AUR#653Gas Agreement Signed, JV UkrGazEnergo Created; Why We (Russians) Don’t Like Ukraine; Chocolate Mania; A Man-Made Eden; New Rev Book

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 653
Mr. E. Morgan Williams, Publisher and Editor  
Washington, D.C., Kyiv, Ukraine, FRIDAY, FEBRUARY 3, 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.    RUSSIA, UKRAINE FINALIZE ACCORD OVER GAS PRICES
By Gregory L. White in Moscow, Staff Reporter
The Wall Street Journal, NY, NY, Friday February 3, 2006

2.      NEW JOINT VENTURE, UKRGAZENERGO, CREATED TO
                 SUPPLY UKRAINE WITH GAS THROUGH 2010
Associated Press (AP), Kiev, Ukraine, Thu, February 2, 2006

3. LVIV REGION GALOL PLANT TO LAUNCH PILOT PROJECT ON
       PRODUCTION OF BIO-DIESEL FROM RAPESEED IN 2006
Interfax-Ukraine, Kyiv, Ukraine, Thursday, February 2, 2006

4.                                  METHANE PROPOSAL
                   How can Ukraine become energy-independent?
ANALYSIS:
By Geoffrey Berlin and Raymond Albright
The Day Weekly Digest in English, #2, Kyiv, Ukraine, Tue, Jan 31, 2006

5RIVNE NPP STARTS USING NEW GENERATION HEAT EMITTING
                     CELLS, SHIPPED BY RUSSIAN CORP TVEL

Ukrinform, Kyiv, Ukraine, Monday, January 30, 2006
 
6UKRAINE, RUSSIA SIGN NUCLEAR FUEL CONTRACT FOR 2006
Interfax-Ukraine news agency, Kiev, in Russian 31 Jan 06
BBC Monitoring Service, UK, in English, Tue, Jan 31, 2006

7LITHUANIAN COMMENTARY EXAMINES RUSSIAN PLAN TO
                        CREATE ‘ENERGY EMPIRE’ IN EUROPE 
COMMENTARY: Lithuanian newspaper Lietuvos Rytas on 30 January
BBC Monitoring Service, UK, in English, Thu, Feb 02, 2006

8.                THE MARRIAGE OF ENERGY AND SECURITY
ANALYSIS: By Roman Kupchinsky for RFE/RL
Prague, Czech Republic, Thursday, Feb. 2, 2006

9.                    U.S. SPY BOSS WARNS ON RUSSIA TIES
Reuters, Washington, D.C., Thursday, February 2, 2006

10.                        WHY WE DON’T LIKE UKRAINE
Missing the empire is not just missing the territory, it’s missing the history

COMMENTARY: By Andrey Zorin
Professor of Russian History, Oxford University
Kommersant, Moscow, Russia, Wednesday, January 25, 2006

11.               FULFILLING VOW, MERKEL LOOKS EAST
             Restoring Germany’s pivotal role as Europe’s largest country
                             and one situated in the middle of Europe.
By Judy Dempsey, International Herald Tribune (IHT)
Paris, France, Thursday, February 2, 2006

12.                      RUSSIAN NEIGHBORS’ PUTIN JITTERS
COMMENTARY: By David A. Mittell, Jr., Providence Journal
Providence, Rhode Island, Thursday, January 19, 2006

13TYMOSHENKO CONDEMNS YUSHCHENKO FOR CONSIDERING A
           COALITION GOVERNMENT WITH VICTOR YANUKOVYCH
              Only the president would be orange, all the others would be blue
By Stefan Wagstyl, East Europe Editor, Financial Times
London, United Kingdom, Friday, February 3 2006

14.                   “NOW WE’VE REALLY COME AWASH……”
                    Law on Ukraine’s side in lighthouse row with Russia
ANALYSIS & COMMENTARY:
By Volodymyr Kravchenko
Zerkalo Nedeli, Kiev, Ukraine, in Russian 21 Jan 06; p 1, 3
BBC Monitoring Service, UK, in English, Friday, Jan 27, 2006

15UKRAINE TRANSPORT MINISTRY PLANNING TO ATTRACT USD
600 MILLION IN INVESTMENTS FOR 2006 RAILROAD DEVELOPMENT
Ukrainian News Agency, Kyiv, Ukraine, Thursday, February 2, 2006

16ITALIAN ANTONIO MERLONI PLANS TO START PRODUCTION
            OF ARDO WASHING MACHINES IN IVANO-FRANKIVSK
Ukrainian News Agency, Kyiv, Ukraine, Thursday, February 2, 2006

