian anti-monopoly legislation, before the joint
venture could be registered, Rosukrenergo had to disclose information on its
shareholders. Asked whether the Ukrainian government knew who owned
Rosukrenergo, he said, “The minister of economy doesn’t know.”

He denied the Russian claim, repeated here by Gref, that Rosukrenergo was
brought into the deal at the insistence of the Ukrainian side. “The
Ukrainians say it was the Russians, the Russians say it was the Ukrainians.”

He said he had met with Gref earlier Friday and on Thursday. He predicted
that President Vladimir Putin and President Viktor Yushchenko would have to
step in to break the deadlock before Wednesday’s deadline. “It depends on
the political willingness, but probably the two presidents have to
reconcile. They are the best negotiators.”

Pinchuk’s lunch was moved to a bigger restaurant because so many people
wanted to come. Among the 100 guests were Soros, a financier who supported
the Orange Revolution; Talbott, president of the Brookings Institution who
was former U.S. President Bill Clinton’s point man on Russia; and Jean
Lemierre, president of the European Bank for Reconstruction and

Development [EBRD].

The Russia dinner that night, which was part of the official forum program
and thus open to everyone, was less of a draw. There was an embarrassing
number of empty seats at the tables.

Dudley said TNK-BP, in addition to expanding in Ukraine, was showing its
confidence in Russia by planning to increase its capital investment in
Russia by another 30 percent this year, from just under $2 billion in 2005
to up to $2.5 billion. This was also part of its protection plan in a
country where the state is increasingly jealous of its energy resources, he
said.

“As long as we continue to do the things we said we’d do, which is continue
to increase investment, bring lots and lots of new technology into the
country through people and expertise, and put in place programs around
developing people, training, and we’re very, very open about what we do, I
think we’re a good citizen and I think the government looks at us that way,”
he said following the Ukrainian lunch.

“We’re in competition with many other companies, including some state
companies in the oil and gas industry, so there’s a normal healthy
competition,” Dudley said. “But we do not feel pressure that makes me
stay awake at night.  -30-
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LINK: http://www.themoscowtimes.com/stories/2006/01/30/002.html
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========================================================
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5.   SEVEN UKRAINIAN BUSINESS TYCOONS LISTED AMONG
            CENTRAL, EAST EUROPE’S 100 MOST AFFLUENT

Ukrinform, Kyiv, Ukraine, Friday, January 27, 2006

KYIV – According to the Polish magazine Wprost, seven Ukrainians are

listed among Central and East Europe’s 100 most affluent persons.

[1] Igor Kolomoiskiy, co-owner of the Privat group, has been placed in the
twelfth position to top the list of Ukrainian tycoons. His fortune is
estimated at 2.8 billion dollars. According to the magazine, in 2005 Igor
Kolomoiskiy’s capital increased by over 500 M. USD.

[2] Rinat Ahmetov, president of the Shakhtar football club, and Viktor
Pinchuk, former president Kuchma’s son-in-law and Interpipe group founder,
lost one billion dollars in 2005. Rinat Ahmetov a year ago topped the Polish
magazine’s list of most affluent Ukrainians. He has been placed in the 15th
position. His fortune is evaluated at 2.1 bn. USD.

[3] Serhiy Taratuta, ISD (Industrial Union of Donbass) chairman, has been
placed in the 13th position, with his fortune estimated at almost 2.5 bn.
USD.

[4] Viktor Pinchuk’s fortune shrank in 2005, as well. He has been placed in
the 27th position. His fortune is evaluated at 1.5 bn. USD, one billion less
than in 2004.

According to the magazine Wprost, other rich Ukrainians are [5] Fedir Shpyk
(Aval bank owner, 51st), [6] Oleksandr Yaroslavskyi (UkrSibBank owner,
62nd), [7] NSDC ex-secretary Petro Poroshenko (95th). The Wprost

appraises Petro Poroshenko’s capital at 300 M. USD.  -30-
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6. UKRAINE: NO LEGAL GROUNDS TO DISQUALIFY OPPOSITION
      LEADER YANUKOVYCH FROM PARLIAMENTARY ELECTION
        Court ruling quashing Yanukovych’s convictions had been forged

ICTV television, Kiev, in Ukrainian 1105 gmt 29 Jan 06
BBC Monitoring Service, UK, in English, Sunday, Jan 29, 2006

Ukrainian Interior Minister Yuriy Lutsenko has said that opposition leader
Viktor Yanukovych cannot be disqualified from the parliament election race,
even though his criminal convictions were quashed unlawfully.

Speaking live during the talk show called “In detail with Dmitriy Kiselev”
on the ICTV commercial TV channel, Lutsenko said that Yanukovych’s
convictions are considered quashed under the statute of limitation.

“I can clarify this issue today. On the one hand, every man who has served
his sentence is considered to be without convictions after some period of
time. Depending on the nature of the crime committed, this happens in three,
six of eight years.

Mr Yanukovych’s last conviction was in 1970. At any rate, at present he is
the person with quashed convictions due to the statute of limitation. On the
other hand he committed crimes for which he served his prison term,”
Lutsenko said.

Lutsenko produced documents in the studio, which, he said, show that the
court ruling quashing Yanukovych’s convictions had been forged. “Currently
an expert examination has unequivocally established that the ruling by the
court of appeals to the effect that Yanukovych had no criminal convictions
and committed no crimes was forged.

The investigation has failed to identify the people who did this because the
people have stopped turning up for questioning and are at large. But this
does not mean that Mr Yanukovych can be disqualified from the election race.
Due the fact that very much time has passed since his last prison term in
1970, this conviction has been quashed automatically. That is it,” Lutsenko
said.

Lutsenko also said that the police have information that some candidates are
running for parliament in breach of Ukraine’s laws. He added that he is
obliged to share these concerns with the public. “Under the law on the
police, I, as a state servant, should inform the public about the criminal
situation.

Therefore, I am informing of the criminal situation in some election lists.
I mean people at the centre of attention from the police and law-enforcement
agencies. We have evidence and have grounds to suspect these people of
involvement in crime,” Lutsenko said.

As an example, Lutsenko mentioned a candidate running for parliament on

the election list of former Prime Minister Yuliya Tymoshenko’s bloc: “In
November last year, he was a citizen of the African republic Cape Verde. We
have checked this, and he received his Ukrainian passport unlawfully, in
breach of the appropriate mechanism.”

“Well, this does not mean that he is suspected of any wrongdoing. But he
received Ukrainian citizenship unlawfully in November last year, and the
Central Electoral Commission will face a dilemma: to register or to
disqualify him,” Lutsenko said.

“Two people, who are on the international wanted list, are also on
[opposition Progressive Social Party leader] Nataliya Vitrenko’s list,”
Lutsenko went on.

“I do not know if this is good or bad. Probably, some people will like it
and definitely vote for them. These are two people wanted internationally by
Interpol. Some may not like this. Let people decide. I am not canvassing for
anyone, but providing information,” Lutsenko said.

Apart from election-related matters, Lutsenko also talked about the reform
of the traffic police and the police’s priorities in this year, including
fighting crime and corruption.  -30-
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7.   WILL THE INTERIOR MINISTRY BECOME AN APPENDAGE
                    OF THE SOCIALIST PARTY OF UKRAINE?

ANALYSIS & COMMENTARY: By Serhiy Porytskyy
Glavred, Kiev, Ukraine, in Russian 0000 gmt 23 Jan 06
BBC Monitoring Service, UK, in English, Saturday, Jan 28, 2006

The Ukrainian Interior Ministry appears to be coming under the influence of
one political party, a website has said. The author said that Interior
Minister Yuriy Lutsenko, a member of the Socialist Party of Ukraine, is
changing priorities in the ministry giving much more power to the Department
of Public Relations.

The author said an internal instruction from Lutsenko means all information
must be filtered through the Department of Public Relations before reaching
the outside world.

The author said the former Socialist Party press secretary [Inna Kysil] now
in charge of the department is disliked for “incompetence” in police affairs
and added that even generals in the ministry are afraid to cross her path as
“it could cost a job”.

The following is the text of the article by Serhiy Porytskyy, entitled “Will
the Interior Ministry become an appendage of the Socialist Party of
Ukraine?”, published on the Ukrainian website Glavred on 23 January;
subheadings have been inserted editorially:

The one-year anniversary of Yuriy Lutsenko becoming the interior minister

of Ukraine is just around the corner. Has it been possible to de-politicize
this police agency and make it “open and transparent”?

The head of the ministry never tires of repeating – yes. At least that
achieving the goal is very close. But that is simply his own particular
opinion. We will be bold enough to express a bit of doubt on this issue.

And here’s why.
                               A CHANGE IN PRIORITIES
First, it looks like the law enforcement institution has undergone a change
of priorities. There is a strong feeling that many of the what would seem to
be the most important units – for example, the investigative department, and
the department of searches and so on – are gradually giving up the leading
positions…[ellipsis as published] to the Internal Ministry’s Department of
Public Relations.

This sector, which is in no way linked to operations or investigative work,
is gradually becoming the main body in the ministry structure. And these are
not simply unsubstantiated assertions.

Glavred has possession of a curious document – a copy of a service
instruction signed by Minister Lutsenko [who is also a member of the
Socialist Party of Ukraine].

It reads: With the goal of coordinating the activities of sub-departments of
bodies under the Internal Ministry…[ellipsis as published] to establish
the following order of preparing and presenting material to the mass media:

To the leaders of structural sub-units of the ministry: Materials prepared
for the media must be agreed with the Department of Public Relations (DPR).

DPR (Kysil I.V.) Interior Ministry of Ukraine: [is instructed] to coordinate
the activity of sub-units of agencies of internal affairs in carrying out
the unified informational policy of the ministry and to organize operative
and objective informing of society through the media of the activities of
the police.
                       A FILTER FOR OUTSIDE WORLD
This instruction could mean that the Internal Ministry has set up a single
powerful information “filter”, without the sanction of which not only
press-officers, but not even a single general can “talk openly” with a
journalist.

That, by the way is about “openness and transparency”. Such “acts” were
unknown even during the Kuchma era. Yes, the old regime once tried to instil
such a means of “communicating” with the press. But then the attempt ended
in a complete fiasco.

What is the reason for giving the DPR such wide-ranging authority? “To
strengthen the image of the minister” – that is a version frequently found
in the press. In our opinion, the reason is deeper and its roots lie in the
ideological sphere. Just like in communist times: ideology is supreme.

It’s just that in this case, the DPR is responsible for the functions of the
Interior Ministry’s political department. Which strongly resembles an
ideological centre, the work of which is permeated by a quite specific
“political spirit”.
                              WHICH SPIRIT EXACTLY?
Here is a small episode which is quite telling. Glavred is in privy to
information that at the congress of the Socialist Party of Ukraine [SPU],
which took place in December, a cameraman from the Interior Ministry DPR

was “delegated” – to film. It is not likely that the DPR employee came on his
own initiative. So one asks the big question: why the sudden disposition to
one particular party?

More than once criticism has sounded against Yuriy Lutsenko for
professionals leaving the police. As one example, people mention the
resignation of deputy chief of police of Kiev Region, Ivan Proshkovskyy.

And we recall another man – Hennadiy Moskal, recently appointed governor
of Luhansk Region.

There are many rumours about why he “was taken out” of the Interior Ministry
ranks. Most of them come down to politics being involved. It is very hard
not to agree with this. What other reasons can explain the dismissal of a
deputy minister with whom few can compare in terms of professionalism?

Meanwhile, our suppositions on the “political priorities” of the uniformed
ministry are to a certain extent strengthened by Yuriy Lutsenko himself. On
20 January, the chief of the Interior Ministry stated his readiness to run
for the Rivne Regional council from the SPU. How can one keep from

recalling the old saying: “Is the congregation just like the pope?”

That, by the way, is about de-politicizing the police. As one bureaucrat in
the ministry expressed in a private conversation, bit-by-bit the Interior
Ministry is becoming an arm of the SPU. One hopes that this is not yet the
case. On the other hand – facts are stubborn things.
                  GENERALS AFRAID FOR THEIR JOBS
Getting back to that wonderful instruction from the chief of the Interior
Ministry, we draw attention to the last point. It is far more important than
it may appear to be. In light of the role now given to the DPR, a “random
person” is not going to turn up at the wheel. One must suppose that Inna
Kysil had no competition for this post.

We remind our reader that in the not-too-distant past she worked as the
press secretary of the leader of the SPU, Oleksandr Moroz, and then for
Yuriy Lutsenko himself. Many complaints have been voiced in the press

about the 23-year old girl.

Foremost, about her – to put it mildly – not-too-high level of competency in
issues of the activity of law enforcement agencies. Nevertheless, the
minister is prepared to stand up for her. “Maybe there are some who like the
former press secretary with a general’s rank? I had hoped one could find
more substantial things to criticize”. That is exactly how Lutsenko parried
unflattering comments about his subordinate during a recent Internet chat.

And it seems no-one cares much that the current leader of the DPR has got
authority that the “general” never even dreamed of.

The situation is bordering on the absurd: police chiefs with big stars who
have more than once looked fatal danger in the eye, literally shake at the
mention of the name of the young boss of the DPR. “God forbid a conflict
with her! It is very easy to lose your position”, a fairly high-ranking
person in the ministry told us, as if excusing himself.

His colleague – also high-ranking – nodding his head in the direction of the
chief of the DPR, said painfully: “Unfortunately, every revolution has its
costs”. We suppose that many publications in general – and journalists in
particular – could join in drawing such conclusions.

Why hide the sin – the possibility of a correspondent “getting in” to any
particular Interior Ministry event depends directly on the “sympathy or
antipathy” towards you on the part of the DPR. Although, it may be better
here to say “loyalty”.

As one source in the ministry told us, the existence of a “black list”
cannot be ruled out. If that is really so, then it is easy to explain the
“green light” for some – chosen – media, and the “red light” for the rest.
For example, I wonder how the Internal Ministry will react to this article?

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8. UKRAINE OPPOSITION PARTY’S ELECTION AD SUPPORTING
      RUSSIAN AS SECOND OFFICIAL LANGUAGE IN UKRAINE
                                Two languages – one people!

Ukrayina TV, Donetsk, in Ukrainian 1857 gmt 27 Jan 06
BBC Monitoring Service, UK, in English, Saturday, Jan 28, 2006

DONETSK – [Male voice-over, in Russian] For the first time in Ukraine!

The Party of Regions presents a short-text-message referendum in favour
of the Russian language.

To take part in the referendum, it is necessary to send a short text message
with figure 2 if you support granting the Russian language the status of
second official language in Ukraine, or with figure 1 if you are against, by
dialling a short number – 7757, which is the same for all national
operators.

The price of a short text message is standard for subscribers’ tariff
packages.

The Party of Regions. [Switches to Ukrainian] Two languages – one people!

[This advertisement has been run ahead of the evening news bulletin. Video
shows a map of Ukraine divided horizontally into the blue (upper) and yellow
(lower) parts – the colours of the Ukrainian state flag. Video also shows
words “Ukraine” and “the Party of Regions” in the top right corner of the
screen, and the above text in the form of short messages written on blue
envelopes.

The same text is shown in Ukrainian – white letters against a blue
background – at the bottom of the screen. The last picture shows the Party
of Regions’ top election candidates Rinat Akhmetov, Taras Chornovil,

Viktor Yanukovych, Yevhen Kushnaryov and Nina Karpachova standing
together, with an inscription in Russian: “Two languages – one people!” and
the same but smaller inscription in Ukrainian at the bottom of the screen.]
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9. TYMOSHENKO UNCOVERED CONSPIRACY OF YUSHCHENKO
      AND YEKHANUROV WITH FORMER PRESIDENT KUCHMA 

 
Ukrayinska Pravda On-line, Kyiv, Ukraine, Monday, January 30, 2006

BYuT leader Yulia Tymochenko is certain that president Yushchenko issued
security guarantees for ex-president Kuchma.

“It is dead certainty”, she said on Sunday on NTN air answering the question
whether there was an agreement between Yushchenko and Kuchma.

“Absolutely ignoring the opinion of general public, just behind everyone’s
back they agreed that peaceful existence is guaranteed for everyone”, – she
is certain.

According to Tymoshenko, the fact that the partnership memorandum was

signed by Yushchenko and Yanukovich, and Kuchma’s son-in-law Pinchuk
had voted for Yekhanurov to become prime minister are strong evidence of
such conspiracy.

“Today Yekhanurov gave back thousands of hectares of land in Borispol

which where given to Pinchuk by Kuchma. Back in possession of Kuchma’s
family.”, stated Tymoshenko.

“Today even Supreme Courts rulings regarding returning of the strategic
objects, which were given to Pinchuk’s during Kuchma’s days in office, into
the state ownership, were suspended”, she said.

According to Tymoshenko’s statement “Yekhanurov and president’s team,
everyone has appeased with Kuchma and his team and they have establish

this kind of happy mutual co-existence.”

“Despite the fact that I have cancelled the directive for his (Kuchma)
government provision, today he carries on living on government dacha, he is
being served by a great number of domestics who are being paid from the
state budget, loads of bodyguards who guard him are also on government
 wages”, said Tymoshenko.   -30-

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10.  YUSHCHENKO DECLARED WAR FOR THE SAKE OF PEACE
              Ukrainian president hints at abolishing constitutional reform

ANALYSIS & COMMENTARY: By Oleksandr Mikhelson
Glavred, Kiev, Ukraine, in Russian 0000 gmt 24 Jan 06
BBC Monitoring Service, UK, in English, Friday, Jan 27, 2006

Ukrainian President Viktor Yushchenko has not given up the idea of
abolishing constitutional reform reducing his powers, which came into

force on 1 January, a Ukrainian web site has said.

In his televised address on the first anniversary of his inauguration,
Yushchenko failed to admit his fault for mistaken personnel decisions

and his programme for 2006 is merely declarative, it said.

The following is the text of the article by Oleksandr Mikhelson entitled
“Yushchenko declared war for the sake of peace” posted on the Glavred
website on 24 January; subheadings have been inserted editorially:

The president’s [Viktor Yushchenko] address to the nation dedicated to the
anniversary of his inauguration has demonstrated: Yushchenko agrees to

be an English queen, but not Queen Victoria.

[Epigraph] All 10,000 grasses blossom out before the sovereign’s eyes, and
trees change their foliage on his order. ([Russian journalist and writer]
Yuliya Latynina, “100 fields”)
                     PECULIARITIES OF PRESENTATION
On Monday [23 January], on the anniversary of his inauguration, Viktor
Yushchenko made another address to the nation. There were at least three
pleasant things in this address.

[1] First, the president abandoned his habitual armchair and stood up before
the nation.
[2] Second, the head of state was likely to have become the first person in
this country to make a public statement “Ukraine above all” [corresponding
to the first line of the German anthem “Germany above all”] (associations
can be different, but is not it present-day pragmatism?).
[3] Third, Yushchenko said everything he wanted without redundant wording.

While the shorter initial part of his address in which Yushchenko enumerated
accomplishments of his administration is quite controversial, one can hardly
argue the rest of theses. This is because they are not subject to
discussion: they are subject to fulfillment.
      CONTROVERSIES IN ASSESSING ACCOMPLISHMENTS
However, there were also some significant points in the “praising” part. [1]
For example, having said that the authorities should draw conclusions of
their own mistakes, Yushchenko emphasized: “All those who stood close to me
on Maydan [central square in Kiev, venue of Orange Revolution] a year ago
received a chance to work in Yushchenko’s team. Unfortunately, sometimes
personal ambitions took precedence.”

These words have more in common with recognition of his own mistakes, in
particular those on personnel issues, but not with another criticism of his
staff members, of course, the former ones.

[2] Second, the president said for the first time that retaining our gas
transportation system in Ukraine’s ownership is an important result of gas
agreements with Russia, the same way as the gas price being “lowest in
Europe” (according to the president).

Being a liberal, Yushchenko surely understands that, as long as we have this
cheap gas, our way to different kinds of EU and WTO is closed. However, what
can be done: the election is coming, and one should speak about good things.

This is the reason of the statement that passage of gas transportation
system to foreign hands is “out of the question” in future as well. One
should understand that this is in case the incumbent authorities remain
intact.

The statement “the cabinet did not increase gas prices for ordinary people,
as it promised” is a different thing, as there is great different between
“did not increase” and “will not increase”, especially in the current
situation… [ellipsis as published]

             PRIORITIES FOR 2006: NO CONCRETE PLANS,
                         LEGISLATION TO BE ADOPTED 
But let’s return to instructions. Actually, there were two “packages of
instructions” in the president’s address. The first one is designated for
quoting in printed media and on TV under the heading “The president
announced the authorities’ priorities for 2006″.

There are five of them: “Health of the Nation”, upgrading the education
system, rural development programme, diversification of Ukrainian energy
market, and finally, judicial reform.

The interesting point was that concentration of concrete points of the
president’s plans in his address dropped from the first sentence to the last
one. Speaking about medical service, the president named the programmes

of fighting AIDS, tuberculosis, etc. personally supervised by him.

Speaking about the energy market, he promised “at least a 10 per cent”
reduction of energy consumption this year; obviously, fighting for Ukraine’s
independence in energy in 2006 ends with this. Finally, while speaking about
the most imminent reform of the third [judicial] branch of power, Yushchenko
did not specify the ways of trying to implement it.

However, there was no special need to give clear interpretations if we take
into account the fact that the priorities announced by Yushchenko seem to
have been copied from the electoral programme of one of the parties. Can you
guess which one? [propresidential Our Ukraine People’s Union Party]

The second “package” is a different thing. By the way, passage to it was
composed quite successfully, the same way as the whole address: dear
Ukrainians, EU remains our strategic priority this year, therefore we should
adopt laws on WTO as soon as possible; by the way, let us speak about laws.
                             DECREE ON FAIR ELECTIONS
Yushchenko made many signals here. First, Yushchenko will observe laws

with all his might and will force others to do so. In particular, it concerns
election laws. For this purpose, the president even signed a decree on fair
elections which he promised long ago.

Those who have read the decree and have reached its final provision paid
attention to the presidents directive to the Interior Ministry, Security
Service of Ukraine and local authorities “to take measures for non-admission
of spreading calls to liquidation of Ukraine’s independence, changing the
constitutional system by forcible means, violation of the country’s
sovereignty and territorial integrity, unlawful usurpation of state power,
propaganda of war and violence, stirring up inter-ethnic, racial, religious
and other kinds of hostilities, infringing of human rights and freedoms and
people’s health, along with materials containing these calls, slanderous
information about political parties, their leaders, election blocs and
candidates during the election campaign in any form.” Unquote.

There are suspicions that the whole decree has been written exactly for the
sake of this provision. Yushchenko confirmed this suspicion in his address.
“I will not allow a single political force to divide the country, speculate
on language, religion, federalism or separatism”, he said.

Undoubtedly, this is the warmest regard to those parties which have included
federalism in their election programmes. If [former President Leonid] Kuchma
had once made this kind of statement, all papers would have written next day
about withdrawal of the criticized parties from the election.
     HARDER LINE ON “DESTABILIZATION OF SITUATION’
There is even more interesting point: “I consider it necessary to introduce
a moratorium on any decision or action by the executive or the legislature
which may destabilize the situation in Ukraine.”

To put it mildly, it sounds enigmatically. How is it related to moratorium,
which means a temporary ban of something? There should not be any actions

of the authorities at all which can result in destabilization, and for this one
should just observe laws and principles of morality.

If it is not done, no decrees and agreements on fair election will help. But
the logic seems to be lying in something else: political justification of
the president’s side in its actions, in particular, with regard to
parliament.

It is not the only point. Speaking briefly, the president made a demand to
harden the line of fighting against “bad guys”. One of them was recently
detained by [Interior Minister Yuriy] Lutsenko.

So, the main essence of this part of Yushchenko’s address means that
“Lutsenko’s line” should be continued and enforced. Let [opposition leader
and former Prime Minister Viktor] Yanukovych visit Brussels to complain…
[ellipsis as published]
            FUTURE LEGISLATION TO IMPLY ABOLITION OF

                              CONSTITUTIONAL REFORM
There is one more point. Yushchenko flatly instructed parliament to swear in
the Constitutional Court judges, but he did not mention that it would be
nice to appoint the parliament’s share of the court. He said that he would
initiate formation of a working group with equal presidential, parliamentary
and government representation to develop “proposals on harmonizing the work
of the branches of power”.

He also emphasized that the laws on the president, the Cabinet of Ministers,
opposition and – attention! – all-Ukrainian referendum should be urgently
adopted.

It means that the president does not abandon the idea of abolishing the
amended constitution. He honestly said this: “I recognize that from 1
January 2006, in accordance with Supreme Council’s [parliament] decision, a
new constitution has come into force in Ukraine (as if it needs this kind of
recognition – Author’s note). But I do not believe that this constitution is
ideal.”

It should be abolished through a referendum or with the help of the
Constitutional Court, and it would be nice to drag down appointment of its
judges from parliament’s quota (it had been successfully done by
propresidential factions until recently), or with the help of both ways:
anyway, in general.

At the same time, Yushchenko intends to take any opportunity to level
enforcement of the political reform with the help of the aforementioned
laws, and probably, not only with them: with the ones drafted by a group
with “parity participation” of representatives of the President, Cabinet of
Ministers and Supreme Council; in other words, with Yushchenko’s majority.

Therefore, after one year the president began doing the thing we was
supposed to do from the very beginning: strengthening his power. But will
the president succeed in making the phrase quoted in the epigraph to this
article not sound ironically in relation ho him in present situation?
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11. HEAD OF US CONGRESS UKRAINIAN CAUCUS PROMISES
               TO SUPPORT UKRAINE IN BIPARTITE ISSUES

Natalia Bukvich, Ukrinform, Kyiv, Ukraine, Friday, January 27, 2006

WASHINGTON, DC – Ukrainian Ambassador to USA Oleh Shamshur
met with Head of the Congressional Ukrainian Caucus Curt Weldon,
Ukrainian Embassy sources told Ukriform correspondent. The meeting
dealt with the current state of Ukrainian – American relations, which are
gaining traits of real strategic partnership.

The parties to the meeting also discussed a series of projects of bipartite
cooperation in 2006. Curt Weldon reassured the Ukrainian Ambassador
to the USA of the Congressional Ukrainian group’s promoting these.

Congressman Weldon noted, after the Orange Revolution, the group
increased almost twofold. Now, it is a weighty political force ready to
solve current issues of bilateral relations. Among these, he named the
revocation of the Jackson – Vanik amendment.   -30-
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12. UKRAINIAN AMBASSADOR TO USA PRESENTS MERITORIOUS
       BADGE TO US ARMY RETIRED COLONEL STEPAN OLIYNYK
                       Born in Lviv region of Ukraine in July of 1930

Nataliya Bukvych, Ukrinform, Kyiv, Ukraine, Sat, January 28, 2006

WASHINGTON, DC – US Army Colonel (ret), holder of the Order Of Merit

3d Grade PhD Stepan Oliynyk has been decorated with the Meritorious Badge
by the Defense Ministry of Ukraine, in view of his personal contribution to the
Ukrainian Armed Forces’ establishment and development.

The award was presented to Stepan Oliynyk by Ukrainian Ambassador to the

USA Oleh Shamshur. Speaking on behalf of the Ukrainian Government, Oleh
Shamshur thanked Stepsn Oliynyki for his years-long work toward promoting
American – Ukrainian bilateral relations and military cooperation.

Stepan Dmytrovych Oliynyk was born in the Lviv region on July 18, 1930. He
came to America after WWII. His military career lasted for as long as 35
years. As a US Army officer he served with the US Army Headquarters, with
the JCS. After retirement in the rank of Colonel he engaged in research work
in matters of national security with the DOD.

Since 1992 Stepan Oliynyk has been working as a consultant, senior
counsellor for national security with the Consultative-Advisory Council
under the Verkhovna Rada of Ukraine and the Defense Ministry for matters

of mobilization readiness.

He is often invited to lecture at the Ukrainian Armed Forces Academy and for
the editorial board of the journal Viysko Ukrainy (“Ukraine’s Army”). Stepan
Oliynyk also participated in activities of  the International Institute for
Global and Regional Security, the Taras Shevchenko Scientific Society, other
professional societies and organisations both in Ukraine and the USA.

Stepan Oliynyk is the author of many scientific papers and books on
military, literary and historic subjects. He has been awarded the Ukrainian
Education & Science Ministry’s honorary diploma.  -30-
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13.            AN OPPORTUNITY IN UKRAINIAN OIL & GAS?

ANALYSIS: By Stephen Clayson, Correspondent, London
ResourceInvestor.com, Miami, Florida Tuesday, 24 Jan 2006

LONDON – Although Ukraine’s oil & gas requirements have only been thrust
to prominence by recent upsets, Cardinal Resources [AIM:CDL] has been
active in the sector for some time.

Cardinal shares have found their natural home here in London, where, as a
rule, investors are more comfortable appraising risky investments in distant
places; the company having grown out of and superseded the defunct,
formerly Toronto listed Carpatsky Petroleum and deliberately switched to
a London listing on account of its greater suitability.

According to Cardinal’s Chairman & CEO Robert Bensh, the outfit has
been operating in Ukraine long enough, since 1995 to be specific, to have
acquired a useful array of contacts across the country’s oil & gas sector,
which is dominated by the state controlled NAK Naftogaz Ukrainy. This
established presence may assist the company in ameliorating some of the
trickiness associated with such an operating environment.

Back when Cardinal was known as Carpatsky though, less was achieved than
would have ideally been so. Bensh imparts that in essence “everything was
wrong with Carpatsky”; he was in fact hired in 2000 to try and sort things
out, the most significant single issues being Carpatsky’s chronic shortage
of funds and that it suffered from the poor quality of certain of its
business relationships in Ukraine.

So, following a long restructuring, Cardinal debuted on AIM in April 2005,
raising GBP10.6 million in the process. Since then its shares have traded
somewhat erratically, and today stand at 28 pence, compared with a placing
price at listing of 32 pence.

The company has recently emplaced a $38 million bridge loan facility, which
was put up by a U.S. hedge fund, and is seeking an additional $10-15 million
in order to satisfy the requirements of its growth plans.

Although Cardinal has producing assets, it does not expect to be a cash
positive concern until 2008 or 2009, owing to high levels of planned
expenditure. If all goes as the company expects, then the funding scheme
just outlined should carry it to this point.

Part of Cardinal’s development expenditure will redress damage done to its
business position by past underfunding, the best example of this damage
being the significant dilution of its profit interest in the producing
Rudivsko-Chernovozavodske (RC) field in the east of Ukraine.

Cardinal now intends to earn its way up to a 45% revenue interest in the RC
field, building from the 14.9% level down to which it has been diluted. The
RC field is a joint venture with Ukranafta, an affiliate of NAK Naftogaz
Ukrainy. At the moment, the RC field can be regarded as the Cardinal’s most
substantial asset, even though 45% is the maximum stake that the company
can hold under the joint venture agreement as it stands.

The field’s original gas in place amounted to 1.5tcf and it presently
supports five producing wells, with significantly greater production
capacity expected to come on stream following a programme of workovers
and new drilling.

A mix of workovers and new drilling is characteristic of Cardinal’s
development plans for its various assets across Ukraine. Many of the
country’s existing oil & gas wells are poorly completed and can often

benefit from workovers either to restore production where total failures
have occurred, or to raise output levels where these sit below their potential.

Cardinal uses mostly Ukrainian equipment hybridised with certain Western
components, which keeps costs lower than would otherwise be the case and
should improve effectiveness, as local equipment tends to be outdated and
ill constructed. However, given the absence of Western oil & gas service
companies in Ukraine, use of adapted local equipment is a convenient option
for Cardinal.

The omens in the Ukrainian gas markets are, to an extent, good from a
producer’s point of view. Ukrainian gas prices have been illustrated to be a
bit of a contentious subject by recent events, but the Ukrainian government
is thought to be moving towards letting prices rise closer to E.U. levels in
order to promote efficiency and because of the difficulty of keeping prices
depressed without Russian support, which has now been conspicuously
withdrawn.

Cardinal already receives world prices for its oil output, a barrel of which
sells at a $3 discount to a barrel of Russia’s Urals blend, which itself
changes hands at a small discount to Brent. The company currently gets an
average price for its gas of around $2.20/mcf; rather low next to current
E.U. prices of $12-15/mcf, making it easy to understand the arguments for
convergence.

Cardinal’s focus is decidedly on production rather than exploration, though
this will not preclude it from some involvement in the latter activity if it
espies the right opening. The company is on the look out for acquisition
opportunities, Bensh seeing a 12-18 month window of opportunity, starting
around now, within which some plum targets may become available before
the competition for Ukrainian oil & gas assets becomes too heated.

Cardinal anticipates this growth in competition as a corollary of its
expectation of improving Ukrainian gas market conditions and of an increase
in the transparency of the nation’s business & government, but the company
feels that its in-country connections will give it an edge. Investors will
hope so, just as they will hope that Ukrainian gas prices are indeed allowed
to track closer to E.U. levels.  -30-
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LINK: http://www.resourceinvestor.com/pebble.asp?relid=16397
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14. INTERNATIONAL INTELLECTUAL PROPERTY ALLIANCE (IIPA)
SUPPORTS US DECISION TO RESTORE TRADE BENEFITS: UKRAINE

ag-IP-news Agency website, Friday, January 27, 2006

WASHINGTON, DC – The International Intellectual Property Alliance (IIPA),
an alliance of seven US copyright-based trade associations comprising over
1,900 companies, announced on Thursday its support for the decision by the
United States Trade Representative (USTR) to restore Ukraine’s eligibility
for benefits under the Generalized System of Preferences (GSP) trade
program.

According to a press release by the Alliance, GSP is a provision of US trade
law that unilaterally grants duty-free trading benefits to certain products
from eligible beneficiary countries from the developing world, conditioned
in part on each beneficiary providing “adequate and effective” protection of
intellectual property rights (IPRs).

GSP benefits in Ukraine were suspended in 2001 based upon a petition filed
by the IIPA (in 1999) because of the then rampant and unregulated optical
disc production and distribution of music, film, business and entertainment
software materials in Ukraine for sale locally and exported for sale in many
other countries. In 2005, Ukraine adopted legal reforms aimed at curbing
this piracy.

IIPA Vice President, Eric J. Schwartz, said, “IIPA supports the US decision
to restore trade benefits to Ukraine. After several years of hard work by
the government of Ukraine in conjunction with US government officials,
Ukraine adopted significant improvements in its optical disc laws in 2005.

These new laws, as well as an agreement by the Ukraine government to
participate cooperatively with the copyright industries in Ukraine on
enforcement, should result in significant improvements in Ukraine.”

Schwartz added, “If fully implemented, these changes will properly regulate
the legal production and distribution of optical media material in Ukraine.

We applaud the combined efforts of the Ukraine and US governments to
make this happen. That said, the government of Ukraine must fulfill its
obligations and remain vigilant on its pledges of cooperative enforcement in
order to improve on-the-ground efforts.”

IIPA notes that there are several steps that the government of Ukraine must
immediately undertake to ensure proper implementation of the new laws.

 
These include the adoption of regular surprise plant inspections; the creation
of an “evidence repository” of the master materials used to produce optical
disc materials in Ukraine; and, the proper prosecution and imposition of
deterrent sentences against commercial pirates of optical disc and other
copyright materials.

If these steps are taken, then Ukraine will go a long way towards improving
its copyright enforcement regime for the betterment of the local economy
and the protection of domestic and foreign copyright owners.

The International Intellectual Property Alliance is a coalition of seven
trade associations formed in 1984 to represent the US copyright-based
industries in bilateral and multilateral efforts to improve international
protection of copyright materials, and to open up foreign markets closed
by piracy and other market access barriers.  -30-
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LINK: http://www.ag-ip-news.com/GetArticle.asp?Art_ID=2599&lang=en

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15.   UKRAINIAN NATIONAL COMMITTEE OF INTERNATIONAL
CHAMBER OF COMMERCE OPENS OFFICE IN TORONTO, CANADA

Ukrinform, Kyiv, Ukraine, Friday, January 27, 2006

KYIV – The Ukrainian National Committee of the International Chamber of
Commerce (ICC Ukraine) opened its office in Toronto (Canada), which is
11th office abroad. The ICC Ukraine will proceed to opening its offices in
the countries, where the Ukrainian Foreign Ministry doesn’t suppose
commissioning diplomatic missions so far.

The ICC Ukraine doesn’t rule out that its offices may in some time become
a basis for embassies or consulates. Prime Minister Yuriy Yekhanurov
charged the Ukrainian Foreign Ministry to tackle this likelihood with the
ICC Ukraine.

As ICC Ukraine President Volodymyr Shchelkunov noted, this initiative is
aimed at making Ukraine’s external relations more economically oriented.

“More concrete affairs and investment projects, stronger protection of
domestic businesses abroad and more world business in Ukraine – that is
how it works in the countries, where the ICC Ukraine runs its offices”, he
stressed.

While opening the office in Toronto, the ICC Ukraine delegation met with
Canada’s business circles. There are preliminary agreements on Canada’s
investments in building in Ukraine with using newest, so said building block
technologies.

Canada is a leader in building cheap dwellings undertime. Introduction of
similar technologies in Ukraine could make dwellings in Ukraine
significantly cheaper.

Canadian business execs also proposed to establish joint ventures in
engineering, rocketry – space and energy spheres, including in fuel,
processing industries and agricultural produce conservation branches.
The talks also dealt with likely exports of Ukrainian pipes and metal-roll
to Canada.

The Ukrainian National Committee of the International Chamber of
Commerce, headquartered in Paris, was established in 1998. The National
Committee is an NGO and registered as the Association of Enterprises.

The ICC Ukraine is mainly meant for creating efficient national system of
intellectual property protection in Ukraine, grating a certificate of
partnership reliability, which is recognized in 93 countries of the national
committee network.  -30-
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16.            UKRAINE AND CANADA AIMING TO DEVELOP
                     INTER-PARLIAMENTARY COOPERATION 

Ukrainian News Agency, Kyiv, Ukraine, January 28, 2006

KYIV – Ukraine and Canada are aiming to develop inter-parliamentary
cooperation. The press service of the Ukrainian Foreign Affairs Ministry
disclosed this to Ukrainian News, citing a meeting between Ukraine’s
Ambassador to Canada Mykola Maimeskul and Canada’s Senate Speaker

Daniel Hays on January 26.

Maimeskul thanked Hays for his interest in events in Ukraine and support

for the democratic changes in the country.
As an example of Canada’s friendly attitude to Ukraine, Hays cited the
Senate’s approval of a special resolution on recognition of the 1932-1933
famine in Ukraine as genocide and the holding of Senate hearings on the
events that took place in Ukraine in late 2004.

Maimeskul and Hays stressed the prospects for deepening inter-parliamentary
cooperation between the two countries and expressed hope for its further
development. The meeting took place as part of events connected with the
completion of Maimeskul’s diplomatic mission.

Maimeskul also met with the Canadian prime minister’s chief adviser on
foreign policy, Jonathan Fried, and the director-general of the Bureau for
Eastern and Central European Countries at the Canadian department of

Foreign Affairs, Tom MacDonald.

They discussed ways of accelerating Ukrainian-Canadian political dialogue,
particularly within the context of exchange of high-level visits.As
Ukrainian News earlier reported, Canada plans to continue supporting

Ukraine in the implementation of political and economic reforms.

Ukraine and Canada are interested in deepening of bilateral trade and
economic cooperation, as well as development of cooperation in the sphere

of defense and environmental protection.  -30-
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17. VOLYN REGION SAID TO BE UKRAINE’S MOST ATTRACTIVE
    REGION FOR FOREIGN INVESTORS BY SWISS ORGANIZATION
                    Zhytomyr, Rivne and Poltava regions also attractive

Ukrinform, Kyiv, Ukraine, Saturday, January 28, 2006

KYIV – The Volyn region in West Ukraine is Ukraine’s most attractive region
as offering best conditions for foreign investors’ operations.  An opinion
to the above effect was stated by Ariana Bauer, a representative of the
Swiss Organisation for Facilitating Investments (SOFI), while on a visit to
Lutsk, the Volyn region’s administrative center.

The SOFI official also mentioned Zhytomyr, Rivne and Poltava regions as
investment-attractive. The Volyn region occupies a 20,200 sq. km. territory,
populated by slightly over a million inhabitants. Its geographic position is
favorable as the Volyn region borders on the EU.