17SCANDINAVIAN SEB BANKING GROUP CONSIDERS BUYING
                              A SECOND BANK IN UKRAINE
IntelliNews-Ukraine Today, Kyiv, Ukraine, Thu, February 2, 2006

18.   EPAM SYSTEMS SOFTWARE COMPANY SECURES EQUITY

                INVESTMENT FROM SIGULER GUFF & COMPANY
EPAM software dev centers located in Russia, Belarus, Ukraine & Hungary.
Business Wire, USA, Wednesday, Feb 01, 2006

19.                           UKRAINE RISK: RISK OVERVIEW
The Economist Intelligence Unit Limited
New York, New York, Thursday, February 2, 2006

20.                                  CHOCOLATE MANIA
  Ukraine hosts its first Korona Chocolate Festival by Kraft Foods Ukraine
Nadia Tysiachna, The Day Weekly Digest in English, #2, Tue, Jan 31, 2006

 
21. AMERICAN POLITICAL CAMPAIGN EXPERTS WORKING FOR
                    SDPU(o), PARTY OF REGIONS AND PORA
    Working for Victor Medvedchuk, Victor Yanukovych, Rinat Akhmetov
LETTER TO THE EDITOR:
From Katie Fox
Deputy Director – Eurasia, National Democratic Institute (NDI)
RE: Glavred.Info article on U.S. campaign experts working in Ukraine
The Action Ukraine Report (AUR), #653, Article 22
Washington, D.C., Friday, February 3, 2006
 
22.                                    A MAN-MADE EDEN
   Cursed land or untouched paradise? Two decades after the Chernobyl
   disaster transformed dozens of communities into ghost towns, a book
                             by Mary Mycio assesses the damage.
BOOKREVIEW
: By David R. Marples
RE: “Wormwood Forest: A Natural History of Chernobyl”
By Mary Mycio, Joseph Henry Press, 259 Pages. $27.95
Moscow Times, Moscow, Russia, Friday, January 27, 2006
23.                                   OUR THERMOPYLAE
               Paying sacred tribute to the 300 young heroes of Kruty
By Ihor Siundiukiv, The Day Weekly Digest in English, #2
Kyiv, Ukraine, Tuesday, January 31, 2006
 
              By Askold Krushelnycky will be published in UK on March 14
By E. Morgan Williams, Publisher & Editor
The Action Ukraine Report (AUR), #653, Article 24
Washington, D.C., Friday, February 3, 2006
 
25. THE POLITICS OF PUBLIC LANGUAGE-USE OR WHY ENGLISH
                    SHOULD BE UKRAINE’S SECOND LANGUAGE
COMMENTARY: By Stephen Velychenko, Resident Fellow,
CERES, Research Fellow, Chair of Ukrainian Studies,
Munk Center, University of Toronto, Ontario, Canada
The Action Ukraine Report (AUR) #653, Article 25
Washington, D.C., Friday, February 3, 2006
========================================================
1
RUSSIA, UKRAINE FINALIZE ACCORD OVER GAS PRICES

By Gregory L. White in Moscow, Staff Reporter
The Wall Street Journal, NY, NY, Friday February 3, 2006

MOSCOW — Russia and Ukraine announced the signing of a key agreement
finalizing their Jan. 4 compromise over natural-gas prices. The pact also is
expected to help secure deliveries of Russian gas to Europe, most of which
come via Ukraine.

Russian gas monopoly OAO Gazprom had demanded a fourfold increase in

the below-market prices Ukraine pays for its gas but ultimately agreed to allow
a little-known trading company to supply cheaper fuel from Central Asia via
Russia to Ukraine. The deal, under which gas prices in Ukraine will nearly
double, sparked a political crisis in Kiev that nearly derailed the entire
compromise.

But Ukrainian President Viktor Yushchenko ultimately prevailed over
opponents who sought to block the deal. Thursday’s agreement sets up a

new venture to sell gas to commercial customers in Ukraine, half-owned by
Ukraine’s state gas company Naftogaz and half by the Swiss-registered
trading company, Rosukrenergo AG.

Gazprom, which owns half of Rosukrenergo, had long sought direct access

to the Ukrainian market and the creation of the trading venture was a key
element of the Jan. 4 compromise.