The region maintains trade-economic relations with over 60 European,
Asiatic, American and African nations. Polish, German, British, other
foreign companies are operating in the region, including the
Switzerland-based Nestle. The Volyn region is among Ukraine’s leaders

in terms of industrial production growth rates.
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18.     CZECH ENERGY GROUP CEZ INTENDS TO ACQUIRE SIX
                    UKRAINIAN ELECTRIC POWER COMPANIES

Ukrinform, Kyiv, Ukraine, Friday, January 27, 2006

KYIV- The Czech energy group CEZ is contemplating to buy six Ukrainian
regional electric power companies (OblEnergos) in 2006. Speaking in an
interview to the newspaper Ekonomicheskiye Izvestiya, Vladimir Schmalz, CEZ
director for mergers and takeovers, said the CEZ had received a principled
consent to wrap up a relevant deal from the VS Energy company, which
controls the OblEnergos.

According to Mr Schmalz, the Credit Suisse First Boston (CSFB, Switzerland)
poses as the deal’s consultant. Besides, the CEZ is interested to buy two
other Ukrainian OblEnergos, Vladimir Schmalz further disclosed, which belong
to the company AES Energy.

The CEZ is contemplating to acquire energy assets in Bosnia, Ukraine and
Bulgaria, which will cost around 3 bn. euros, of which 1.5 bn. euros will be
spent on buying energy assets in Ukraine and Bulgaria.

In 2005 the CEZ bought the Romanian distribution company Oltenia for 151

M. euros and three Bulgarian distribution companies for 281.5 M. euros.
                                      UKRINFORM NOTE:
The Netherlands-based VS Energy International N.V. (a daughter-company of
the Slovakia-based Vychodoslovenske Energeticke Zavody S.P, or VSE) owns
stakes in the public joint-stock company SevastopolEnergo (95.18 percent),
KhersonOblEnergo (94.51 percent), KirovogradOblEnergo (94 percent),
ZhytomyrOblEnergo (75.56 percent), OdesaOblEnergo (20.36 percent),
ChernivtsiOblEnergo (21.98 percent), KhmelnytskOblEnergo (11.79 percent),
TranscarpathiaOblEnergo (10.53 percent).

In October 2005 the VS Energy International N.V. refuted media reports about
the company’s alleged intention to sell its parcels in several Ukrainian
energy companies. According to the reports, the auditing company Deloitte &
Touche was carrying out audits of these companies, with a view of evaluating
their assets.

As VS Energy International N.V. representatives stressed, the company
annually hires the Deloitte & Touche and KPMG to carry out audits of the
Ukrainian energy companies.

The company AES Washington B.V. BN (a daughter-company of the US-

based AES Corporation) holds 75 percent plus one share stakes in the
AES-RivneEnergo, AES-KyivOblEnergo.  -30-
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19.   UKRAINIAN OPPOSITION LEADER YANUKOVYCH SAYS
                            RUSSIA’S GAS POLICY WRONG 
UNIAN news agency, Kiev, in Ukrainian 1231 gmt 28 Jan 06
BBC Monitoring Service, UK, in English, Saturday, Jan 28, 2006

DONETSK — The [opposition] Party of Regions leader, Viktor

Yanukovych, has said that Russia’s “wrong” gas policy is disastrous
for the Ukrainian economy.

Speaking at a Party of Regions conference in Donetsk today, Yanukovych
said: “Gas price hikes are disastrous for the Ukrainian economy. We

believe that this position in relations with Ukraine is wrong.”

He stressed that the Party of Regions does not support “this position of
Russia”. “We do not support this position of Russia, we believe that this
position of Russia is not promising in relations with Ukraine,” Yanukovych
said.

He said that “Russia took advantage of the weakness of the authorities

and government ministers involved in the talks”. “On the other hand, we
understand very well that all participants in the talks were cornered at
the end of the last year,” Yanukovych said.

He said that gas talks should not stop. “We believe that this process
should never be stopped. I made it quite clear during my meeting with the
Russian Security Council secretary, Sergey Ivanov,” Yanukovych said. He
said that there are constructive forces on both sides which should develop
a long-term policy to satisfy the national interests of both Russia and
Ukraine.

Yanukovych also said that it is necessary “to develop a project of shifting
to market prices”. “We are confident that we should meet at the negotiating
table and hold a very serious discussion of this issue, to develop a
project of shifting to market prices, and, by the way, Russia should do
this as well,” Yanukovych concluded.
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20.  RUSSIA VS UKRAINE-MORE THAN AN ECONOMIC DISPUTE

ANALYSIS & COMMENTARY: Electricity4Business, PrWeb.Ccm
London, United Kingdom, Sunday, January 29, 2006

LONDON – The current crisis over the increase in gas prices from Russia
to Ukraine can be viewed differently depending on which side of the fence
you stand.

Many Ukrainians, including the present leader, believe that Russia is using
its economic strength to make a political point. Viktor Yushchenko’s
eventual victory in the election for a leader last year was not popular with
the Russians due to his leanings towards the West. It is thought that the
huge rises in gas prices is an attempt to destabilise the Ukrainian economy
and hence undermine the current leadership.

Those with Russian sympathies would argue that Yushchenko is turning it
into a political issue because of his and his government’s incompetence in
running the country since his election.

Whichever way it is viewed the problem is real and could escalate into a
crisis which affects the whole of Europe. Which is why the EC called a
crisis meeting to try to find a way to resolve the dispute.

For years now the rest of Europe has been urging Russia to raise the price
of gas to market rates. However, few would recommend that this is done in
one fell swoop as has been carried out in this case. The proposed rise is a
fourfold one, clearly too high for Ukraine to swallow – it should be noted
that Russia has been rather more lenient on some of the other nearby states
where price rises have been limited to 100%. This may give some credence
to Yushchenko’s argument -.

Negotiations have come to a stalemate with the Ukrainians refusing to pay
and the Russians carrying out their threat to cut off supplies on 1st
January.

Russia now accuses Ukraine of siphoning gas from the pipeline and this is
causing concern in Europe with a number of countries experiencing a
significant drop in supplies.
                         ELECTRICITY4BUSINESS’S VIEW
Without getting too embedded in the politics of the Eastern Bloc, we would
like to highlight the position of the UK should this dispute escalate,
either now or in the future.

[1] We have always questioned the wisdom of the UK government’s energy
policy in relinquishing control of its energy supplies to foreigners. This
dispute has exposed the vulnerability of the UK to the energy giants of
Europe, who when threatened by an interruption to their own supplies would
be expected to ration the movement of gas though the pipeline to the UK.

[2] Secondly, can we really rely on an energy policy which is crucially
dependent on Russian gas supplies when there is such a history of
instability in the region? Just remember that our existing energy policy
depends on future gas supplies from Russia to help replace our dwindling
reserves in the North Sea. Pressure should be exerted on the government to
consider this position in depth when carrying out the forthcoming energy
review.
                                             THE DEAL
Ukraine has until now been paying only $50 per 1000 cubic metres of gas
and even then, a deal was done to enable Ukraine to barter this for use of
its territory through which the pipeline passed. The new rate agreed is $230

per cubic metre – more than a fourfold increase.

However, this is the rate payable by RosUkrEnergo – a joint venture company
between the Russians and Austrians – who will in turn sell a combination of
Russian and Turkmen gas to the Ukrainians at $95 per 1000 cubic metres.
Complex or what? Talk about fudge!

In a related deal the transportation cost payable to the Ukraine for use of
its territory was set at $1.60 per for the transit of 1000 metres of gas
through each 100kms of its territory. This deal, double the previous amount,
has been fixed for a period of five years.

Electricity4Business’s opinion is that a deal has been thrashed out to save
face. Russia cannot be seen to back down on its original offer, however, it
has to protect as much as possible its position as a reliable international
gas supplier and since international supplies were being affected by the
dispute a compromise had to be found to resolve it. However, the
implications for future security of supply to Europe cannot be ignored.
     A RESOLUTION OR JUST A TEMPORARY REPRIEVE?
The news that a deal has been done between the Russian state-run Gazprom
and the Ukraine’s Navtogaz which will allow gas supplies to flow freely
through the European pipeline will bring a sigh of relief that Europe can at
least for the moment secure enough gas supplies to take it through a
predicted colder than average winter.
                             BUT WHAT OF THE FUTURE?
This deal is for five years only. Clearly, Europe’s energy policy must plan
much further ahead than the next five years. Also, Ukraine’s bargaining
power will be greatly reduced in 2010 when the North European Gas Pipeline
is expected to come into operation. This will by-pass Ukraine and other
former Soviet Bloc nations, connecting Gazprom’s Siberian gasfields directly
with Germany using a route that goes under the Baltic Sea.

Who knows what the relationship between Ukraine and Russia will be like in
2010 or how close Ukraine will be to the West? But simply the prospect of
further dispute is likely to have a significant effect on the European price
of gas.

The dispute has also had an effect on the oil price and the prospect of
persistent shortages in Gas is likely to result in a rise in price of
alternative fuels.

It’s worth noting that the Nuclear Lobby in the UK will have further
ammunition to make their case to the forthcoming energy review. The
wisdom of rushing to gas and the run down of nuclear plants may now

be put in question. The security of supply argument along with the
environmental impact of burning fossil fuels could well establish the
basis for a compelling case.
                    IMPACT ON BUSINESS ELECTRICITY
Although the government would like us to believe that the dispute will have
little effect on British gas and electricity supplies the reality is
different. Anything which has an impact on the wholesale price of gas, as
this dispute certainly has, will inevitably filter through to the final
customer. Unfortunately, businesses are always first to suffer the increases
and unlike the domestic customers, will bear the brunt of the full increase
at once.   -30-
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                                      EDITORS NOTES:
Electricity4business is Britain’s independent electricity retail company
specialising in the supply of electricity to small and medium sized
businesses. E4B’s aim is to cut the cost for British business by offering
lower prices.
Gazprom is the Russian state run gas giant. Its policies are very much tied
to the Russian government, hence its involvement in what is essentially a
political dispute.
The German energy giant E.ON has very close ties with Gazprom and
controls the infrastructure which distributes Russian gas throughout
mainland Europe.
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LINK: http://www.prweb.com/releases/2006/1/prweb338773.htm
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21.                         RISKING ANOTHER SLAVIC WAR

OP-ED: by Masha Lipman, Columnist
The Washington Post, Washington, D.C.
Monday, January 30, 2006; Page A17

MOSCOW — A group of young people carrying spades came together
recently where the isthmus connecting the Crimean Peninsula to the
Ukrainian mainland is narrowest. “Isolate the Crimea from Ukraine!” their
leader shouted in a mock military order, and then, as TV cameras recorded
it all, the group began to dig.

The Crimea is a Russian-speaking territory joined to Ukraine in 1954 by
Nikita Khrushchev as part of an administrative rearrangement within the
Soviet Union that is seen by many in Russia as unfair. The recent publicity
stunt with shovels, however unserious, is another example of growing
friction between Russians and Ukrainians that got the world’s attention last
month during a dispute over natural gas supplies. If tensions are further
inflamed, it will be an unpardonable consequence of Russia’s geopolitical
aspirations.

After Russia moved to raise the price of the natural gas it supplies,
Ukraine warned that it may revise the contract regulating rent paid by the
Russian government for the Black Sea Fleet bases in the Crimea. The Russian
defense minister, Sergei Ivanov, responded with a thinly disguised threat to
take the Crimea away from Ukraine. A revision of the rent contract, he said,
might lead to renunciation of the 1997 agreement by which Russia recognized
the 1954 borders of Ukraine.

Several Russian legislators chimed in, but unlike the defense minister, they
were quite explicit. “Sooner or later the Crimea will be reclaimed,” one
Russian Duma deputy said. “To make the Crimea again part of Russia will
be an absolutely right decision,” said another.

Those who live in the Crimea have long complained about forced
“Ukrainization.” Recently, the complaints have become more vocal: The
Crimean inhabitants claim that their last names have been changed in the
lists of registered voters to sound Ukrainian.

In mid-January Ukraine and Russia got involved in a dispute over control

of Crimean lighthouses. One lighthouse was seized by a group of Ukrainians
who barred access to anybody from the Russian Black Sea Fleet. The
Russian fleet commanders regard the lighthouses as part of their operation.
A Ukrainian ambassador said all of them are the property of Ukraine and
must be returned to it.

A Ukrainian foreign ministry spokesman said that with respect to the
lighthouses the actions of the Black Sea Fleet “border on interference with
the affairs of a sovereign state.” Ukrainian student groups picketed the
headquarters of the Black Sea Fleet in Sevastopol, demanding that the
lighthouses be returned to Ukraine, while their pro-Russian opponents
camped outside one of the lighthouses.

A dispute that broke out in 2003 over the border between Russia and Ukraine
in the Kerch Strait, which connects the Sea of Azov with the Black Sea, has
flared up again. And about 10 days ago Ukraine blamed Russia for giving
shelter and granting Russian citizenship to Ukrainian government officials
who were ousted in the country’s Orange Revolution and are under
investigation for alleged misconduct. (Russia also has barred all imports of
Ukrainian meat and dairy products, citing safety concerns that Ukraine
disputes.)

The gas conflict, which continues to pick up steam, has an obvious political
underpinning. Since the humiliating failure of Russia’s attempt to influence
the Ukrainian presidential election in late 2004, the Kremlin has sought
ways to recoup. The move to raise gas prices for Russia’s intractable
neighbor came three months before important parliamentary elections and was
clearly meant to cause maximum destabilization of Ukrainian politics. The
goal of Kremlin strategists appears to be a weak coalition government in
Ukraine that will be more vulnerable to Russian economic pressure.

This may or may not work. One thing is certain, though: Russia’s attempt
to cut gas to Ukraine led to a disruption of supplies to Europe, thus
undermining Russia’s reputation as a reliable economic partner.

There may be another consequence of Russia’s ambition to emerge as an
energy superpower. Political destabilization and the stirring up of
territorial disputes could provoke nationalist sentiment and anti-Russian

feelings in Ukraine, a country that is divided into mostly Russian-speaking
and mostly Ukrainian-speaking regions and is struggling to shape its
nationhood.

If this happens, anti-Ukrainian sentiment in Russia is also certain to grow.
People in Russia hardly differentiate between those of Russian and Ukrainian
ethnic origin, even though Ukrainian last names are easily recognizable. The
neighboring Slavic nations are blessed with good relations based on
historical, cultural and language kinship.

This is exactly why it would be unforgivable should the current conflict
lead to an accidental act of violence. After all, in recent times we have
seen Slavic nations in Yugoslavia with shared history and basically common
language engage in bloody warfare nobody had predicted.  -30-
———————————————————————————————-
Masha Lipman, editor of the Carnegie Moscow Center’s Pro et Contra
journal, writes a monthly column for The Post.
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22.  THE UKRAINIAN-RUSSIAN GAS CRISIS AND ITS AFTERMATH

       ECONOMIC, POLITICAL & INTERNATIONAL RAMIFICATIONS
               Conference: Ukrainian Research Institute, Harvard University
                       Sunday, February 5 and Monday February 6, 2006
 
Ukrainian Research Institute, Harvard University
Cambridge, MA, Friday, January 27, 2006
 
The Ukrainian Research Institute is pleased to invite the larger academic
community and general public to the following event of special interest:

PROGRAM: SUNDAY, FEBRUARY 5, 2006, 3:00–6:00 p.m.
Ukrainian Research Institute, Harvard University
1583 Massachusetts Ave., Cambridge, MA
WELCOME AND OPENING REMARKS —–
Michael S. Flier, Director, Ukrainian Research Institute
Lubomyr Hajda, Associate Director, Ukrainian Research Institute
 
SESSION 1. Economic Aspects of the Crisis: Players, Agendas, Outcomes
Chair: Margarita M. Balmaceda  (Associate Professor, John C. Whitehead

School of Diplomacy and International Relations, Seton Hall University,
and Associate, Ukrainian Research Institute and Davis Center, Harvard
University)
a. “Introductory Remarks: The Background to the Crisis”
Margarita M. Balmaceda, Associate Professor, John C. Whitehead
School of Diplomacy and International Relations, Seton Hall University
Associate, Ukrainian Research Institute and Davis Center for Russian
and Eurasian Studies
b. “Player One at the Table: Ukraine”
Oles Smolansky, University Professor of International Relations
(Emeritus), Lehigh University
c. “Player Two at the Table: Russia”
Marshall Goldman, Kathryn Wasserman Davis Professor of Russian
Economics (Emeritus), Wellesley College , Associate Director, Davis
Center for Russian and Eurasian Studies
d. “The Unexpected Guest:  RosUkrEnergo”
Roman Kupchinsky, Coordinator of Corruption Studies, RFE/RL,
Inc., Prague, Czech Republic
e. “The Ukrainian-Russian Gas Agreement: Analysis and Alternatives”
Ferdinand Pavel, Research Associate, German Institute for Economic
Research, Berlin, Member, German Advisory Group with the Ukrainian
Government, Kyiv
f. Commentator: Serhiy Teriokhin, former Minister of Economy of Ukraine
g. Rapporteur: Oleh Havrylyshyn, Deputy Director and Special Advisor,
Office of Internal Audit, International Monetary Fund
 
MONDAY, FEBRUARY 6, 2006, 12:00–2:00 p.m.
Case Study Room, Center for Government and International Studies
Harvard University, 1730 Cambridge St., Cambridge, MA
SESSION 2. The Political Fallout in Ukraine
Chair: Oxana Shevel (Assistant Professor of Political Science, Purdue
University, University and Eugene and Daymel Shklar Research Fellow,
Ukrainian Research Institute)

a. “Energy, Interest Groups, and Politics in Ukraine”
Margarita M. Balmaceda, Associate Professor, John C. Whitehead School

of Diplomacy and International Relations, Seton Hall University, Associate,
Ukrainian Research Institute and Davis Center for Russian and Eurasian
Studies
b. “The Political Context of the Crisis: The Split in the Orange Coalition,
Constitutional Reform, Parliamentary Election”
Gene Fishel, Acting Division Chief, Bureau of Intelligence and Research,
U.S. Department of State
c. “The Governmental Crisis: Kto kogo, or Who Is Getting Whom?”
Taras Kuzio, Visiting Professor,  Institute for European, Russian and
Eurasian Studies, Elliott School of International Affairs, George
Washington University
d. Commentator: Serhiy Teriokhin, former Minister of Economy of Ukraine
e. Rapporteur: Oleh Havrylyshyn, Deputy Director and Special Advisor,
Office of Internal Audit, International Monetary Fund (IMF)

MONDAY, FEBRUARY 6, 2006, 4:00–6:00 p.m.
Case Study Room, Center for Government and International Studies
Harvard University, 1730 Cambridge St., Cambridge, MA
SESSION 3. International Dimensions of the Gas Crisis
Chair: Lubomyr Hajda (Associate Director, Ukrainian Research Institute)
 
a. “Ukrainian-Russian Relations: Beyond the Gas”
Paul D’Anieri, Associate Professor of Political Science, and Associate

Dean, College of Liberal Arts and Sciences, University of Kansas
b. “Europe and the Ukrainian–Russian Gas Crisis: Political Lessons”
John Gillingham, Professor of History, University of Missouri-St. Louis
Senior Visiting Scholar, Ukrainian Research Institute
c. “Europe and the Ukrainian–Russian Gas Crisis: Economic Lessons”
Ferdinand Pavel, Research Associate, German Institute for Economic
Research, Berlin Member, German Advisory Group with the Ukrainian
Government, Kyiv
d. “The Central Asian Factor”
Carol Saivetz, Associate, Davis Center for Russian and Eurasian Studies
e. “The View from Washington”
Gene Fishel, Acting Division Chief, Bureau of Intelligence and Research,
U.S. Department of State
f. Commentator: Serhiy Teriokhin, former Minister of Economy of Ukraine
g. Rapporteur: Oleh Havrylyshyn, Deputy Director and Special Advisor,
Office of Internal Audit, International Monetary Fund
CONCLUDING REMARKS 
———————————————————————————————
PLEASE NOTE:  Registration is required.  Participants may register at the
door before the sessions.   Pre-registration is strongly encouraged. 
Pre-registration forms may be downloaded from the HURI web site at:  
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23.            AUSTRIA CONVERTS ITS BIOMASS TO ENERGY

By Delphine Strauss, Financial Times, Lonon, UK. Mon, Jan 30 2006

Wood smoke curling from chimneys of an Alpine village encapsulates the
picture- postcard image of an Austrian winter. But the reality is fast
becoming more high-tech – sleek, smoke-free boilers burning wood pellets or
other biomass fuels to heat villages, factories and urban housing, with a
neutral impact on carbon emissions.

In 2003, nearly 70 per cent of Austria’s domestically produced power came
from renewable sources. Biomass fuelled 11.2 per cent of Austria’s total
primary energy supply and 21 per cent of heat production, according to
International Energy Agency (IEA) statistics. Not only do forests grow back,
they absorb carbon dioxide from the air as they grow.

As businesses in Europe struggle with mounting energy costs, worries over
supplies, and pressure to reduce carbon dioxide emissions, Austria’s biomass
proponents are keen to show that small-scale schemes offer an economic
solution. With almost half of Austria covered in forests, wood-fired heating
schemes have grown in popularity.

Even the fashionable Lech ski resort has a biomass plant that provides 90
per cent of its heat, and has spurred imitators as far away as the Canadian
Rockies.

Biomass energy is a growing business in Austria, sustaining a new market in
wood pellet supply, and building a technology cluster that increasingly
exports its services. Forestry, the second largest sector after tourism, has
a growing stock of wood and is keen to put by-products – chips, sawdust

and low-grade logs – to use.

It is no surprise, then, that the Austrian presidency of the EU has put
biomass high on its agenda. Wolfgang Schuessel, the Austrian chancellor,
told the European parliament on January 18 that Europe must diversify energy
supplies to reduce its dependence on imports, especially after Russia’s gas
dispute with Ukraine.

Austria’s commitment to biomass stems from concerns over energy security –
Austria relies on imports for two-thirds of its supply, and has banned
nuclear generation – as well as environmental targets and a wish to support
rural jobs.

The use of biomass energy “started as a grassroots movement”, says

Reinhard Madlener, a senior energy economist at the Swiss Federal Institute
of Technology.

Over time the design of plants that could be smelly and inefficient
improved, arousing the interest of mainstream energy suppliers. A new market
in wood pellets – compressed sawdust that is dryer, cleaner and easier to
transport than other biomass fuels – was key to the spread of domestic
biomass boilers.

Nonetheless, government support has been crucial to the development of an
industry where the start-up costs of buildingboilers are high, and
transporting fuel over long distances uneconomic.

It supports biomass through subsidies of up to 50 per cent of investment
costs, funding for research and development, and legislation matching a 4
per cent target for renewable electricity with a guaranteed price for
suppliers.

With these incentives, and new technology that can support larger projects,
big utility companies are starting to take an interest. Siemens’ power
generation division is building Europe’s largest wood-fired power plant in
Vienna, due to supply 5,000 households with electricity and 12,000 with
district heating from June.

EVN, the leading energy supplier in the country’s largest province of Lower
Austria, is building two biomass heat and power plants and says its
environmental business made up 14 per cent of total sales in 2005.

Taxes make natural gas more expensive than pellets in Austria, especially
after the recent surge in gas prices, but the cost of installing boilers has
raised doubts over the market’s ability to survive without subsidy.

Volatility in oil and gas prices and the stability of a local wood supply
could change this logic. For businesses investing in a system lasting 10-15
years, says Kasimir Nemestothy from the Austrian Energy Agency: “It makes
sense to reduce the risk by choosing the fuel with the least price
volatility.”

Less thickly-wooded countries are already exploring other options. Kerrin
Buckley, at the Bangor Centre for Alternative Land Use in Wales, says crops
such as willow and miscanthus could grow even in damp, isolated North

Wales.

So Austria’s support for biomass and its focus on localised heating schemes
could provide a template for other European markets too far from forests for
transporting pellets to be viable.

Its genesis in rural communities should appeal to European farmers seeking
more profitable non-food crops as Common Agricultural Policy subsidies are
separated from production.
———————————————————————————————

[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
24.                             THE MUSHROOM CLOUD

Ruadhan Mac Cormaic, Irish Times, Dublin Ireland, Jan 28, 2006

Many thousands of Latvians come to Ireland to work on mushroom farms.

A book by undercover reporter Laima Muktupavela about their lives,
working conditions and the land devastated by their departure, has become
a bestseller in her native Latvia, and would be an eye-opener for Irish
readers. She talks to Ruadhan Mac Cormaic.

On Christmas Day that year they were en route before sunrise. From the
three-bedroom house that the 12 Latvians shared to the mushroom farm where
they worked could have been no more than a few miles, though it felt longer
after a day’s exertion.

“I can still remember that Christmas Day,” says Laima Muktupavela. “We had
to start work at five o’clock in the morning. Between 5am and 7am we had to
prepare 200 boxes of mushrooms, ready to go to the shops. I asked could we
have more money for that work, but the owner said: ‘If you ask questions,
you can go home.’

“I remember another time when I found myself sweating all over. I had fallen
ill, and whatever I had brought out a rash and swelling on my skin. I asked
the owner if he could help me with some bandages or medicine. He replied
that he couldn’t be bothered with it. It wasn’t his problem, he said, and
walked away. I approached him again and said: ‘It is your problem. It’s a
big problem.’

“What I did was, I lay down and placed cabbage leaves over my skin to try to
relieve the pain and bring down the swelling. He was terrified when he saw
how bad the damage was. So he looked at me and said [giving an exasperated
wave of the arm]: ‘Go away! I don’t want to see you again today.’ “

Muktupavela laughs at the recollection. Her walk-on role in the drama of
Latvian migration was an ambivalent one from the start, she says, conceived
not of economic need but of a journalist’s hunch. As a newspaper reporter in
Latvia at the turn of the century, Muktupavela had increasingly found
herself as chronicler of an incipient trend, jotting down the impressions of
returning emigrants with greater frequency, if diminishing insight.

In all such conversations, she found, one could go so far before invariably
hitting the boundary of the emigrant’s need to rationalise his lot by
painting his experience in primary colours alone. “Yes, I thought they were
hiding something. They were holding back. They weren’t telling the absolute
truth. So I thought, I’ll go myself. I’ll find out.”

Leaving behind her partner and four children, Muktupavela travelled to
Ireland in 2001 and joined the group of 11 other Latvians working on a
mushroom farm in Co Meath. “We shared one house between 12 of us. There

were three bedrooms upstairs, and there was even a small kid in the house. I
fought for my own space. Physically! I didn’t tell anyone I was a journalist
but made a point of talking with everyone, trying to get to know their
characters, their attitudes, the way they interacted.”

A typical working day began at 6am and finished when they could no longer
see the mushrooms through the darkness. For this they each earned about
GBP125, or just under 160, a month. As the only member of the group with any
English, Muktupavela became its spokeswoman. “I asked the owner why Irish
people were getting better pay than Latvians. And do you know what he said?
‘You are different.’

“But at the end of the day he was good enough. He wasn’t the worst man.
There was a lady among us who was due to give birth, and he would bring

her to the hospital; he would look after her. I wrote that in the book: that we
were very grateful to him for that.”

When she returned home, the impressions Muktupavela had formed in Ireland
became the matter for her first book, and the questions raised by “The
Mushroom Covenant” were of such resonance that its first edition was briskly
followed by a second, then a third and a fourth.

It was awarded the Latvian National Literary Award in its publication year,
and its author’s voice radiated outwards like a bell; the work has been
translated several times, with an English version on the way. To most
Latvians, Muktupavela’s name is the standard gambit in debates on
emigration.

The book drew on the author’s experience to broach a broader set of
questions, most to do with the social ramifications of the exodus of young
Latvians seeking better-paid work in countries such as Ireland, Britain and
Sweden. Doing so, it tapped into deeply-held national misgivings that had
taken root by the time of its publication.

“When I came back from Ireland,” says Muktupavela, “I started to write about
the social problems this huge movement of people was having on Latvia –
about the break-up of families, marital separation. Just some journalism, at
first. What kind of life is it for a woman with children whose husband
leaves the country? How would they live? At first, people were angry with

me for bringing all of this up. But in general the book was received very
well.”

She likens it to “a Bible” on the bookshelves of those who have family
members working abroad. When she arrived in Dublin last week, an official

at the Latvian embassy told her that when he left home for this posting, his
family made sure to send him off with a copy of The Mushroom Covenant
under his arm.

Muktupavela was born in Rezekne, a town in the poor Latgale region, in
eastern Latvia. Built on seven hills close to the border with Russia, it is
a place of great lakes, bad roads and long memories. As an old geopolitical
pivot – Rezekne is where the Moscow-Riga and St Petersburg-Warsaw

railway lines intersect – the family trees of its 40,000 people are multi-ethnic
mosaics.

And the economic forces that here drew together Balts and Slavs and
Ugro-Finns, Polish landlords and Russian peasants, are today exerting the
same circular effects. Unemployment in Latgale is the highest in Latvia, and
since the country joined the EU, in May 2004, tens of thousands of the
region’s young have departed with the certainty of a better wage overseas.
Few homes in Latgale have not had a son or daughter emigrate to Ireland,
says Muktupavela.

Employers in the region now look to Ukraine and Belarus to fill their
vacancies, but the social collateral is heavier still: broken families,
orphaned children, desolate townships.

“We have very small salaries in Latvia, and these people left Latvia because
they need to have a normal life. Thank God that Ireland can help. But people
who go to Ireland, many don’t come back. We were the first wave of Latvians
[in 2001]. Now I see that Latvians are building the economies of other
countries, like Ireland.

Only now, after five years, has the Latvian government started to think
about this problem. Only now have they started to discuss it. Only now,

when 50,000 Latvians have left for Ireland.”

Muktupavela speaks English, but I have brought along an interpreter just in
case. Though skilled, he is more accustomed to legal translation, with a
spare style and an uncanny knack for rendering two minutes of Latvian

speech in three words of English. But he has been following the conversation
intently, and here he takes up Muktupavela’s argument. He has been in
Ireland for some time, he says.

His mother, who joined him two months ago, has found a job washing dishes

in the city. His father stayed at home; he is a foreman on a building site.
“Every time I call home, my father tells me how they have to finish a
building by such a time, but they can’t because they’re short of staff. All
they have is unqualified workers, because the qualified builders are earning
much more money abroad.”

Four years and five books have passed since that Christmas morning on the
mushroom field. Muktupavela, liberated from daily journalism by the
commercial success of The Mushroom Covenant, is now a full-time writer.

She has returned to Ireland with a television production team to prepare for
a full-length documentary and a 20-programme series based on the experience
of Latvians in Ireland.

The project, for which she is writing the script, will involve shuttling
between the two countries over the next three years. The job is a pleasure;
they need do no more than sit in a Dublin cafe to find their subjects, says
Muktupavela. The day after we meet, the production team hopes to track down
Jekabs Nakums, a Latvian Olympic athlete who announced on television last
November that he was leaving to go and wash cars in Ireland.

The project also gives Muktupavela the chance to indulge an abiding passion
for the country she is so closely identified with at home. A regular
visitor, she spent her last trip hitching around the west with her daughter,
and she has taken in much of the rest of the country over the years. “I have
thought about buying a house here,” she says.

“I have dreamed of it. In Co Mayo. Irish people always laugh when I tell
them that. Who would have believed five years ago that a Latvian would be
talking about buying a house in Ireland? I can’t explain my attitude to
Ireland. I cannot find words.”

She reverts to Latvian, smiles and fluently pours forth, her hands waving,
her voice halting once or twice while scouring for the right word, before
delicately nudging her head forward and conspiratorially imparting the final
clause in a whisper. When she has finished, we turn to the interpreter. He
raises his gaze slowly from the table. “Yes, she is happy.”
——————————————————————————————–
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
25.        UKRAINIAN FOLKLORE SOUND FILES ON LINE 

 
Natalie Kononenko, Kule Chair of Ukrainian Ethnography
University of Alberta, Modern Languages and Cultural Studies
Edmonton, Alberta, Canada, Mon, 16 Jan 2006
I am pleased to announce another exciting web page.  Please go to
http://projects.tapor.ualberta.ca/UkraineAudio/  From this page you will
be able to access all of the sound files that I recorded in Central Ukraine
between the years 1998 and 2000 or about 150 hours of sound. 
 
What makes this page special and ground breaking is that all of the sound
files are indexed, thanks to the careful and thoughtful work of our graduate
student, Svitlana Kukharenko.  Indexing means that you can find a topic on
our keyword list, click on the topic, and go directly to the sound recording
where that topic is being discussed.

The project for which the files were recorded had to do with family or life
cycle rituals: weddings, birth rites, baptisms, funerals.  At the same time,
all sorts of other material came up: personal recollections, stories about
house spirits or domovyky, stories about the unquiet dead and their return.
Our interviewees told me etiological and anecdotal narratives to educate me.
Since my field partner is interested in tales, a number of them are
included.

When you go to the TAPoR page, you will find a list of keywords.  Those

are the topics covered in the sound files indexed so far.  Click on the topic. 
You will see one or more recordings.  Click on the recording.

You will also find a list of the topics on the entire file that you have
pulled up. Should you want to listen to something you see on the list,

drag the pointer to the appropriate number of the file and click play.  If
this is not clear from my explanation, it will be when you see the website.

In addition to crediting Svitlana Kukharenko for her good work, I must

also credit Yue (Eric) Zhang, the programer at TAPoR, and Peter Holloway,
our resident digital expert.  They deserve the credit for the programming
behind the ground-breaking module.

Natalie Kononenko, Kule Chair of Ukrainian Ethnography
University of Alberta, Modern Languages and Cultural Studies
200 Arts Building, Edmonton, Alberta, Canada T6G 2E6
Phone: 780-492-6810, nataliek@ualberta.ca
Web: http://www.arts.ualberta.ca/uvp/
——————————————————————————————-
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AUR#649Steel Industrialists Speak Out: Plants Could Be Stopped; Moroz Interview; Anti-Ukrainian Histeria; Do Not Forget Belarus; An Artist

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 649
Mr. E. Morgan Williams, Publisher and Editor  
Washington, D.C., Kyiv, Ukraine, FRIDAY, JANUARY 27, 2006
                           ——–INDEX OF ARTICLES——–
         Clicking on the title of any article takes you directly to the article.               
Return to the Index by clicking on Return to Index at the end of each article
                            No one knows where Ukraine is going
                 We chose the socialists, because that’s our ideology.
INTERVIEW WITH
: Volodymyr Boyko, Steel Plant Industrialist
INTERVIEW BY: Serhiy Leshchenko, Ukrayinska Pravda web site,
Kiev, Ukraine in Ukrainian Monday, 23 January 06
BBC Monitoring Service, UK, in English, Thursday, Jan 26, 2006
2. UKRAINIAN TV SHOWS MAIN OPPOSITION PARTY’S ELECTION AD
UT1 State TV, Kiev, in Ukrainian 1630 gmt Wed 25 Jan 06
BBC Monitoring Service, UK, in English, Thu, Jan 26, 2006

3PRESIDENT YUSHCHENKO LISTENED TO ONLY THOSE PEOPLE
                WHO LED TO DISASTROUS GAS AGREEMENTS
        Ukrainian steel magnate warns of plant stoppages due to dearer gas
INTERVIEW WITH
: Serhiy Taruta, Manager & Co-Owner
Industrial Union of Donbass steel holding
INTERVIEW BY: Serhiy Leshchenko, Ukrayinska Pravda web site
Kiev, Ukraine, in Ukrainian Wednesday, 18 January 06
BBC Monitoring Service, UK, in English, Thursday, Jan 26, 2006

4“THE ICE AGE. OLEKSANDR MOROZ: ‘THE PRESIDENT HAS NO
                     GROUNDS FOR HOLDING A REFEREMDUM’
                 Ukrainian Socialist Leader Calls For More Democracy
INTERVIEW
: With Socialist Leader Oleksandr Moroz
INTERVIEW BY: Oleksandr Oleksandrovych
Kiyevskiy Telegraf, Kiev, in Russian 20 Jan 06; p 1, 4
BBC Monitoring Service, UK, in English, Thu, Jan 26, 2006

5. PAVLOVSKIY SEES UKRAINE AS STRONG ‘WORLD SUPPLIER

                                        OF FEAR OF RUSSIA’ 
ANALYSIS & COMMENTARY: By Gleb Pavlovskiy,
President, Effective Policy Foundation, under the
“First Person” rubric: “Ukrainian Export of Spokes in Wheels”
Izvestia, Moscow, Russia, Tue, January 24, 2006

6.          “PAVLOVSKIY FLEDGLINGS BACK IN UKRAINE”
                     Russian pollsters set up shop again in Ukraine
By Oleksandr Mikhelson, Glavred website, Kiev, in Russian 19 Jan 05
BBC Monitoring Service, UK, in English, Wed, Jan 25, 2006

7UKRAINE’S FOREIGN MINISTER BORYS TARASYUK ACCUSES
RUSSIAN MEDIA OF FUELLING AN ANTI-UKRAINIAN “HYSTERIA”

Interfax-Ukraine news agency, Kiev, in Russian 0757 gmt 26 Jan 06
BBC Monitoring Service, UK, in English, Thursday, Jan 26, 2006

8.              RUSSIA GAS LINE EXPLOSIONS SCARE EUROPE
By Andrew E. Kramer, The New York Times
New York, New York, Thursday, January 26, 2006

9POLAND: RUSSIAN GAS SUPPLY BEHAVIOR “NOT PROMISING” 

By Adam Smallman & Ben Winkley, Dow Jones Newswires
Davos, Switzerland, Thu, January 26, 2006 .

10.           WHAT’S BEHIND GAZPROM’S CONCESSIONS TO

                                       MOLDOVA & ARMENIA
Argumenty i Fakty, Moscow, in Russian 24 Jan 06
BBC Monitoring Service, UK, in English, Thu, Jan 26, 2006

11MOLDOVAN, US OFFICIALS DISCUSS DNIESTER SETTLEMENT
US Deputy Assistant Secretary of State for Europe & Eurasia, David Kramer
Moldovan Radio, Chisinau, in Russian 1200 gmt 26 Jan 06
BBC Monitoring Service, UK, in English, Thursday, Jan 26, 2006

12. UKRAINIAN OFFICIAL PREDICTS JOINT RUSSIAN-UKRAINIAN
  ENTERPRISE WITH ROSUKRENERGO WILL NEVER BE CREATED
Interfax, Kyiv, Ukraine, Thursday, January 26, 2006

13.     GEORGIA SUFFERS WORST ENERGY CRISIS IN YEARS
                         Misery deepened for Georgians on Thursday
By Misha Dzhindzhikhashvili, AP Worldstream
Tbilisi, Georgia, Thursday, January 26, 2006

14.    UKRAINE’S NATO AMBITIONS FORCE RUSSIA TO STOP

Interfax-AVN military news agency website, Moscow, in Russian 26 Jan 06
BBC Monitoring Service, UK, in English, Thursday, Jan 26, 2006

15.      UZBEKISTAN JOINS RUSSIA-DOMINATED EX-SOVIET

                 ECONOMIC BLOC THUS REINFORCING TIES
AP Worldstream, Moscow, Russia, Wed, Jan 25, 2006

16.    “EUROPE SHOULD NOT FORGET ABOUT BELARUS, YET

         ALREADY TODAY WE FEEL FORGOTTEN, ABANDONED”
Belarusian opposition presidential candidate Milinkevich tells Polish paper
INTERVIEW WITH: Alyaksandr Milinkevich,
Belarusian opposition presidential candidate
INTERVIEW BY: Waclaw Radziwinowicz
Gazeta Wyborcza newspaper website, Warsaw, in Polish 25 Jan 06
BBC Monitoring Service, UK, in English, Thu, Jan 26, 2006

17YURI YEGOROV: CELEBRATING A LIFETIME AS AN ARTIST
                        Black Sea odyssey with Odessa at its heart
         In his 80th year, artist Yuri Yegorov presents powerful canvases
          that echo his reverence for the Black Sea, writes James Brewer
By James Brewer, Lloyds List, London, UK, Friday, Jan 27, 2006
========================================================
1
HEAD OF INDUSTRIAL COMBINE RUNS ON SOCIALIST TICKET

                            No one knows where Ukraine is going
                   We chose the socialists, because that’s our ideology.

INTERVIEW WITH: Volodymyr Boyko, Steel Plant Industrialist
INTERVIEW BY: Serhiy Leshchenko, Ukrayinska Pravda web site,
Kiev, Ukraine in Ukrainian 23 January 06
BBC Monitoring Service, UK, in English, Thursday, Jan 26, 2006

The director of the Mariupol-based Illich steel plant, Volodymyr Boyko, has
decided to stand for parliament on the Socialist Party list. Speaking in an
interview with a Ukrainian website, he said his decision is based on the
fact that the party is neither pro-government nor pro-opposition.

He said he sees little difference between President Viktor Yushchenko and
opposition leader Viktor Yanukovych. He also criticized the Ukrainian
government for being economically inept: increased gas price and railway
rates are ruining steel production, which is falling significantly each
month, Boyko added.