Few details of Thursday’s agreement were released, however. Naftogaz said
the deal provided for as many as 60 billion cubic meters of gas a year
through 2010 at the new price Rosukrenergo had agreed to sell at — $95 per
thousand cubic meters, up from the $50 Ukraine paid last year, but still one
of the lowest rates in the region, the Associated Press reported.

Under the Jan. 4 deal, that rate was fixed only through June 30.
Rosukrenergo had said it wanted to tie the rate to the prices charged by
Central Asian suppliers, which are expected to rise. Ukrainian officials had
resisted, fearing that the country’s fuel-guzzling export industries would
be ruined.

The ultimate ownership of the other 50% of Rosukrenergo, held by a unit of
Raiffeisen Bank AG of Austria on behalf of unnamed investors, also remained
secret. Gazprom officials have said the stake is held by Ukrainian
interests; officials in Kiev deny any government entity is involved.

Gazprom appears to be in the driver’s seat, however, with one of its top
executives named to head the supervisory board of the newly created venture
for selling gas in Ukraine.

Despite Thursday’s deal, Gazprom and Ukraine still have disputes to resolve,
including over excess gas Ukraine used during January’s cold snap.

Even after the compromise was reached, Europe remains wary of its main gas
supplier. Reports Thursday that Gazprom was considering a bid for Centrica
PLC, Britain’s largest utility, triggered a quick response from U.K.
regulators, who promised “robust scrutiny” of any deal.

But late Thursday, Gazprom issued a statement denying it had expressed
interest, saying an executive’s comments on a conference call with analysts
were misconstrued. A Centrica spokesman said the company hasn’t been
approached by Gazprom.  -30-
——————————————————————————————–
Write to Gregory L. White at greg.white@wsj.com
———————————————————————————————

[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
2.      NEW JOINT VENTURE, UKRGAZENERGO, CREATED TO
                  SUPPLY UKRAINE WITH GAS THROUGH 2010

Associated Press (AP), Kiev, Ukraine, Thu, February 2, 2006

KIEV – Ukraine signed off on a deal Thursday that will provide it with some
of the cheapest supplies of imported natural gas in the former Soviet Union,
ending what had been a bitter feud with Moscow over prices.

Under the deal, Ukraine will receive 34 billion cubic meters of Russian and
Central Asian gas this year at a price of $95 per 1,000 cubic meters,
state-controlled gas company Naftogaz (NGAZ.YY) said – a nearly twofold
increase for Ukraine but far less than the $230 it would pay if it was
getting only Russian gas.

The deal also stipulates that Ukraine will receive up to 60 billion cubic
meters of gas annually at the same price through the end of 2010, Naftogaz
spokesman Eduard Zaniuk said.

“All the documents were signed today, the talks are officially over,” Zaniuk
said at a brief news conference after three days of tense talks. “It is the
lowest price for all post-Soviet countries except Belarus.”

The agreement appears to represent a major victory for Ukraine, which
initially had been promised the $95 price only for the first six months of
this year. Naftogaz insisted that it didn’t surrender control over any of
the country’s lucrative pipelines, which pump Russian gas on to Europe, or
its vast underground gas storage tanks to cement the deal.

The deal came nearly a month after Russia and Ukraine reached a framework
agreement to settle a bitter price dispute that caused a temporary drop in
supplies to Europe when Russia turned off the taps to Ukraine, sparking
concerns about energy security across the continent.

At the crux of the Jan. 4 agreement was a plan to create a new venture,
co-owned by Ukraine’s Naftogaz and the intermediary RosUkrEnergo, to

supply gas to Ukrainian industrial consumers. The proposal sparked criticism
in Ukraine over the involvement of RosUkrEnergo, a shadowy company about
which little was known. RosUkrEnergo is owned 50-50 by Russia’s OAO
Gazprom and a group of secret investors.

But Ukraine’s government gave its approval Tuesday, paving the way for
Thursday’s signing. The new venture, called UkrGazEnergo, will supply
Ukraine’s industrial consumers with gas together with Naftogaz.

Naftogaz retains the right to supply residential consumers. Zaniuk said that
founding capital of the company, which will be based in Ukraine, is
$987,000. “We want to confirm our readiness to fulfill the agreement,” said
Oleg Palchikov, a director of RosUkrEnergo.

Ukraine currently uses some 80 billion cubic meters of gas a year, and is
able to provide only about 20 billion cubic meters of this itself. This
year, it is making up the difference with a separate contract with
Turkmenistan, but that contract expires at the end of 2006.