The following is an excerpt from the interview Boyko gave to Serhiy
Leshchenko published on the Ukrainian website Ukrayinska Pravda on 23
January; subheadings have been inserted editorially:

The appearance of Volodymyr Boyko on the list of the SPU [Socialist Party of
Ukraine] was one of many confirmations that serious changes have taken place
in the party. Big money is coming to the socialists, money that used to
support the former authorities politically and that now is not frightened of
moving into the camp of their fiercest enemies.

At the previous elections Volodymyr Boyko was in fourth place on [former
President Leonid] Kuchma’s For a United Ukraine. However, at the same time
he says that he was almost a communist by conviction.

Boyko, who received the order of Hero of Ukraine under the old regime, is
building his socialism in Mariupol. He is head of the Illich metallurgical
combine, the country’s biggest after Kryvorizhstal.

                            IT IS A STATE WITHIN A STATE
It is a state within a state – they have their own airline, agricultural
land, fish canneries and dairies, a clothing factory, a pharmaceuticals
network, an insurance company, fifty-odd public catering establishments
and the Uman agricultural engineering plant.

Boyko’s position at the plant is unshakeable thanks to the law on special
features of privatization, which in 2001 without competition gave the plant
over to Illich-stal, created by the workforce.

Boyko claims that because of that he had to come into conflict with Kuchma.
“He did not want such a scheme, but I got what I wanted. I said that I would
take 200,000 people to Kiev and that we would defend that right.”

Considering the lack of alternative, in Mariupol Boyko can allow himself the
luxury of being radically frank. And considering the fact that he does not
often give interviews, and does not like public politics, his conversation
with Ukrayinska Pravda often verged on the edge of folly.
              WHAT DO YOU THINK ABOUT THE GAS PRICE?
[Leshchenko] The first question is very traditional: what do you, as one of
the country’s biggest directors, think about the new gas price?
[Boyko] But nobody knows the new gas price even this month, not a single
factory! Our steel plant is operating, we have been given a limit, but no
contracts have been signed with anyone.
Everyone says that last year we bought gas at 50 dollars [per 1,000 cu.m.]
and this has become embedded in the average person’s thinking. I assure you
that nobody bought gas at 50 dollars! The price without transport and VAT
was 76.6 dollars.
In 2004 the price really was 50 dollars. And I am asking where did the other
26.6 dollars go that we paid for the whole of last year?!
Today the profitability of steel plants has fallen five- to ten-fold. I
don’t understand what the country is going to live on! In January the drop
in GDP will amount to between 3 and 10 per cent. And a drop in GDP means a
collapse in the economy. We are repeating 1983!
[Prime Minister Yuriy] Yekhanurov phoned me saying that we should meet.
Colossal decisions now need to be made how to save everything! Yesterday, I
listened to the head of Ukrainian Railways, and I nearly dropped! Where is
there such a country? They make colossal losses on passenger transport and
compensate it all by industrial transport; the state gets money from
Ukrainian Railways in the form of dividends and is virtually not developing
its transport.

[Leshchenko] Last week saw the publication of a demand by the directors of
all the major plants in Ukraine to dismiss Fuel and Energy Minister [Ivan]
Plachkov and the head of [oil and gas monopoly] Naftohaz, [Oleksiy] Ivchenko
over the gas accords with Russia. The signature of the head of the Mariupol
Illich steel plant was also on it.
[Boyko] Let’s say I did sign it. They rang and asked, but I didn’t sign the
statement… [ellipsis as stated]
My position is simple – we should not have gone for that gas agreement that
throws us who knows where. The new authorities have made lots of mistakes.
If they had done nothing at all, it would be easier today with the gas
price.
                    CRISIS IN UKRAINIAN METALLURGY
But the authorities were unlucky. Metal prices fell by 35-40 per cent, which
is a colossal amount of money! And they additionally increased the price for
the manufacture of metal. And prices for rail transport have increased not
by 50 per cent, but by much more!

[Leshchenko] But in spring 2005 you were at a news conference together with
the then prime minister [Yuliya] Tymoshenko when she announced a rise in the
rates for transport, and you supported her!
[Boyko] Yes, she took me by the hand and led me to the news conference! But
we agreed then that the new rates were being introduced for two months and
we would then review them.

[Leshchenko] But the then transport minister, [Yevhen] Chervonenko, said
that we had the lowest rates in Europe.
[Boyko] Let them not tell lies, please! They are much lower in Russia. They
have enormous distances there and everything is calculated in such a way as
to protect the producer.
When they made the decision to raise the rates for railway freight
transport, I spoke in the Cabinet of Ministers and said: “I don’t understand
this government at all. How can a decision be taken at the Cabinet of
Ministers to raise rail transport rates when there is 40 per cent
profitability on industrial haulage? Transport affects everything, and there
will be an immediate rise in prices for meat, milk, butter and bread. As a
result, it leads nowhere.”
In February [President] Viktor Andriyovych [Yushchenko] presented us with
the new governor of Donetsk Region, [Vadym] Chuprun and I arranged a

meeting with him and drew up a report where I wrote down everything that
would happen. However, I thought that the metals market would fall in July,
but it fell in March.
The new authorities were unlucky! I’ll quote the example of our plant: in
April last year we produced commercial metallurgical output worth 300m
dollars, in June – 220m. Minus 80m!
In January this year we will produce output worth at most 220m. In January
last year the figure was 290m. And that’s just one plant!
And the 14 metallurgical plants throughout Ukraine this January will produce
metallurgical output worth 650-700m less than in January last year!
Today there are far higher expenses in the cost price. Profitability has
fallen. The payments that we used to make from profits are no longer there.
I’m confident that in a month or two they’ll start conserving investments.
If people took out credit, they’ll lose confidence in the banks, because
there is a huge growth in the risk of that money being returned.
NO DIFFERENCE BETWEEN AUTHORITIES AND OPPOSITION
No-one knows where we are going! The worst thing is that nobody has a
programme and nobody knows what tomorrow will bring!
Everyone talks about the market and doesn’t understand one thing: there is
no unregulated market anywhere! Nowhere! In the countries of Europe and
America laws strictly operate, primarily anti-monopoly laws. And if anyone
transgresses them, he’s immediately torn to pieces!
With us people do as they please. With us capitalism resembles the beginning
of the 19th century. The new authorities have lost their credit of trust. I
myself am from the east, but I meet with people in Cherkasy Region.
Milkmaids say to me in Uman, “Mr Boyko, how can we understand this?
We voted for the new authorities! What are they doing?”
How can one explain to them? There’s no difference between the new regime
and the old… [ellipsis as published]

[Leshchenko] For a milkmaid there’s no difference between the old regime

and the new, but for you has it got better or worse?
[Boyko] It’s got a lot worse! Under the old authorities at least there were
professionals at whom you could swear, squabble and make your point,
whoever was the president, prime minister or deputy prime minister…
[ellipsis as published] But here, who is there to talk with?
Nobody is thinking about human beings in Ukraine. Why did I not vote at the
presidential election either for Yushchenko or Yanukovych? Because there’s
no difference!

[Leshchenko] You didn’t go to vote at the presidential election?
[Boyko] I voted only in the first round. I voted for Yanukovych. But when
the events started in Kiev, I went to a meeting of the Regions of Ukraine
faction and said: “Mr Yanukovych, remove your candidacy, we’ll crush
Yushchenko!”
TODAY WE SEE CLEARLY THAT EVERYONE WAS DECEIVED
[Leshchenko] How would you crush Yushchenko?
[Boyko] Like this! We’d find another candidate who would work for Ukraine!
That’s all history now. But today we see clearly that everyone was deceived!

[Passage omitted: Yushchenko’s unpopularity in east Ukraine; recapping
distaste for both presidential candidates]

[Leshchenko] They say that when Kuchma was president, you were one

of his favourites.
[Boyko] Favourite? At one time in 2000 I couldn’t get through to him for
eight months. And there was persecution of us.

[Leshchenko] But in 2002 you were an MP on the list of the pro-presidential
For a United Ukraine.
[Boyko] Yes, I could have become an MP at any convocation, but I never
wanted to enter parliament. And only at the request of Leonid Kuchma did I
come here. But I don’t regret it, although at first I had a different
opinion. I understood how difficult it was to work there. [Passage omitted:
expanding this]
But the most important thing for me is work at the plant because it is there
that the state’s might and wealth is forged.
[Passage omitted: Boyko attacks Yushchenko’s arrogance]

Ukraine’s main misfortune today is that nothing is changing, there’s no
normal ideology, no programme in which people can believe. If you look
at the programmes of all the parties, they’re identical, apart from the
communists and socialists.

[Leshchenko] But Tymoshenko and Yekhanurov conduct policy differently!
[Boyko] What’s the difference in their policy?
                              AGAINST PRIVATIZATION
[Leshchenko] Well, for example, Tymoshenko carried out reprivatization

and Yekhanurov doesn’t.
[Boyko] And what about this privatization? Let’s sell everything, and then
what? I was against privatization in general. And from the very outset I
said privatization must not be started from the basic industries.
But today everyone understands that we created a lot of calamities with
privatization. [Passage omitted: expanding this]
  INDIANS HAVE COME TO KRYVORIZHSATL, IT’S BAD
[Leshchenko] You don’t like the fact that Indians have come to
Kryvorizhstal?
[Boyko] It’s bad. They are already suggesting that they will bring
refractory materials from China, and our refractory materials plants have
already started suffering from this. If the Indians also get hold of the
Kryvyy Rih ore-enrichment plant of oxidized ores and take the ores, I can’t
imagine at all what will happen to Ukraine.
Nobody understands one thing: they paid that money and will do everything
to get it back. They aren’t interested in the country, in people, even their
workers. [Passage omitted: expanding this]

[Leshchenko] When you were invited to stand for the SPU, were you not
embarrassed that this party for many years fought against Kuchma and was
even the instigator of the cassette scandal [recordings made by former guard
Maj Mykola Melnychenko in Kuchma’s office apparently implicating him in
serious crimes]?
[Boyko] What have the Melnychenko tapes got to do with it?! Yes, [Socialist
Party leader Oleksandr] Moroz was brave enough to go ahead and make those
tapes public… [ellipsis as published]

[Leshchenko] But the socialists carried the flag of the Melnychenko tapes
for four years!
[Boyko] They are no longer carrying it. I went to the faction and explained
my position to them. How can it be that an officer of the SBU [Security
Service of Ukraine] recorded the president; after all, he had sworn an oath
of loyalty to his homeland! [Passage omitted: expanding this]

[Leshchenko] If there is a trial where the Melnychenko tapes are used in
evidence, will you consent to confirm that your voice is on the tapes?
[Boyko] Listen, what rubbish… [ellipsis as published] I know that if I am
recorded on those tapes, I was always talking about the interests of the
state. My attitude to this story is very simple: I consider Melnychenko to
be a traitor!
How would they have acted in the USA if they had discovered that
conversations had been recorder in Bush’s office? They’d probably have
sentenced such a person to the electric chair, eh? [Passage omitted: Boyko
believes there is no evidence of crimes on the tapes]
                           SOCIALIST IDEOLOGY APPEALS
[Leshchenko] Why did you agree to stand at the elections with the SPU?
[Boyko] Everyone wanted to have [MP Serhiy] Matviyenkov and me on

their election list – just ask [parliamentary speaker Volodymyr] Lytvyn, for
example.
But I understand one thing: we have to stand as ourselves or with
the socialists or communists. We chose the socialists, because that’s our
ideology.
Although it’s difficult for us. I constantly defend Moroz in Mariupol,
because everyone tells me that he is orange [propresidential]. And I say to
them, “What sort of orange person is he? He’s a normal person.” The flag
outside our Mariupol Illich steel works is raspberry-coloured and the
Socialist Party’s flag is also raspberry-coloured. A normal flag and a
normal ideology.

[Leshchenko] You constantly criticize the new authorities. But your
socialists themselves are in power!
[Boyko] I can say one thing: I’m sure that both [Education and Science
Minister Stanislav] Nikolayenko and [Agriculture Minister Oleksandr]
Baranivskyy, with their little mistakes, and [Interior Minister Yuriy]
Lutsenko and [State Property Fund chairwoman Valentyna] Semenyuk are

in the right place.
There is not a single socialist in the government’s economic bloc.
[Passage omitted: Boyko praises Donetsk governor Chuprun]

[Leshchenko] Did the Party of Regions not get upset that you didn’t join
their list?
[Boyko] They did. But what is there to get upset about if they expelled me,
an associate member of the Party of Regions faction, when I voted to confirm
Yekhanurov as prime minister? What is more, they expelled Matviyenkov and
me, but not [Yukhym] Zvyahilskyy, who also voted “for”… [ellipsis as
published]
Well, not to worry, it’s all right… [ellipsis as published] I would have
stood at the elections with the socialists anyway.
———————————————————————————————

[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
2. UKRAINIAN TV SHOWS MAIN OPPOSITION PARTY’S ELECTION AD

UT1 State TV, Kiev, in Ukrainian 1630 gmt 25 Jan 06
BBC Monitoring Service, UK, in English, Thu, Jan 26, 2006

[Party of Regions election candidate and former Kharkiv Region governor,
Yevhen Kushnaryov, in Russian] We are a force! We are reliability! We are
confidence in tomorrow!

[Party of Regions election candidate and MP Taras Chornovil] We are a true
team, a team of winners.

[Party of Regions election candidate and Donetsk tycoon Rinat Akhmetov,

in Russian] We must build a strong economy and create jobs.

[Party of Regions election candidate and parliamentary ombudsman Nina
Karpachova, finishing Akhmetov’s sentence] In order to unite our country
into a united Ukraine, together with you.

[Party of Regions leader Viktor Yanukovych, in Russian] We will win

together for the sake of the whole of Ukraine.

[The advertisement was run after the news bulletin. Video shows a blue sky,
a yellow field and a blue-and-yellow map of Ukraine, with the words
“Ukraine. Party of Regions” in the middle.

Video also shows Kushnaryov, Chornovil, Akhmetov, Karpachova and

Yanukovych speaking against the background of crowds of people waving
blue and white flags (blue and white are the party’s campaign colours).

The words they are pronouncing appear in Ukrainian at the bottom of the
screen. All of them are then shown together. A slogan is shown on the
screen: “Improving your lives now! Party of Regions. Ukraine.”]
———————————————————————————————

[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
3. PRESIDENT YUSHCHENKO LISTENED TO ONLY THOSE PEOPLE
                WHO LED TO DISASTROUS GAS AGREEMENTS
                                    Turuta Voted for Yushchenko
        Ukrainian steel magnate warns of plant stoppages due to dearer gas

INTERVIEW WITH: Serhiy Taruta, Manager & Co-Owner
Industrial Union of Donbass steel holding
INTERVIEW BY: Serhiy Leshchenko, Ukrayinska Pravda web site
Kiev, Ukraine, in Ukrainian, Wednesday, 18 January 06
BBC Monitoring Service, UK, in English, Thursday, Jan 26, 2006

Serhiy Taruta, the manager and co-owner of the Industrial Union of Donbass
steel holding, has said that the recent gas deal with Russia will have
disastrous consequences for Ukraine. In a rare interview, Taruta warned that
with the new gas price, four of his company’s steelworks will be loss-making
and will have to be shut down.

He says that an “energy lobby” including Fuel and Energy Minister Ivan
Plachkov and Naftohaz Ukrayiny state energy company chairman Oleksiy
Ivchenko persuaded President Viktor Yushchenko not to sign a decree
appointing IUD co-owner Vitaliy Hayduk deputy prime minister for fuel and
energy, adding that Yushchenko relies only on those promoting the gas deal
for information.

Taruta said that Donetsk-based tycoon Rinat Akhmetov is not linked to IUD as
a shareholder, though they worked on joint projects in the past.

The following is an excerpt from Taruta’s two-part interview with Serhiy
Leshchenko posted on the Ukrayinska Pravda website on 18 and 19 January
under the title: “Serhiy Taruta: President Yushchenko listened to only those
people who led to disastrous gas agreements”, subheadings have been inserted
editorially:

It took us several months to arrange this interview with the director and
co-owner of the Industrial Union of Donbass, Sehiy Taruta. [Passage omitted:
Description of Taruta’s office, background on gas talks with Russia]

[Leshchenko] You were against the revision of gas agreements from the start,
but it all ended with a vote on the dismissal of [Prime Minister Yuriy]
Yakhanurov’s cabinet. Are you satisfied?
[Taruta] I think everyone understands that an acting prime minister bears
less responsibility while having the same powers. The first task was to
figure out the essence of the gas agreements.
The fact that this issue was raised so sharply – is good!.. [ellipsis as
published] But then instead of the real problem of gas supplies attention
was shifted to playing the election cards.
We should form an expert commission on gas to find out why this

unfavourable agreement had been signed! We are prepared to provide our
representatives as experts, to work for free on this commission.
I would also advise that the Audit Chamber inspect Naftohaz jointly with
independent multinational auditing companies.

[Leshchenko] You said that the gas deal should be annulled. How can this be
done now that the document had been signed?
[Taruta] You see, two parties sign an agreement, and one of them does not
have authorized rights to sign this document. In legal terms, this document
is not a contract. The chapters signed by [Naftohaz chairman] Mr Ivchenko
are beyond his pay grade.
The charter of Naftohaz does not provide its chairman with the function of
changing transit tariffs… [ellipsis as published]
The tariffs are not within Naftohaz’s remit, that is the level of
intergovernmental agreements.

[Leshchenko] But if your scenario is accepted, the Russians can sue you
after the signed agreement is ignored!
[Taruta] No! Because a treaty is a form of accord, which later must be put
into the specific legal form of a contract.
In this case, the negotiators exceeded their remit, they did not have the
authority of the Cabinet of Ministers to touch upon these issues. Especially
because there were three parties involved in the agreement. For some

reason, the bilateral talks were always attended by representatives of the
RosUkrEnergo [Gazprom-affiliated intermediary company].
Now Ukraine must think not about how Russia will react to the breach of
the contract but about national interests. It is hard to expect Gazprom
approving it, and that is why we witnessed Russia boasting about the
agreement which had been reached.
De facto the price of gas and transit is a purely political part of the
question. Market relations cannot exist between two monopolists.
                     HIGHER GAS PRICES HIT ECONOMY
[Leshchenko] But you are also thinking about your own interests: you will
lose from high gas prices.
[Taruta] Right now I am talking about the country. This agreement will have
negative consequences for Ukraine as a whole. We are a doing business in
this country and we are inseparably linked to hundreds of other businesses.
Of course, we can diversify some parts of our business, engage in less
energy-consuming projects… [ellipsis as published] The real problem is
that the Ukrainian economy will fall into depression. The stagnation will be
felt in the next few months.

[Leshchenko] On the other hand, you are motivated by resentment: they did
not appoint your Hayduk deputy prime minister as promised.
[Taruta] Our group did not show any initiative concerning his advancement to
the deputy prime minister’s office… [ellipsis as published] Taking into
account that the situation was hopeless, the country’s leadership asked
Hayduk for help with finding a way out from the situation in the energy
sector.

[Leshchenko] In the end, the authorities decided to refuse Hayduk’s
services: there is no decree on his appointment.
[Taruta] The decree was signed but was not registered…[ellipsis as
published] As far as I know, Hayduk saw the decree and had a long talk with
the president. They agreed that Hayduk would start in his new position a
little bit later, after the New Year. But during this period, the energy
lobby group began doorstepping the president’s office in order to have that
decree cancelled.

[Leshchenko] Who makes up this “energy lobby”?
[Taruta] Everyone who holds senior posts in the energy sector – Plachkov,
Ivchenko and others.
                                     ROSUKRENERGO
[Leshchenko] What about Dmytro Firtash, who is linked to lobbying the
interests of RosUkrEnergo? Do you know him?
[Taruta] We had to contact a firm represented by Firtash when the IUD

worked as a contractor importing Uzbek gas. But all the legal and financial
documents were signed not by Firtash but other people.

[Leshchenko] Firtash’s company is linked to [Semen] Mogilevich…[ellipsis
as published]
[Taruta] You are a journalist, not a detective! I’ve never met Mogilevich,
and I cannot comment on that. Back in the days when [Yuriy] Boyko was

the head of Naftohaz, I often saw representatives on this transit operator,
which is still working on delivering gas to Ukraine…[ellipsis as
published] Now there is no reason to go to Naftohaz, and I am not an
adequate expert on this issue.

[Leshchenko] By the way, when RosUkrEnergo appeared during Kuchma’s
presidency, you did not speak up against it, everything suited you. Even
though the opposition at the time – who are in power today – were very vocal
in criticizing RosUkrEnergo. Now the situation is reversed – they are
satisfied, and you are not!
[Taruta] I do not know a single reasonable person who agrees with the
proposed model of gas supplies, except for those actually involved in it.

Today, Ukraine is no longer considered a player on Europe’s gas market,
and Russia is moving on to gas “choking” of other European countries.

[Leshchenko] But President Yushchenko supports the gas deal!
[Taruta] Unfortunately, the president has not heard other opinions. He
should invite independent experts, they will make it clear! Then, I think,
his reaction will change sharply. Unfortunately, to this day, the president
relied only on the information provided by people who facilitated the
signing of these disastrous gas deals.
UKRAINE NEEDED TO STAND FIRM IN TALKS WITH RUSSIA
[Leshchenko] Well, which version of the gas deal do you consider
appropriate?
[Taruta] We should have stood firm on the existing agreements at the time.
We have witnessed how Russia achieved high prices on gas, while Ukraine lost
its more favourable geopolitical positions as the main transporter of gas to
Europe. This is an obvious fact!

[Leshchenko] If Ukraine had insisted on the old agreements, as you propose,
it would be siphoning Russian gas and leaving Europe in short
supply…[ellipsis as published]

[Taruta] Why is this Ukraine’s problem? We have no collective responsibility
to Western countries concerning gas supplies. This is Gazprom’s problem.
As far as I understand, Europe was on our side, supporting us tacitly and
sending us messages like “look, we are saying that we do not depend on
Russia gas, you settle it yourself”.
How long would Gazprom last? Exactly one day! Because specialists who are
deeply involved in this topic know that Gazprom must transport gas no matter
what. They must either let the gas out into the air from the well or keep
pumping it through the pipeline.
The system is designed so that it has, in effect, a non-stop production
cycle. Today, Gazprom is dealing with the negative fallout from its strategy
in Europe – these countries are urgently passing replacement programmes. I
know that Poland is deciding on the specific location of a sea terminal for
receiving liquid gas.
In addition, they are looking into construction of two new gas pipelines
from Algeria and Iran-Turkey. Even Germany’s largest energy company
E.ON said that no-one will let Europe be blackmailed this way.
It is only Ukraine that allows political blackmail and a theatrical show
behind closed curtain to be held around this! If we read Gazprom’s balance
sheet for 2006, which was prepared as early as 11 October, you will see that
Naftohaz is not even in there. They already had RosUkrEnergo, and Naftohaz
could not be unaware of this.
It seems like everything was planned in October 2005. We only saw the
implementation of this plan.
Including the pre-recorded news stories for “Eurovision” [as published,
could be “Euronews”] about a country stealing gas from the EU.
And commentaries when for the Ukrainian side they show the prime minister,
and for the Russian side a disgruntled worker is put at the same level with
him, saying “Ukraine is stealing gas!”

[Leshchenko] In general, your position on this issue corresponds with that
of [former prime minister Yuliya] Tymoshenko?
[Taruta] My position corresponds with the opinion of qualified specialists
on gas supplies.
I have not met a single person who could present convincing evidence in
defence of the agreements signed on 4 January 2006!
You know, I do not like conflicts. But I stand for this country’s national
interests. With this configuration we are going towards economic collapse.

Now the government wants to introduce a moratorium on gas price rises for
residential consumers and communal services. Tell me, who is going to pay
for this? Only industry, which will have to subsidize this while working at
a loss.
I think that if the government wanted to reach some agreement, they would
have accepted Putin’s proposal to preserve the old conditions for the first
quarter and find a compromise solution during that period.
I understand why this agreement was signed at two o’clock in the morning.
Because before that out delegation was in Turkmenistan, and it was clear
that they had nothing to bring to Kiev, nothing to tell President Yushchenko
on their real achievements.
Because before the New Year they were misinforming the country that
everything was fine with Turkmenistan, that we have gas, we have a long-term
contract.
But they did not show it to anyone…[ellipsis as published] They were
preparing the people to celebrate victory, but the result was different.
That is why they were in a hurry to report to the president. This is where
we should look for answers about the personnel change in the cabinet that
never happened.
                      FOUR PLANTS COULD BE STOPPED
[Leshchenko] Have you calculated the possible losses that your plants will
sustain because of the new price?
[Taruta] For comparison, I can say that the difference between the old price
and the new for our companies is bigger than today’s salary fund. Today all
of our plants are profitable, but with the new price some will become
loss-making.
For example, the Dniprovskyy metallurgy combine of Dzerzhinskiy will be on
the brink of stoppage. The same problem will be at “Petrovka”. Makiyivka and
the DMZ will probably be stopped.

[Leshchenko] Stopped? You mean the plants will not work?
[Taruta] Of course they will not! Who would operate at a loss?

[Leshchenko] Does it mean that four of our plants will stop?
[Taruta] A business vision is that if you see the light at the end of the
tunnel you invest into cutting energy dependence and in a few years you are
profitable and you pay off that loan.
But if you do not see any ways out for the foreseeable future – it is better
to stop production. It is easy to predict that several steelworks will
become the source of cheap scrap for others.
The same goes for chemical plants. They should think before saying things
like what Plachkov said after signing the agreement: “Thanks God, now
everyone will work on introducing energy-saving technologies!” They need to
understand that in order to introduce energy savings we need lots of money
and an adequate transition period.

[Leshchenko] When do you think the Ukrainian industry will be ready for the
price of 95 dollars per 1,000 cu.m. of gas?
[Taruta] Today, we have a programme of technical conversion of the plants,
which will result in lower energy dependence. If in Hungary we have a
balanced company, then in Ukraine this programme is planned for three to
four years.
And the government must develop a national programme of energy conservation,
specifying clear preferences for those who cut energy consumption by 30-40
per cent. In order to do that, we need a credit agency…[ellipsis as
published]

[Leshchenko] You are saying that Yushchenko hears only one side of the
story. Have you tried to contact Yushchenko during that period?
[Taruta] I tried, but I failed. I called the secretariat and said that there
are other opinions on the gas issue, different from that of Ivchenko. But
obviously Matviyenko (deputy head of the presidential secretariat) could not
report this to Yushchenko.

[Leshchenko] Look, there have been so much unfairness in Ukraine all these
years, but you kept silent! You are speaking up only now, when your business
is involved!
[Taruta] We are not talking about our plants. What we did at the Alchevsk
steelworks – we are 18 months ahead of everyone, including in the area of
energy conservation. This means that Alchevsk is less affected by the gas
pricing policy. We plan to cut energy consumption threefold by 2009.
But I am talking not about myself but about the interests of the nation.
Today, we are creating fundamental problems for the economy, which will be
difficult to solve.

If we want to keep paying higher pensions to the people, they need to come
from income tax, which is paid from salaries at operational companies. I
want to stress – operational! Not those barely surviving with chronic wage
arrears.
I am absolutely convinced that we could get much better conditions in our
talks with Russia. Any successful businessman would tell you
that…[ellipsis as published]

[Leshchenko] Today you are sharply critical of the gas agreements. If you
knew last month what would happen to gas, would you have run for

parliament?
[Taruta] I hope my voice will be heard even without the parliamentary
rostrum.
                     SUPPORTS EUROPEAN INTEGRATION
                                   Voted for Yushchenko
[Leshchenko] Some time last March you confessed that you supported
Yushchenko at the [presidential] election in 2004. Did you give money?
[Taruta] Support is not always in this sphere. We did not pay money.
Some are saying: “You are putting [eggs] in different baskets…[ellipsis as
published]”
Realistically, we are engaged in attracting investment in Ukraine, we are
developing business, improving the overall investment climate, and that is
how we see our mission of support.

[Leshchenko] So how did you help Yushchenko at the election then?
[Taruta] With my vote.

[Leshchenko] Then I helped just as much as you did?!
[Taruta] Of course! But Yushchenko too is responsible to you, because your
vote was there. The president belongs to the people, not to himself. He must
not assume this position: to depart after the New Year, when the gas dispute
is not resolved and to be aside from the negotiation process.
Because this conflict concerned every citizen. Even an old lady who lives
next door was asking me: “What is happening to gas?” This was the No 1
problem for the nation. And Yushchenko must lead the way and not listen to
only one biased opinion.
I have an opportunity to speak these words because the result of the 2004
election was right. We now have access to real democracy.

[Leshchenko] Was it difficult to support another candidate, not [former
Prime Minister Viktor] Yanukovych being in Donetsk?
[Taruta] I was in favour of European choice. And when the events in Kiev
began, when we were in danger of losing financial trust in our country, we
needed civil choice. What was done at that stage was right. But what the
government is doing with gas is blatant incompetence!

[Leshchenko] A new election is coming up, and the prime minister will be
determined by parliament. Whom do you trust more – Tymoshenko,

Yekhanurov or Yanukovych?
[Taruta] If I say one name, you will say that I favour this person. Today I
would rank them by how they defend the national interests in the energy
sector. So far, I can mention only Tymoshenko. Even though I had some sharp
disputes with Yuliya Volodymyrivna [Tymoshenko], when she was prime
minister, concerning railroad tariffs.
She had a distorted view of this problem. Maybe the tariffs needed to be
raised, but the methods were wrong. I can say that I do not support some of
her actions.
Some things she was not allowed to do, and some ideas received strong
opposition, and everything was done to prevent them from coming to life. I
can note that with the old system of authority any prime minister may become
ineffective.
Also, it is not right to limit the number of candidates to the prime
minister’s post to these three names. Some other consolidated figure may
appear. [Passage omitted: talks about his art collection]
                         AKHMETOV NOT LINKED TO IUD
[Leshchenko] How would you estimate your total assets?
[Taruta] I will be able to answer this question in one month, when our audit
for 2005 is complete. We are preparing it as part of our plans to conduct an
initial public offering (IPO). In order to do that, we need to have at least
three years of audited consolidated balance sheets.

[Leshchenko] I heard that [Donetsk-based tycoon Rinat] Akhmetov also

wants to issue shares through an IPO?
[Taruta] I do not know which business groups in Ukraine will be able to
satisfy the requirements for audited consolidated balance sheets.

[Leshchenko] How is the ownership of the IUD divided, between whom

and inwhat proportion?
[Taruta] Today the IUD has two shareholders – the firms Vizavi and
Azovimteks. Another company has a small share.

[Leshchenko] About five to six years ago many people thought that the IUD
and Akhmetov were linked somehow. Why did everyone think that?
[Taruta] In the history of the IUD, Akhmetov was never a shareholder of the
company. Yes, we were partners in some projects – the Azovstal, the
Khartsyzsk pipe plant and the Alchevsk metal works. Then we did a swap for
other assets.
Since the very start the IUD has been a Ukrainian company, it has never had
any offshore companies. We have a fairly transparent history and the
shareholders of the IUD have never changed.
We had other joint businesses with Akhmetov as equal shareholders, but he is
more well-known in Donbass, and we have always been in the shadows.
                        HOW DID YOU START IN BUSINESS?
[Leshchenko] How did you start in business?
[Taruta] Me? From a garden.

[Leshchenko] What do you mean?
[Taruta] My parents had a garden…[ellipsis as published] My brothers and I
worked in this garden, earned money for our studies and helped our parents.

[Leshchenko] What about the starting capital?
[Taruta] My family instilled in me the desire to work hard. Then I had
priceless experience at Azovstal – I went from being a foreman to deputy
director. Then we founded a firm – we were doing sales for leading foreign
metal traders. We did not really have any metal quotas, we were providing
our services only as an intermediary.
On 19 December we marked 10 years since the founding of the IUD. The

company began with authorized capital of 126,000 hryvnyas [currently
about 25,000 dollars] and a huge effort by tens of managers.
For the first five years, the shareholders rarely finished working before
three o’clock in the morning, except on weekends when we worked until 10 in
the evening.

[Leshchenko] Why didn’t you attend Yushchenko’s meeting with oligarchs,
which was held at the presidential secretariat last autumn?
[Taruta] I had to be in another place at that time. I did not consider that
meeting purposeful. What was achieved? We only have critical
arrows…[ellipsis as published]

[Leshchenko] It was shown that the president extended his hand to
business…[ellipsis as published]
[Taruta] How exactly? We can have 10 meetings around a table. There are
legitimate mechanisms which must be implemented in order to help business.

Not declaring that business lives separately and government is separate.
It was a wrong thesis from the beginning, and an unachievable one too.
Nowhere do business and government exist separately. These are two
organisms interlinked in harmony, who mutually complete each other.

[Leshchenko] But when government and business grow together – this is
corruption…[ellipsis as published]
[Taruta] When businessmen use official power for personal gain – this is a
sin and must be punished. The government must help business to work on
foreign markets and introduce absorbing mechanisms when foreign capital
becomes too active. Those people who sat around the table with the president
all have different ideology.
Today everyone is interested in growing Ukraine’s capitalization. We should
not be afraid of big businessmen in power. We simply need to find a
mechanism to make sure that they do not go there for personal gain.
     DISAPPOINTED IN GOVERNMENT’S PERFORMANCE
[Leshchenko] Are you disappointed in Yushchenko?
[Taruta] Like many people, I am disappointed in the final results. We had a
colossal opportunity to achieve a breakthrough, and everyone was ready – the
investment funds, banks and Europe.

We should have shocked and scared it by saying that tomorrow we would be
in the European Union. By the way, it must be investigated why we have had
practically zero results in European integration.
Many plans were not implemented because the government had no people
capable of implementing them. We should have conducted lustration of
professionals, regardless of their colour – blue or orange [ellipsis as published]
Who can present valid arguments accusing Hayduk of lobbying his business?
On the contrary, the company consciously exited those niches in the coal and
gas business where it had worked successfully for many years.
——————————————————————————————–
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========================================================
4. “THE ICE AGE. OLEKSANDR MOROZ: ‘THE PRESIDENT HAS NO
                  GROUNDS FOR HOLDING A REFERENDUM”
               Ukrainian Socialist Leader Calls For More Democracy

INTERVIEW WITH: Socialist Leader Oleksandr Moroz
INTERVIEW BY: Oleksandr Oleksandrovych
Kiyevskiy Telegraf, Kiev, Ukraine in Russian Fri, 20 Jan 06; p 1, 4
BBC Monitoring Service, UK, in English, Thursday, Jan 26, 2006

Socialist leader Oleksandr Moroz has advocated political reform as a step
towards a more democratic system of government. In an interview with Iryna
Havrylova, Volodymyr Skachko and Oleksandr Yurchuk, he criticized President
Yushchenko for opposing amendments to the constitution that reduce the
president’s remit.

If Yushchenko had publicly approved the changes that came into force on 1
January 2006, parliament would not have dismissed the government, Moroz
stated. Speaking about the Orange coalition, Moroz said that his party was
not a member of any coalition in the presidential election but supported
Viktor Yushchenko personally as a democratic candidate.

Yushchenko was a banner of the Orange Revolution rather than its leader,
Moroz maintained. The following is an excerpt from the interview, published
in the weekly Kiyevskiy Telegraf on 20 January, under the title “The ice
age. Oleksandr Moroz: ‘The president has no grounds for holding a
referendum'”; subheadings have been inserted editorially:

The political “heat” is at its peak, yet Oleksandr Moroz is maintaining an
enviable coolness. This is hard for the Socialist leader to do, though,
since the attacks on his favourite brainchild – constitutional reform – are
relentless. It came into force on 1 January 2006 and brought about the
dismissal of the government, the political crisis and fierce political
wrangling between parliament and the president.

It is twice as hard for Moroz, since the Socialists are allies of the head
of state, and the best representatives of the SPU [Socialist Party of
Ukraine] hold senior posts in that very government that has been dismissed
by the Supreme Council [parliament]. Their status is still unclear.

This, however, does not faze Mr Moroz: he remains a supporter of Viktor
Yushchenko and is his constitutional “mentor” – much to the dislike of some
members of the president’s inner circle. The Socialist leader thinks that
the best way of “ironing out” the political crises at all levels – from the
government crisis to the electoral one – is careful study of the basic law
[i.e. the constitution].

Read the constitution, people say, and you will find prescriptions for all
of life’s ills. He himself has been successfully drawing on them for many
years now and so is rightly regarded as one of the most intelligent and
prudent Ukrainian politicians.

Will he manage to bring Viktor Yushchenko into that category? What will
happen to the Cabinet of Ministers? Will the reform be abolished? Oleksandr
Moroz has given Kiyevskiy Telegraf journalists some answers to these
questions.
       PRESIDENT HAS NO POLITICAL OR LEGAL GROUNDS

                          FOR REFERENDUM ON REFORM
[Interviewer] Oleksandr Oleksandrovych, what do you think of the idea of
revising the constitutional reform by means of a referendum? Some members of
[Yushchenko’s] Our Ukraine [party] are proposing to combine a plebiscite
with the parliamentary elections [on 26 March]\ [ellipsis as published]

[Moroz] Attempts are being made today to link all the fuss over reform with
the sacking of the cabinet. The real problem boils down to one thing: the
executive (and, apparently, the president too) are showing that they don’t
acknowledge the amendments to the constitution.

This attitude is concealed by various fig leaves, but their meaning is the
same. I want to stress that the sacking has nothing to do with the
constitutional amendments. The cabinet of [Prime Minister] Yuriy Yekhanurov
was dismissed in keeping with the same sort of formula that was once used to
fire the government of Viktor Yushchenko [on 26 April 2001].

As for forming a new cabinet, that’s impossible given the present
composition of parliament. When speaking in the Supreme Council, I warned
that the government shouldn’t be dismissed. Such a step is irrational and is
harmful from the state policy point of view, since there are currently no
mechanisms for forming the Cabinet of Ministers.

That can only be done by a parliamentary coalition, but, according to the
constitution, a coalition can only be formed after the 2006 election.

Still, parliament took the decision, and that means the cabinet has been
dismissed. However, it may continue its activities – indeed it must – since
it is required to do so by the constitution. Moreover, the parliamentary
resolution makes it clear that the present government must function until a
new cabinet is formed after March 2006. Everyone is well aware that, in this
way, the Supreme Council has simply made an appraisal of a number of

cabinet officials.

As far as the referendum is concerned, I want to point out that the
president has no political or legal grounds for holding it. The constitution
stipulates clearly how a referendum may be carried out at the initiative of
the head of state. Other options call for a complicated procedure, including
the collection of 3m signatures from Ukrainian citizens.

On the basis of current legislation, it is impossible to hold a plebiscite
at the same time as parliamentary elections. One further point: the
Constitutional Court has already stated its opinion on the referendum.
Admittedly, it did pass two diametrically opposed decisions on directly
amending the basic law.

No country in the world has the practice of confirming constitutional
amendments by plebiscite. If a referendum were to be held in full conformity
with the constitution, its result would be approval or disapproval of the
whole text of the basic law. Incidentally, such a practice exists in many
countries, including Russia.

Not only does the president have no legal grounds for declaring an
“anticonstitutional referendum”; he has no political grounds either. We’ve
carried out public opinion polls and found out that there are virtually no
forces in society that oppose a democratic parliamentary-presidential model
of administration.

As [the hero created by the Soviet writers Ilf and Petrov] Ostap Bender
said, “The ice is on the move!” Most of the political parties and blocs
taking part in the elections must react to the public’s demands and act
accordingly. So, if the president held a referendum today on “cancelling”
constitutional reform, he would definitely lose it.

[Passage omitted: Moroz expects the new parliament to be more homogeneous,
leading to a broader coalition than exists at the moment]
PRESENT CRISIS IS ARTIFICIAL AND CAN EASILY BE RESOLVED
[Interviewer] It has been proposed that a meeting should be held between the
president, the prime minister and MPs to seek a solution to the political
crisis. Do you think that such a measure would help to boost the level of
understanding between the branches of power? Or would it be no more than a
political ritual?

[Moroz] The crisis is an artificial one. It can easily be resolved. The
president needs to go on television and say: “I acknowledge the amendments
to the constitution, and, as its guarantor, I demand that all citizens and
all institutions of power should observe the basic law.”

It is perfectly obvious that there is a need for networking and for seeking
ways towards engaging in a dialogue. When I was chairman [i.e. speaker] of
the Supreme Council [May 1994 to July 1998], I had a very difficult
relationship with [the then president] Leonid Kuchma.

When the interests of parliament or the state were at issue, though, I would
always be prepared for coordinated action by the legislature and the
executive. The present crisis is linked with preparations for the
elections – hence the “specific” positioning of certain political forces.

The government’s mistakes are being used by the political parties and blocs
to produce a contrast and claim: we’re not like them, and in difficult
crisis circumstances we’re able to act more effectively.

In the present situation, the gas problem was chosen as the point of
departure. Everyone has tried to play on the issue – from the political
heavyweights to the marginal contenders, who are promising the people to
lower the price of gas to virtually 20 dollars per 1,000 cu.m. if they win
the parliamentary election.

This is despite the fact that specific agreements were reached between the
two presidents [Viktor Yushchenko and Russian President Vladimir Putin] in
[the Kazakh capital] Astana [on 11 January], and it would be shortsighted to
count on their being reviewed.
                         WHAT WILL THE SOCIALIST DO?
[Interviewer] But, if Viktor Yushchenko signs a decree instituting a
referendum, how will the SPU act in that eventuality?

[Moroz] The short answer is that the Socialists will act appropriately. I
think that the main thing in the current situation is to prevent the
president from taking any hasty, unconstitutional action. The president
knows my position.

I shall use every opportunity I have to restrain Yushchenko from breaching
the constitution, since I stick up for Ukraine’s authority and for the
authority of the institutions of power, including the presidency.

I disagree with many of Viktor Yushchenko’s statements, which I regard as
tactless and sometimes simply groundless. How can one say, for example, that
the amendments to the constitution were adopted in a difficult political
situation, almost on the verge of civil war?

We signed an agreement on this with Yushchenko back on 6 November 2005,

when no threats were in the offing\ [ellipsis as published]. Apart from that, the
other day, I was watching Justice Minister Serhiy Holovatyy telling the
media about the “horrors” of the block voting on 8 December 2004.

The MPs were leaned on, and members pressed other people’s [voting] buttons.
But nothing of the sort actually happened! The block voting took place
properly, all agreements were honoured and all MPs were in their seats.

One other thing: it’s fashionable today to talk of the secrecy of political
reform. That’s not true either: society knew about the replacement of the
power model two years before the event. Throughout that time, both the
people and the political elite discussed the finer points of constitutional
modernization. The process was largely formal, since people aren’t
interested in the constitution in a state that isn’t governed by law, but
that’s a different matter.

[Interviewer] When the People’s Strength coalition appeared, it was the SPU
that came in for the accusation that the Socialists would be the first to
back out of the agreements with the “orange” [pro-Yushchenko] coalition.

But what happened was the exact opposite: Yuliya Tymoshenko [the ex-prime
minister and leader of the YTB, the Yuliya Tymoshenko Bloc, which supported
Yushchenko in the 2004 presidential elections] was the first to split away
from the leader of the revolution. If the president does decide to hold a
referendum, will the Socialists remain “true” to him?

[Moroz] We didn’t join any coalition. We personally supported Viktor
Yushchenko’s candidature in the presidential election. In addition,
Yushchenko isn’t the leader of the Orange Revolution. He is its banner.

I regard the people of Ukraine, those who went to the Maydan [Kiev’s
Independence Square, the focal point of the Orange Revolution] for the sake
of freedom and democracy, as being the leader and mover of the “orange”
events.

The fact that the SPU did not take part in the vote to dismiss Yekhanurov’s
cabinet confirms yet again that we are a constructive political force, able
to make objective evaluations. In our draft resolution, the cabinet came in
for heavy criticism, especially as regards its handling of the gas problem,
but the Socialists thought it illogical to dismiss the government.

[Passage omitted: general remarks on who is responsibility for energy
matters; Ukrainian energy pricing policy; gas barter deals have simply put
more money into the oligarchs’ pockets in both Russia and Ukraine; billions
of dollars still being made from the re-exporting of gas by officials; there
is no justification for imposing direct presidential rule]
                                NO NEW CONSTITUTIONS
[Interviewer] At the moment, many political forces – the YTB, the PDP
[People’s Democratic Party] and Our Ukraine – are competing to write new
versions of the constitution, claiming that, instead of “rehashing” the old
one, it would be better to pass a basic law “from scratch”.

How do you see these initiatives? Are the Socialists going to join in the
business of a wider editing of the constitution? Your draft 3207-1 was far
more detailed in its first version\ [ellipsis as published]

[Moroz] All political forces and even individual citizens can talk about
writing a new constitution. Who will adopt these amendments is a different
matter. So I can assure you that there will be no new constitutions.

The SPU’s position boils down to the following: it is necessary to knock
into shape all the provisions that relate to strengthening the functions of
local authorities and to pass draft 3207-1 as a document of the Supreme
Council. But that, evidently, won’t happen before a new parliament has been
elected.

The laws needed to set up a mechanism for implementing the amendments

must be passed immediately, although I wouldn’t rule out the possibility that
laws on the Cabinet of Ministers and the presidential coalition may be
passed even before the elections.

[Passage omitted: Socialists need to moderate the overwhelmingly liberal
ideology in parliament; the president will still have plenty of power after
constitutional reform; new parliament will operate effectively; Yushchenko
unlikely to be impeached; the “lighthouse conflict” with Russia should not
be exaggerated; Yushchenko should not have withdrawn his signature from the
agreement on unity with the Party of the Regions, dated 22 September 2005;
the Constitutional Court is out of tune with the new political realities]
——————————————————————————————–

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5. PAVLOVSKIY SEES UKRAINE AS STRONG ‘WORLD SUPPLIER
                                        OF FEAR OF RUSSIA’ 

ANALYSIS & COMMENTARY: By Gleb Pavlovskiy,
President, Effective Policy Foundation, under the
“First Person” rubric: “Ukrainian Export of Spokes in Wheels”
Izvestia, Moscow, Russia, Tue, January 24, 2006

I think the most important outcome of the gas conflict is not the
additional $3 billion or so that Gazprom intends to earn from the deal with
Ukraine but the new experience we have gained of conducting a policy
aimed at becoming a great energy power.

In doing this, Russia encountered an extremely pained response to its return
to world politics. And its future steps will come up against ever greater
resistance. World demand for brake shoes for Russia and for fear of
Russia is growing. And Ukraine, it must be admitted, is a strong supplier
of fears of Russia.

With its former tariffs, Russia subsidized Ukraine to the tune of $1
billion per year. This was the basis for the subsidized economy of the East
and for Kiev’s political elites. When it was not formalized, Russian aid
was stolen, officially not existing and dubbed “agreed price.” Thanks to
this, any suspension of aid (after the revolution, of course) could easily
be declared “use of gas prices for political blackmail” by Russia. And that
is what happened.

During the talks we dealt with the Kiev government, which (leaving rhetoric
aside) is always prepared to sacrifice economic priorities for political
and propaganda gain. But is this a weakness or a strength?

Given that Ukraine is a producer and world supplier of fear of Russia, it is
“successful” when its product is bought. Having lost commercially, Ukraine
demonstrated effectiveness as a country acting as a brake on Russia. Its
experience was highly acclaimed in the United States, where Condoleezza
Rice unequivocally sided with Kiev.

However, nobody wants to pay for these services in full, and an attempt is
being made one way or another to force Russia to continue to pay for
everything. All that is needed for this is a fresh pretext. Such a pretext
could be the notorious issue of “Ukraine’s accelerated admission to NATO.”
Then Kiev will start selling fear of Russia to NATO, and fear of Kiev’s
admission to NATO to Russia.

The Ukrainian political classes — this must be clearly understood — have
long been accustomed to subsidized dependence. Even Kuchma’s foreign
policy maneuvering was a tactic of carefully creating difficulties for
Russia while at the same time being subsidized by Russia (the “multi-vector”
strategy). Ukrainian policy is a policy of manipulating dependence. In this
sense Yushchenko is a clear Kuchmaite.

He has not yet made a final choice between a genuinely European Ukraine
and a Ukraine that acts an obstacle-country to Russia. It is possible that
he wants there to be a fight for him. Weak politicians quite often provoke
others into a fight for them. Moreover the use of hysteria and sobbings is
part of the strategy of the weak, often proving successful. Russia should
not enter into this fight.

Russia’s next possible mistake is concessions and subsidies to Kiev for
delaying admission to NATO. This would be a desirable scenario for Kiev,
whereby even technical incapacity for membership (without keen interest
on the part of NATO countries) can easily be presented as a desire for
neutrality.

Eventual admission to NATO — which is a foregone conclusion,
as soon as the receiving side requires it — will be timed to coincide with
the delay or suspension of Russian subsidies. Grounds for this can easily
be created, as the “Crimean lighthouse affair” shows.

So it must not be forgotten that, regardless of the configuration of the
new majority in the Supreme Council, Ukraine will remain a creator of
problems for Russia and a seller of fears of Russia.  -30-
———————————————————————————————–

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========================================================      
6.            “PAVLOVSKIY FLEDGLINGS BACK IN UKRAINE”
                     Russian pollsters set up shop again in Ukraine

By Oleksandr Mikhelson, Glavred website, Kiev, in Russian 19 Jan 05
BBC Monitoring Service, UK, in English, Wed, Jan 25, 2006

KIEV – The Russian Public Opinion Foundation has set up a Ukrainian
branch in Kiev, a web site has said. Its top analyst Gleb Pavlovskiy has
a bad reputation in Ukraine for links with the Russian Club, which
reportedly interfered in the Ukrainian presidential elections of 2004.

The following is an excerpt from the article by Oleksandr Mikhelson entitled
“Pavlovskiy fledglings back in Ukraine” published on the Ukrainian web site
Glavred on 19 January:

Ukrainian sociology, seriously wounded in the political battles of the year
before last, has acquired a fresh link. One of the oldest sociological firms
of Russia has made its proud entrance on to our market.

It is the Public Opinion Foundation (POF), which has been in existence
since 1992. The piquancy of the situation is the fact that since 2004 that
structure can also be considered one of the most disgusting in Ukraine.

The POF, which until then had been known in Ukraine only to specialists,
earned itself dubious glory thanks to its cooperation with the Russian Club
(RC) and political scientist Gleb Pavlovskiy personally. The RC was set up
in late summer 2004 with the lofty aim, it was stated, of strengthening
links between experts and politicians of the two countries.

The result was such “non-interference” by the Kremlin in the Ukrainian
elections, in comparison with which the secret visit of the CIA chief to
[President] Viktor Yushchenko looks like an innocent tea party. The RC
served as an important instrument of that “non-interference”, and the
wide-ranging arsenal of its own methods included, of course, sociology.

It was the POF, with which Mr Pavlovskiy has had long-standing good
relations since the time of the fruitful, work on [former Russian President]
Boris Yeltsin’s 1996 campaign, that dealt with it. [Passage omitted: POF
reportedly rigged opinion and exit polls in Ukrainian 2004 presidential
elections.]

The creators of POF-Ukraine promise to prove the purity of their intentions
by the quality of work of their new child – the freshly presented
international commercial sociological organization, POF-Ukraine. Mr [POF
president Aleksandr] Oslon repeatedly stressed during his news conference
that “the word ‘commercial’ is the key word here”.

The message, as they say, is clear: gentlemen, we’re only here for the money
and we promise no longer to hold the Kremlin’s hand.

Participants in the news conference say that POF-Ukraine intends to work
intensively with business structures, political parties and non-government
organizations. In general, they are prepared to cooperate with everyone
“except Al-Qa’idah”, as Mr Oslon put it.

The director-general of POF-U, Aleksandr Bukhalov, promised a Glavred
correspondent that he would try to enroll as a client even the secretariat
of President [Viktor] Yushchenko. Although it is hard to imagine this, for
the POF even today proudly lists among its most important clients the
presidential administration of the Russian Federation.

As regards cooperation with business structures, meanwhile, things are also
unclear. The market for marketing service here is, of course, developing,
and in theory may interest a big player from the neighbouring country.

On the other hand, POF-U itself intends to work with the polling network of
the Ukrainian Marketing Group [UMG] that carries out research for all sorts
of improvers of our life – from Coca-Cola to UMC [telephone company].

But this company also has its own clients and its own methods, up to and
including its own software: in general it is not certain that it especially
needs POF’s methods.

But the benefit for the Russians is clear. Previously POF conducted opinion
polls in Ukraine mainly on the capacities of the Kiev International
Institute of Sociology. Now it is possible firmly to “get ensconced” in the
friendly UMG polling network. What is more, the “network” of market
researchers makes it possible to poll far more people than is done under
normal representative polls.

Thus, in Ukraine nationwide polls are conducted with a random sample of
1,200 to 1,800 respondents, while the POF-U with the UMG have already
carried out a poll with a sample of 8,296 people, which, in the words of
Aleksandr Bukhalov, reduces the margin of error to 1.1 per cent.

Getting back to business, by the way, it should be noted that this reduction
in the margin of error is important precisely for those “businessmen” whose
business is politics (which was emphasized by Mr Bukhalov himself).
Especially given such a low electoral hurdle as now. [Passage omitted:
increasing demand for opinion poll research; rival Ukrainian pollster
dismisses POF as a fly-by-night set-up]  -30-
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========================================================
7. UKRAINE’S FOREIGN MINISTER BORYS TARASYUK ACCUSES
RUSSIAN MEDIA OF FUELLING AN ANTI-UKRAINIAN “HYSTERIA”

Interfax-Ukraine news agency, Kiev, in Russian 0757 gmt 26 Jan 06
BBC Monitoring Service, UK, in English, Thursday, Jan 26, 2006

The Ukrainian Foreign Minister, Borys Tarasyuk has said that the Russian
media are fuelling an anti-Ukrainian “hysteria” as tensions continue with
Moscow over the stationing of the Russian Black Sea Fleet in Crimea, gas
prices and restrictions on Ukrainian imports.

He denied that Ukraine was deliberately orchestrating a crisis over the
Russian fleet in the run-up to the parliamentary election, saying Kiev
simply wanted to make Moscow comply with its commitments under bilateral
accords. The following is the text of report by Interfax-Ukraine news
agency:

KIEV – 26 January: Ukrainian Foreign Minister Borys Tarasyuk does not link
the tense situation around the Russian Black Sea fleet and the upcoming
parliamentary election in Ukraine. “I insist that this issue has nothing to
do with the election. It all started a year ago,” he told journalists.

He said that back in the spring of 2005 the Ukrainian Foreign Ministry came
up with an initiative to set up an interdepartmental group that would
analyse and verify agreements concerning the Black Sea fleet. The
commission, led by Ukrainian Deputy Foreign Minister Volodymyr

Ohryzko, made a visit to Sevastopol.

“Ukraine started voicing its concerns back then… This is because the
Foreign Ministry complies with its commitments. One of the Foreign
Ministry’s functions is to check the execution of international agreements
by both Ukraine and our partners,” he said.

He rejected the idea that Ukraine has been consciously aggravating the
problems of the Black Sea fleet.

“If someone spreads rumours that we have purposefully created (the
problems – Interfax), than it is absolutely not true… It is quite another
matter that all are seeking a link to election for political motives. Let
them who allege this think so. But I deny it. There is no link to the
election.

We should be persistent in making the Russian side comply with its
commitments. And they are looking for a political motivation in us doing so.
There is no political motivation. We are just doing our job. It is not our
fault that it was not done before us. We are working and will continue doing
so regardless of the election,” he said.

“Certainly, if we try to analyse these actions (a series of problems –
Interfax), a certain line will be built. It is difficult to say now whether
it is a well-considered strategy or a coincidence. But it is a fact that we
are witnessing the deterioration of talks on gas and meat products, on the
execution of agreements concerning the Black Sea fleet. This is the case,”
he said.

“It is quite another matter how each side is interpreting this. Whereas
hysteria and the stoking up of anti-Ukrainian sentiment can be seen on the
Russian side, nothing like this can be said about the Ukrainian media,” he
added.  -30-

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8.               RUSSIA GAS LINE EXPLOSIONS SCARE EUROPE

By Andrew E. Kramer, The New York Times
New York, New York, Thursday, January 26, 2006

MOSCOW, Jan. 25 – Saboteurs who bombed two natural gas pipelines
high in the Caucasus Mountains this week, by one estimate sending a gas
fireball nearly 600 feet into the sky, paralyzed Georgia and sent a message
straight to Western Europe, which depends on Russian natural gas.

The Russian authorities are calling the strike a terrorist attack,
suggesting that groups in or near the rebellious Chechnya region are aiming
attacks at the country’s energy distribution system.

That would be bad news for Western Europe, which gets a quarter of its
natural gas from Russia. European leaders were already jittery after
supplies were disrupted twice this month, once during a Russian dispute with
Ukraine – ostensibly over prices – and later when extremely low temperatures
caused demand in Russia to surge.

Georgian officials, upset over what they contended were unexplained delays
in fixing the sabotaged pipeline, cautioned that Europe should look at their
unheated capital, Tbilisi, before becoming more reliant on Russia.

“The lesson that all of Europe should draw is the importance of alternative
corridors of energy and of not being dependent on one source of energy,
especially from a country such as Russia,” George Arveladze, presidential
chief of staff in Georgia, said Tuesday in an interview. Georgia and another
former Soviet republic, Armenia, draw gas from the damaged pipelines.

All this is proving an embarrassment for the Kremlin, because the problems
have coincided with Russia’s turn in the presidency of the Group of 8
industrial countries and Russia’s pushing a theme of energy security. Still,
Russia’s Gazprom natural gas monopoly has yet to sign a detailed supply
contract with the Ukrainian national gas company as foreseen in the Jan. 4
settlement of the price dispute, and talks seem to be adrift.

A signing ceremony first scheduled for Saturday was delayed again
Wednesday. The entire agreement seemed to be adrift this week in a
growing din of criticism of the deal.

Gazprom officials have repeatedly insisted that supplies are reliable at
current levels and can easily be increased from vast Arctic reserves to meet
growing demand in Western Europe, where the company expects to increase
its market share to 38 percent by 2020 from 26 percent today. Chechen
separatists and Islamist terrorist groups have articulated a policy of
hitting objects important to Russia’s economy, and the country’s energy
infrastructure has been sabotaged before, though without causing big
disruptions.

Last summer the Federal Security Service, a successor agency of the
Soviet-era K.G.B., said it had arrested 11 suspects in what it called a
terrorist attack on a gas pipeline in Tatarstan, a Muslim region of Russia
east of Moscow.

A spokesman linked that attack to separatist movements in the North
Caucasus, the area of southern Russia that includes Chechnya as well as
North Ossetia, where the bombing on Sunday took place. Last year, saboteurs
struck gas pipelines in Dagestan, also in the North Caucasus. Two years ago
a bombing shut operations for several days along the same mountain route to
Georgia that was hit Sunday.

Other separatist conflicts have been simmering nearby. South Ossetia, a
pro-Russian and Orthodox Christian enclave in Georgia, has carried out a
low-level insurgency against Georgian authorities for a decade. The attacks
occurred not far from the South Ossetian border.

The latest strike hit a main and a reserve pipeline, running on opposite
banks of the headwaters of the Terek River, Vladimir A. Ivanov, a spokesman
for a regional branch of the Ministry of Emergency Situations, said in a
telephone interview. The explosions, before dawn, set fire to residual gas
in a reserve pipeline and punctured but did not ignite the active pipeline,
he said.

Whoever placed the bombs probably waded in the dark across the shallow
river from a nearby military highway, he said. Alerted by falling pressures,
pipeline workers shut valves about two miles from the blast site, Mr. Ivanov
said.

Repairs were delayed Tuesday by what Gazprom said was residual gas in a
pipeline that prevented welding for fear of another explosion. The work was
also slowed by strong winds and subzero temperatures, Gazprom said. On
Wednesday, Gazprom said the residual gas was gone, but repairs had not yet
been completed.

Georgian officials, who have darkly hinted that Russia was behind the
bombing, with the intention of undermining the economy of a pro-Western
former Soviet state, dismissed Gazprom’s explanation.  -30-
————————————————————————————————-
C. J. Chivers contributed reporting from Tbilisi, Georgia, for this article.
http://www.nytimes.com/2006/01/26/international/europe/26georgia.html?_r=1
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9. POLAND PM: RUSSIAN GAS SUPPLY BEHAVIOR “NOT PROMISING” 
By Adam Smallman & Ben Winkley, Dow Jones Newswires
Davos, Switzerland, Thu, January 26, 2006 4:56 a.m.

DAVOS, Switzerland — Polish Prime Minister Kazimierz Marcinkiewicz said
Thursday the recent Russian behavior on the supply of natural gas is “not
promising,” and said his country is working hard to diversify the source of
its gas imports.

Speaking at the World Economic Forum, Marcinkiewicz said: “Trust is
measured in practice, and the practice we’ve seen in January this year is
definitely not promising.”

Marcinkiewicz told reporters “We’re holding talks on diversifying the supply
of gas from the north and south, plus we’re performing a meticulous analysis
on construction of gas infrastructure.”

The move comes after increased European concerns on the security and
reliability of natural gas supply from Russia in the first few weeks of
2006.

A pricing spat resulted in Russia reducing gasflows to Ukraine and, by
default, to Europe, as one of the main gas pipelines runs through that
country. Russian gas giant OAO Gazprom (GSPBEX.RS) has also

accused Ukraine of illegally siphoning gas.
Gas flows to parts of Europe have also fallen in the past week, as
unusually cold winter weather has led to increased demand. Sunday, two
explosions blamed on sabotage cut the main Russian gas supply to
Georgia and Armenia.  -30-
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10.           WHAT’S BEHIND GAZPROM’S CONCESSIONS TO
                                    MOLDOVA & ARMENIA
Argumenty i Fakty, Moscow, in Russian 24 Jan 06
BBC Monitoring Service, UK, in English, Thu, Jan 26, 2006

Having signed a scandalous agreement with Ukraine, Gazprom turned to

Moldova and Armenia. But it failed to make them buy fuel at European prices.
In the first quarter of 2006 Moldova will pay 110 dollars per cu.m. instead of
160 dollars. Armenia is doing even better: it will receive gas at a discounted
price of 56 dollars for 1,000 cu.m. until the end of April.

What is behind these concessions? According to Gazprom spokesman

Sergey Kupriyanov, instead Russia will be able to increase its share in the
Moldovan gas transportation system. But there is another version, too.
Allegedly, Moldova which became a WTO member in 2001, can obstruct
Russia’s membership in the World Trade Organization by specifying a
number of conditions.

For instance, by lifting all the existing restrictions on supplying
Moldova’s cattle-breeding products and wines to Russia. Moscow has

decided that it is dangerous in such a situation to annoy neighbours by
excessively increasing gas prices.

Armenia also has reasons to challenge Gazprom’s “market” approach.

Armenia is in fact Russia’s only strategic ally in the Transcaucasus. Russia
does not pay anything for its military base in Gyumri. This is why Yerevan
wonders why Armenia should pay for Russian gas more that Turkey which
is its enemy (75 dollars per 1,000 cu.m.)

Presidents Putin and Kocharyan discussed this in Moscow not long ago.

Some reports say Russia’s compromise may be in maintaining discounted
prices for gas after 1 April and instead getting 45 per cent of shares of the
Iran-Armenia gas pipeline which is currently under construction.

Turkmen President Saparmyrat Nyyazow has also come to Moscow for gas

talks. At the time of signing this article for press, the outcome of his talks with
Putin was not clear. One thing was clear – Gazprom head Aleksey Miller is to
visit Asgabat to settle Russian-Turkmen relations.

Some reports say the Turkmenbasy was so impressed by the results of the
Russian-Ukrainian “gas war” that he decided to increase the price for his
gas: from 65 to 80-90 dollars per 1,000 cu.m. This is very untimely for
Russia which tops up its gas balance by Turkmen gas (including that
delivered to Ukraine).

Meanwhile, it seems Gazprom is keen not only on its expansion in the CIS.
There are tasty morsels closer to home. Rumours say that the gas major has
been nurturing plans regarding the office of the Constitutional Court in the
centre of Moscow in Ilyinka [Street]. ‘AiF has already written that the
transfer of the Constitutional Court to St Petersburg has been practically
decided.

The vacant residence will be taken over by Gazprom’s board of directors and
its council. Allegedly, there has long existed an opinion that the bosses of
the country’s main company should not remain on the outskirts of the
capital, even if they have a luxurious hi-rise there.

According to another version, they are going to move because it is likely
that Putin will become the head of the gas monopoly after he leaves the
presidential post in 2008. No-one will dispute that the new office of the
former head of state must be as close to the Kremlin as possible. -30-
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11. MOLDOVAN, US OFFICIALS DISCUSS DNIESTER SETTLEMENT
US Deputy Assistant Secretary of State for Europe & Eurasia, David Kramer

Moldovan Radio, Chisinau, in Russian 1200 gmt 26 Jan 06
BBC Monitoring Service, UK, in English, Thursday, Jan 26, 2006

CHISINAU – Moldovan President Vladimir Voronin has met the US deputy
assistant secretary of state for Europe and Eurasia, David Kramer, who is
representing the USA at the expanded talks on Dniester settlement [involving
Moldova, the Dniester region, Russia, Ukraine, the OSCE, the EU, and the
USA], the presidential office’s press service has said.

The two officials exchanged views on the issues which are in the focus of
the ongoing round of the Dniester settlement talks [held on 26-27 January in
Tiraspol and Chisinau]. Voronin said that Chisinau representatives at the
talks would insist on monitoring the Dniester military-industrial complex,
and would agree to checks of the Moldovan armed forces in a similar manner.

They would also insist on reorganization of the peacekeeping forces into a
mission of international servicemen and civil observers and on the
unconditional resumption of the withdrawal of Russian troops and weapons
from Moldova.

Kramer congratulated the Moldovan authorities on the achievements in 2005 in
terms of territorial reintegration of the country and boosting political
dialogue with the European Union and the USA, as well as in other important
areas. Kramer wished that 2006 were also a successful year for Moldova.

David Kramer expressed bewilderment over the suspension of the 30 December
2005 joint statement by the Moldovan and Ukrainian prime ministers on the
transit of goods through the Moldovan-Ukrainian border. [Under the document,
which is said to be in force starting from 25 January 2006, all Dniester
commodities should be accompanied by Moldovan customs documents.]

Kramer underlined the importance of increasing control on the Moldovan-
Ukrainian border.

Voronin said that the enforcement of the decision on transit of goods in
accordance with the Moldovan customs procedures is a way of legitimizing

the Dniester economy, a thing in which all Dniester economic agents should
be interested in.

This decision is based on the appropriate international norms, it is in line
with Moldova’s commitments towards the World Trade Organization and it
provides for real legal access of Dniester commodities to the EU and CIS
markets, Voronin said.

Kramer congratulated the Moldovan authorities on the inclusion in the
preliminary stage of the US Millennium Challenge programme and called on

the authorities to take measures to increase the efficiency of the central
public administration and curb corruption.
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12.UKRAINIAN OFFICIAL PREDICTS JOINT RUSSIAN-UKRAINIAN
  ENTERPRISE WITH ROSUKRENERGO WILL NEVER BE CREATED

 
Interfax, Kyiv, Ukraine, Thursday, January 26, 2006
LVIV – A joint Russian-Ukrainian enterprise for shipping gas to Ukraine 
will never be created, Ukrtransgaz General Director  Anatoly Rudnik said at
a Thursday session of the Lviv’s Choice 2006 press club that.

Commenting on the agreement to create such an enterprise, that went
unsigned on Wednesday, January 25, Rudnik said that “this structure will
never be created at all, I am one hundred percent certain.”

The  agreement  was not signed on Wednesday for two reasons, Rudnik
said. “No  one  wants  all  of  Europe  to  know  that  the RosUkrEnergo
structure is utterly tainted,” Rudnik said.

“No one made it clear, and no one presented full information on its
founders  and  employees,”  Rudnik  said,  adding that he possessed such
information, but would not disclose it.

Ukraine’s Naftogaz promoted the Gaz Ukrainy company to take part in
the joint  venture’s  formation  instead  of itself, Rudnik said, adding
that Gaz Ukrainy “does not have anything but an office, fifty chairs and
office equipment.”

Talking  about  the  possible further development of the situation,
Rudnik said  that “it will be difficult. We will go back to our previous
scheme of  gas  supplies  by  direct  contracts, working with Russia and
Turkmenistan.”

Ukrtransgaz  is  a  subsidiary  company  of  Naftogaz  that manages
Ukraine’s gas transportation system.  -30-
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========================================================
13.      GEORGIA SUFFERS WORST ENERGY CRISIS IN YEARS
                         Misery deepened for Georgians on Thursday

By Misha Dzhindzhikhashvili, AP Worldstream
Tbilisi, Georgia, Thursday, January 26, 2006

TBILISI – Misery deepened for Georgians on Thursday, as millions were
without power and a natural gas shortage forced people to chop wood for

heat while snow and freezing temperatures blanketed the capital.

With the ex-Soviet Caucasus Mountain nation suffering its worst energy
crisis in years, President Mikhail Saakashvili cut short his trip to the
World Economic Forum in Davos, Switzerland, to try and assuage anxiety

that sent residents into long lines to fill kerosene canisters for portable
heaters.

Saakashvili said Iran had agreed to supply Georgia with gas via Azerbaijan.
“Iran is ready to start emergency gas deliveries to Georgia within days,” he
said at an official meeting.

Some people brought jewelry and other valuables to pawn shops to scrape
together enough money to buy heaters and kerosene, the price of which has
increased sharply. Others could be seen cutting down trees and branches in
the capital to burn in wood stoves.

“The situation is horrible,” said Georgy Kiknadze, a 60-year-old taxi
driver. “Prices for kerosene and firewood have soared, and we have to find a
way out of the crisis. My fares also have increased. What can I do?”

The 1991 Soviet collapse, and several years of civil war in the early 1990s,
left much of Georgia’s energy infrastructure decrepit and in desperate need
of repairs, forcing many to rely on generators and wood- and gas-fired
heaters and stoves.

In recent years, the situation had stabilized with fewer outages and
Saakashvili, who came to power on the wave of the 2003 Rose Revolution,

had restored optimism for many Georgians.

Over the weekend, however, an explosion on a major gas pipeline that runs
through the Russian border region of North Ossetia cut supplies to many
Georgian regions. Russian authorities blamed the blasts on saboteurs.

The misery worsened early Thursday when fierce weather in western Georgia
ruptured power lines leading from the Inguri hydroelectric station to
eastern regions, leaving about 3 million people in the dark, Deputy Energy
Minister Alexander Khetaguri said.

Then, a gas-powered unit of a Tbilisi power station shut down because of
malfunctions, leaving most of Tbilisi’s 1.5 millions residents to scrounge
for other heating options as a heavy snow fell and daytime temperatures fell
to -8 C (17.6 F).

“The situation is very difficult, with neither gas nor electricity. Temperatures

in school were so low that we had to let our pupils go home,” said Tamara
Beruchashvili, a 35-year-old teacher.

Kerosene prices have jumped 25 percent to US$1.50 (A1.22) per liter (about
one quart) – a sizable sum in the ex-Soviet republic, where monthly pensions
average the equivalent of US$22 (A18) and monthly salaries average US$25
(A20).

Saakashvili has complained about the slow pace of repairs to the Russian
pipeline and hinted that Russia was deliberately stalling to punish the
country and its pro-Western policies of recent years – suspicions shared by
many Georgians. “It’s an attempt to roll back democratic changes in the
country,” he said. Russian officials have rejected the allegations.

Earlier Thursday, Saakashvili told Associated Press Television News that
Russia’s conduct had raised questions about its intentions. “We are dealing
with very dubious circumstances, with very bad follow-up, and basically
telling an untruth with deception, cover-up operations afterward,” he said.

“The world should wake up to this threat, because yesterday it was Ukraine,
today it’s much worse in Georgia. Tomorrow can be any other European

country that’s dependent on this irresponsible and unpredictable supplier,”
he said.

Neighboring Azerbaijan has stepped up supplies of electricity and gas, but
had to cut back on gas supplies over the past day because of technical
reasons.  -30-
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14.    UKRAINE’S NATO AMBITIONS FORCE RUSSIA TO STOP

        BUYING HELICOPTER ENGINES PRODUCED IN UKRAINE

Interfax-AVN military news agency website, Moscow, in Russian 26 Jan 06
BBC Monitoring Service, UK, in English, Thursday, Jan 26, 2006

ST PETERSBURG, As of 2006, series production of parts for helicopters
commissioned by the Defence Ministry will take place only in Russia. “Until
recently the Motor Sych open-type joint stock company in Zaporizhzhya
[Ukraine] made engines for Russian helicopters.

Taking into account the Ukrainian leadership’s declared plans for the
country to join NATO, however, it has been decided to move series

production of the engines to Russia,” a briefing was told today by
Aleksandr Batagin, managing director of the Klimov Works, a federal
state unitary enterprise.

He went on to say that “of course, the decision wasn’t easy for our
Ukrainian partners either, with whom relations of partnership have

developed over many years of cooperation”. He said that in the initial
phase, from 2006-2008, production would take place at the Klimov
Works in St Petersburg. From 2009, it would be at the Chernyshev
Works in Moscow.

Batagin recalled that under a Russian government resolution the enterprise
was to be corporatized in 2006, with all shares to be owned by the Russian
Federal Agency for the Management of Federal Property.

In future the works will be part of a horizontally-integrated structure that
is being set up with the provisional name of the Engine Building Holding
Company. As well as the Klimov Works, which is to be the chief engine
designer, the holding company will include St Petersburg’s Krasnyy Oktyabr
factory, Moscow’s Chernyshev Engineering Works and the Soyuz design

bureau in Tushino. The Klimov Works is part of Russia’s MiG aircraft
building corporation.

At present, 95 per cent of Russian small and medium transport helicopters
have Klimov engines and work in 80 countries in Asia, Africa, America and
Europe.  -30-
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15.     UZBEKISTAN JOINS RUSSIA-DOMINATED EX-SOVIET

                     ECONOMIC BLOC REINFORCING TIES

AP Worldstream, Moscow, Russia, Wed, Jan 25, 2006

MOSCOW – Uzbekistan joined a Russian-dominated ex-Soviet economic

bloc on Wednesday, reinforcing ties between the Central Asian nation’s
hardline leadership and the Kremlin. The move comes as Uzbek relations
with the West have soured over a bloody crackdown on protesters there
last year.

Meeting in St. Petersburg, Russian President Vladimir Putin thanked his
Uzbek counterpart Islam Karimov for helping increase cooperation between
former Soviet states. “We are taking a decision about the admission of
Uzbekistan to this organization. I would like to thank you for your
determined efforts in advancing integration processes in the post-Soviet
space,” Putin said in televised remarks.

Karimov, who has ruled his energy-rich country with an iron hand since 1989,
has sought to shake off Russian influence in the past, but recently forged
closer security and political ties with Moscow.

Putin and Karimov met on the sidelines of a summit of the Eurasian Economic
Community, which now links Russia and Belarus with four Central Asian
nations – Uzbekistan, Kazakhstan, Kyrgyzstan and Tajikistan. The community
is one of several overlapping regional organizations of former Soviet
states.

Its three largest members – Russia, Belarus and Kazakhstan – also belong to
the Common Economic Space, together with Ukraine. But the future of that
Moscow-led body is in doubt because the new pro-Western leadership in
Ukraine is reluctant to pursue further integration with other former Soviet
nations.

Uzbekistan has faced strong Western criticism since government troops
crushed the uprising in the eastern city of Andijan in May last year,
killing hundreds of people, according to rights groups.

Karimov’s government has refused an international inquiry into the Andijan
events and evicted a U.S. military base used for operations in neighboring
Afghanistan.  -30-

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16. “EUROPE SHOULD NOT FORGET ABOUT BELARUS, YET
     ALREADY TODAY WE FEEL FORGOTTEN, ABANDONED”
Belarusian opposition presidential candidate Milinkevich tells Polish paper

INTERVIEW WITH: Alyaksandr Milinkevich,
Belarusian opposition presidential candidate
INTERVIEW BY: Waclaw Radziwinowicz
Gazeta Wyborcza newspaper website, Warsaw, in Polish 25 Jan 06
BBC Monitoring Service, UK, in English, Thu, Jan 26, 2006

Text of interview with Belarusian opposition presidential candidate
Alyaksandr Milinkevich, by Waclaw Radziwinowicz, date and time not given,
entitled “Europe should not forget about Belarus”, by Polish newspaper
Gazeta Wyborcza website on 25 January:

After the election, we will probably have to go underground. But we will
act, and Europe should not forget about us, says Alyaksandr Milinkevich, the
democratic opposition’s candidate for president of Belarus, who will be in
Warsaw today [25 January].

[Radziwinowicz] It is very early, only just dawning, and you are already
setting off. Where are you going? Who are you going to visit?

[Milinkevich] Now, when the Belarusian presidential election is only two
months away, I try to visit at least two towns every day, to meet voters.
Now I am planning to travel to Smarhon and Ashmyany, where petty

merchants trading at the markets are waiting for me.

It is cold out, 20 degrees below, but people are waiting. They want to meet
with the opposition presidential candidate, to talk about how the regime
torments them, tries to deprive them of the means to support themselves. I
will also go to Catholic churches, Orthodox churches, to visit Protestants.
I hope that after returning to Hrodna I will also meet students near the
university in the evening.

[Radziwinowicz] Near the university, but not at it?

[Milinkevich] They don’t allow me into universities, or to schools or
factories either. A campaign meeting can be organized at an education
institution or a factory only with the consent of the local administration.
And bureaucrats always tell us that they cannot grant such consent, because
we will disturb the rhythm of production or the process of education.

In Zodino there is a boy who wanted to study in Belarusian, not Russian.

He was adamant, his parents were adamant, and the authorities ultimately
organized a one-member class for him with Belarusian as the teaching
language. I wanted to meet with him at school, to donate textbooks.

One day previously, the school’s director had visitors from Minsk who
threatened him that if the opposition entered the school, he would
immediately lose his job. In the end in the boy and I met out in front of
the school. The other pupils were literally glued to the windows in the
classrooms, smiling and waving to us. That was laughable and sad at

the same time.

[Radziwinowicz] Where did you get the money for the campaign?
[Milinkevich] Belarusian law stipulates that I can only spend the funds

that the state allocates to me on the campaign. This is called “equal
opportunities for each candidate.” Yet the amount that the state allocates
doesn’t even suffice for printing a candidate’s portraits.

[Radziwinowicz] Can’t you collect money from your supporters?
[Milinkevich] No, I am not allowed to. In Belarus, you can’t expect support
from business, either. Any businessmen bold enough to donate money to

an opposition politician can be certain that he will very quickly begin to be
tormented by the tax services, and will get into serious trouble.

[Radziwinowicz] And which media sources can you expect to give you

support?
[Milinkevich] This too is a very modest arsenal. There are still three
nationwide newspapers in Belarus that are bold enough to write something
nice about me.

These are Belaruska Gazeta , which the authorities recently forced to change
its name to Belgazeta, Belarusky Rynok, and the Minsk edition of the Russian
Komsomolskaya Pravda. The first two have a circulation of about 6,000
copies, while Komsomolskaya has 100,000 every day, and 300,000 on Fridays.

[Radziwinowicz] And can you, for instance, make an appeal to voters

through them?
[Milinkevich] I’m not sure of that. I will try to do so before the election,
but I fear that the editors could get scared and refuse.
[Radziwinowicz] You did not mention Narodnaya Volya , the most
well-known opposition newspaper in Belarus.

[Milinkevich] Because it is no longer sold in the kiosks or distributed by
the post office. It is being printed in Smolensk in Russia. It does come
out, but we pass it out like pamphlets. I can also count on 18 small local
newspapers. Of course, provided that they are not shut down before the
elections, as it looks like they might.

Prior to the previous presidential election in 2001, we had more than 300
small underground newspapers. You Poles still remember what that means;

you had such newspapers during the martial law period in your country.
We are now trying to revive them. But there is a shortage of paper and
printing ink.

[Radziwinowicz] And the electronic media?
[Milinkevich] When I was recently in France, Euronews filmed and broadcast

a five-minute interview with me. Perhaps they will do so again before the
election. I would be good, because this channel reaches 25 per cent of
Belarusians. We are also making use of the Internet, which one-third of the
country’s inhabitants have access to.

As you can see, the arsenal I have my disposal is very modest. Given the
information blockade and the ruthless pressure from the authorities, we
oppositionists are left with one option: to go knocking from door to door,
from heart to heart. To go to people and say: “We are here. There is hope
for change.” And it turns out that many people are waiting for us; they need
hope.

[Radziwinowicz] President Alyaksandr Lukashenka, running for a third term,
has a devastating advantage over you. He has newspapers with circulation
figures of half a million, and he is constantly on the TV screens. The
visits he pays to factories do not disturb anything.

He has the administrative apparatus, the apparatus of repression working for
him. And moreover, he is the one who sets the rules of the game. He can
order you to be struck from the list of candidates at any moment. You have
already received warnings that you are engaging in unlawful campaigning.
Does it even make sense to run under such conditions?