Thursday’s announcement about the locked-in lower prices failed to stifle
criticism about the deal in Ukraine, which led last month to a parliamentary
vote to sack President Viktor Yushchenko’s Cabinet. Yushchenko has

ignored the vote.

Valentyn Zubov, an ally of former prime minister and opposition leader

Yulia Tymoshenko, said he did not understand the need for an intermediary.
RosUkrEnergo was investigated by Ukrainian authorities last year following
accusations of involvement in criminal activities; the company has denied
the allegations.

The new venture, part-owned by RosUkrEnergo, “was created behind

closed doors in a secret way,” Zubov said. Yushchenko is personally
responsible…he openly showed incompetence and acted against the
interests of the Ukrainian people.”  -30-
———————————————————————————————
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
3. LVIV REGION GALOL PLANT TO LAUNCH PILOT PROJECT ON
         PRODUCTION OF BIO-DIESEL FROM RAPESEED IN 2006

Interfax-Ukraine, Kyiv, Ukraine, Thursday, February 2, 2006

KYIV – Drohobych-based Oil and Chemical Plant Galol of Lviv region is

to start implementation in 2006 of a pilot project on the production of
bio-diesel from rapeseed on basis of a partially reconstructed facility at
the enterprise.

Cost of the project, including the reconstruction, amounts to $1 million,
Yevhen Puschyk, the co-owner of FK-group Ltd., the owner of the plant,

said in Kyiv on Wednesday.

The company intends to attract credits to implement the project and is
currently holding talks with several banks. He said implementation of the
project would allow the enterprise to produce 15,000 tonnes of bio-diesel
from the new harvest of rapeseed in 2006. He also said the project should be
implemented together with the refinery, which would be a consumer of
bio-diesel.

He said he is unsure whether construction of two plants for bio-diesel
production would go ahead. He said it is necessary to work out all
technological aspects of bio-diesel production before building such plants,
as this will considerably cut financial risks.

He also proposed to create the Bionaftokhimia industrial park on the basis
of the Galol plant to develop the Ukrainian bio-fuel market.

He said that Ukraine annually consumes about 5 million tonnes of petrol and
6 million tonnes of diesel fuels. Using bio fuel mixed with regular fuels
would cut petrol consumption on average by 400,000 tonnes, and diesel
consumption by 300,000 tonnes. Besides, he said this would also allow a

reduction in foreign oil consumption. -30-
——————————————————————————————–
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
4.                               METHANE PROPOSAL
                 
How can Ukraine become energy-independent?

ANALYSIS: By Geoffrey Berlin and Raymond Albright
The Day Weekly Digest in English, #2, Kyiv, Ukraine, Tue, Jan 31, 2006

Now that Ukraine appears to have settled its gas dispute with Russia’s
Gazprom, it is high time to accelerate the development of Ukraine’s own
natural gas resources.  One place to start is in the coal beds of the Donbas
region of eastern Ukraine, which are rich in methane gas that can be
captured and delivered right into the natural gas distribution system.

Coal-bed methane gas is a proven natural resource in the United States,
where it now accounts for eight percent of natural gas production, in
contrast to Ukraine where it accounts for less than one percent. Yet Ukraine
has the world’s tenth largest coal-bed methane reserves, which by
conservative estimates are 1.7 trillion cubic meters.

Capturing and commercializing the methane gas would enhance Ukraine’s
energy security. Ukraine depends on increasingly expensive imports for
74 percent of its natural gas consumption, which in 2006 is expected to
totaled 76 billion cubic meters, 53 percent of which is to be supplied from
Turkmenistan and another 21 percent from Russia. Ukraine’s coal-bed
methane reserves could cover at least 22 years of Ukraine’s gas
consumption at its current level.

Capturing methane gas from coal beds before they are mined can also save
lives. Since Ukraine’s independence in 1991, nearly 4300 coal miners have
lost their lives in Ukraine’s coal mines, due mainly to methane gas
explosions, an average of over three miners per million tons of coal
produced, making the coal mines of the Donbas among the world’s most
treacherous. These tragedies could be averted.

Capturing the methane gas will nonetheless prove challenging in the Donbas
coal mines, which average 585 meters in depth. The geological conditions of
these coal mines complicate the hydraulic fracturing process that creates a
production stream of methane gas, increasing the risk for prospective
investors.

Yet investors have a new financial incentive: coal-bed methane projects in
Ukraine may now qualify for revenue from carbon credits under the Kyoto
Protocol of the United Nations Framework Convention on Climate Change.