[Milinkevich] It does, it makes great sense. But let’s admit clearly, that
our objective is not to win the election. Because in fact there are no
elections in our country, and as long as this regime exists there will not
be. No one will even count the votes after the election. Regardless of what
the outcome is, the authorities will announce their own “elegant” victory,
as Lukashenka calls it.

But we cannot fail to take up the fight. Only during the election campaign
can we go campaigning, go to people, meet with them. Tell them that the law
is behind us. To persuade them that there is hope, that changes are
possible. If we tried to do this at a different time, we would have ended up
in prison.

Our work is not going to waste. When the congress of opposition forces
elected me to be their presidential candidate in Minsk in early October, the
opinion polls were giving me the support of 1.5 per cent of voters. Now the
opinion polls say that 24 per cent of Belarusians support me.

[Radziwinowicz] What is now the opposition’s goal, if not to win the
election?
[Milinkevich] The situation in Belarus is now similar to the one that you
had in Poland in the early ’80s. Then you also had a regime and there were
no elections. But the opposition managed to unite around Solidarity.

The authorities responded with repression, by introducing martial law, and
that was the beginning of their end. I am not thinking about 19 March,
election day, but about what will happen the next day.

[Radziwinowicz] And so, mass protests, an Independence Square [a
demonstration as in Kiev] in Minsk. How many people will go to the streets?
Probably not more than several thousand, as is usual in your country. And
the police will break them up without difficulty.

[Milinkevich] We will see how many people defend their dignity, their right
to choose. The opposition has never been as united as it is now.
Demonstrations and protests were previously organized in our country by
individual parties. Now all the most important groups are moving in a united
front.

[Radziwinowicz] You are united, but not fully so. Zyanon Paznyak, founder of
the Belarusian National Front, a presidential candidate in 1994 and 1999,
and Alyaksandr Kazulin, former president of the Belarusian State University,
are also running as oppositionists?

[Milinkevich] That is not yet a foregone conclusion. When the campaign to
collect signatures in support of the candidates is completed, we will hold
talks about having a single opposition candidate.

[Radziwinowicz] Aside from Lukashenka, you have one more difficult opponent.
I am thinking about how the people, especially the elderly, those living in
villages, are attached to old Soviet values. For these people Lukashenka
represents a guarantor of stabilization in the kolkhoz system they are
accustomed to, without which they cannot imagine living. There are a great
number of such people in Belarus.

[Milinkevich] No, not as many as our propaganda portrays. Village residents
now represent 28 per cent of Belarus citizens. A great many of them really
do fervently believe what Lukashenka and the TV tell them. I admit that we
are not working much in these kolkhoz communities, because we would not
achieve much there.

Everywhere, even under conditions of developed democracy, candidates mainly
campaign in those places where they can win support. We are concentrating on
the cities and towns. There, people want change most. They want an end to
the poverty, to their lack of prospects, to the hopelessness, which chiefly
affect young people.

[Radziwinowicz] How much are the people of the state apparatus ready to
stand by Lukashenka, if he got into trouble?
[Milinkevich] One should definitely not expect the bureaucrats to be ready
or capable of open rebellion against the regime. But they too are very
frustrated. They know that our economy is stuck in torpor. The propaganda
boasts that Belarus has an impressive national product, but people from the
administration know that there is no demand for what our factories produce.

They know that without market reforms the situation will only worsen. They
know that the level of investment in Belarus is the lowest throughout the
entire former USSR.

Many administration employees have had enough of the authorities’ lies. The
way things work in our country, the president rebukes his ministers publicly
and without mincing words, they pass it on to their subordinates, and so on.

In such conditions it is very difficult for someone who is concerned for
their own dignity to live and work. Quite a few people in the administration
contact us, give us information. They are also waiting for change.

[Radziwinowicz] Soon an independent radio station is to begin broadcasting
from Poland to Belarus. What do you think it should tell your countrymen?
[Milinkevich] It should employ people who are very familiar with the
arguments of Belarusian propaganda. People in our country do not know at all
what it is really like to live in Lithuania or Poland.

[Radziwinowicz] Recently the official Belarusian newspaper Respublika wrote
that Poles are happy when they earn 100 dollars per month.
[Milinkevich] Exactly. Our propaganda keeps reiterating that the standard of
living in Belarus is the highest throughout the former USSR, that everywhere
around there is poverty and a mess. Our earnings are indeed higher than in
Russia or Ukraine, but our people need to be told about the progress that
reforms have produced for our Polish or Lithuanian neighbours.

I am very much counting on this radio station. That it will tell Belarusians
the truth about the world around us.

[Radziwinowicz] You will meet Polish politicians in Warsaw on Wednesday

[25 January]. What do you want to tell them?
[Milinkevich] Above all that the Belarusian opposition is very much counting
on Poland, that your country will be our advocate in the EU. Just like it
was a year ago on Ukrainian issues.

I also want to say that after the election we will probably have to go
underground. But we will act. And Europe should not forget about us.

Yet already today we feel forgotten, abandoned.

And who, if not the Poles, know how to understand and to explain to

others that whenever the fight for freedom and human dignity is
concerned, there are no hopeless cases.  -30-
——————————————————————————————-
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
17. YURI YEGOROV: CELEBRATING A LIFETIME AS AN ARTIST
                      Black Sea odyssey with Odessa at its heart
         In his 80th year, artist Yuri Yegorov presents powerful canvases
          that echo his reverence for the Black Sea, writes James Brewer

By James Brewer, Lloyds List, London, UK, Friday, Jan 27, 2006

LONDON – COSMOPOLITAN home to 1.4m people, its ice-free seaport

having drawn over the centuries a rich variety of merchants and aesthetes,
Odessa is reaching out to revive a glorious reputation.

Much of its reward for being a great Black Sea port was dispersed through
misrule of many kinds in the past two centuries, but no one could plunder
its responsiveness to the arts.

In music, violinists David Oistrakh and Nathan Milstein, pianists Emil
Gilels, Sviatoslav Richter and Shura Cherkassky are among giant talents
closely associated with the city.

In painting, we are hearing and seeing much more of the Odessa Group,

thanks to the devotion of enthusiasts including London’s Chambers Gallery.
We are talking about something more resonant than an Odessa file, or even
a Ukraine effect.

In the 18th century, Russian empire Odessa became the largest port after St
Petersburg. The city was always a magnet for migrants. Greeks attracted to
the area centuries earlier were followed by waves of compatriots and
Romanians, Turks, Armenians, Russians and Jews, conversing in a common
language of Russian.

The Russian thread allowed Stalin to homogenise this and other then Soviet
republics, and artists in Odessa hewed their own path as much as they dared.

In the Ukraine Artists’ Union the independence streak was strong and one of
the greatest living representatives, Yuri Yegorov, is seen to advantage in
the exhibition about to open at the Chambers.

Born in 1926, Yegorov studied at Odessa College of Fine Art and Mukhina

Art Institute in Moscow and became a member of the Artists’ Union. At
first he was recognised as an accomplished painter in the socialist realist
style, but he broke out later with experimental and nonconformist styles.

There was no getting away from Odessa at the easel, however. His inspiration
is the Black Sea, seascapes and sturdy bathing belles. Throughout there is,
as the catalogue puts it, ‘a sense of monumentality and timelessness’. With
his front window overlooking the sea, he was unable to tear himself away and
trek westwards.

Today, his oeuvre can be seen at many fine galleries including the Odessa
Fine Art Museum, the National Museum of Ukrainian Art, the Tretyakov

Gallery in Moscow and the Norton and Nancy Dodge Collection in the US,
but only occasionally in London.

Despite the post-Stalin thaw, Yegorov at first depicted the common person

in heroic form, but the treatment then veers towards the impressionist,
allowing him to become a member of the Soviet Union of Artists in 1957.

In common with others Yegorov was striving to break the chains of

socialist realism, finding himself in what became known as the Odessa
School.

Western European influences grew, but in the case of Yegorov the presence

of statuesque, confident but sometimes featureless women persisted. Often
in the back- ground we see suffused a glow from the Black Sea.

According to the catalogue: ‘He captures the fundamental character of the
Black Sea and of Odessan culture and surroundings.’ Just as important, he
fought for freedom in the world of art long before the ‘Orange re-volution’
came to political fruition.
  -30-
——————————————————————————————-

Yuri Yegorov: Celebrating a lifetime as an artist. The Chambers Gallery,
23 Long Lane, London EC1A 9HL. February 2-28.
——————————————————————————————-
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AUR#648New Moment Of Truth; Gas Intermediary RusUkrEnergo – Q&A; Roof Top Boilers; UNICEF Winning Photo; Deal To End All Barters; Opera Moses

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 648
Mr. E. Morgan Williams, Publisher and Editor  
Washington, D.C., Kyiv, Ukraine, THURSDAY, JANUARY 26, 2006
                           ——–INDEX OF ARTICLES——–
         Clicking on the title of any article takes you directly to the article.               
Return to the Index by clicking on Return to Index at the end of each article
1.                                 HARD CHOICES IN KIEV
             Ukraine’s new moment of truth is approaching by the week.
EDITORIAL
: Early Warning, London, UK, Tue, 24th Jan, 2006
What value does RUE add to the Ukrainian-Russian gas deal? NONE
By Roman Kupchinsky, Investigative Journalist and Analyst
Prague, Czech Republic, Thursday, January 26, 2006

3.          PRESSURE BUILDS ON UKRAINE OVER GAS DEAL
                           To reconsider RosUkrEnergo’s role
Tom Warner in Kiev, Financial Times, London, UK, Thu, Jan 26 2006
                            
4.                                 ROOF-TOP BOILERS
Ukraine needs to fundamentally change its attitude to energy conservation
             In multi-family houses two-thirds of all energy is wasted.
ANALYSIS & COMMENTARY
: By Volodymyr Skomarovsky
President of the analytical center “Na Perekhresti”
The Day Weekly Digest in English, #1, Kyiv, Ukraine, Tue, Jan 24, 2006

5.                              UKRAINE’S UNION DAY

  Union Day is not a symbol of the past but a tragic signal from the future
          that is warning us about what can destroy the Ukrainian state.
COMMENTARY: By Ihor Siundiukov, The Day
The Day Weekly Digest in English #1, Kyiv, Ukraine, Tue, 24 Jan 2006

6.     FACE OF A CATASTROPHE: STREET CHILD IN ODESSA
                           UNICEF PHOTO OF THE YEAR 2005
UNICEF, United Nations, New York, NY, Tue, January 24, 2006

7.   EBRD CONTINUES MOVE AWAY FROM CENTRAL EUROPE
        Reported a particularly sharp increase in its investment in Ukraine
Paul Hannon, Dow Jones Newswires, London, UK, Tue, Jan 24, 2006

8.  UKRAINIAN COMPANIES FOLLOW THE RUSSIAN IPO BOOM 
Access PBN, Kyiv, Ukraine, Wed, Jan 25, 2006 Volume 1 Issue 28

9. NORWEGIAN TELECOMMUNICATIONS OPERATOR TELENOR
          APPEALS COURT RULING ON KYIVSTAR IN UKRAINE
Edited Press Release, Dow Jones Newswires
Stockholm, Sweden, Tuesday, January 24, 2006

10UKRAINE: RUSSIA BANNING IMPORTS OF UKRAINIAN MILK &

 MEAT PRODUCTS IN RETALIATION OVER LIGHTHOUSE DISPUTE
Associated Press, Kiev, Ukraine, Wednesday, January 25, 2006

11. UKRAINE: MICROSOFT SUES ALLO FOR SELLING COMPUTERS
         WITH UNLICENSED MICROSOFT SOFTWARE IN KHARKIV
Ukrainian News Agency, Kyiv, Ukraine, Tuesday, January 24, 2006

12.    KYIV-BASED SOFTWARE PRODUCER SOFTLINE UPDATES
                    SECURITY SERVICE OF UKRAINE’S WEB SITE
Ukrainian News Agency, Kyiv, Ukraine, Tuesday, January 24, 2006

13UKRAINE WISHES TO DRAW FOREIGN INVESTORS TO FUND
           NUCLEAR MATERIAL SAFETY ENHANCING PROJECTS 
Ukrainian News Agency, Kyiv, Ukraine, Tue, January 24, 2006

14.       UKRAINE FOREIGN MINISTER TARASYUK CONDEMNS

Embassy of Ukraine, Washington, D.C., Wednesday, Jan 25, 2006

15.                  UKRAINE GOVERNMENT CALLS FOR ACTION

                                     AGAINST ANTI-SEMITISM
NCSJ, Washington, D.C., Wednesday, January 25, 2006

16.                              A DEAL TO END ALL BARTER
OP-ED: By Viktor Yushchenko,The Wall Street Journal
New York, New York, Wednesday, January 25, 2006

17RUSSIA/UKRAINE DISPUTE OVER GAS SHIPMENTS INTENSIFIES
By Gregory L. White in Moscow and David Crawford in Vienna
Staff Reporters of The Wall Street Journal
New York, New York, Wed, January 25, 2006

18.     BITTER ARTIC BLASTS COOL KIEV POLITICAL PASSIONS 
By Paul Betts, Financial Times, London, UK, Wed, January 25 2006

19.            GEORGE SOROS: GAS A WAKE-UP FOR EUROPE
                         Balance of power is swinging toward Russia
             Russia is using gas factor to bring Georgia and Ukraine to heel
REUTERS, Davos, Switzerland, Wed, January 25, 2006

20EU LEADERS ‘TOO WEAK’ TO FACE RUSSIAN ENERGY THREAT
                Two words are appropriate – puzzlement and powerlessness
COMMENTARY: Excerpt from Lithuanian weekly magazine Veidas
Vilnius, Lithuania, in Lithuanian Thu, 19 Jan 06
BBC Monitoring Service, UK, in English, Wed, Jan 25, 2006

 
21. RUSSIA ILL-EQUIPPED TO LEAD ON GLOBAL ENERGY SECURITY
COMMENTARY: By Vladimir Milov, President of the Institute of
Energy Policy in Moscow and Russia’s former Deputy Energy Minister
Financial Times, London, United Kingdom, Wed, January 25, 2006
 
22RUSSIA TO UP EUROPE GAS SUPPLY: BLAMES SHORTAGES
                    ON UKRAINE SAYS UKRAINE IS SKIMMING
Associated Press (AP), Moscow, Russia, Wed, January 25, 2006
 
              Ex-Soviet nation wastes much of the energy that it receives
AFX Europe (Focus), Moscow, Russia, Thu, Jan 26, 2006
 
24.   YUSHCHENKO’S REFERENDUM THREATS RING HOLLOW
             Does Yushchenko really accept the new division of powers?
ANALYSIS & COMMENTARY: By Taras Kuzio
Eurasia Daily Monitor, Volume 3, Issue 17
The Jamestown Foundation, Wash, D.C., Wed Jan 25, 2006
 
25.      UKRAINE PRESIDENT REJECTS “BARGAINING” OVER
               APPROVING CONSTITUTIONAL COURT JUDGES
Ukrayina TV, Donetsk, in Ukrainian 1900 gmt 25 Jan 06
BBC Monitoring Service, UK, in English, Wed, Jan 25, 2006
 
By Tetiana Polishchuk, The Day Weekly Digest in English, #1
Kyiv, Ukraine, Tuesday, 24 January 2006
========================================================
1                            HARD CHOICES IN KIEV
            Ukraine’s new moment of truth is approaching by the week.

EDITORIAL: Early Warning, London, UK, Tue, 24th Jan, 2006

Despite the recent parliamentary tribulations in Kiev following the vote of
no confidence in Yuri Yekhuranov’s administration inspired by his
predecessor, Yulia Tymoshenko, there are ways in which the reformers
could move head – if they see clearly the future of Ukraine’s troubled
revolution.

The fractiousness that has been the hallmark of relations between the
triumphant Orange revolutionaries has allowed Viktor Yanukovych’s Party
of the Regions back into the electoral frame barely a year after its leader
appeared to be politically buried.

Now his group party is leading in the most recent polls with 25 per cent
voter support. So Yanukovych appears set fair to head the largest party in
parliament, the Rada, following parliamentary elections on 26 March.
                                        OLIGARCHS
This would not bode well for further reforms. The Donetsk based party
is backed by oligarchs, such as the Chief of Staff of the old Kuchma
regime, Viktor Medvedchuk, and the ex-President’s son-in-law, Viktor
Pinchuk.

Rinat Akhmetov, owner of System Capital Management and reportedly
Ukraine’s richest man, will join the party as a prospective member of the
Rada.

Backers such as these will ensure that the line between business and
politics remains blurred.

The stable and predictable business environment these oligarchs claim they
wish to see restored is most probably the baleful cronyism of the Kuchma
era. Meanwhile The Party of the Regions is far closer to Moscow than
Yushchenko’s beleaguered reformers.

Vladimir Putin will feel he has regained Ukraine after losing to the Orange
coalition.
                                         ELECTION
Tymoshenko’s Motherland party is at 13.6 per cent in the polls while
Yushchenko’s Our Ukraine party trails in third place with 11 per cent. These
figures are unlikely to change dramatically. That would leave no party with
an overall majority capable of forming an administration in March.

On these figures, the Party of the Regions will gain some 175 seats in the
Rada while Tymoshenko will receive 95 seats and Our Ukraine 79. Socialists,
the ultra left Vitrenko bloc, the Popular Party and the Communists should
receive some 25 or so seats apiece should they poll over the 3 per cent
threshold to obtain Rada seats.

So coalition games will be the score.
                                     RECONCILIATION
There is little likelihood of Yanukovych and Tymoshenko joining forces.

Her party would not support such a move. Ideological differences aside,
neither leader would be satisfied with anything less than the Prime Minister
slot. Their recent unity on the No Confidence vote was a short lived
marriage of convenience.

From Tymoshenko’s point of view it was a chance to remind Yushchenko
that he needs her to push through his policies. For Yanukovych it was a
splendid chance to further embarrass Yushchenko ahead of the March
elections.

It is unlikely that Our Ukraine would seek an alliance with Yanukovych.

Many of its members would defect to an opposition led by Tymoshenko. Our
Ukraine could team up with the Socialists who supported Yushchenko during
the Orange Revolution and possibly Rada Speaker Lytvyn’s Popular Party.

However, to obtain some form of political legitimacy and muscle Yushchenko’s
party must seek out reconciliation with Tymoshenko.
                                           ONE ORANGE
This is not impossible. Tymoshenko was wounded by her dismissal in
September 2005, but will feel honour was satisfied by her dismissal of the
Yekhuranov government.

There were solid alliance talks at the end of 2005 – and the parties’
positions do not seriously diverge. Both believe broadly in the direction of
reforms. Tymoshenko has said she will regard the Party of the Regions as
her main opponents. She still regards herself as being on Yushchenko’s side.

The sticking point will be whether Yushchenko will show similar political
nous. This has not been a feature of his administration so far.

He approached reform as a technocrat, not a politician. He needs advisers
with better political instincts to translate his plans into lasting and
successful change. So far, he has achieved little, save the squandering of
much of the goodwill bred by the Orange Revolution.
                               CONSTITUTIONAL POWER
The dismissal of Tymoshenko in September ended by weakening the
President’s position – there than clearing of the air he had envisaged.

Tymoshenko had a valid point when she claimed that the recent gas deal with
Russia that sparked the no confidence vote would only be valid for six
months, and in no way represented a long term solution to this vexed issue.

No one knows better than Tymoshenko, a former energy billionaire, the
temptations and potential corruption inherent to the barter capitalism
represented by gas agreements with Russia.

Simply, Yushchenko must swallow his pride in March and ensure that his
Our Ukraine party works with Motherland under Tymoshenko as Prime
Ministership.

His choices are limited, but, if he fails to form such a coalition, there is
little chance of a reform government.
                                  MOMENT OF TRUTH
Should the parties fail to reach agreement in the spring, the country’s new
constitution holds Damoclean sword for Yushchenko to wield.

If there is no majority within a month of elections then they face
disbandment by the President and thus repeat elections and more

uncertainty that will be damaging both politically and economically.

Ukraine’s new moment of truth is approaching by the week.  -30-
———————————————————————————————-
http://www.earlywarning.com/articles/2006_01_24_hard_choices_kiev
———————————————————————————————

[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
2.         GAS INTERMEDIARY: RosUkrEnergo (RUE) – Q&A

By Roman Kupchinsky, Investigative Journalist and Analyst
Prague, Czech Republic, Thursday, January 26, 2006

Q. What physical property does the Swiss company RosUkrEnergo (RUE)
own? Does it own any gas fields in Russia or Central Asia, or any pipelines
in the former Soviet Union? What services does RUE provide?

A. RosUkrEnergo does not own any property except a few bank accounts,
pens, pencils, a few computers and some very expensive Mercedes sedans.
Most gas fields in Russia belong to Gazprom which owns the licenses to
extract gas from these fields. According to Russian law, only Gazprom is
allowed to sell Russian gas outside the borders of the former Soviet Union.

In Central Asian countries, gas fields are owned by those countries. None

of these fields are leased to RUE in either Russia or Central Asia.

The pipeline from Central Asia is called the “Center” pipeline. It
transverses Turkmenistan, Uzbekistan, Kazakhstan and Russia to the

Ukrainian border and is owned respectively by the countries it goes through.
RosUkrEnergo does not own any length of this pipeline or the compressor
stations which pump the gas through the “Center” pipeline. RUE merely
manages the transport of gas going through the pipeline until it reaches
Ukraine.

The services which RosUkrEnergo performs is to sign transit documents

and customs declarations and send bank transfers to pay those countries the
customs fees and for the cost of the work they perform in pumping gas (the
transit fee). RUE does not have any technicians, any repair men or
technicians to operate the compressor stations. .

Q. How is RUE paid for signing these documents and paying bills?

A. The payment details for RUE were NOT included in the copy of the
4 January “agreement” which was released by Yulia Tymoshenko to the
press so all I can base my answer on is the old Eural Trans Gas agreement
I have a copy of and media reports.

I say “agreement” because it is not a contract and does not contain any
contractual obligations by either side. It is an expression of intent and
nothing more.

The original contracts between RUE and Gazprom and Naftohaz Ukraine,

signed in 2004, were never made public despite numerous vows on the part
of Putin, Kuchma, Yuriy Boyko, the head of Naftohaz Ukraine and Alexei
Miller, the head of Gazprom, that RUE was as pure and transparent as
mothers milk.

According to media reports, RUE is to be paid in the same manner as its
predecessor, Eural Trans Gas was paid – the Ukrainian side will give RUE

13 (or possibly 15) billion cubic meters of gas which RUE will then sell to
Europe using the services of Gazexport, the foreign sales subsidiary of
Gazprom. RUE will make a profit of close to $2 billion by reselling the gas.
This is a very hefty fee for signing documents.

Since RUE is registered in a Swiss Canton, it will only pay an agreed upon
amount of taxes to the Canton. The Russian treasury will not see a penny in
taxes from this deal.

Q. Why did Russia give RUE exclusive rights to be the sole supplier of gas
to the Ukrainian border? Was there a tender?

A. There was no tender when RUE, or its predecessor, Eural Trans Gas,

were given exclusive rights to be the middleman in this arrangement.
Gazprom simply decided on what type of  company it wanted, formed
the company, and signed an agreement with it.

It is not clear if RUE pays Gazprom for this exclusive right. In the Eural
Trans Gas contract there was no mention of any fee paid to Gazprom for

this right. In reality however, part of the huge fees which RUE is paid by
Ukraine might go back to the Russian side – but to whom and how much
is a Russian (and apparently an Austrian) state secret.

Q. Could not Gazprom or Naftohaz Ukraine have performed the same

services which RUE performs and saved a lot of money?

A. Yes, that is the main point of contention. Of course Gazprom could have
done this without RUE as well as Naftohaz Ukraine.  There was no need to
have a company registered in Zug (RUE) and two other companies registered
in Austria (Arosgas Holdings and Centragas Holdings) and an Austrian
Investment company which does nothing except hold bearer bonds and make
a lot of noise about its suspiciously clean bill of health.

There was no need to set up Eural Trans Gas in 2002 in a forlorn town
outside of Budapest, owned by an unemployed Romanian actress and a young
Romanian married couple who could not pay their own gas bills and a lawyer
in Tel Aviv who represented Semyon Mogilevich to be the owner of the

company and to have Dmytro Firtash ask this lawyer to please, do us a favor
this one time and help us transport Turkmen gas to Ukraine.

Q. What value does RUE add to the Ukrainian-Russian gas deal?

A. None. All it does is act as a transmission belt for huge sums of money
and a tax shelter for Russia’s finest. Its main assets are its bank accounts
and close contacts to the Russian elite. RUE in reality is the alter ego of
Gazprom.  -30-
———————————————————————————————
NOTE: Roman Kupchinsky is the organized crime and terrorism analyst
for RFE/RL Online and the editor of “RFE/RL Organized Crime and
Terrorism Watch.” He was director of the RFE/RL Ukrainian Service
for 10 years. Contact: KupchinskyR@rferl.org
———————————————————————————————

[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
3.      PRESSURE BUILDS ON UKRAINE OVER GAS DEAL
                          To reconsider RosUkrEnergo’s role

Tom Warner in Kiev, Financial Times, London, UK, Thu, Jan 26 2006

The government in Kiev is under mounting pressure to revise the natural gas
deal it struck with Russia this month to reduce or eliminate the role of
RosUkrEnergo, the Swiss-registered company that would become sole
supplier of gas to Ukraine.

Kiev and Moscow yesterday postponed for a second time the signing of
contracts and agreements that would finalise the deal, after Ukraine’s
anti-monopoly committee said it had not received sufficient information
from RosUkrEnergo to approve a key part of the deal.

Ukraine’s prime minister, Yuri Yekhanurov, and Russia’s deputy prime
minister for energy, Viktor Khristenko, both described the problem as a
minor hitch and said they were working on a solution. But others close to
the talks said domestic and international pressure was increasing on Kiev to
reconsider RosUkrEnergo’s role.

Alex Danilyuk, an adviser to Mr Yekhanurov working on the gas deal, said the
pressure was growing with each delay, and he felt it would be better to slow
down the talks with Russia and consider the agreements more carefully.

“There’s no reason to put pressure on the government to sign a deal quickly.
We have a framework deal and it’s working,” he said.

Mr Danilyuk said the anti-monopoly committee’s position threatened only the
least important of two roles given to RosUkrEnergo in the deal and did not
threaten the overall agreement.

The deal says RosUkrEnergo will sell gas in Ukraine through a 50-50 joint
venture with the state oil and gas company Naftogaz. But that part of the
deal cannot go ahead without clearance from the anti-monopoly committee,
which is headed by Olexy Kostusyev, who is running in March parliamentary
elections for the opposition Regions party.

Bohdan Yakymyuk, a spokesman for the committee, said its specialists were
working intensively with RosUkrEnergo to help it meet the requirements but
the company had not delivered the documents needed to clarify who, or which
organisations, controlled RosUkrEnergo and what connections they had, if
any, to other participants in Ukraine’s gas market.

“The possible granting or not granting of permission depends solely on
whether we get the documents required by law,” Mr Yakymyuk said.

However, Mr Danilyuk said RosUkrEnergo could retain the more important

role of sole supplier of gas to the Ukrainian border because Gazprom, the
Russian natural gas giant, had given the company exclusive rights to transit
gas across Uzbekistan, Kazakhstan and Russia.

The delay came as Daniel Fried, a US assistant secretary of state, remarked
during a visit to Kiev on Tuesday that “little was known” about
RosUkrEnergo.

Ukrainian opposition groups have accused RosUkrEnergo of having links to
crime, which the company has strongly denied. RosUkrEnergo is owned half

by Gazprom and half by an Austrian-registered company, Centragas Holding,
on behalf of unnamed beneficiaries.

Konstantin Chuychenko, a RosUkrEnergo director representing Gazprom,
said yesterday that RosUkrEnergo wanted Naftogaz to buy the stake in
RosUkrEnergo not owned by Gazprom. However, Mr Yekhanurov told a
press conference yesterday his government had ruled out buying any stake.
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4.                                   ROOF-TOP BOILERS
 Ukraine needs to fundamentally change its attitude to energy conservation
             In multi-family houses two-thirds of all energy is wasted.

COMMENTARY: By Volodymyr Skomarovsky
President of the analytical center “Na Perekhresti”
The Day Weekly Digest, #1, Kyiv, Ukraine, Tue, Jan 24, 2006

Ukraine is facing the urgent need to fundamentally change its attitude to
energy conservation policies, which should be founded exclusively on an
economic basis. The recent gas war, whether lost or won, has only made
this problem more acute. The major principle to follow here is that we must
invest funds in projects that are profitable and self-sustaining.

The old system has exhausted itself, and no European country today has
such energy-intensive industrial and private sectors as Ukraine. Gas prices
pose the biggest problem for the public utilities sector.

The reason is well known: in multi-family houses two-thirds of all energy
is wasted. In fact, heating plants are not heating buildings so much as the
soil and the air.

Back in 1999 I proposed a project for Vinnytsia, which could significantly
improve the situation. The project boiled down to building rooftop boilers
to which several multistory buildings could be connected. This approach
would make it possible to cut gas consumption by 66%, as it rules out loss
of heat on the way to consumers.

I see this as a top priority measure for resolving the energy problem in the
public utilities sector. Given the continuing technological progress,
today’s boilers are much more efficient than six years ago, which is why

the impact of this approach would be even greater today.

If a private company builds a rooftop boiler, its payback period will be
just three or four years even if gas prices go up (on condition that
consumers make timely payments for gas at the rates established by the
government). At the same time, the quality of service will increase
significantly. Consequently, this approach has a big future, which is why it
is being utilized in all new housing projects.

The government’s project to install plastic windows is praiseworthy. After
all, it takes six to eight times less energy to heat one square meter in a
building with externally foam-insulated walls and plastic windows than in an
ordinary building. This task is up to the government because state utilities
will never do this.

As for alternative energy sources, unfortunately, Ukraine is still at square
one even though it has a great potential in terms of know-how and resources.
For example, Austria, Germany, and many other European nations effectively
use wind power plants to generate energy. Ukraine has ample space to build
such plants and use them effectively.

However, such a project would require appropriate government funding.

Our water resources potential has not been fully utilized either. We cannot
continue the current practice of burning tremendous amounts of coal to
produce electricity and heat.

Of course, this is a global problem and requires both government funding
and private investments. I once spoke to Minister Baranivsky of the
Agro-industrial Complex, who said that since fuel prices have gone up, it is
now economically feasible to manufacture diesel fuel from rapeseed.

Poland has built such plants, and Ukrainian farmers are successfully
supplying them with raw materials. Therefore, we simply must find investors
to build plants of our own to produce diesel fuel from rapeseed in an
environmentally friendly way. Some 60% of agricultural lands in Vinnytsia
oblast are overgrown with weeds. Meanwhile, growing rapeseed on these
lands would benefit both the industrial and agrarian sectors. -30-
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LINK: http://www.day.kiev.ua/156081/
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5.                                UKRAINE’S UNION DAY

   Union Day is not a symbol of the past but a tragic signal from the future
          that is warning us about what can destroy the Ukrainian state.

COMMENTARY: By Ihor Siundiukov, The Day
The Day Weekly Digest in English #1, Kyiv, Ukraine, Tue, 24 Jan 2006

Last Friday Ukraine officially observed a holiday that should (or should
have?) become a sacred symbol of the unity of our political nation from
Donetsk to Uzhhorod, from Chernihiv to Symferopol.

This was Union Day, which will always be a reminder to contemporaries
and their descendants of Jan. 22, 1919, when Kyiv’s St. Sophia Square
heard the solemn proclamation of an historic act of the official union of
the Ukrainian National Republic and the Western Ukrainian National

Republic (ZUNR).

The initiators of this act joining the Ukrainians of Halychyna with their
brethren in eastern Ukraine – Symon Petliura, Volodymyr Vynnychenko, and
Yevhen Petrushevych (president of the ZUNR) – firmly believed that from

then on and for centuries to come the once separated branches of the
Ukrainian people would be politically and spiritually united.

The path to the realization of this noble dream was a terrible and tragic
one. Two weeks later, on Feb. 5, 1919, Kyiv was captured by Bolshevik
troops, who understood the unity of Ukraine as a purely nationalistic slogan
and did their best to drown the national spirit in blood.

Yet even today the long dreamed-of goal of One Indivisible Ukraine has still
not been attained in many respects. (We must admit this honestly and frankly
because illusions, no matter how “rosy” they may be, lead to a dead end.)
Why?

To answer this question, it is necessary to determine why the Ukrainian
national revolution of 1918-1922 failed.

In spite of different views, most historians agree that the fatal role in
the Ukrainian liberation movement was played by disunity, a maniacal
aspiration of politicians to fight not so much against real enemies
(primarily, foreign ones) as among themselves for the coveted “mace,” the
symbol of power, and also by their inability to wisely and harmoniously
resolve ethnic and social problems, which are the Scylla and Charybdis
through which all revolutions must pass.

There were also tragic disagreements between the leaders of the ZUNR
(mostly liberals and conservatives) and the socialist- minded leaders of the
Ukrainian National Republic.

Dear reader, does this remind you in some way of contemporary
developments? The answer is all too obvious. For us Union Day is not a
symbol of the past but a tragic signal from the future that is warning us
about what can destroy the Ukrainian state.

Moreover, it is a very pressing problem to find the principles that could
unite western and eastern Ukrainians. (We must admit that here things have
not improved much, to put it mildly, during the year in which the Orange
government has been in power.)

I will briefly mention these principles: equality before the law for
absolutely all individuals no matter where they reside, whether in Donetsk
or Lviv, and no matter what offices they hold (Immanuel Kant said that one
should not deliver long speeches about moral politics but should just
strictly obey the law); the refusal to make lofty promises and express
agreeable but empty words (it is better to do something without superfluous
words); responsibility on the part of the topmost official all the way to a
humble housing maintenance employee; rejection of the practice whereby a
narrow circle of individuals close to “the No. 1 person” makes all the
decisions.

The final principle is a clear understanding on the part of all government
branches that people vest them with power not forever but for a certain
period of time, and the people will inevitably proclaim a just verdict (for
this is democracy).

At the same time every rank and file citizen must clearly understand: quite
a lot (as a minimum) depends on me in our (not “this”) country, because
my children, grandchildren, and I have to live here.

In my opinion, these are the principles that could bring together the
Ukrainian political nation. Readers can probably name quite a few others.
This is the beginning of a very pressing and crucial dialogue.  -30-
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LINK: http://www.day.kiev.ua/155900/

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6.   FACE OF A CATASTROPHE: STREET CHILD IN ODESSA
                           UNICEF PHOTO OF THE YEAR 2005

UNICEF, United Nations, New York, NY, Tue, January 24, 2006

NEW YORK – The British photographer David Gillanders is the winner of
this year’s international photographic contest “UNICEF Photo of the Year”.
His photo shows a street child in Odessa, Ukraine.

Yana made her way from Moldova, the poorest country in Eastern Europe,
to the Ukrainian city. She died last Christmas addicted to drugs and
infected with the HI virus. She was only 13 years old.

Yana’s fate is a typical example for a lost generation of children and
adolescents in many Eastern European countries. In no other region of the
world does the virus spread as rapidly – above all because drug addicts
often use contaminated syringes.

Approximately one per cent of the population is addicted to hard drugs. 1.4
million have already contracted HIV, primarily young people are affected: 80
per cent of all infected people in Eastern Europe are less than 30 years
old – every tenth of them is a child.

“The UNICEF Photo of the Year 2005 gives a face to the HIV/AIDS
catastrophe in Eastern Europe. It is an appeal for our compassion. We

must not forget the children who collapse in view of the breakdown of
their families and the harsh social environment”, says Eva Luise Köhler,
Patroness of UNICEF Germany at the award ceremony.

87 of the world’s best photographers from 20 countries submitted 894
photos for this UNICEF contest. The jury headed by Timm Rautert,
Professor for Photography at the Academy of Visual Arts in Leipzig,
awarded a second and third prize and gave seven honourable mentions.

For the sixth time UNICEF awards photographs of a high artistic and
photojournalistic level that illustrate the living conditions of children.
The contest is supported by the magazine GEO and Citibank.

FIRST PRIZE DAVID GILLANDERS: STREET CHILDREN IN ODESSA
          Photos: David Gillanders, Scotland / Free Lance Photographer

13 year old Yana finds her way from Moldova to the Ukraine. Her father, an
alcoholic, died early; her mother was sent to jail when Yana was eight years
old. Since, she has been living on the street, recently in Odessa. By
injecting drugs, she gets infected with the HI-Virus. During Christmas 2004,
she feels very sick, crawls into a hole and dies in the winter cold.

The Scottish photographer David John Gillanders is working on a project
about street children in Odessa since three years. His attention is directed
towards a lost generation: Children who grow up without parental protection
in the States of the former Soviet Union.

Hundreds of thousands of them are homeless. They wash cars, collect

bottles or sell stolen goods. Many of them work as prostitutes or take
drugs. More and more kids continue to become infected with HIV.

Yana’s story is not an exception. Even more, it is typical for the hardships
a growing number of children and teenagers has to endure in Eastern
European States. Nowhere in the world is the virus spreading as fast as in
this region.

Since 1995, the number of people infected with HIV increased from 160.000
to 1.4 million. In the Ukraine, the rate of infections is even twentyfold
higher than five years ago. Meanwhile, 360 000 are HIV positive.

AIDS is a silent disaster that had been pushed aside also in Eastern Europe
for too long. The virus spread almost unnoticed, mainly by drug abuse.
Addicts share dirty needles and infect each other. In the meantime, the
virus threatens all parts of the society.

In particular young people are affected: 80 percent of all HIV-infected
persons in Eastern Europe are younger than 30 years – ten percent of them
are children. Women are especially vulnerable. In the Ukraine, 40 percent
of all people living with HIV are female.  -30-
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NOTE:  To see the winning photographs click on the following link:
http://www.unicef.de/foto/2005/english/index_2005_engl.htm
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7. EBRD CONTINUES MOVE AWAY FROM CENTRAL EUROPE
           Reported a particularly sharp increase in its investment in Ukraine

Paul Hannon, Dow Jones Newswires, London, UK, Tue, Jan 24, 2006

LONDON — The European Bank for Reconstruction and Development is

continuing to shift the bulk of its new investments towards south eastern
Europe, central Asia and Russia, and away from central Europe.

In 2005 the development bank agreed to invest EUR1.1 billion in Russia,
EUR2.1 billion in South Eastern Europe, the Caucasus and central Asia, and
just EUR700 million in the eight countries of central Europe that joined the
European Union in 2004.

The share of new investments going to the E.U.’s new members fell to 16%
from 23% in 2004, while the riskier countries of the Balkans, the Caucasus
and central Asia accounted for 58%, up from 47% in 2004.

And according to EBRD President Jean Lemierre, that process of gradually
moving away from central Europe is set to continue, with new investments in
central Europe likely to fall to EUR550 million this year.

“There is a change in the geographical distribution of our investments, with
less going to central Europe, the same level going to Russia, and a
significant increase in activity in south eastern Europe, the Caucasus and
central Asia,” he told a press conference Tuesday.

The development bank reported a particularly sharp increase in its
investments in Ukraine, which almost doubled to EUR500 million from

EUR260 million, despite a considerable amount of political uncertainty.

Lemierre said that reflected a greater interest in the country among private
investors, a development that was also true of Romania and Bulgaria. “We
are driven by the market, and because the situation has improved we do
less in central Europe and more elsewhere,” Lemierre said.

That shift to the south and east was requested by the EBRD’s 60 government
shareholders when they last reviewed the development bank’s strategy in
2001.

But as shareholders prepare to decide a new five-year strategy for the bank
at its annual meeting in May, there is some disagreement over how rapidly
the bank should disengage from the new E.U. members.

The U.S. government has called on the EBRD to stop investing in the eight
E.U. members within the next two years, arguing that private sector finance
is readily available in those countries. But that’s a move that has been
rejected by most of the development bank’s E.U. shareholders.

“The U.S. reminds us from time to time that this is important for them,”
Lemierre said. “You can debate the speed of the move.”

The EBRD made investments in all 27 of its countries of operation during
2005, but Lemierre said it’s likely to have ceased investing in some central
European countries by 2010. “It is reasonable to think that by 2010 it will
happen,” Lemierre said. “But not everywhere.”

One consequence of the move south and east is that the EBRD is investing

in a larger number of smaller projects. In 2005, it backed a total of 159
projects, well above the average of 100 to 120 a year since it was founded
in 1991. It is also hiring more bankers in places like Russia, Ukraine and
Montenegro, while cutting jobs in central Europe.

The development bank is also placing more emphasis on helping to develop
local capital markets. One way of doing that is to issue local currency
bonds, giving investors a high-quality credit to cut their teeth on. The
development bank issued its first bonds denominated in Russian rubles in
2005, and expects to launch local currency bonds in Romania and

Kazakhstan in 2006.

Elsewhere it is promoting securitization, and particularly the repacking of
housing mortgages, which both enables local banks to lend more and gives
local pension companies and insurers a larger range of securities in which
to invest.

One thing shareholders are unlikely to have to worry too much about is the
financial health of the bank. Lemierre said that prior to an independent
audit having been carried out, the EBRD appears to have made a net profit

of more than EUR1 billion in 2005, up from EUR297.7 million in 2004.
——————————————————————————————–
Paul Hannon, Dow Jones Newswires, paul.hannon@dowjones.com
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8. UKRAINIAN COMPANIES FOLLOW THE RUSSIAN IPO BOOM 
 

Access PBN, Kyiv, Ukraine, Wed, Jan 25, 2006 Volume 1 Issue 28

The market value of Ukrainian companies increased significantly in 2005.

The Orange Revolution raised interest in the country in general. But it is the
transparent and fair sale of Kryvorizhstal, the acquisitions of Ukrainian
banks by foreign investors and the first successful Initial Public Offerings
(IPOs) at the London Stock Exchange’s Alternative Investment Market (AIM)
by three Ukrainian companies that heated up the price for Ukrainian assets.

The most recent and largest IPO was completed in mid-December by XXI
Century, a Ukrainian real estate developer and property manager. XXI Century
raised nearly $140 million by floating 32 percent of the company’s shares on
the AIM. The offering was 6 times oversubscribed.

The previous successful IPOs of Ukrproduct, a Ukrainian dairy company,

and Cardinal Resources, an oil and gas company – which combined raised
around $30 million – has led to a number of other Ukrainian companies
looking to the foreign exchanges to raise money in the coming years.

More than a dozen Ukrainian companies have already publicly stated their
intentions to list their shares, including Velyka Kyshenya, a leading
supermarket chain; Industrial Union of Donbas Corporation (IUD), a major
holding company with assets in the resource and engineering industries; and
OJSC Galnaftogas, an oil and gas company.
UKRAINIAN COMPANIES TURN TO FOREIGN EXCHANGES
“2005 saw Ukrainian companies’ first serious forays into the international
capital markets,” explains Oksana Monastyrska, PBN’s Deputy Managing
Director of the Kyiv office. “These three companies’ successes, as well as
those of other companies from the former Soviet Union, have significantly
increased the appetite and the interest of local companies to also make
their shares available to outside investors.”

Gross capitalization of all Ukrainian companies traded could reach $35-40
billion by the end of 2006, with daily turnovers in the $20 million to $30
million range. By comparison, the Polish securities market has a net
capitalization of $80 billion and the Czech market is valued at $50 billion.
“These numbers clearly show that the Ukrainian market has considerable

room for growth,” says Oksana.

“As key sectors of the Ukrainian economy continue to grow, more and more
companies are having to gain access to reasonable financing,” Oskana
observes. “An IPO can be financially more attractive than traditional bank
financing or strategic investors. What’s more, the development of Ukrainian
companies makes it the right time to consider IPOs. A larger number of
Ukrainian companies are embracing the principles of transparency, corporate
governance and international accounting standards.”

The option of listing on a local exchange is not a credible alternative for
most Ukrainian companies. There are more than eight regional stock
exchanges, but none with the technological sophistication or investor base
for companies seeking to raise serious capital. Efforts are underway to
consolidate and restructure these exchanges.  -30-

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Oksana: oksana.monastyrska@pbnco.com; http://www.pbnco.com/
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9.  NORWEGIAN TELECOMMUNICATIONS OPERATOR TELENOR
          APPEALS COURT RULING ON KYIVSTAR IN UKRAINE

Edited Press Release, Dow Jones Newswires
Stockholm, Sweden, Tuesday, January 24, 2006

STOCKHOLM — Norwegian telecommunications operator Telenor ASA

(TELN) Tuesday said it has appealed the court ruling in the Ukraine which
questions the validity of parts of the shareholder agreement between Storm
and Telenor and the charter of Kyivstar. Telenor appealed to the Supreme
Court and said the ruling won’t affect its consolidation of Kyivstar.

The High Commercial Court has in its ruling challenged the way the board is
nominated and elected as well as procedures for appointing chief executive
of the company, Telenor said. Today the board of Kyivstar consists of nine
members, of which five are nominated by Telenor and four by Storm.

The CEO will, according to the charter, be nominated by Telenor. The High
Commercial Court calls upon a renegotiation of these points in the Charter.

“Telenor believes that there is no discrepancy between requirements in
Ukrainian law and the way the board composition and voting requirements are
structured in the present charter. Two court instances have previously ruled
in favor of Telenor, and we will keep defending this position before the
Supreme Court,” said Jan Edvard Thygesen, executive vice-president of
Telenor.

“We do not believe the present court interpretation will prevail. However,
if so, it is important to note that it only requires the parties (Storm and
Telenor) to make adjustments to the charter to make it compliant with the
law as interpreted by the court. The changes required are only technical.

It is obvious that a shareholder must be represented with a voting power
that reflects the actual shareholding. The present board representation and
voting requirements reflects the current shareholding, as Telenor holds a
majority of the shares (56,5%),” said Thygesen.

“Based on the foregoing, speculations that Telenor’s ability to consolidate
Kyivstar is lost as a consequence of the present ruling and that Storm and
Telenor now is on equal footing, is grossly exaggerated and wrong in our
view, and has no foundation in the ruling by the High Commercial Court of
Ukraine,” Thygesen said.

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10. UKRAINE: RUSSIA BANNING IMPORTS OF UKRAINIAN MILK &
 MEAT PRODUCTS IN RETALIATION OVER LIGHTHOUSE DISPUTE

Associated Press, Kiev, Ukraine, Wed, January 25, 2006

KIEV  A top government minister accused Russia Wednesday of banning
Ukrainian milk and meat imports in retaliation for Ukraine’s efforts to
reclaim a number of disputed lighthouses on the Black Sea coast. The
accusation from Agriculture Minister Oleksandr Baranovsky is likely to
increase tension between Kiev and Moscow, which have had several disputes

in the last two months.

Earlier this month, Russia accused Ukraine of attempting to seize
lighthouses on the Crimean peninsula that were being used by Russia’s Black
Sea Fleet. Ukraine insists the lighthouses fall under its control. Days
later, Russia banned imports of Ukrainian meat and milk products, citing
violations of veterinary norms.

The ban could cause heavy losses to Ukraine’s agricultural sector.
“According to our information, this is the Russian answer to our position
regarding navigation systems on Crimea, which has been a hot topic lately,”
Baranovsky said. He added that he had met with his Russian counterpart six
days before the ban and no concerns were raised.

Russia had accused Ukraine of selling meat “of questionable quality.”
Baranovsky said the order was linked to meat that came from New Zealand

and was passing through a Ukrainian port on the way to Russia.

He acknowledged that Ukrainian veterinary officials must oversee food
products passing through Ukrainian territory, but said such questions over
particular shipments occur frequently from both sides and are usually easily
resolved.

Prime Minister Yuriy Yekhanurov, meanwhile, demanded that officials
responsible for violating rules over the shipment of meat be sacked.

Russian and Ukrainian relations worsened after President Viktor Yushchenko
defeated a Kremlin-backed candidate in the 2004 election and began a drive
to reduce Russian influence in this ex-Soviet republic. Ties between the
neighboring states were further strained during a bitter dispute over
natural gas prices over the New Year.  -30-
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11. UKRAINE: MICROSOFT SUES ALLO FOR SELLING COMPUTERS
         WITH UNLICENSED MICROSOFT SOFTWARE IN KHARKIV

Ukrainian News Agency, Kyiv, Ukraine, Tuesday, January 24, 2006

KYIV – Representatives of the Microsoft Corporation have filed a lawsuit in
Kharkiv demanding UAH 30,000 as compensation from the Allo company

for selling computers with unlicensed Microsoft software in its shops. The
Coalition for Intellectual Property Rights (CIPR) disclosed this to
Ukrainian News.

According to the disclosure, Kharkiv police inspected a local affiliate of
Allo – a major network for sale of telecommunications equipment with 153
shops throughout Ukraine – in October 2005 and seized 10 computers.
Unlicensed Microsoft software (Windows XP and Office XP) was installed

on eight of the computers. The damage inflicted on Microsoft is estimated at
over UAH 30,000.

An administrative case was launched based on a complaint filed by
Microsoft’s representatives, and the Kyivskyi district court of Kharkiv
ruled on November 11 that Microsoft’s copyrights were violated and fined

he director of the Allo affiliate a few hundred hryvnias. Additionally, a
Microsoft representative sued Allo for compensation.

According to Microsoft’s legal representative Vladyslav Shapoval, this case
demonstrates the increased understanding by the law enforcement agencies

of the need to fight copyrights violations in the corporate sector and not only
in the area of retail trade in compact discs.

“We expect the result of this change of priority in the near future, and we
believe that they are necessary for a more effective fight against such a
phenomenon as piracy,” he said.

According to CIPR, the law enforcement agencies have filed over 400 cases
connected with violation of copyrights and intellectual property rights in
the past six months.

CIPR is an organization whose activities are aimed at improving the
mechanisms for advancing intellectual property rights protection,
enforcement, and reform in the CIS countries and the Baltic States.

The coalition unites major producers of foodstuffs, medicines, beverages,
computers, software, tobacco goods, as well as the fashion industry. The
Allo company was founded in Dnipropetrovsk in 1998. It owns a network

of shops for mobile communications and telecommunications equipment.
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12.  KYIV-BASED SOFTWARE PRODUCER SOFTLINE UPDATES
                 SECURITY SERVICE OF UKRAINE’S WEB SITE

Ukrainian News Agency, Kyiv, Ukraine, Tuesday, January 24, 2006

KYIV – Softline, a Kyiv-based software producer, has updated a web site
of the Security Service of Ukraine http://www.ssu.gov.ua. The company’s
press service reported this to Ukrainian News.

“In January 2006, a new official web portal of the Security Service of
Ukraine http://www.ssu.gov.ua was put into operation
(http://www.sbu.gov.ua is also available),” the statement reads.

According to the statement, the new site was developed on the platform
of the system of portal management Megapolis. Portal Manager. Special
attention was paid to the security system of this internet resource.

Security Service’s web portal is integrated with the official web portal of
the Cabinet of Ministers and has a unified interface.

Security Service’s site is hosted on the server of the Cabinet of Ministers’
secretariat and is part of the Data-Center system that unites the websites
of other executive government agencies, built on unified principles of
structure and design.

As Ukrainian News reported earlier, in October 2005, Softline updated
the website of the Transport and Communications Ministry
(http://mintrans.kmu.gov.ua). Softline was founded in 1995.

It develops business software for automating portals for government
organizations as well as for major and medium enterprises. It is also a
systems integrator. The SigmaBleyzer international investment company
controls Softline [through the Ukrainian Growth Funds (UGF) managed
by SigmaBleyzer].  -30-

——————————————————————————————-
CONTACT: Yuriy Sivitsky, Vice President, Marketing, Kyiv,
Ukraine, yuriy.sivitsky@softline.kiev.ua; Volia Software website:
http://www.volia-software.com/ or Bill Hunter, CEO Volia Software,
Houston, TX  77024; bill.hunter@volia-software.com.
——————————————————————————————-
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13. UKRAINE WISHES TO DRAW FOREIGN INVESTORS TO FUND
           NUCLEAR MATERIAL SAFETY ENHANCING PROJECTS 

Ukrainian News Agency, Kyiv, Ukraine, Tue, January 24, 2006

KYIV – Ukraine is going to offer the international community to take part in
financing of 53 long-term projects aimed at the increase of security of
nuclear materials. Chairperson of the State Nuclear Regulation Committee
Olena Mykolaichuk made the statement to the press.

According to her, during the press service devoted to control and physical
security of nuclear materials of Ukraine, which opened on Tuesday, Ukraine
will hold a presentation of projects on increase of security of the research
reactor of the Southern Ukrainian and Zaporizhia NPPs, facilities in the
alienation zone and on handling of highly active sources of radioactive
emission, projects to prevent illegal turnover of nuclear materials.

“The goal of the conference is to ask for sponsorship… We hope to receive
support both in form of finances and equipment,” Mykolaichuk said.

According to her, the overall cost of projects is over USD 20 million.
Representatives of 16 countries will take part in the conference.

As Ukrainian News reported earlier, the Cabinet of Ministers approved a
concept for a program for safe storage of spent highly active sources of
radioactive emission.

According to the approved concept, implementation of the program will

result in creation of an infrastructure for safe storage of highly active
sources of radioactive emission, including creation of a full register of
radioactive sources, analysis of their actual state, development of uniform
technologies for conditioning them, and design and construction of surface
storage for radioactive sources, etc.

Implementation of the program for safe storage of spent highly active
sources of radioactive emission will require about UAH 27.7 million from

the state budget. Ten enterprises use highly active sources of radioactive
emission in Ukraine. In the past decade, these enterprises have been
forced to store these substances in their own facilities.

Problems arose in the area of safe storage of spent radioactive sources
because of unsatisfactory material and technical support, lack of proper
conditions for their storage, and a change in the conditions for
international cooperation with Ukraine’s partners in this area. The State
Committee for Nuclear Regulation formulates state policy in the area of use
of nuclear energy and ensures implementation of the requirements of nuclear
and radiation safety.  -30-

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14.     UKRAINE FOREIGN MINISTER TARASYUK CONDEMNS
             ANTI-SEMITIC ACTIVITIES BY MAUP UNIVERSITY
 
Embassy of Ukraine, Washington, D.C., Wednesday, Jan 25, 2006

WASHINGTON – On January 23rd speaking on national television

Ukraine’s Foreign Minister of Ukraine Borys Tarasyuk strongly
condemned the anti-Semitic actions of MAUP University in Ukraine.

He confirmed that “having exhausted all efforts to convince MAUP leaders

to drop their unlawful and wrongful actions” he broke off contacts with
University a year ago. According to Tarasyuk, “there is no place for any
form of anti-Semitism or xenophobia in Ukraine”.

At the same time the Ministry of Education and Science of Ukraine issued

a press-release accusing MAUP of breaking Ukrainian law. In particular it
pointed out persistent incompliance with requirements of state licensing
rules for universities, failure to abide with legally binding decisions of
the State Accreditation Commission etc.

The press-release qualifies it as “a general negligence of law and a desire
to pursue activities inconsistent with the status of Higher Education
Institute in Ukraine”. The Ministry addresses the issue to the Ukrainian

law enforcement bodies with request to analyze to what extend the
actions of MAUP comply with Ukrainian law.  -30-
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15.            UKRAINE GOVERNMENT CALLS FOR ACTION
                                 AGAINST ANTI-SEMITISM

NCSJ, Washington, D.C., Wednesday, January 25, 2006

WASHINGTON – NCSJ applauds the positive steps taken by the Ukrainian
government to address anti-Semitism. On Tuesday, ministries of the

Ukrainian government publicly condemned the anti-Semitic activities of the
Interregional Academy of Personnel Management (MAUP), the largest non-
state university in Ukraine, and pledged to pursue legal action against it.

On national television, Foreign Minister Borys Tarasiuk called MAUP’s
actions “unlawful,” and proclaimed that “there is no place for any form of
anti-Semitism or xenophobia in Ukraine.”

At the same time, in a press release, the Ministry of Education cited MAUP
for its pursuit of activities inconsistent with higher education, and asked
Ukrainian law enforcement bodies to analyze the extent to which MAUP’s
actions can be sanctioned under Ukrainian law.

The government’s statements are in response to MAUP’s continued support

of anti-Semitism and xenophobia.  NCSJ has been in close consultation with
the government in recent months, following MAUP statements supporting
the President of Iran’s denial of the Holocaust and appeal for Israel’s
destruction. According to the Ukrainian Jewish organization Va’ad, MAUP
is responsible for much of the anti-Jewish publications disseminated in the
Ukraine.

NCSJ Executive Director Mark Levin welcomed the Ukrainian government’s
moves.  “It’s definitely an important step in the right direction,” Levin
said, “and we hope that a full investigation by the appropriate ministries
and law enforcement agencies will put a stop to MAUP’s hatred.”  -30-
———————————————————————————————
NCSJ: Advocates on behalf of Jews in Russia, Ukraine, the Baltic States

& Eurasia, is the mandated central coordinating agency of the organized
Jewish community for policy and activities on behalf of the estimated
1.5 million Jews in the former Soviet Union, including over 500,000
Jews in Ukraine. Contact: Mark Levin, NCSJ (202-898-2500)
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16.                          A DEAL TO END ALL BARTER

OP-ED: By Viktor Yushchenko,The Wall Street Journal
New York, New York, Wednesday, January 25, 2006

When Ukrainian voters elected me President last year, I promised that our
future relations with Russia would be based on national interests alone. The
time when our policy to Moscow would be dictated by the special interests

of financial-industrial groups and oligarchs was over.

The dispute that recently erupted between Moscow and Kiev over Russian
natural gas prices was a trying test of our political maturity. Corporate
players threatened our sovereignty, economic independence and freedom.

We could have contributed to the rising tensions by pursuing court action to
assert our contractual rights. Under the terms of an existing agreement
signed in 2004 between our national gas companies, prices had been fixed
until 2009.

However, we were troubled by the fact that Gazprom’s unilateral decision to
reduce gas deliveries to Ukraine also led to a loss of gas pressure in our
pipelines to the rest of Europe. Instead of escalating the conflict we
therefore sought to settle the differences with Moscow and allay the fears
of both Ukrainian and European citizens.

Fortunately, pragmatic heads on both sides prevailed. The importance of this
settlement became all too evident for Ukrainians who for the past week had
to endure double-digit sub-zero temperatures.

Together with Russia’s President Vladimir Putin, we were able to find a
workable formula for the transport of Russian natural gas to European
consumers. As was our strategic goal from the outset, the deal was based

on mutual respect for national interests and market pricing.

For Ukraine, the compromise has several advantages. First, unlike in our
neighboring countries — where Gazprom has taken control of the national

gas pipelines — our strategic gas pipelines remain Ukrainian property.

Second, and maybe most importantly, the compromise finally introduces

cash payments to our international gas trade, ending the murky Russian-
Ukrainian barter operations for energy supplies.

Previously, Ukraine contractually withdrew up to 25 billion cubic meters of
Russian gas pumped towards Europe through its pipelines in exchange of
industrial assets and the right to use our pipeline to deliver gas to the
Continent.

Now, Ukraine pays cash for the Russian gas it consumes just as Russia

pays cash for the transport of its gas through Ukraine’s pipeline.
Everything is transparent and fixed in contracts.

For fourteen years, though, international barter settlements had cost
Ukraine hundreds of strategic assets such as factories, shipping vessels

and other enterprises, which had been used as payment for Russian
(and Turkmen) gas supplies.

The practice of forfeiting strategic assets had fueled cronyism and
corruption, enriching a few oligarchs at the expense of the rest of the
nation. This intolerable practice has finally ended.

It is true that Ukraine now pays a higher price for Russian natural gas.
However, we still pay less per cubic meter than what Moscow charges our
closest neighbors, with the exception of Belarus. That’s because we now
receive more cheap Turkmen and Kazakh gas.

Moving closer to market pricing mechanisms will force our domestic industry
to improve energy efficiency and conservation. At the same time, developing
domestic gas drilling has become a policy priority and will help Ukraine
become more energy independent.

During the discussions with President Putin we also agreed to soon create a
joint venture for a more transparent international gas transporter to
fulfill the terms reached between our national gas companies. The opaque
shareholder structure of the gas transporter currently in charge has caused
concern domestically and abroad.

European businesses and consumers will also benefit. Russian gas deliveries
to Ukraine have now been contractually separated from gas designated to the
rest of Europe. Honoring these now separate agreements and their five-year
terms offer consumers in both Europe and Ukraine predictability and
stability.

Meanwhile, we intend to work with all gas producing countries to our east

on developing and diversifying natural gas supplies to Europe in order to
provide consumers with options for the future. The idea is to transport
natural gas from Turkmenistan, Kazakhstan and other central Asian countries
through new pipelines which could eventually be connected to the existing
network supplying Europe.

The gas compromise, though, caught many in Ukraine off-guard. Oligarchs
oppose it because it ends one of the largest and most corrupt international
barter schemes in Europe. Proceeds from it benefited numerous fifth column
groups at the expense of Ukraine’s national security.

The influence of these oligarchs reaches as far as to Ukraine’s parliament.
Last month lawmakers broke constitutional procedures and sacked the cabinet
of Prime Minister Yuriy Yekhanurov — only weeks before Ukrainians are set
to elect a new legislature.

Ukraine experienced a similar episode only five years ago. In 2000, as Prime
Minister, I set the goal of ending domestic barter payments for energy
supplies. Achieving that objective cost me my political job when once more
the oligarchs used their political influence to rally lawmakers against the
government.

Nonetheless, it ended corrupt barter schemes between national enterprises
and introduced competitive pricing within the economy, unleashing six years
of consecutive economic growth in Ukraine. By removing murky business
intermediaries who facilitated the flow of natural gas to Ukraine, our gas
debts to Russia became more transparent and manageable.

This benefited both Ukrainian and European consumers as it allowed a stable
gas transportation system to operate for more than half a decade. Only
Ukraine’s oligarchs were unhappy then because a grey market loophole of
hyper-profits and barter schemes was closed.

The compromise reached earlier this month over Russian gas supplies to
Ukraine and their transit to Europe attests to the pragmatic relations
developing between our two countries. Through actions rather than mere
slogans Ukraine demonstrated its commitment to regional stability and
ability to forge mutually beneficial economic relations. My country’s course
toward European integration and adherence to market principles has once
again been affirmed.

In the long-term, domestic market prices for energy will only enhance
Ukraine’s global economic competitiveness. I am convinced that Ukrainian
entrepreneurs will meet this challenge. Together we will develop our energy
diversity, strengthen domestic gas reserves and launch a long overdue
national energy conservation program. To help facilitate these goals and
develop key sectors of our national economy, Ukraine is ready and open

for strategic foreign investment.   -30-
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Mr. Yushchenko is president of Ukraine.
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17. RUSSIA/UKRAINE DISPUTE OVER GAS SHIPMENTS INTENSIFIES

By Gregory L. White in Moscow and David Crawford in Vienna
Staff Reporters of The Wall Street Journal
New York, New York, Wed, January 25, 2006

MOSCOW — Bickering over natural-gas shipments intensified between

Moscow and Kiev as reduced supplies of Russian gas to Europe led to
shortages in several countries and fueled energy-security anxieties across
a continent gripped by an arctic cold snap.

Russia, which provides a quarter of Europe’s gas, blamed Ukraine for taking
too much of the fuel from pipelines carrying Moscow’s exports to Europe.
Kiev insisted it was entitled to the extra volumes amid a winter cold snap
but officials pledged drastic measures to rein in record-high gas
consumption.

Alexei Miller, chief executive of Russian gas monopoly OAO Gazprom, said
Ukraine’s consumption has been rising over the last few days, swamping
Gazprom’s efforts to boost supplies to its frost-stricken European
customers. “We boosted supply again today,” he said.

Facing steady shortfalls in supplies, Italian officials called on the public
to lower thermostats and take other steps to reduce energy use. Italy’s
industry minister will meet Thursday in Moscow with Russian officials to
seek assurances that supply contracts would be observed. Romania, also
facing temperatures as low as -30 Celsius, appealed to Russia to boost
supplies as shortages developed and led to school and other closings.

“For most of the last 15 years there really haven’t been any concerns about
security of supply,” said Ben Hollins, a gas specialist at consultants Wood
Mackenzie. “The reality is that Europe is dependent on Russia and will
remain so.”

But the gas troubles have fueled debate about alternatives. Poland’s prime
minister plans to unveil a plan for a common approach to energy policy that
he compared to the NATO military alliance, news agencies reported.

“We want Europe to take common responsibility for energy security — all

for one and one for all. This is a brand new initiative: joint reaction to any
individual country’s problems, joint investments in energy security,” Prime
Minister Kazimierz Marcinkiewicz said in Warsaw.

Russia has sought to reassure its customers of its reliability, and
Ukrainian officials have vowed to ensure shipments to Europe are delivered.

But the two sides Wednesday failed to reach agreement on the details of
implementing the Jan. 4 compromise deal that ended Russia’s brief shutoff

of gas to Ukraine. That conflict led to sharp drops in supplies to European
customers and triggered harsh criticism of Moscow for using energy as a
political weapon against the pro-western government in Kiev.

Officials said the agreements, which would finalize the terms for shipments
to Ukraine as well as transit of Russian gas to Europe, will be signed in
the next few days. But opposition politicians in Ukraine have attacked the
deal, which calls for gas prices to jump to $95 per thousand cubic meters
from about $50 last year.

“The gas conflict isn’t over,” said Vladimir Saprykin of the Ukrainian
Center for Political and Economic Studies in Kiev.
Few analysts expect a repeat of the New Year’s gas cutoff, known in the
region as “the gas war.” But as details of the Jan. 4 deal have emerged,
doubts have grown about whether it sets the stable foundation for supplies
and exports to Europe that its backers claim.

“It’s not at all a compromise, it’s more of a time bomb that could lead to
future conflicts,” said Vladimir Milov, president of the Institute for
Energy Policy in Moscow and a former deputy energy minister.

A key element of the pact, the $95 price for Ukraine, is fixed only through
the first half of this year and analysts warn the rate could rise sharply
after that, dealing a brutal blow to Ukraine’s fuel-guzzling economy.
Already, Turkmenistan and the other Central Asian producers whose low-cost
gas is to be sold at that rate, are pushing for higher prices in the future.
Under the deal, Ukraine agreed to a price of $230 for Russian gas, although
Ukrainian officials have said they intend to sharply limit any purchases.

Rosukrenergo AG, the Swiss-registered trading company at the heart of the
Russian-Ukrainian deal also has drawn increased scrutiny. Half-owned by a
unit of Gazprom, the identities of the owners of the remainder, held by a
unit of Austria’s Raiffeisen Bank, remain secret.

“My clients say their names can’t be released at this time for political
reasons,” said Wolfgang Putschek, the Raiffeisen official representing the
unidentified shareholders. He said they have been instrumental in mediating
compromises between the Moscow, Kiev and the Central Asian suppliers.

In an interview, he said Rosukrenergo could earn as much as $1.3 billion in
profits this year thanks to the new agreement, which substantially increases
the volumes it handles and opens the way for more sales of gas to
high-paying customers in Europe. The group earned about $500 million last
year supplying Turkmen gas to Ukraine through Russia. Details of its
financials remain secret, however.

Wednesday, Ukrainian Prime Minister Yuri Yekhanurov rejected calls for his
government to buy the 50% stake in Rosukrenergo not owned by Gazprom.

The Russian company had said it would like to see Ukraine’s state oil and gas
company as its partner in the venture.

Gazprom officials have defended Rosukrenergo’s role in the Ukrainian trade
as critical to reaching the compromise deal with Kiev. Ukrainian officials
said Gazprom insisted on using the Swiss company as a supplier. Anti-trust
regulators in Kiev are probing its ownership structure.  -30-
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18.  BITTER ARTIC BLASTS COOL KIEV POLITICAL PASSIONS 

By Paul Betts, Financial Times, London, UK, Wed, January 25 2006

Moscow and Kiev are today expected to finalise the gas supply agreement
negotiated earlier this month that ended their bitter dispute but led to the
sacking of the Ukrainian government.

But this is unlikely to have much impact on the heated political climate in
Kiev, with the charismatic former prime minister Yulia Tymoshenko

pursuing her populist campaign against the deal before next March’s
elections.

Fortunately, the bitter cold spell that has hit many parts of Europe – in
Ukraine the temperatures have dropped to -25Ã,ºC – should help cool
political passions. It may knock some sense into the country’s political
establishment and avert the risk of power cuts.

The agreement is not perfect, but so far no viable alternative has been
proposed. It is all very well for Ms Tymoshenko to accuse President
Yushchenko of “betraying national interests” and to encourage the country

to terminate the deal and take as much Russian gas as it needs from the
supplies piped through its territory. But this is hardly a civilised
solution.

Not only would this play into Moscow’s hands, it is unlikely to win much
support from a Europe far more interested in securing steady Russian gas
supplies than in Ukrainian democracy.

Considering that Ukraine is still paying less than other east European
nations and former Soviet republics for Russian gas, the agreement seems,
under the circumstances, an acceptable compromise.

Rather than betraying national interests, President Yushchenko is simply
being pragmatic. He must be hoping the arctic weather holds until the

March elections.  -30-
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19.           GEORGE SOROS: GAS A WAKE-UP FOR EUROPE
                        Balance of power is swinging toward Russia
            Russia is using gas factor to bring Georgia and Ukraine to heel

REUTERS, Davos, Switzerland, Wed, January 25, 2006

DAVOS, Switzerland – Russia’s political use of its growing power as a gas
exporter should serve as a wake-up call for a Europe growing more

dependent on Russian energy imports, U.S. billionaire fund manager George
Soros said Wednesday.

“It’s a wake-up call for Europe because Russia is using the gas factor to
bring Georgia and Ukraine to heel,” Soros told reporters at the World
Economic Forum in Davos. “Russia is in the driving seat.”

The balance of power is swinging toward Russia as energy-hungry

European countries rely more on its oil and gas, Soros said.
Some of Russia’s ex-Soviet neighbors say the Kremlin is using energy
supply as a political weapon against those which have opted to shift
towards the West and away from Moscow’s sphere of influence.

Last weekend, a pipeline blast cut of Russia’s gas supply to Georgia,
triggering an energy crisis there. Russia blamed the explosion on
terrorists, while Georgian officials accused Russia of sabotage. Georgia’s
President Mikhail Saakashvili called it “outrageous blackmail.”

In early January, Russian gas monopoly Gazprom briefly cut off gas supplies
to Ukraine, demanding a fourfold price hike and heightening tensions a year
after the election of pro-Western Ukrainian President Viktor Yushchenko.

The two countries agreed a deal to raise the price, but it plunged Ukraine
into crisis as parliament later sacked the government.

The row flared up again this week as Gazprom all but accused Ukraine of
stealing gas. The dispute shook European energy policy makers, who
questioned Russia’s reliability as an increasingly important supplier.
Claude Mandil, executive director of the International Energy Agency
(IEA) on Wednesday urged Russia to reform its energy markets and
end Gazprom’s monopoly.

But Soros said the window of opportunity may be closed for this type of
reform due to Russia’s bitter experience of liberalization in the
post-Soviet era.

Europe relies on Russia for a quarter of its gas imports. Russia plans to
increase its gas exports to Europe by a third to 200 billion cubic meters a
year by 2020 but its market share will remain constant as European demand
grows.

Russia’s oil output has also grown rapidly in recent years and hit a
post-Soviet high in December 2005. The country produces one of every 10
barrels of oil in the world. It is the world’s No. 2 crude exporter after
Saudi Arabia, with supplies going mainly to Europe. Russia’s crude exports
of up to 5 million barrels per day cover more than a quarter of Europe’s oil
needs.  -30-
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20. EU LEADERS ‘TOO WEAK’ TO FACE RUSSIAN ENERGY THREAT
                Two words are appropriate – puzzlement and powerlessness

COMMENTARY: Excerpt from Lithuanian weekly magazine Veidas
Vilnius, Lithuania, in Lithuanian Thu, 19 Jan 06
BBC Monitoring Service, UK, in English, Wed, Jan 25, 2006

In trying to describe European politicians’ feelings about Russia’s New Year
attack against Ukraine, two words are appropriate – puzzlement and
powerlessness. The sluggish reaction of Europe’s powerful shows that they
simply do not know what to say or do. Actually, they know very well what

to say, but the words are such that it is too scary to express them while
voters are listening.

Once those words are said, decisive action must also be taken. However, the
term “decisive action” has disappeared from the vocabulary of European

Union politicians. The term has been replaced by the words “negotiations,”
“consultation,” and “compromise.” To put it simply, the Europeans are
prepared to talk and to negotiate forever, so that they do not have to act.

Meanwhile, in reality, the Russian Bear, which after the end of the Cold War
has been seen by the majority of Europeans as a totally harmless teddy bear
that could be used to play with, unexpectedly stood up on his two feet and
let out a loud roar.

Many, oh so many, who until now were friends with the Kremlin, and for five
years have competed to be Vladimir Putin’s best friend, do like not to hear
that roar. To hear that roar means to admit that the politics of the past
10, or maybe even 20 years, have been wasted.

Contrary to the long-lived statements (lullabies) of European leaders,
Russia does not intend to become democratic or European. Its idea of coming
together with Europe is not changing, losing Soviet era buildup, but to make
Europe (or at least a part of its leaders) more “Russian” by making Europe
play the game that is useful to the Kremlin. The name of this game is energy
cooperation. [passage omitted]

Today, when oil and natural gas prices are sky high, and the European
economy is in a decline, the situation has changed. European politicians,
who have been afraid of starting painful economic reforms, become more and
more dependent on relatively cheap Russian natural gas. Russia, meanwhile,
has used high oil and gas prices to ensnare Europe from the north and the
south, like an octopus with its suckers.

Gazprom’s incursion into Europe has been easier, because the strong hand

of the Kremlin controls all of Russia’s natural gas. Meanwhile, despite all the
European commissions and parliaments, Europe is divided. Single politicians
or commissioners can talk about alternative oil routes all they want, but
who will implement them? No single corporations, resembling Gazprom,
have been planned.

Central Asia is full of oil and natural gas, and its politicians are eager
to bypass Russia and to sell their resources to Europe directly. However,
who in Europe would start constructing pipelines that would deliver the
energy resources? The answer to this question will determine not only
Lithuania’s future, but also the future of Europe.  -30-

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21. RUSSIA ILL-EQUIPPED TO LEAD ON GLOBAL ENERGY SECURITY

COMMENTARY: By Vladimir Milov, President of the Institute of
Energy Policy in Moscow and Russia’s former Deputy Energy Minister
Financial Times, London, United Kingdom, Wed, January 25, 2006

The main topic of Russia’s current presidency of the Group of Eight leading
industrial nations is supposed to be energy security. At the end of last
year President Vladimir Putin called for a better investment climate,
improved corporate governance and innovative technologies as tools to
address international energy security challenges and claimed that Russia
deserved a status of “fashion leader” in a new global energy architecture.

Russia’s official rhetoric is a sharp contrast with reality. Recently, its
energy policies have all been about increasing state control over the
energy sector, sacrificing investment, growth and efficiency. Production
growth last year in the oil sector fell to just over 2 per cent compared
with an average of 8.5 per cent a year in 2000-2003.

The earlier impressive increases were led by private sector companies,
which served as benchmarks of growth and efficiency for the whole
country. But, by raising oil export taxes, banning the construction of
private oil pipelines and restoring control over some of the oil companies
(Yuganskneftegaz and Sibneft), the growth era was brought to an end.

Destruction of Yukos, the largest private oil company, contributed to the
decline in growth as well: in 2004-2005, Yukos lost around 270,000 barrels
a day of oil production.

In the gas sector, production growth by Gazprom, the Soviet-created
mono­poly, was below 1 per cent in 2005. Market restructuring of Gazprom
was blocked by Mr Putin in 2003. Now production at the largest mature gas
fields is sharply declining and Gazprom’s inefficiency does not allow the
company to invest enough in development of the new gas fields in the Yamal
peninsula. These are no closer to introduction than 15 years ago.

Russia holds the largest gas reserves in the world but they are stranded
and the market cannot expect significant new volumes of gas from Russia
in the next eight to 10 years.

Russia has also announced a closing of doors for foreign investors in the
oil and gas sector through new legislation. This is a particularly heavy
blow not only for international energy security but for Russia itself. Oil
and gas production is moving to new greenfield and remote areas such as
eastern Siberia and offshore, with extremely long-term, capital-consuming
and risky projects.

The weak Russian financial system and state energy companies, pressurised
by the burden of debt generated during the recent asset acquisitions, are
not ready to finance such projects – but foreigners will not be allowed to.

The era of quick recovery and success of the Russian oil sector, led by
private initiative and openness, is over. It has been replaced by a new era
of state domination, non-transparency, high risks and stagnation.

The recent gas conflict between Russia and Ukraine demonstrated what
a poor source of “energy security” Russia can be. We had been
subsidising Ukraine with cheap gas for years but Russia made up its mind
to increase gas prices more than fourfold overnight only after the election
of the new democratic leader, President Victor Yushchenko.

During the whole crisis, no Russian representative approached other
European importers of Russian gas to at least advise European partners
what to do if Ukraine was cut off and the bulk of Russian gas supplies to
western and central Europe was putat risk.

“This is not our responsibility,” Russian officials said on television,
­disengaging from the protection of European consumers. Political games
in the post-Soviet space seem to matter more.

Using the muscle of energy supply to exert more political influence and put
European energy-importing nations at risk – is that an example of the
“global architecture” the Kremlin wishes to build? Can we expect a serious
world energy security discussion under this environment?

As a Russian, I would welcome it if my country used the G8 presidency to
contribute to the improvement of global energy security, encouraging more
transparent and assured international energy markets.

But you cannot build a global energy security architecture on the basis of
non-transparent state-dominated monopolies, destruction of successful
private businesses, closing doors to international investment and using
energy as a tool of neo-imperial politics.

Russia still has a long way to go to be able to discuss the real global
energy security issues with the world’s largest industrial democracies.
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22. RUSSIA TO UP EUROPE GAS SUPPLY: BLAMES SHORTAGES
                  ON UKRAINE SAYS UKRAINE IS SKIMMING

Associated Press (AP), Moscow, Russia, Wed, January 25, 2006

MOSCOW – Russia Wednesday promised to increase gas supplies to freezing
European customers, but blamed Ukraine for shortages that forced several
countries to consider drastic measures such as suspending some industrial
operations. Romania, Italy and Ukraine itself are among the nations mulling
taking such measures.

Analysts said uncertainty over supplies would serve as yet another reminder
to Europe of its precarious dependence on Russian gas, after a bitter price
fight between Russia and Ukraine led to a fall in supplies.

“We are increasing gas supplies to the Russian-Ukrainian border on
practically a daily basis, but the shortfall in supplies to Europe is
increasing daily and correspondingly the removal of gas in Ukraine is
increasing,” Alexei Miller, chief executive of state-owned gas monopoly
Gazprom (GSPBEX.RS) said in televised comments. “Ukraine is continuing

to take gas that is being exported to Europe.”

Russian Industry and Energy Minister Viktor Khristenko was more blunt: “One
should not be resolving one’s own problems at the expense of neighbors,
especially near and dear Poland, which is freezing.”

Ukrainian Prime Minister Yuriy Yekhanurov called on the nation’s industrial
producers to cut back on consumption for the sake of households or face
measures “up to and including the suspension of production.”

With temperatures plunging to minus 25 degrees Celsius Wednesday, demand

at Ukraine’s infamously inefficient industries has reached record levels.

Despite assurances by Gazprom that it is actually over-fulfilling its
contractual obligations inside and outside Russia, the resources of the
world’s biggest gas producer appear to have been strained in the coldest
winter in Russia since 1978.

As domestic demand has soared, some Russian industries have shifted to
alternative fuel sources while European customers have clamored for
additional supplies as the bitter cold shifts its grip west.

On Wednesday, Romania asked major industrial consumers to halt their use

of gas until Friday when freezing temperatures that claimed at least 27 lives
are expected to recede.

Imports from Russia, which supplies 40% of the country’s gas needs, were
down 10% to 15%. Utility companies have been told to switch to alternative
fuels such as coal and heating oil, and cut gas deliveries to other
industrial users by 30%.

Several schools in Romania’s capital of Bucharest were closed Wednesday,
while residents who use gas furnaces to heat their homes switched to
electric heaters or stayed with relatives connected to the municipal heating
system.

Meanwhile, Italian oil and gas company Eni SpA (E), which has reported daily
shortages, said it expected natural gas supplies from Russia to be 8.1%
below requested volumes for 24 hours Wednesday.

“The emergency stems from reasons that lie outside of Italy,” Industry
Minister Claudio Scajola said Tuesday. Earlier, Italy had called on the
public to reduce heating use by one hour a day and lower thermostats to help
conserve energy.  -30-

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23. GAZPROM SAYS UKRAINE RECEIVED JANUARY GAS QUOTA 
              Ex-Soviet nation wastes much of the energy that it receives

AFX Europe (Focus), Moscow, Russia, Thu, Jan 26, 2006

MOSCOW  – Ukraine has taken all of the Russian-supplied gas provided for in
the January quota, the Russian gas giant Gazprom’s spokesman said. “As of
today, Ukraine has taken the entire January quota,” Sergei Kupryanov said,
as quoted by the RIA-Novosti news agency.