Projects that capture methane gas, which would otherwise be released into
the environment through coal mining, can receive revenue of over 50 U.S.
dollars per thousand cubic meters of gas through carbon credits, on top of
the revenue that may be gained from commercializing the gas.

Total methane emissions from Ukraine’s coal mines are about 2.0 billion
cubic meters a year, of which only seven percent are captured and put to
use. Coal bed methane operations that would capture these emissions could
generate revenue and help clean up the environment too.

What needs to be done to make this happen? The Government of Ukraine
must finalize the domestic regulatory and legal mechanism for project
sponsors to cash in on carbon credits under the Kyoto Protocol, a western

government or institution must commit to funding those carbon credits, and
about 20 million U.S. dollars of investment commitments must be secured
to get the first project up and running.

It is a superb opportunity to unite Ukrainian and western expertise in
finance, technology and management, to enhance Ukraine’s energy security,
save lives and improve the world’s environment.  -30-
————————————————————————————————
NOTE: Geoffrey Berlin is managing director for Ukraine of GlobalNet
Financial Solutions, an investment banking firm based in Washington, DC.
Raymond Albright is former senior vice president of the Export-Import
Bank of the U.S. and a managing director of GlobalNet Financial Solutions.
————————————————————————————————
LINK: http://www.day.kiev.ua/156422/
——————————————————————————————–

[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
    Send in names and e-mail addresses for the AUR distribution list.
========================================================
5. RIVNE NPP STARTS USING NEW GENERATION HEAT EMITTING
                     CELLS, SHIPPED BY RUSSIAN CORP TVEL

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

KYIV – New generation heat emitting cells (TVSA), which the Russian
corporation TVEL makes and which possess better operational
performance characteristics, necessary for switching to a five-year fissile
fuel cycle, have started functioning in the Rivne NPP’s reactor three.

The new cells ensure a greater degree of the fissile fuel’s combustion.
Besides, they make the process of reloading faster, which shortens
scheduled maintenance periods.

The new generation heat emitting cells’ yet another advantage is their
higher safety, which was confirmed during TVSA cells’ tests at the
Kalininskaya NPP (Russia).

According to Nikolai Fridman, director of the Rivne NPP, the new cells
are now only part of the reactor’s fuels, with the tree-stage replacement
process scheduled to finish by 2008.

In Mr Fridman’s opinion, this scheme will make the nuke’s performance
more flexible. The TVSA cells will also be used on the nuke’s reactor
four, he noted.  -30-

——————————————————————————————
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================      
6. UKRAINE, RUSSIA SIGN NUCLEAR FUEL CONTRACT FOR 2006

Interfax-Ukraine news agency, Kiev, in Russian 31 Jan 06
BBC Monitoring Service, UK, in English, Tue, Jan 31, 2006

KIEV – Ukrainian national nuclear energy company Enerhoatom and Russian
nuclear fuel producer TVEL on 25 January signed a contract on the supplies
of fresh nuclear fuel for this year, determined its amounts, price,
deadlines and terms.

The contract for 2006 envisages fuel supplies to all of 15 Ukrainian nuclear
reactors and increases the share of improved fuel rods to 86 per cent. The
first batch of fresh fuel will be supplies to the South Ukrainian nuclear
power plant in February.

Commenting on the contract, Enerhoatom President Yuriy Nedashkovskyy
said: “This is a very good compromise.” The price of fuel supplied by TVEL
will increase insignificantly compared to last year, he said. Enerhoatom’s
rates could be raised by less than 0.1 kopeck [per 1 kW], Nedashkovskyy

said. Enerhoatom’s current rate is 8.01 kopecks per 1 kW without VAT.

The Enerhoatom director also recalled that on 22 January 2006 the company
managed to agree with TVEL the formula to calculate the price of nuclear
fuel until 2010.

The formula allows the supplier to set the price, taking into account
changes on the world market, he said. However, the price of fresh nuclear
fuel calculated according to the formula will be cheaper than the fuel
supplied to Bulgaria or the Czech Republic, Nedashkovskyy said. [Passage
omitted: repetition]  -30-
——————————————————————————————–
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
7.  LITHUANIAN COMMENTARY EXAMINES RUSSIAN PLAN TO
                        CREATE ‘ENERGY EMPIRE’ IN EUROPE 

COMMENTARY: Lithuanian newspaper Lietuvos Rytas on 30 January
BBC Monitoring Service, UK, in English, Thu, Feb 02, 2006

Would you like to become part of the newly created Russian Empire? Do
not think that I am trying to frighten you. The new Polish Government is
even advocating creating a new NATO to resist this empire. A NATO for
energy.