Gazprom had repeatedly charged Kiev with withholding gas meant for Europe,

a charge Ukrainian officials admitted while arguing they have no choice but to
increase energy use to counter the severe cold weather, which has left at
least 130 people dead over the past week.

And government officials insist that although Kiev has recently surpassed
daily averages it is not in breach of agreements with Russia which are based
on monthly — not daily — calculations which Ukraine says will be
respected.

“It is very hard, in my opinion, to call our daily telegrams demanding cuts
in gas consumption and return to contracted norms an agreement,” Kupryanov
shot back. Italy, Romania, Poland, Bosnia and Bulgaria have already
registered a drop in Russian gas deliveries.

The controversy surrounding Ukraine’s gas consumption is compounded by

the fact that the ex-Soviet nation wastes much of the energy that it receives.

“The energy intensity of use in Ukraine is perhaps the highest in the
region,” the World Bank said in a report recently, with the industrial
sector estimate to waste some 70 pct of energy that it receives.
(cal/bm/dg/dk)  -30-
———————————————————————————————

[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
24.    YUSHCHENKO’S REFERENDUM THREATS RING HOLLOW
            Does Yushchenko really accept the new division of powers?

ANALYSIS & COMMENTARY: By Taras Kuzio
Eurasia Daily Monitor, Volume 3, Issue 17
The Jamestown Foundation, Wash, D.C., Wed Jan 25, 2006

President Viktor Yushchenko used the dual anniversary of Ukraine’s
unification into an independent state in 1919 and his own inauguration in
January 2005 to provide concrete suggestions to escape the political crisis
resulting from parliament’s January 10 vote of no confidence in his
government (see EDM, January 11).

In an address to the country Yushchenko outlined a long list of achievements
made in his administration’s first year in office, such as media freedom,
reducing the shadow economy, and improving social welfare and pensions
(www.president.gov.ua).

Yushchenko also claimed, “Together we have proved that the Ukrainian nation
is capable of building a modern, independent, and democratic state.” He
continued, “Today we say: Yes, I am a citizen of Ukraine and I am proud of
it. This is the main achievement of the first year of my presidency.”

Yushchenko also stressed Ukraine’s democratic breakthrough under his watch.
The New York-based Freedom House upgraded Ukraine from “partly free” to
“free” in 2006 (www.freeedomhouse.org). Yushchenko declared, “The year
of 2005 was, first of all, the year when our community revised its values.
And this is its historical significance. We have taken a new look at ourselves
and our country, its history and its future.”

On the day of his address, Yushchenko also issued a long decree outlining
steps to ensure that the March 26 parliamentary elections will be free and
fair. He called upon Ukraine’s political forces to sign a memorandum in
support of free and fair elections.

Ukraine has not held free and fair elections since 1994, before the reign of
former president Leonid Kuchma. The 1998 and 2002 parliamentary elections
used a mix of proportional and majoritarian voting, and the contests for the
250 majoritarian seats saw abuse of “state-administrative resources” that
helped propel pro-Kuchma officials and businessmen to victory. The 2006
elections will be held using a fully proportional law that reduces the
opportunities for such abuse.

Yushchenko’s address heeded the call of many politicians to accept the
legitimacy of the constitutional reforms that went into effect on January 1.
“But, I do not regard them as ideal.” Yushchenko reiterated that the
amendments had been made without the input of Ukraine’s citizens and
therefore, “society should give its views regarding constitutional changes”
(president.gov.ua).

Earlier Yushchenko had said that the changes “were an anti-constitutional
action, hidden from the people” (Financial Times, January 13). Since spring
2005 there have been periodic threats by Yushchenko, his staff, and
then-prime minister Yulia Tymoshenko to hold a referendum about the
reforms (Ukrayinska pravda, May 8, 2005).

Over the summer threats to hold a referendum faded, and Interior Minister
Yuriy Lutsenko told Kommersant-Daily (September 26, 2005) that
Yushchenko had come around to accepting constitutional reforms.

This apparent shift of presidential opinion failed to reduce fears that
Yushchenko would call a referendum. Parliament has deliberately stalled the
swearing in of Constitutional Court judges for this very reason. Currently
the Court does not have the quorum necessary to function, thus Yushchenko
is unable to appeal to the Constitutional Court over the legality of the
December 2004 constitutional changes.

Yushchenko’s threats to hold a referendum are unlikely to materialize for at
least five reasons.

First, Yushchenko did not agree to the constitutional reforms under duress.
The changes were proposed during the December 2004 roundtable negotiations,
a time when over a million Orange supporters had filled the streets of Kyiv.
During those days, Yushchenko also had the support of the military, the
intelligence services, and elements of the Interior Ministry, while both
Kuchma and then-prime minister Viktor Yanukovych were increasingly
powerless.

Second, unlike the Yulia Tymoshenko bloc, Yushchenko’s Our Ukraine bloc
always supported constitutional reforms. Our Ukraine differed from the
centrist Kuchma camp and the political left (Communists, Socialists) only on
timing. Our Ukraine insisted they should come into effect after the March
2006 elections, while the Kuchma camp and the left supported their
introduction after the 2004 elections.

Third, Yushchenko did not avail himself of the president’s extensive powers
contained in the constitution that was in effect through until 2005. Why
call a referendum to restore powers he had squandered?

Fourth, if Yushchenko had agreed on the constitutional reforms merely a
tactical ruse to overcome the December 2004 presidential crisis, he could
have scheduled a referendum immediately after coming to power in January
2005. Tymoshenko, then prime minister, would have wholeheartedly supported
such a move at a time when the opposition was still in disarray. But since
being removed as prime minister in September 2005, Tymoshenko has moved
towards support for constitutional reforms.

Fifth, Yushchenko cannot risk alienating the Socialists by calling a
referendum, as he will need them in any coalition in the 2006 parliament.
The Socialists will abandon Yushchenko if he goes ahead with a
constitutional referendum.

These five arguments suggest that a constitutional referendum would only be
called if the March elections go badly for Yushchenko. Like Kuchma in 1996,
Yushchenko would seek a referendum because he did not like the political
configuration of the new parliament.

By threatening to hold a referendum on constitutional reforms, Yushchenko
is misplacing his energy. Instead, he needs to focus on winning the 2006
elections, re-uniting the Orange camp (that he himself divided by firing
Tymoshenko in September 2005), and creating a pro-reform and
pro-presidential parliamentary majority in the newly elected parliament.
———————————————————————————————
LINK: http://www.jamestown.org
——————————————————————————————–
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
25.      UKRAINE PRESIDENT REJECTS “BARGAINING” OVER
              APPROVING CONSTITUTIONAL COURT JUDGES

 

Ukrayina TV, Donetsk, in Ukrainian 1900 gmt 25 Jan 06
BBC Monitoring Service, UK, in English, Wed, Jan 25, 2006

[Presenter] A working group of the political council of the president will
hold a meeting tomorrow to discuss a plan to stabilize the situation in
Ukraine, which was proposed by [Ukrainian President] Viktor Yushchenko.

This was what the presidential secretariat said today.

[Correspondent] The authorities have failed to admit the existence of a
political crisis until recently. The president said in a TV address to the
nation on Monday [23 January] that the political situation required urgent
stabilization. Yushchenko proposed several steps to achieve stability.
First, the president, the prime minister [Yuriy Yekhanurov] and the
parliamentary speaker [Volodymyr Lytvyn] should sign a kind of

nonaggression pact.

[Ivan Vasyunyk, captioned as first deputy head of the presidential
secretariat] The president is proposing a moratorium on both statements

and actions by players in the political process, political dialogue which
may lead to the further destabilization of the situation in Ukraine.

[Correspondent] A viable Constitutional Court must be a guarantor of
political stability in Ukraine. The conflict between the government and
parliament is dragging on precisely because there is no-one to provide a
legal assessment of parliament’s actions. The president said that time X has
come. MPs are obliged to have Constitutional Court judges sworn in at the
next parliamentary session.

[Vasyunyk] Bargaining in this situation is simply not serious. The
Constitutional Court of Ukraine cannot be well-balanced or correct for
everyone. The Constitutional Court should be constitutional and should be
formed in line with the existing constitution and the law.

[Correspondent] The authorities should develop a consolidated position on
energy security in the country, as it was this matter that became a bone of
contention between the government and parliament. A fair election is a
guarantee of political stability, the president said. A tripartite group
will monitor the implementation of the president’s plan. It started working
yesterday.  -30-
——————————————————————————————-
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
26.                  OPERA “MOSES” TO APPEAR IN KYIV

By Tetiana Polishchuk, The Day Weekly Digest in English, #1
Kyiv, Ukraine, Tuesday, 24 January 2006

Myroslav Skoryk’s opera Moses will premiere at the National Opera
of Ukraine on January 27. It is staged by the young director Anatoliy
Solovianenko and the distinguished musician and conductor Ivan
Hamkalo. The stage setting is by Maria Levytska, and the choir is
conducted by Lev Venedyktov. The choreographer is Aniko
Rekhviashvili.

Five years ago, the Krushelnytska Opera House of Lviv first presented
this work to the public. The premiere, which was meant to coincide with
Pope John Paul II’s visit to Ukraine, was a notable cultural event.

Moses on the Kyiv stage is the second version of this musical and
philosophical creation. The libretto was written by the poet Bohdan
Stelmakh and the composer Myroslav Skoryk. The opera is based on
Ivan Franko’s long, same-titled poem.

Last Tuesday the National Opera played host to Filaret, head of the
Ukrainian Orthodox Church of the Kyiv Patriarchate, who blessed the
cast and everyone who was involved with the production. At the request
of maestro Hamkalo, His Holiness told those present about the biblical
prophet and leader of the Jewish people, who dedicated all his energy
and life to leading his people out of captivity and to the Promised Land.

His Holiness drew parallels with modern realities, declaring: “Today we
need our own Moses, who will free Ukraine from the shackles that have
bound it for many centuries.”

“I think the opera Moses will be interesting for the Ukrainian public
because we are experiencing a period of liberation from Soviet bondage,”
Patriarch Filaret stressed in an interview with The Day, adding, “We are
aware of the spirit of freedom living in an independent country, although
there are quite a few Ukrainians who are looking back to the past, the way
the Israelites looked back to Egypt during the times of Moses.

While the latter missed meat and garlic, some of our fellow countrymen feel
nostalgic about Soviet sausage that used to sell for 2.20 rubles [per kilo].
I believe that this opera will have an impact on our society, so we will
fear no hardships, will not stop halfway, and will remember that freedom is
far more precious than cheap meat, sausage, and gas.”

The opera in Lviv was blessed by John Paul II, you blessed Moses in
Kyiv. So this opera was supported by different church confessions.

Filaret: Confessions are of no importance here because Moses is a biblical
opera, and the Holy Bible is the same not only for Christians but also for
the Jews; it unites all believers. I think this opera will occupy a worthy
place in the theater’s repertoire and will remain topical for many years,
until Ukraine firmly asserts itself as an independent country.

Myroslav Skoryk said that in Lviv the production involved 500 persons
and that the one in Kyiv will be on an even larger scale.

The choreography and setting of the stage versions are different (Lviv’s
Moses was staged by the Polish director Zbigniew Chrzanowski together
with the production designer team of brothers Tadej and Mychajyo
Ryndzak), but the basis is the same. Skoryk will be at the conductor’s
stand, but only during one act.

“I’m fond of Lviv and I remain its patriot, but the scales of the two
theaters are different,” stressed Skoryk, adding, “I don’t mean to offend
the Lviv cast, but the National Opera troupe’s professional level is
noticeably higher. They had only one cast in Lviv and Kyiv has three, all
top-notch soloists.

For example, the lead part of Moses has been prepared by the company’s
strongest basses, Mykola Shopsha, Bohdan Taras, and Serhiy Mahera;
before long a fourth singer, Taras Shtonda, will join the team.”

“Many composers, including Orifice, Rossini, Rubenstein, and Schoenberg,
addressed the Moses theme,” said the conductor, Ivan Hamkalo, adding:
“Our opera house perceives Skoryk’s opera in the light of Ivan Franko’s
poem. It as important for me to find a special intonation for every word, to
make he opera sound topical today (The Day will carry interviews with
Hamkalo nd Skoryk in upcoming issues).

Mykola Shopsha (Moses) said: “This opera is a profoundly spiritual
composition and one must perform it with a pure soul. Skoryk has written
very interesting music. I will be singing this part for the first time and
am thrilled to rub shoulders with this original composer, who is a subtle
and intellectual individual, during rehearsals.

As a singer I’ll remember this opera for a long time. It has infused a fresh
spirit into the theater’s repertoire and revealed our company’s creative
potential. I hope that from now on modern Ukrainian music will be heard
on our stage. With Moses in our repertoire we will become a national theater
in essence, not just in name.”  -30-
——————————————————————————————-
LINK: http://www.day.kiev.ua/156067/

——————————————————————————————-
FOOTNOTE: Walter Prochorenko, the new Director of Publications
for the Ukrainian National Association in New Jersey was one of the
major promoters of the Opera “Moses” when it was first performed
in Lviv five years ago.  Walter invited me to go to Lviv with him for
the last rehearsal and the first official performance.  This was one of
those special moments one does not have often enough.  For those
of you who are in Kyiv I highly recommend the opera. EDITOR
——————————————————————————————-
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AUR#647U.S. Reinstates Trade Benefits; RosUkrEnergo Makes $50 Million Profit Per Employee, No Physical Assets, Avoids Hundreds Of Millions In Taxes

      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 647
Mr. E. Morgan Williams, Publisher and Editor  
Washington, D.C., Kyiv, Ukraine, TUESDAY, JANUARY 24, 2006
                           ——–INDEX OF ARTICLES——–
         Clicking on the title of any article takes you directly to the article.               
Return to the Index by clicking on Return to Index at the end of each article
1.           U.S. REINSTATES TRADE BENEFITS FOR UKRAINE
U.S. Trade Representative cites progress on intellectual property protection
By Jeffrey Thomas, Washington File Staff Writer, USINFO
U.S. Department of State, Washington, D.C. Mon, Jan 23, 2006

2USTR REINSTATES GENERALIZED SYSTEM OF PREFERENCES
                                  BENEFITS FOR UKRAINE                             
Office of the U.S. Trade Representative (USTR)
Executive Office of the President, Wash, D.C., Mon, Jan 23, 2006         

3. U.S. COMMERCE DEPT REOPENS UKRAINE MARKET ECONOMY
INVESTIGATION AND EXTENDS PERIOD FOR COMMENT TO JAN 25
         Comments are needed for the record, only two day left to submit
The Action Ukraine Report (AUR), Washington, D.C., Tue, Jan 24, 2006

4HIGH-LEVEL U.S. GOVERNMENT TEAM IN KYIV THIS WEEK

E. Morgan Williams, Publisher & Editor
The Action Ukraine Report (AUR), Wash, D.C., Tue, Jan 24, 2006
5 WASHINGTON CHOOSES AN AWKWARD TIME TO BOLSTER
         TRANSATLANTIC TIES AND REFORM 26-NATION NATO
      US Ambassador to NATO says for Ukraine Nato’s members had an
            obligation “to say ‘Yes, we want you as part of our family as 
             soon as you can do it’ [but] . . It has to be up to Ukraine.”
By Daniel Dombey, Financial Times, London, UK, Tue, Jan 24 2006

6.         BUSH’S BIG SILENCE, WILL THE PRESIDENT OBJECT

                                  TO RUSSIA’S REGRESSION?
           If promoting democracy is President Bush’s largest ambition,
                                  then Russia is his largest failure.
OP-ED
: By Fred Hiatt, The Washington Post
Washington, D.C., Monday, January 23, 2006
SUBSIDIARY, PLANNING TO EXPAND THEIR FACTORY IN UKRAINE        
Polish News Bulletin, Warsaw, Poland, Sunday, Jan 22, 2006

9.   MARKS AND SPENCER TO OPEN FIRST STORE IN UKRAINE
By Sophy Buckley, Financial Times, London, UK, Tue, Jan 24 2006

10COURT BACKS UKRAINE GOVN’T OVER FACTORY STAKE 

By Tom Warner in Kiev, Financial Times
London, United Kingdom, Saturday, January 21 2006 
11 WORLD BANK CUTS UKRAINE GDP GROWTH FORECAST
          FROM 3.5-5.5% TO 1.5-3.5% DUE TO HIGHER GAS PRICE 
Ukrainian News Agency, Kyiv, Ukraine, Thursday, January 19, 2006

12   TWISTED ROUTE TO WEST FOR RUSSIAN NATURAL GAS
 RosUkrEnergo makes $50 million per employee in profits, no physical assets
   Front for unknown owners has become an embarrassment for Gazprom
By Andrew E. Kramer, The New York Times
International Herald Tribune, Paris France, Mon, Jan, 23, 2006

 
13                             MORE TO THE GAS ISSUE
       Complicated schemes: how the RosUkrEnergo Co was established,
   how it operates, allocates profits and avoids hundreds of millions in taxes
ANALYSIS & COMMENTARY
: By Yulia Mostovaya
Zerkalo Nedeli On The Web (ZN), Mirror-Weekly, #2 (581)
International Social Political Weekly
Kyiv, Ukraine, Saturday, 21-27 January 2006

14ROSUKRENERGO MUST REVEAL ITS STOCKHOLDERS’ NAMES
           UKRAINE’S ECONOMICS MINISTER YATSENIUK INSISTS
Ukrinform, Kyiv, Ukraine, Monday, January 23, 2006

15.                         RUSSIA: PIPELINES AND SPIES
EDITORIAL: The Guardian, London, UK, Tuesday, Jan 24, 2006

16.   UKRAINIAN DEFENCE MINISTER HRYTSENKO DUBIOUS

                           ABOUT GAS DEAL WITH RUSSIA                          
INTERVIEW: Ukrainian Defence Minister Anatoliy Hrytsenko
By Iryna Kostsyna, Fakty i Kommentarii, Kiev, in Russian 19 Jan 06; p 7
BBC Monitoring Service, UK, in English, Sunday, Jan 22, 2006

17UKRAINIAN PRES PROPOSES POLITICAL STABILIZATION PLAN
IN SPEECH MARKING FIRST ANNIVERSARY OF HIS INAUGURATION
NATIONWIDE SPEECH: President Viktor Yushchenko
UT1 State TV, Kiev, in Ukrainian 1900 gmt 23 Jan 06
BBC Monitoring Service, UK, in English, Monday, Jan 23, 2006

18.   UKRAINE: COURT CLOSES PORTIONS OF GONGADZE TRIAL
Committee to Protect Journalists (CPJ), NY, NY, Mon, Jan 23, 2006

19.   RUSSIAN FOREIGN MINISTER CRITICIZES U.S. SOVIET-ERA
          TRADE CURBS UNDER JACKSON-VANIK LEGISLATION
Alex Nicholson, AP Worldstream, Moscow, Russia, Friday, Jan 20, 2006

20                      THE LIGHTHOUSES OF CONFLICT
                          Money behind lighthouse row with Russia
ANALYSIS: Journalist Mykyta Kasyanenko
Den newspaper, Kiev, Ukraine, in Ukrainian 17 Jan 06; p 1, 2
BBC Monitoring Service,UK, in English, Saturday, Jan 21, 2006
========================================================
1
          U.S. REINSTATES TRADE BENEFITS FOR UKRAINE
U.S. Trade Representative cites progress on intellectual property protection

By Jeffrey Thomas, Washington File Staff Writer, USINFO

U.S. Department of State, Washington, D.C. Mon, Jan 23, 2006

WASHINGTON –  The United States is reinstating trade benefits Ukraine

lost in 2001 for failing to protect intellectual property, particularly computer
software and films and music recorded on compact discs and digital versatile
discs.

Citing Ukraine’s efforts to improve the enforcement and protection of
intellectual property rights (IPR), U.S. Trade Representative Rob Portman
announced January 23 that the United States is reinstating Generalized
System of Preferences (GSP) benefits for Ukraine and lowering Ukraine’s
designation under Special 301 from “priority foreign country” to “priority
watch list.”

The GSP provides preferential duty-free entry to approximately 3,000
products from designated beneficiary countries and territories. Ukraine’s
benefits under the GSP were suspended in August 2001, and, in 2002, 100
percent tariff sanctions were imposed on $75 million worth of Ukrainian
exports to the United States.

The United States placed these prohibitive tariffs “because of the continued
failure of the Ukrainian Parliament to enact legislation cracking down on
sound recording and optical media piracy,” according to a press release
issued by the Office of the United States Trade Representative (USTR) at
that time (January 23, 2001). Ukraine was reckoned the largest producer and
exporter of pirated optical media products (CDs and DVDs) in Europe,
according to the USTR.

The so-called Special 301 provision of U.S. trade law — the principal U.S.
statute for addressing foreign unfair practices — authorizes measures
against U.S. trade partners for failing to protect U.S. patents, copyrights
and other intellectual property.  Sanctions were applied against Ukraine
after it was identified as a “priority foreign country,” the ranking
reserved for the worst situations.

In 2004 and 2005, Ukraine was the only country designated a “priority
foreign country” in USTR’s annual Special 301 Report.

“I commend the Government of Ukraine for its sustained efforts to crack
down on copyright piracy and urge the government to continue their efforts,”
said Portman in announcing the upgrading of Ukraine’s status.

The USTR statement noted approvingly that Ukraine passed legislation in July
2005 that strengthens its licensing regime and enforcement efforts to stem
the illegal production and trade of CDs and DVDs.

“Since the legislation passed, Ukraine has been actively inspecting plants
licensed to manufacture optical discs, conducting raids against businesses
involved in commercial distribution of IPR-infringing products, and imposing
fines against infringers,” Portman said. “We strongly urge Ukraine to keep
up these efforts, which reflect positively on the investment environment in
Ukraine.”

The sanctions imposed in 2001 were removed on August 31, 2005, “after
extensive efforts by the Ukrainian Government to pass important amendments
to Ukraine’s Laser-Readable Disk Law,” according to the statement by the
USTR.

A Special 301 Out-of-Cycle Review (OCR) of Ukraine focusing on IPR
enforcement recently has been concluded, the statement said. “Ukraine has
further agreed to work with the U.S. Government and with the U.S. copyright
industry to monitor the progress of future enforcement efforts through an
Enforcement Cooperation Group,” the statement said.  “USTR will continue
to monitor developments in the protection of intellectual property rights in
Ukraine.”

USTR also said Ukrainian exports to the United States that could benefit the
most from the country’s restored GSP eligibility “include manufactured items
such as iron or steel articles, electrical and railway products, snow skis,
protein products such as casein, and certain mineral and metal products.”

——————————————————————————————–
http://usinfo.state.gov/eur/Archive/2006/Jan/23-388575.html?chanlid=eur
———————————————————————————————
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
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2. USTR REINSTATES GENERALIZED SYSTEM OF PREFERENCES
                                 BENEFITS FOR UKRAINE 
                            

Office of the U.S. Trade Representative (USTR)
Executive Office of the President, Wash, D.C., Mon, Jan 23, 2006         

WASHINGTON – In recognition of the Government of Ukraine’s efforts

to improve the enforcement and protection of intellectual property rights,
U.S. Trade Representative Rob Portman today announced that the United
States will reinstate Generalized System of Preferences (GSP) benefits
for Ukraine and lower Ukraine’s designation under Special 301 from
Priority Foreign Country to Priority Watch List.

“I commend the Government of Ukraine for its sustained efforts to crack
down on copyright piracy and urge the government to continue their
efforts,” said Ambassador Portman. 

In 2001, significant illegal manufacturing of optical media products,
such as CDs and DVDs, was occurring in Ukraine.  The Office of the U.S.
Trade Representative designated Ukraine as a Priority Foreign Country
and repeatedly urged Ukraine to take steps to address this problem.  In
July 2005, Ukraine passed legislation that strengthens its licensing
regime and enforcement efforts to stem the illegal production and trade
of CDs and DVDs. 

“Since the legislation passed, Ukraine has been actively inspecting
plants licensed to manufacture optical discs, conducting raids against
businesses involved in commercial distribution of IPR-infringing
products, and imposing fines against infringers,” Portman continued.

“We strongly urge Ukraine to keep up these efforts, which reflect
positively on the investment environment in Ukraine.” 
                                   BACKGROUND: 
In March 2001, the U.S. Trade Representative designated Ukraine as a
Priority Foreign Country under Special 301 (Section 182 of the Trade Act
of 1974), and initiated an investigation under Section 301 of the Trade
Act of 1974.  At that time, Ukraine was the largest producer and
exporter of pirated optical media products (CDs and DVDs) in Europe. 
 
As a result of the Section 301 investigation, USTR suspended Ukraine’s
benefits under the Generalized System of Preferences in August 2001, and
in 2002 imposed 100% tariff sanctions on $75 million worth of Ukrainian
exports.  The latter sanctions were removed on August 31, 2005, after
extensive efforts by the Ukrainian Government to pass important
amendments to Ukraine’s Laser-Readable Disk Law.

The Administration concluded a Special 301 Out-of-Cycle Review (OCR)

of Ukraine in January 2006, which focused on Ukraine’s IPR enforcement,
and considered Ukraine’s status as a Priority Foreign Country and its
eligibility for Generalized System of Preferences benefits.  Ukraine has
further agreed to work with the U.S. Government and with the U.S.
copyright industry to monitor the progress of future enforcement efforts
through an Enforcement Cooperation Group.  USTR will continue to
monitor developments in the protection of intellectual property rights in
Ukraine pursuant to Section 306 of the Trade Act of 1974.

The purpose of the GSP program is to promote economic growth in the
developing world by providing preferential duty-free treatment for 3,400
products from nearly 140 designated beneficiary countries and
territories.   Ukrainian exports to the United States that could benefit
the most from Ukraine’s restored GSP eligibility include manufactured
items such as iron or steel articles, electrical and railway products,
snow skis, protein products such as casein, and certain mineral and
metal products.  -30-
———————————————————————————————-
Scott R. Elmore, Public Affairs Assistant, Office of the United States

Trade Representative, Executive Office of the President
600 17th Street, NW, Washington, DC  20508
P: (202) 395-3230; F: (202) 395-6121, www.ustr.gov
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3. U.S. COMMERCE DEPT REOPENS UKRAINE MARKET ECONOMY
INVESTIGATION AND EXTENDS PERIOD FOR COMMENT TO JAN 25
         Comments are needed for the record, only two day left to submit

The Action Ukraine Report (AUR), Washington, D.C., Tue, Jan 24, 2006

WASHINGTON – The U.S. Commerce Department’s Import Administration,
on January 12, issued a “Changed Circumstances Review of the Antidumping
Duty Order on Carbon and Certain Alloy Steel Wire Rod From Ukraine:
Opportunity To Comment on the Status of Ukraine as a Non-Market Economy
Country and Extension of Final Results”

There is now a very narrow window of opportunity to submit further

comments by Wednesday, January 25 further comments addressing the
six relevant criteria: (1) currency convertibility; (2) whether wages determined
by free bargaining between labor and management; (3) extent to which
foreign investment permitted; (4) government ownership or control of means
of production; (5) extent of government control over allocation of resources
and over price and output decisions of enterprises; (6) other factors.

Companies, organizations and individuals are encouraged to submit comments.
The notice was published in the Federal Register, Vol 71, No. 11, Wednesday,
January 18, 2006, pages 2904-2905.

71 FR 2904, January 18, 2006
DEPARTMENT OF COMMERCE
International Trade Administration [A-823-812]

Changed Circumstances Review of the Antidumping Duty Order on Carbon
and Certain Alloy Steel Wire Rod From Ukraine: Opportunity To Comment
on the Status of Ukraine as a Non-Market Economy Country and Extension
of Final Results

AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
DATES: January 12, 2006.
ACTION: Request for Comments and Extension of Final Results.

SUMMARY: The Department of Commerce is requesting further comment
on whether Ukraine should continue to be treated as a non-market economy
country for purposes of the antidumping duty law. The final results for
this changed circumstance review are therefore extended by thirty days,
making the new deadline February 16, 2006. Written comments (original
and six copies) should be sent to David Spooner, Assistant Secretary
for Import Administration, U.S. Department of Commerce, Central Records
Unit, Room 1870, 14th Street and Constitution Avenue NW., Washington,
DC 20230.

FOR FURTHER INFORMATION CONTACT: Lawrence Norton or
Shauna Lee-Alaia, Office of Policy, Import Administration, U.S. Department
of Commerce, 14th Street and Constitution Avenue, NW., Washington DC,
20230; telephone: 202-482-1579 or 202-482-2793, respectively.
                             BACKGROUND [FR Page 2905]
On April 2, 2005, the Government of Ukraine’s Ministry of Economy
and European Integration requested that the Department of Commerce
conduct a review of Ukraine’s status as a non-market economy (“NME”)
country within the context of a changed circumstances review of the
antidumping duty order on carbon and certain alloy steel wire rod from
Ukraine.

In response to this request, the Department initiated a changed
circumstances review in order to determine whether Ukraine should
continue to be treated as an NME country for purposes of the
antidumping law, pursuant to sections 751(b) and 771(18)(C)(ii) of the
Tariff Act of 1930, as amended (“the Act”). See Initiation of a
Changed Circumstances Review of the Antidumping Duty Order on
Carbon and Certain Alloy Steel Wire Rod from Ukraine, 70 FR 21396
(April 26, 2005).

In its notice of initiation, the Department invited public comment on
Ukraine’s ongoing economic reforms and received extensive initial and
rebuttal comments on July 11, 2005, and August 31, 2005,
respectively. These comments have been made available to the public
at the Import Administration Web site at the following address:
http://ia.ita.doc.gov/. In addition, the Department has compiled and
analyzed information regarding Ukrainian economic reforms from
independent third-party sources that it commonly cites for market
economy status decisions.
  OPPORTUNITY FOR PUBLIC COMMENT & EXTENSION
                                  OF FINAL RESULTS
In order to consider any economic and institutional developments
that occurred in Ukraine since the closure of the record in this review
that may be of importance to the Department’s decision, the Department
is inviting further public comment on reforms in Ukraine. Specifically,
the Department invites comment on such developments in relation to the
factors listed in section 771(18)(B) of the Act, which the Department
must take into account in making a market/non-market economy decision:

    (i) The extent to which the currency of the foreign country is
convertible into the currency of other countries;
    (ii) The extent to which wage rates in the foreign country are
determined by free bargaining between labor and management;
    (iii) The extent to which joint ventures or other investments by
firms of other foreign countries are permitted in the foreign country;
    (iv) The extent of government ownership or control of the means of
production;
    (v) The extent of government control over allocation of resources
and over price and output decisions of enterprises; and
    (vi) Such other factors as the administering authority considers
appropriate.

In order to provide opportunity to consider the comments, the
Department is extending the deadline for the final results of this
changed circumstance review by thirty days, making the new deadline
February 16, 2006.
COMMENTS–DEADLINE, FORMAT, & NUMBER OF COPIES
The deadline for submission of comments is January 25, 2006. The
deadline for rebuttal comments is February 1, 2006.
Each person
submitting comments should include his or her name and address. To
facilitate their consideration by the Department, comments should be
submitted in the following format: (1) Begin each comment on a separate
page; (2) concisely state the issue identified and discussed in the
comment and include any supporting documentation in exhibits or
appendices; (3) provide a brief summary of the comment (a maximum
of three sentences) and label this section “summary of comment”; (4)
provide an index or table of contents; and (5) include the case number,
A-823-812, in the top right hand corner of the submission.

 Persons wishing to comment should file a signed original and six
copies of each set of comments by the dates specified above. All
comments responding to this notice will be a matter of public record
and will be available for public inspection and copying at Import
Administration’s Central Records Unit, Room B-099, between the hours
of 8:30 a.m. and 5 p.m. on business days. The Department requires that
comments be submitted in written form. The Department recommends
submission of comments in electronic media, preferably in Portable
Document Format (PDF), to accompany the required paper copies.
Comments filed in electronic form should be submitted on CD-ROM
as comments submitted on diskettes are likely to be damaged by postal
radiation treatment.

Comments received in electronic form will be made available to the
public on the Internet at the Import Administration Web site at the
following address: http://ia.ita.doc.gov/.

Any questions concerning file formatting, document conversion,
access on the Internet, or other electronic filing issues should be
addressed to Andrew Lee Beller, Import Administration Webmaster,
at (202) 482-0866, e-mail: webmaster-support@ita.doc.gov.

Dated: January 12, 2006.
David Spooner, Assistant Secretary for Import Administration.
[FR Doc. 06-461 Filed 1-17-06; 8:45 am]BILLING CODE 3510-DS-P
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4.  HIGH-LEVEL U.S. GOVERNMENT TEAM IN KYIV THIS WEEK
 
E. Morgan Williams, Publisher & Editor
The Action Ukraine Report (AUR),
Washington, D.C., Tuesday, January 24, 2006
 
WASHINGTON – The U.S. government has fielded a high-level team to
Ukraine this week to discuss a variety of important economic, business,
financial, energy, defense, security, democratic elections, government to
government issues and other relevant matters with top officials in the 
Ukrainian government. 
 
Heading the U.S. delegation are Daniel Fried, Assistant Secretary,
Europe and Eurasia, U.S. State Department; Anthony Wayne,
Assistant Secretary, Economic and Business Affairs, U.S. State
Department; Peter Flory, Assistant Secretary, International
Security Policy, U.S. Department of Defense; and Damon Wilson,
Director Central, Eastern, & Northern European Affairs, National
Security Council. 
 
Additional members of the U.S. Ukraine team are: 
[1] U.S. STATE DEPARTMENT
, Marta Youth, Financial Economist,
Office of Monetary Affairs, Bureau of Economic & Business Affairs;
Rob Garverick, Energy Officer, Bureau of Economic & Business Affairs;
George Frowick, Country Assistance Officer for Ukraine, Moldova and
Belarus, Office of the Coordinator of Assistance for Europe & Eurasia;
and Darren Hultman, Ukraine Desk, Political Officer,
[2] U.S. DEPARTMENT OF DEFENSE, Jessica Kehl, Country Director
for Ukraine, Office of the Secretary of Defence ISP/Eurasia and Colonel
Michael Vogl,
[3] U.S. DEPARTMENT OF ENERGY, Lana Ekimoff, Director of Office
of Russia & Eurasian Affairs, Office of Policy & International Affairs,
[4] U.S. DEPARTMENT OF COMMERCE, Christine Lucyk, Senior
Policy Advisor, International Trade Administration,
[5] U.S. DEPARTMENT OF THE TREASURY, Matthew Gaertner, 
International Economist, Office of Europe & Eurasia.

According to Ukrainian state news service Ukrinform President

Yushchenko met in Kyiv with visiting US Assistant Secretary of State,
Bureau of European and Eurasian Affairs, Daniel Fried on Monday.
The parties discussed Ukrainian – American cooperation in the energy
sector and energy-saving.
According to President Yushchenko, the USA’s technical assistance is
very important in drawing out Ukraine’s energy-saving strategies. The
meeting also dealt with bipartite trade-economic cooperation.
The US delegation members reassured the President with regard to the
USA’s active work toward signing the bipartite protocol Ukraine needs
for joining the World Trade Organization (WTO).
 
Ukrinform also reported on Monday, January 23 that Verkhovna Rada
Chairman Volodymyr Lytvyn met in Kyiv with US Assistant Secretary
of State, Bureau of  European and Eurasian Affairs, Daniel Fried. 
As Mr Lytvyn noted, the meeting coincided with the first anniversary
of  President Viktor Yushchenko’s inauguration. In this connection Mr
Lytvyn stated his opinion that it would be proper to focus on assets of
this year as a very complicated one according to Ukrinform.
In turn, Mr Fried said that he was leading a representative delegation, the
very composition of which demonstrates the USA’s respect for Ukraine 
as a sovereign democratic nation, which is why we support the democratic
principles and are ready to cooperate with the new Ukrainian government.
Changes, which are typical of nations undergoing the process of democratic
transformations do not worry us, Daniel Fried said, as reported by
Ukrinform in Kyiv. -30-
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5.  WASHINGTON CHOOSES AN AWKWARD TIME TO BOLSTER
         TRANSATLANTIC TIES AND REFORM 26-NATION NATO
      US Ambassador to NATO says for Ukraine Nato’s members had an
            obligation “to say ‘Yes, we want you as part of our family as 
             soon as you can do it’ [but] . . It has to be up to Ukraine.”

By Daniel Dombey, Financial Times, London, UK, Tue, Jan 24 2006

The US is setting out an ambitious agenda to bolster transatlantic ties and
reform the 26-nation Nato alliance, despite doubts about the organisation’s
ability to expand its role.

The alliance is seeking to carve out a place for itself in the post-cold war
world, but it is going through testing times. Its most high-profile task –
its peacekeeping mission in Afghanistan – could be thrown into confusion by
a parliamentary vote in the Netherlands, one of the countries that has
promised to send troops to expand the mission.

But, despite such pitfalls, US policymakers want to push ahead with a reform
plan ahead of a summit in Riga in November. “It’s time to get back to using
this house for an effort to build strategic consensus,” said Victoria
Nuland, Washington’s ambassador to Nato and one of the most influential
figures in the alliance.

Ms Nuland told the FT that the US and Europe had “re-understood” the need

to work together and that issues such as Iran’s nuclear programme would
increasingly be discussed at Nato’s Brussels headquarters.

The ambassador, a former aide to Vice-President Dick Cheney, argued that
Nato should focus on deepening its co-operation with countries such as
Australia and Japan and becoming a genuine globally deployable military
force in the run-up to the November gathering. It should also consider
setting up training academies in the Middle East and Africa, she said.

She hoped Nato would be able to admit new members in 2008, when Nato

plans a second summit. As for Ukraine, the highest-profile aspirant, she said
that Nato’s members had an obligation “to say ‘Yes, we want you as part of
our family as soon as you can do it’ [but] . . . It has to be up to Ukraine.”

At present, however, the dilemma over the Afghanistan mission – which Ms
Nuland identifies as “first and foremost” among her priorities – is
overshadowing such far-reaching goals.

In repeatedly delaying a parliamentary vote on the dispatch of 1,200-1,400
troops, the Dutch government has displayed the country’s unease over sending
its nation’s forces to the turbulent south of Afghanistan, an issue on which
Ms Nuland seeks to strike a reassuring note.

“We hope they go,” she said of the Dutch. “They’re great soldiers and we
want the strongest possible force in Afghanistan.” She added that the
mission would go ahead with or without the Dutch contingent.

But operations in Afghanistan and elsewhere are still hampered by Nato’s
lack of funds and resources.

“Nato is at the midway point of its transformation, not at the end point,”
said Dan Fried, US assistant secretary of state for European affairs. “Nato
needs more common assets, it needs the funding mechanisms to meet its
responsibilities, it needs institutional outreach in the world . . . It is
not the solution to every problem but it is part of the solution to many
problems.”

Ms Nuland, who is married to Robert Kagan, the polemicist and author of
Americans are from Mars, Europeans are from Venus, acknowledged Nato

had a poor image in Europe and to a lesser extent in the US.

“We do a lousy marketing job,” she said, comparing Nato to the EU. “Every
time a European opens his wallet these days, the euro is staring him in the
face . . . We need to name our missions Nato. . . Our soldiers need to wear
the Nato patch . . . We’ve got to become a 21st-century organisation that
the population sees as keeping it safer every day.”

To do so, she argued, Nato needed to increase its common funding for
operations rather than relying on the countries sending soldiers and
materiel to pick up the bill. She said that improved funding and
long-distance airlift were also essential for the future of the Nato
Response Force, the rapid reaction force, which is supposed to become

fully operational this year. At present she acknowledged there were “a lot
of issues and problems” with the NRF.

“This is all part of a continuum of moving from a house where basically
everyone had to hold their own territory . . to common collective deployment
at strategic distances,” she said. “It’s a totally different animal.”
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========================================================      
6.       BUSH’S BIG SILENCE, WILL THE PRESIDENT OBJECT
                                 TO RUSSIA’S REGRESSION?
 
OP-ED: By Fred Hiatt, The Washington Post
Washington, D.C., Monday, January 23, 2006

If promoting democracy is President Bush’s largest ambition, then Russia

is his largest failure.

Not that President Vladimir Putin is the world’s most repressive ruler —
far from it. Dictatorships in Burma, North Korea and Zimbabwe are more
stifling. So, for that matter, are tyrannies in Russia’s neighborhood, such
as Belarus, Uzbekistan and Turkmenistan.

But no other nation has regressed from openness to authoritarianism during
Bush’s time in office as dramatically and decisively as Russia — and with
less apparent objection from Bush.

Of course, no U.S. president is responsible for Russia’s fate; Russians
are. Yet Syrians and Egyptians will determine their own fates, too, and
that doesn’t stop Bush from wielding U.S. diplomacy and rhetoric to aid
pro-democracy forces in their countries. His foreign policy is grounded in
the belief that over time the United States can be a force for liberty
throughout the world.

So his insouciance with respect to Russia is a mystery. Does it mask a
calculation that what happens inside Russia just isn’t as important as
democratic development in the Middle East, given the U.S. war against
radical Islamic terrorists? That it makes sense to keep Putin as a partner
while fighting those more pertinent battles?

That would be a miscalculation, for at least three reasons.

 
First, Russia is one front in the war. Its brutal tactics in the southern
province of Chechnya are radicalizing Muslim residents there; growing
Slavic nationalism risks alienating Muslim minorities in other parts of
Russia; and Putin’s succor of dictators in neighboring Islamic countries
such as Uzbekistan helps create the kind of terror-incubators that Bush
said after Sept. 11 could no longer be tolerated.

Second, while an authoritarian Russia may offer tactical cooperation from
time to time according to its interests, it cannot be a strategic partner
of the America that Bush described in his second inaugural address,

because the two countries’ values and goals will differ so sharply.

Third, and perhaps most damaging to Bush’s strategy, is the negative
example Russia provides. In the 1990s, democratization seemed inexorable.
Countries were moving toward freedom at different speeds, and some hadn’t
moved at all — but with the fall of communism, all eventually would. The
ease and speed with which Putin has reversed course saps the sense of
momentum and inevitability that could be Bush’s biggest ally.

Irina Yasina, director of a pro-democracy foundation in Moscow, said the
mood in Russia today resembles what Russians recall as the “stagnation era”
under General Secretary Leonid Brezhnev. Yasina, 42, remembers as a
10-year-old being told by her father — the now well-known liberal
economist Yevgeny Yasin — that he felt buried alive by the communist
system.

“But at least then we knew that we were at the end of something,” Yasina,

a former journalist, said during a visit to Washington last week. “What is
most frightening now is that we don’t know whether something is ending
or is only just beginning.”

This month Putin signed legislation that could shutter Yasina’s foundation
and many other civic organizations. The law creates a Soviet-style
bureaucracy to register nongovernmental organizations, leaving the
qualifications so vague that the bureaucrats, or the Kremlin, will be free
to license or reject as they choose.

Yasina’s foundation is a likely target because it was founded, and is still
largely endowed, by billionaire oilman Mikhail Khodorkovsky, whom Putin

has had confined to a labor camp near the Chinese border because the
tycoon dared hint of a political challenge. The camp is a nine-hour plane
ride followed by a 15-hour train ride from Moscow, but sometimes when
his lawyers arrive they are told they cannot see their client because lawyer
visiting hours coincide with forced-labor hours, Yasina said.
Khodorkovsky’s visit with his wife, promised for month’s end, was
canceled — because, he was told, the visiting room is undergoing
renovation.

This may seem petty, but pettiness and paranoia are hallmarks of a
president who increasingly has isolated himself from anyone but former

KGB agents like himself. The broadcast media are Kremlin-controlled, as
are parliament, provincial governors, unjailed business tycoons and the
judiciary. All of these sectors were free and independent when Putin —
and Bush — took office.

Now, although they are weak and he is strong, Putin is going after civic
organizations, because they are the final outposts of independent activity
— and because he is convinced that the CIA will use such groups to
threaten his regime.

This is the man whom Bush will visit in July when Putin hosts a Group of
Eight meeting in St. Petersburg. There will be fine photo opportunities in
repainted czarist palaces, and the message Putin wants to send his subjects
will be clear: I am a czar, and the leaders of the world’s democracies do
not care; they accept me. The question for Bush is whether he is happy to
help Putin send that message
.  -30-
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7. POLISH CLOTHES DESIGNER AND DISTRIBUTOR LPP PLANNING
     TO OPEN MOST OF ITS NEW SHOPS IN UKRAINE AND RUSSIA

Polish News Bulletin, Warsaw, Poland, Monday, January 23, 2006

WARSAW – In 2006 the LPP clothes designer and distributor is planning to
spend around ZL70m on investment in the development of its sales network,
especially abroad. “Our company wants to open up about 45 new shops,”
announced Dariusz Pachla, financial director and deputy CEO at LPP.

“Most of the new shops will be established in Russia and Ukraine. There

are a lot of opportunities for profit as you can realise the largest profit
margins there. They are also potentially very large markets,” continued
Pachla. Apart from Poland, LPP sells its products in Lithuania, Estonia,
the Czech Republic, Russia, Latvia, Hungary and Ukraine.

According to Pachla the clothes producer is not considering entering new
markets at the moment. 15 percent of LPP’s consolidated income comes

from foreign sales. The company’s long-term strategy is based on increasing
the number of shops and incomes abroad.  -30-
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8. POLISH FURNITURE COMPANY FORTE OPENS NINTH FOREIGN
SUBSIDARY, PLANNING TO EXPAND THEIR FACTORY IN UKRAINE 
             
Polish News Bulletin, Warsaw, Poland, Sunday, Jan 22, 2006

WARSAW – Forte, one of the largest Polish furniture producers, has
registered two subsidiary companies in France and Spain. Forte Iberia

from Valencia is Forte’s ninth foreign subsidiary.

It wants to gain a turnover of around EUR10-15m in 3-4 years of presence
on the Spanish market. In December last year Forte established its
subsidiary in Paris.

The turnover of the France-based company is to be larger than the Spanish
one’s by as much as EUR10m. Both Western European companies will not
be engaged in production.

“Costs in Western Europe are much higher than in the East. We produce in
Ukraine and Russia and are planning to expand our Ukrainian factory this
year,” said Andrzej Kotrzeb, Forte’s board member.

The furniture producer’s management forecasts that 2006’s incomes are to
exceed ZL500m. Other Polish furniture companies are also trying to conquer
the European market. Among them are Grupa Nowy Styl from Krosno and
Mikomax from Lodz. -30-
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9. MARKS AND SPENCER TO OPEN FIRST STORE IN UKRAINE

By Sophy Buckley, Financial Times, London, UK, Tue, Jan 24 2006

LONDON -Marks and Spencer, the high street retailer, will shortly have

more than 200 international franchise stores, five years after it said it was
withdrawing from its lossmaking European operations.

This year it expects to open its first store in Ukraine and at least one
more in Moscow, where it already has two with FYBA Group, its

franchise partner.

M&S is also looking to open up shops in Switzerland and expects to

announce its franchise partner there before the spring. -30-
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10.  COURT BACKS UKRAINE GOVN’T OVER FACTORY STAKE 
By Tom Warner in Kiev, Financial Times
London, United Kingdom, Saturday, January 21 2006 
Ukraine’s government yesterday won an important victory in its effort to
renationalise a majority stake in one of the country’s biggest metallurgy
plants, Nikopol Ferroalloy, when the Supreme Court upheld a lower
court’s ruling ordering the stake returned to state ownership.

Ukraine’s president, Viktor Yushchenko, wants to re-sell the stake in a live
auction similar to the one in October in which Mittal Steel paid $4.8bn
(Euro4bn) for the steel mill Kryvorizhstal.

However, he is facing resistance from Viktor Pinchuk, son-in-law of the
former president, Leonid Kuchma, and from employees of the plant.

Mr Pinchuk said he acted “in good conscience” when he paid $80m in 2003

for a stake of just over 50 per cent, which today is worth an estimated
$300m-$500m. He accuses the government of helping other businessmen
who own a minority stake seize control.  -30-
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11.  WORLD BANK CUTS UKRAINE GDP GROWTH FORECAST
         FROM 3.5-5.5% TO 1.5-3.5% DUE TO HIGHER GAS PRICE 

Ukrainian News Agency, Kyiv, Ukraine, Thursday, January 19, 2006

KYIV – The World Bank has cut its Ukraine’s GDP growth forecast for

2006 from 3.5-5.5% to 1.5-3.5% due to a higher gas price. World Bank
Country Director for Ukraine, Belarus and Moldova Paul Bermingham
made this statement to the press.

The World Bank expects Ukraine’s budget deficit to grow to 4-4.5% of

GDP this year, again because of the new gas price.

An adverse effect of the price increase on Ukraine’s current accounts is
estimated by the World Bank experts at 3% of GDP, including 1.7% as

a direct influence and 1.3% as an indirect influence through export
industries.

The World Bank did not provide an assessment of the influence of the

price rise on inflation, saying that it is lacking latest reports on retail price
fluctuations. -30-
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12.    TWISTED ROUTE TO WEST FOR RUSSIAN NATURAL GAS
 RosUkrEnergo makes $50 million per employee in profits, no physical assets
   Front for unknown owners has become an embarrassment for Gazprom

By Andrew E. Kramer, The New York Times
International Herald Tribune, Paris France, Mon, Jan, 23, 2006

MOSCOW – Three weeks after Ukraine signed over exclusive rights to import
natural gas to an offshore company based in Switzerland, promised change has
been slow in coming to a little-known corporation that overnight became one
of the largest energy traders in Europe.

But a member of the board said the company was struggling with its new,
higher-profile role after functioning as a behind-the-scenes financial
intermediary in natural gas deals in the former Soviet Union on behalf of an
unknown group of international investors.

“We have an image problem,” said Wolfgang Putschek, a member of the board
of the company, RosUkrEnergo. “Something that was set up as an economic
intermediary has become a very political enterprise,” he said by telephone
from Vienna, where he is based. “Therefore we are open to attack by all the
political forces.”

Indeed, the company’s role as a front for unknown owners has become an
embarrassment for Gazprom, the Russian natural gas monopoly that is also a
half-owner of RosUkrEnergo, according to analysts who follow Gazprom.
The world’s largest natural gas trader, which opened its stock to foreign
investors this month, is pushing to clear up the ownership structure.

The company’s opacity has also moved the Parliaments in both Ukraine and
Russia to open investigations; muckraking Russian journalists have tried to
untangle the skein of shell companies and subsidiaries in the ownership
structure, and a prominent Ukrainian politician has tried to expose two
alleged beneficiaries.

The investigations are opening a window on the widespread use of shell
companies and offshore dealing, a dimension of Russian business practices
that proliferated in the 1990s yet remains mostly unseen.

In December 2004, a production unit of Russia’s then-largest oil company,
Yukos, was sold to Baikal Finans Group. The company, with a registered
address at a cellphone store 170 miles, or 270 kilometers, outside Moscow,
paid $9.37 billion for the Siberian oil field amid political tensions over
what was interpreted as the beginning of a partial nationalization of
Russian oil assets.

RosUkrEnergo, which owns no physical assets, has a dozen or so employees
at an office in Zug, Switzerland. They brought in $500 million in profit
before taxes last year, or about $50 million per employee, according to
Putschek.

The company evolved from a previous company that was registered in a
Hungarian village, which in turn grew from a trading firm called Itera that
reportedly fueled the high-rolling lifestyle of a generation of politically
connected business tycoons in both Moscow and Kiev, Russia’s Novaya
Gazeta newspaper reported this week.

Yulia Tymoshenko, the former prime minister of Ukraine, has said that the
current deputy director and former chief executive at Naftogaz are among

the beneficiaries. Neither man responded to requests for comment.

Under the contract that settled the gas dispute between Russia and Ukraine,
the company will buy Russian natural gas for $230 per thousand cubic

meters and sell it to Ukraine for $95. It will make up the difference by either
reselling gas in Western Europe – where prices range around $250 – or
blending the Russian gas with cheaper fuel from Central Asia.

Analysts say its potential for profit depends on the fuel mix and volumes
re-exported to Western Europe.

RosUkrEnergo is owned evenly by Gazprom and Raiffeisen Investment, a
branch of Banque Raiffeisen of Austria. The banking arm operates the share
in trust for unknown beneficiaries, Putschek said.

He said he knew the investors, yet by law their names never needed to appear
on any stock register. The shares are owned as bearer instruments, meaning
whoever holds the physical stock certificates owns the company.

Putschek said his shareholders’ representatives gathered for board meetings
in Zug, but generally exercised no control over operational questions of gas
supply or shipment.

“The industrial leadership is with Gazprom,” he said. “Formally, it’s 50-50,
but in practice Gazprom is the leading partner. As Raiffeisen, we won’t have
any say” over operations.

His company, he said, “enables Gazprom to accept compromises that are
face-saving for all parties involved. It could not be accepted by Gazprom
itself, because it’s removed from Gazprom. On the other hand, it’s very
clear that Gazprom controls the pipelines.”

Regarding Raiffeisen’s share, Putschek said the investors he represented
might consider selling to Naftogaz, the Ukrainian national company.

But for now, he said, RosUkrEnergo was planning what would be a first for
such offshore operators with an obscure past from the former Soviet Union:
an initial public offering. Analysts have been skeptical about its chances
of success amid the uncertainties over its role.  -30-
———————————————————————————————-
LINK: http://www.iht.com/articles/2006/01/23/business/energy.php?rss

——————————————————————————————-
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13.                              MORE TO THE GAS ISSUE
       Complicated schemes: how the RosUkrEnergo Co was established,
   how it operates, allocates profits and avoids hundreds of millions in taxes

ANALYSIS & COMMENTARY: By Yulia Mostovaya
Zerkalo Nedeli On The Web (ZN), Mirror-Weekly, #2 (581)
International Social Political Weekly
Kyiv, Ukraine, Saturday, 21-27 January 2006

A reader who wants to understand how the RosUkrEnergo Company was
established, and how it operates and allocates profits will need patience,
stamina and analytical skills. We will do our best to explain those
complicated schemes in the simplest way possible, and based on the
documents we have at our disposal.

[Fact One] The Rosukrenergo Aktiengesellschaft Company is registered in the
Swiss canton of Zug. This is an important fact for us to bear in mind since,
according to the canton’s legislation, locally registered companies pay a
negotiated fixed tax, its rate being negotiated between the company owners
and local authorities at the moment of registration.

The tax rate may be fixed at 30 or at 3 million Swiss francs, depending on
the negotiation outcomes. The profit made by the company and its
stakeholders does not affect it at all.

The founders of RosUkrEnergo (RUE) are:
(1) Raiffeisen Investment Company, registered in Austria to
the address Tegetthoff-Strasse, 1, 1015 Wien;
(2) Austrian national Wolfgang Putcheck and
(3) another Austrian national, Yorg Windbichler.

These two men and the Raiffeisen Investment Company decided to convert
RUE into a joint stock company and issued 1,000 shares. Messrs Putcheck
and Windbichler got one share each, with the rest being held by Raiffeisen
Investment.

Later, the RUE founders assigned those shares to two holdings – Centragas
and Arosgas – both, by a strange concourse of circumstances, registered to
the same address as one of the RUE founders Raiffeisen Investment, namely:
Tegetthoff-Strasse, 1, 1015 Wien.

Of course, there is nothing criminal in either this coincidence or the
organization of every separate link of the RUE chain. Yet we can see that
the scheme was conceived in one center.

[Fact Two] Another significant fact to remember is that, according to
Austrian law, holdings registered in Austria but doing no business in the
country’s territory are exempt from tax.

Thus, the RUE founders decided to transfer 500 shares of this Swiss company
to the Arosgas Holding and the other 500 shares, including the two held by
Putcheck and Windbichler, – to the Centragas Holding, which expands the
circle of the RUE shareholders to embrace the companies forming the above
holdings.

These companies receive dividends from the profits made by RUE. Both
holdings are formed from a multitude of off-shore companies and, probably,
individuals.

We have no access to the identities of those off-shore companies but,
frankly speaking, names like “System Ltd” based in the Virgin Islands,
Antigua, Cyprus, Panama or Delaware will not tell us much, although it is
under those names that the true RUE owners are disguised.

Their real names are known only to a registrar who keeps the registry of
RosUkrEnergo shareholders. He is the only outsider who knows whether the
Austrian holdings incorporate companies owned by Semion Mogilevich, Dmitry
Firtash, Vladimir Putin, Yuriy Tumanov, Yuriy Boiko, representatives of the
new Ukrainian administration or their family members.

[Fact Three] The third notable fact is that off-shore companies and their
profits are not liable to tax. So we have traced the main links of this
“tax-free” chain. Numerous off-shore companies belonging to the RUE real
owners do not pay taxes; two holdings made up of those companies do not
operate as commercial entities in Austrian territory, for Turkmenistan,
Uzbekistan, Kazakhstan, Russia, Ukraine and several European countries,
where RUE supplies gas, are not parts of the RUE-ETG “Austro-Hungarian
Empire”.
                   HUNDREDS OF MILLIONS IN TAXES LOST
And local authorities of the Swiss canton Zug are quite content with the
negotiated fixed tax they receive irrespective of the profits that companies
make.

The RUE profits amount to billions of US dollars, but the resource
countries, i.e. countries providing the company with their raw material
resources or transit facilities, lose hundreds of millions in uncollected
taxes. Ukraine and Russia top this list.

The RUE profits are allocated fifty-fifty between the Centragas and Arosgas
Holdings. You will remember that these holdings received 500 RUE shares
each. How those are divided within the Centragas and Arosgas Holdings
amongst their founding companies is unknown. In other words, only the top
management of both holdings is informed of individual off-shore companies’
profits.

However, ZN has learned from its sources who represents those holdings and
apportions profits. We are in possession of the minutes of a shareholders’
meeting chaired by one of the Gasprombank Vice Presidents. At the meeting, a
decision was made to form a coordination board to manage the RUE Company.
Yuriy Boiko, Ihor Voronin, Wolfgang Putcheck and a Mr Shelter-Jones were
elected to represent the Centragas holding on that board.

Interestingly, at the time the decision was made to delegate Yuriy Boiko as
a Centragas representative, he was Chairman of the Board of the National JSC
Naftogas Ukrainy. Moreover, as the First Deputy Minister for Fuel and
Energy, he was also a civil servant and, consequently, had no right to
represent any commercial entity.

This episode should have long ago been investigated as a gross violation of
the Law “On Corruption”, especially given that, according to our sources,
there is not a single document in the Naftogas Ukrainy archive authorizing
Mr Boiko to sit on the coordination board of the RosUkrEnergo Company.

Centragas is, conventionally, considered a “Ukrainian” holding, whereasa
Arosgas – a “Russian” one. As recorded in the abovementioned minutes of the
shareholders’ meeting, the Arosgas Holding is represented by deputies to
Chairman of the Board of the Russian JSC Gasprom Alexey Miller: Komarov,
Akimov and Riazanov, together with the CEO of a Gasprom subsidiary,
Alexander Medvedev (do you still remember we are speaking about an Austrian
holding?).

The authorized representatives of both holdings form a “legislative” body of
sorts. People belonging to the “executive branch” are entitled, inter alia,
to sign agreements and contracts in the deals involving RUE. The
RosUkrEnergo CEOs are Messrs Chuychenko and Palchikov. They put their
signatures under the gas agreement concluded between Ukraine and Russia
on 4 January 2006.

As reported by the Russian “Nezavisimaya Gazeta”, Mr Chuychenko has close
links with the Federal Security Service (FSB). Mr Palchikov is also an
extraordinary character. Not only do we mean his eventful biography (with
its history of a long and rewarding friendship with Mr Mogilevych), but also
his work record as the EuralTransGas Company CEO. This fact, along with
other evidence, albeit circumstantial, gives grounds to regard RUE as the
successor to ETG.

In 2005, the Security Service of Ukraine (SBU) investigated an alleged gas
smuggling case and conducted a search in the unofficial Kyiv office of the
ETG Company. The investigators seized several foreign passports issued in
the names of non-existing people and of some former Naftogas managers
who worked there in the Kuchma era.

These and other documents found in the course of the search allowed the
investigating team to conclude that RUE is a successor to ETG, pursuing a
similar policy and using similar schemes but on a larger scale.

Formally speaking, RUE was incorporated in compliance with both Russian
and Ukrainian law (of course, if one turns a blind eye to “minor” breaches
of anti-corruption legislation by some individuals combining official
positions in public administration and business careers).
     COMPANY UNDOUBTEDLY OPERATES IN THE SHADOW
However, the company undoubtedly operates in the shadow, transferring to
off-shore zones big capital, which otherwise would be channeled into the two
countries’ state budgets.

For example, could Gasprom have undertaken to transit Turkmen gas for
Ukraine via the territory of Russia on its own? It could, but somebody
decided to engage RUE as an intermediary. Of course the transit dues are
commercial secret known only to Gasprom and RUE as contractual parties,
but gas experts maintain that RUE supplied Turkmen gas to Ukraine at the
internal Russian transit tariff.

Ukraine paid higher transit dues, but to RUE instead of Gasprom. It was the
first stage where the Russian state budget lost several billions. Ukraine
paid for the RUE transit services with gas. Last year, Kyiv paid about 13
billion cubic meters of gas for transit services to the Swiss (not Russian)
RUE Company.

This gas was then sold in Europe at a market price, so dear to Gasprom’s
heart. The proceeds, you will guess, went to the Rue shareholders’ accounts,
by-passing the Russian state budget.

The RUE Company was, purportedly, created to increase Russian natural gas
exports to Europe. Thus, Gasprom sells gas to RUE at an undisclosed price
(by some expert estimates, the producers’ release price is around USD $33
per 1000 cubic meters), and the Swiss company re-sells it in Europe.
     WHO REAPS THE NON-TAXED PROFITS? WHO BENEFITS?
Who reaps the non-taxed profits? Off-shore companies and individual
shareholders that own them. Gasprom and the Russian budget forgo millions.

Who benefits? Those who were allowed to design schemes for moving abroad
capital that should have been used to develop the national economy.

The Gasprom management has recently stated its intent to examine the RUE
schemes and take a closer look at its founders. The reason could be that
FATF, the international anti-money-laundering watchdog, paid attention to
the unremarkable RUE Company after it emerged from the whirlpool of the gas
conflict that had scared Europe so much and became a monopolistic supplier
of Asian gas to Europe.

The other day, local law enforcement authorities, reportedly, visited the
Swiss lawyer who keeps the RUE shareholder registry and served a court
writ on handing the full shareholder registry over to the authorities and
disclosing the beneficiaries, i.e. names of the off-shore companies’ owners.
The lawyer cannot flout the local court decision.

The FATF steps could have urged Gasprom to make the public statement
mentioned above. The State Duma raised several uncomfortable questions, too.
Besides, Russians understand that the situation in Ukraine in general and
with the Ukrainian shareholders of RUE, in particular, is unpredictable.

Therefore Russia, having so awkwardly placed RUE in the spotlight, could
want to replace the real and dummy founders and shareholders of the company
with official ones. However, questions to the Russian leaders about the
allocation of profits made earlier by the Swiss company remain unanswered.

And who will dare ask them of Putin? Perhaps interest groups in FSB and
Gasprom that resent the growing role RUE has come to play in the country’s
gas sector? Perhaps those who refuse to regard RUE as a staging post for
Putin between presidential terms?

Perhaps those who smuggled to Ukrainian politicians the text of the
agreement signed in Moscow on the night of 4 January 2006, which was later
publicized through the Internet? Various financial and political clans can
use the RUE story in their internecine struggle. Therefore, the pro-Putin
part of Gasprom is so keen to settle the hassle with the Russian share of
the company.
        THE UKRAINIAN SHARE IS A DIFFERENT MATTER
The Ukrainian share is a different matter. For one thing, some of the
shareholders have lost their positions in state power. For another, the
opposition in Ukraine is active and competent enough to analyze the
available information. It is wealthy enough to buy the missing information.
SBU has accumulated sufficient materials to bring criminal action against
specific persons.

According to the ZN sources, last week, for the first time since his
appointment in September, SBU Chief Ihor Dryzhchany took an active interest
in the progress in the ETG and RUE investigation. It transpired that the
team investigating shadow schemes used in Ukraine’s territory had been
dissolved. Mr Dryzhchany, supposedly, ordered to gather them again, but
we have no way of knowing what their mandate could be.

Obviously, people directly involved in the RUE activities from the Ukrainian
side, have started negotiating with their Russian counterparts the
possibility and terms of their acquiring citizenship in the Russian
Federation. Moscow has gained the reputation of a new Casablanca, having
offered haven to a number of persons wanted by the Ukrainian law
enforcement.

Given the country leaders’ political will and the SBU’s capacity, the RUE
Company’s shadowy schemes and activities in Ukraine could be revealed very
quickly. They have already missed this chance once. About six months ago, ZN
published a series of articles on RUE, highlighting its key role in shaping
relations between the Kremlin and Bankova Street. Yet we were not the first
to appreciate this role. It was a person who brought Dmitry Firtash to meet
Viktor Yushchenko during the election campaign. Some sources suggest it was
Olexander Tretyakov.

Dmitry Firtash, whom numerous world media tag as the mastermind of the gas
mediation scheme, met with Yuliya Tymoshenko soon after she was appointed
Prime Minister. No information was released on the subject or manner of
their talk. She might try to coax Firtash or, on the contrary, to threaten
him. In any case, they never found a common language.

Ms Tymoshenko went to war with RUE, presenting it to the public as

combating shadowy schemes in the country. Some think, though, that her
hidden motive was to have this company replaced with another intermediary
– ITERA. We do not know if it is true. Yet anyway, the RUE activities in
Ukraine had to be scrutinized for their detrimental implications for the state
budget revenues. The money that never reached the state budget could have
gone to the former public officials.

Presumably, Yuliya Tymoshenko strongly recommended that the Security
Service start investigating RUE’s arrangements and activities. She had no
formal authority to give instructions to the SBU, but [her closest political
ally] Turchynov’s position in the SBU and the importance of the issue for
the state treasury had a combined effect of adding momentum to the
investigation.

Involvement of the Security Service was justified because the top leaders of
the country were associated with the case: in June 2004, Kuchma and Putin
discussed the incorporation of RUE at their meeting, less than a month
before its official registration.

So, an investigation team was set up under the leadership of the newly
appointed SBU Deputy Chief Andriy Kozhemiakin. The team did not have to
start from scratch: SBU had some materials gathered by [previous SBU Chief]
Ihor Smishko’s men who had probed into RUE’s predecessor – the Hungarian
ETG Company.

Yuliya Tymoshenko commissioned a thorough inspection of state monopolies,
including the National Joint Stock Company Naftogas Ukrainy. At first, the
inspection was planned to last a month, but the scale of revealed
malpractice was such that the inspection period was prolonged. The
investigators dug out a lot, ranging from trivial theft to systemic abuse.
They were about to press charges against Yuriy Boiko and Ihor Voronin.

However, the investigation was suspended for a number of reasons.

[1] First, Olexander Turchynov was, of course, SBU Chief but deep down
he was also (and still is) a public politician. Where the interests of the
investigation required low-profile, quiet and routine work coupled with
professional coordination of effort and meticulous recording of evidence,
his political self craved prompt and loud revelations, which did harm,
rather than good, to the investigation process.

[2] Second, Olexiy Ivchenko, new Chairman of the Board of the NJSC

Naftogas Ukrainy, was increasingly and ostentatiously vexed with the
inspectors’ presence in the Naftogas office. He seemed to become more
aware by day of the company’s grand capacity.

Concurrently, the investigators gained deeper insight into the dubious
schemes of using (or, rather, abusing) this capacity, and not only by the
previous Naftogas crew. The President received frequent complaints about the
damaging effect the long inspection had on the company’s performance and,
finally, issued a special edict forbidding Tymoshenko to interfere with
Naftogas.

[3] Third, the Financial Audit Department and the Security Service of
Ukraine did not get any support from the prosecution and police authorities
whose help in some situations was critical.

[4] Fourth, some of the investigators, including the team leader, lacked
experience and skills in unraveling gas schemes. For instance, they should
have carried out searches simultaneously on all administrative premises of
the NJSC Naftogas Ukrainy. Instead, they did so with a two-week interval,
letting the key actors destroy essential evidence that could have shed light
on the Naftogas former management’s involvement with ETG and RUE as its
successor.

[5] Fifth, Olexander Turchynov made a lot of attempts to report the progress
of the RUE case inquiry to the President. When he was finally summoned to
the head of state in August, the latter met him in the doorway giving him
two orders, in the presence of several witnesses: “Stop spying on my guys”
and “Stop pitting me against Putin”.
   YUSHCHENKO CLAIMS NOBODY EXPLAINED RUE TO HIM
Today Viktor Yushchenko claims nobody explained to him what RUE is,
what groups have a vested interest in it and in what way its activity is
injurious to Ukraine. It is hardly so. According to the ZN sources, over the
ten months of the inquiry, the Security Service of Ukraine sent about 20
analytical reports with a detailed description of RUE’s activities, and
forecasts of the imminent gas crisis.

Of course, we do not know if these reports were sifted by the people in the
President’s entourage eager to influence his perception of the gas
situation. Did the President get those reports? Did he read them? If he did,
why did he not demand from the Naftogas management whole information
about the company supposed to take a lead in supplying gas to Ukraine?

In theory, receiving regular SBU reports, Viktor Yushchenko should have
sought advice from his friend Olexiy Ivchenko. In theory again, Olexiy
Ivchenko should have prepared for the President a comprehensive, albeit
brief, fact-sheet with the data that any foreign counteragent must make
available to the Ukrainian party in order to draw a contract: statutory
documents, bank guarantees, a bank certificate confirming the company’s
solvency, the list of the company’s shareholders and a certificate of the
above data verification by the Security Department of the NJSC Naftogas
Ukrainy, if only to justify their existence.

Yet the Naftogas Board Chairman could not do it because the company has no
such data. More than that, neither the previous, nor the incumbent Naftogas
management ever asked RUE to provide them for contract drafting and signing.
Did Viktor Yushchenko instruct SBU to collect this information? If he did,
those instructions never reached the investigation team.

Investigation in the ETG and RUE case stalled while Turchynov was still the
SBU Chief, not because of him but, rather, due to containment by Yuliya
Tymoshenko, who did not want to further exacerbate her strained relations
with the President. After their dismissal, the investigation was frozen.

And again, it is up to the President who, under the amended Constitution,
has retained control of the Security Service which way the inquiry will go
from now on.

The Russian party is busy cleaning up the holding it controls, and it will,
probably, do so soon enough. Meanwhile, the Ukrainian party’s behaviour
is hard to predict, for there is no single decision-making authority in the
country.
GAIN CONTROL OF UKRAINE’S GAS-TRANSPORTATION SYSTEM
Some gas analysts argue that Russia’s ultimate aim is not the RUE individual
stakeholders’ enrichment. Nor is it Gasprom’s making more money on higher
prices for Ukrainian consumers. Those are important objectives, of course,
but the final aim is more ambitious. Many, although not all, of our
decision-makers realize that Russia aspires to get control of Ukraine’s
gas-transportation system.

This could be achieved in a number of ways, including the following:
pursuant to the decision of the National Electricity Regulation Commission
of Ukraine, the NJSC Naftogas Ukrainy sells natural gas to state-owned
enterprises and municipalities at prices disadvantageous for the company
headed by Olexiy Ivchenko. In fact, Naftogas Ukrainy subsidizes even private
companies.

Naftogas Ukrainy regulated its financial balance making profit on gas
re-export. The agreement of 4 January 2006 prohibits Ukraine from exporting
both Russian and Turkmen gas. Moreover, it envisions the establishment, by
Naftogas and RUE, of a joint venture to sell gas inside Ukraine. Thus,
Naftogas Ukrainy will have to share its gas proceeds. Unless the company
raises its prices (which would be damaging for the industries whose export
forms Ukraine’s state budget revenues), it will suffer substantial losses.

Further, recently the Fitch agency has announced the worsening of Naftogas’s
rating from “stable” to “negative”. According to experts, in theory this may
become a signal for the creditors of Naftogas, who in their turn may demand
the repayment of the credit lines which were opened for the company last
year.

You certainly remember that during one of his first visits, Viktor
Yushchenko signed a credit line from Deutschebank to Naftogas. Its amount is
two billion dollars (eight percent interest). According to our source at the
National Bank of Ukraine, this credit line was transmitted to a Gasprombank
agent.

According to a source, Gasprom and its bank were also interested in other
international financial obligations of Naftogas of Ukraine. If all its
creditors concurrently and coordinately apply for the repayment of their
loans on the basis of the deteriorating economic situation in Naftogas, it
may possibly be forced to announce its bankruptcy. In such a situation, a
creditors’ committee is set up to determine the form of payment of damages.

What do you think it may ask for? Right you are – the gas pipeline. The
transit pipeline is certainly not a property of Naftogas. It is state
property. Yet the problem may lie in the fact that Ukrainian government
served as a guarantor of the opening of credit lines for Naftogas. However,
Ivchenko denies this fact, and nobody has seen the credit agreement.
RUSSIA MAXIMUM EFFORT TO CONTROL UKRAINIAN PIPELINE
By implementing this or any other scheme, Russia will put forth their
maximum effort to obtain control over the Ukrainian pipeline.

Russia’s “throat” is located in the same place as that of Europe and that
place is Ukraine. The question is who will be the first to take a grip on
it: Russia or Europe.

If Europe were not guided by a collective mind, constrained by bureaucracy,
but by an active one, such as that in the USA or Moscow, it would have
realized its benefit from its friendship with Ukraine or the danger of
Ukraine’s friendship with some one else long ago. In the next five to seven
years 80 percent of the Russian (and Asian) export gas will go through the
territory of Ukraine to Europe.

After the launch of Northern pipeline this percentage will be somewhat
redistributed, however Europe’s need in gas may well increase by that time?
If Europe turns unprepared to support Ukraine and having pulled it over to
its side to dictate the European rules of the game to Russia, Russia will
pull over Ukraine.

Moscow has cut Ukraine off the Turkmen gas, imposed a monopolist
supplier to it and fixed the transit rate for five years. Now it needs only
the pipeline. Then it will dictate its conditions to both Asian and European
states.

Some experts believe that if Europe fails to realize the need to fight for
the “energy throat”, Ukraine may well enter into an alliance with Russia:
“We buy a large tested gas field from you, while you give us a quota for the
supply of Turkmen gas and ensure the transit of the gas from Asia and from
our deposit. And we yield 50 percent of the pipeline to you.” What will we
lose in this situation? experts ask.

However, the difference between the European and Russian rules of the game
is that in Europe these rules are stable, while in Russia they are
subjectively changeable. If you sign an agreement with Poland, you are not
interested if Kwasnewski will remain in power or not. If you have agreements
with Germany, it is all the same for you who will win in the elections –
Schroeder or Merkel.

But if you enter into an agreement with a Russian business, moreover a
monopoly, you have no guarantees that Druzhkov will not come instead of
Putin and rewrite the whole thing. There are dozens of tools for that
starting from the government’s decision on a radical increase of the taxes
imposed on foreign developers of Russian natural deposits to the law of the
State Duma outlawing those developers and owners.

We can’t disregard one more aspect: the USA is much concerned with

strategic consequences of the Russian-Ukrainian agreements. They are
aware of Ukraine’s role in “European security” much more than the
Ukrainian government.

They realize that gas and oil are another nuclear weapon, and consequently
Russia is a double nuclear state. That is why the USA would rather take a
grip on the Euro-Asian “throat” itself.

In short, it is not difficult to assume who has started the gears of the
International organization fighting money laundering. The information
obtained as a result of the exposure of the real shareholders of
RosUkrEnergo is capable of destabilizing the situation in those states

where Russia is at the first place.

We can only hope that we will not have to say the same about Ukraine.
It still has to fight off the hands stretching to its throat.  -30-
——————————————————————————————-
LINK: http://www.mirror-weekly.com/ie/show/581/52384/
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[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
14. ROSUKRENERGO MUST REVEAL ITS STOCKHOLDERS’ NAMES
          UKRAINE’S ECONOMICS MINISTER YATSENIUK INSISTS

Ukrinform, Kyiv, Ukraine, Monday, January 23, 2006

KYIV – If the company RosUkrEnergo refuses to divulge the list of its
stockholders this will be a serious obstacle to establishing a joint
venture, meant for supplying gas to Ukraine, Economics Minister Arseniy
Yatseniuk told 1+1 tv channel viewers.

As Mr Yatseniuk noted, in accordance with Ukraine’s legislation, companies,
which have such sizeable capital concentrations as the NaftoGaz Ukrainy and
the RosUkrEnergo, are obliged to unveil complete lists of their
shareholders. Such are demands, in particular, of Ukraine’s anti-monopoly
legislation, Mr Yatseniuk added.

However, Arseniy Yatseniuk went on, we must pay attention not only to the
stockholders’ names  more importantly, we must scrutinize the RosUkrEnergo’s
relations with the gas suppliers. We must vet the RosUkrEnergo’s guarantees
to the Ukrainian party to ensure Ukraine’s natural gas balance.We are living
in the 21st century, and this means that any assets and any financial flows
must be transparent.

So, the company, which undertakes to supply natural gas to both Ukraine and
Europe, must be public, transparent and comprehensible, Arseniy Yatseniuk
said. He aired his assumption that, as could be gathered from statements by
both Gazprom and RosUkrEnergo senior execs, both companies will start
publicly placing their stocks, they will unveil their structures, with a
view of attracting new investors.

As Ukrinform reported on earlier occasions, on January 4, 2006 the

agreement was signed in Moscow among the Ukrainian national company
NaftoGaz Ukrainy, Russia’s Gazprom and the Russian – Swiss company
RosUkrEnergo, under which Ukraine will buy gas at its frontier, priced at
95 USD per thousand cu. m.

Tariffs for transit transportation of gas have been raised from 1.09 USD to
1.6 USD per thousand cu .m. per 100 km.

The NaftoGaz Ukrainy and the RosUkrEnergo are supposed to establish a joint
venture by February 1, 2006, which will supply Russian and Central Asiatic
gas to Ukraine.

 The Gazprom delegation’s visit to Kyiv, which had been slated for Saturday,
January 21, has been postponed to tentatively Wednesday, January 25. The
visit is meant for signing contracts on supplies of Russian gas to Ukraine
and establishment of a joint venture by the national company NaftoGaz
Ukrainy and the RosUkrEnergo.  -30-
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[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
15.                          RUSSIA: PIPELINES AND SPIES

EDITORIAL: The Guardian, London, UK, Tuesday, Jan 24, 2006

It is surely just a coincidence that two big stories involving Russia have
hit the headlines in the past 24 hours, but both are puzzling – and
worrying. First came the accusation from Georgia’s President Mikhail
Saakashvili that Russia was responsible for the sabotage of gas pipelines
and electricity-transmission stations serving his country.

He gave no evidence to support his claim, which was duly ridiculed by the
Kremlin. But there has been tension between Moscow and Tbilisi since the
“rose revolution”, two years ago, and repeated charges of Russian meddling
in the former Soviet republic.

Russian energy exports have in any case been in the news a lot since before
Christmas when the state-owned giant Gazprom quadrupled the price of the gas
it supplies to Ukraine, ruled by Victor Yushchenko since its western-backed
“orange revolution”. The crisis ended quickly but left anxiety about the
dependence of the old Soviet “near abroad”, as well as most of western
Europe, on Russian gas and oil.

So, true or false, the Georgia pipeline affair belongs to a new era in which
Russia is suspected of using energy to intimidate its neighbours. The charge
that British spies have been at work in Moscow has a more old-fashioned
flavour, despite the hi-tech kit they allegedly used.

But there is a twist. The FSB, successor to the KGB, did not paint this as a
Smiley-type operation to recruit highly placed agents but to fund Russian
non-governmental organisations, which of course weren’t around in the old
days but are subject to Soviet-era smearing now.

Not surprisingly, there has been no confirmation from the British
government. It is no secret, though, that the UK, like the rest of the EU
and the US, supports the development of civil society, free media and an
independent judiciary in Russia – and rightly so. But this is done openly by
bodies such as the Westminster Foundation, the European commission and

the Ford Foundation, not MI6 or the CIA.

It is hard to know exactly what is going on. Still, this is all probably
linked to the Kremlin’s crackdown on NGOs, more evidence of the
“authoritarian drift” and “managed democracy” which have become bones of
contention between Vladimir Putin and his normally over-indulgent western
friends, especially since he took over the presidency of the G8 earlier this
month.

Mr Putin’s reply is that stricter regulation is needed to stop Russian
groups being used and subverted by foreign elements. How very convenient
then, to discover that the cack-handed Smileys of the post-cold war era are
doing just that. That is surely no coincidence.  -30-

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[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
16.  UKRAINIAN DEFENCE MINISTER HRYTSENKO DUBIOUS
                          ABOUT GAS DEAL WITH RUSSIA

INTERVIEW: Ukrainian Defence Minister Anatoliy Hrytsenko
By Iryna Kostsyna, Fakty i Kommentarii, Kiev, in Russian 19 Jan 06; p 7
BBC Monitoring Service, UK, in English, Sunday, Jan 22, 2006

Defence Minister Anatoliy Hrytsenko has said that most cabinet members are
unaware of what was actually signed in Moscow on the Ukrainian-Russian gas
conflict, and that the involvement of a restricted number of people in the
talks is a cause for concern. In an interview with a