“The Russians are coming!” This phrase still makes many Lithuanians smile.
World analysts, however, have been talking about this new empire, which is
being created by the Kremlin, for a long time now.

Not about another ineffective union or commonwealth, but about an energy
empire of Eurasia. It is true that so far everyone has talked loudly only
about the things that even the Kremlin has not been hiding – energy
resources have become Russia’s weapon in its effort to recreate the big
country’s status in the world and its former influence.

After Russia cut off the natural gas supply to Ukraine at the beginning of
this year, Europe, which has been sleeping for a long time, started to wake
up and started to scream about its energy security problems and the need to
seek alternative sources of energy.

But that could be viewing things through an old paradigm. The challenges

the West and Lithuania face, however, require a new response.

The energy empire being created by the Kremlin has already crossed the
borders of the countries whose energy sectors the Kremlin already controls.
[passage omitted on the damaged reputation of former German Chancellor
Gerhard Schroeder because of his friendship with Russian President

Vladimir Putin]

By the way, even now when people have started talking about the need to

seek alternative natural gas supplies, no one in Europe has started to doubt
the need to construct the gas pipeline under the Baltic Sea.

It is as if people forget that it will increase Germany and Europe’s
dependence on Russian natural gas.

The reason is simple – the project is promising billions not only for Russian,

but also for German companies. This is not an isolated incident.

For example, is it not strange that the name of the investment branch of

the respected Austrian bank Raiffensen can be seen behind Gazprom’s
suspicious schemes?

New example – the scheme to supply natural gas to Ukraine, which is very
nontransparent and looks suspicious to the whole world, uses an
intermediary – Rosukrenergo. Raiffensen Investment is one of the creators of
Rosukrenergo. The name of Mogilevich, who has been known as the godfather

of the Russian mafia and has been wanted by the FBI, is behind Rosukrenergo.

Some experts suspect that such a partnership between bankers and suspicious
companies is the source of Gazprom’s billions in Raiffensen’s deposit
accounts.

Maybe it is different in Lithuania? In Lithuania, for example, the government

has even promised to buy Mazeikiu Nafta [oil refinery] stock from Yukos,
allegedly so that it may later choose an investor that is more suitable for the
country.

Moreover, the Foreign Ministry recently created the special Economic
Security Policy Department. The State Security Department also devotes

a lot of attention to analysing the threats that arise.

It is doubtful, however, that anyone is oblivious to the fact that the
current Lithuanian Government is full of people who hold pro-Russian
political views.

It is also hard to forget that many of them or their family members have
business ties with Russia.

The Lithuanian energy interest groups influence a big part of the country’s
politics. Their ties with such players as the Russian spy Alganov, who
gained notoriety in Poland, speak loudly about their connections with
Russia.

Therefore, now it is not enough to merely urge the European Union to take
better care of its energy security. It is also not enough to try and find a
buyer for Mazeikiu Nafta that is less dependent on the Kremlin.

Just like in other countries, the Kremlin has plenty of partners that are
willing to assist in creating the new Russian Empire.  -30-
——————————————————————————————–

[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
               Send in a letter-to-the-editor today. Let us hear from you.
========================================================
8.              THE MARRIAGE OF ENERGY AND SECURITY

ANALYSIS: By Roman Kupchinsky for RFE/RL
Prague, Czech Republic, Thursday, Feb. 2, 2006

The recent squabbles between Russia and Ukraine, Moldova, and Georgia

over gas have shed light on an interesting symbiotic relationship between
Russia’s National Security Concept, signed in March 2000, and Russia’s
Energy Strategy adopted in August 2003.

The most significant “modification” of Russia’s National Security Concept
appears to be an expanded role given to the use of energy as the primary
lever of Russian foreign policy.

 The “Energy Strategy of Russia Up To 2020,” while not formally a part of
the National Security Concept, has become a road map for Russian foreign
policy.

According to the Energy Ministry’s website: “Russia possesses large
resources of energy and has a powerful fuel and energy complex that serves
as the foundation for its economic development and is an instrument for
implementing domestic and foreign policy. The role of the country in world
energy markets determines its geopolitical influence.”

 Putin was clearly guided by the text of the energy strategy when he spoke
on 22 December 2005, at the height of the Ukrainian-Russian “gas war.”

 
“Our country enjoys a natural competitive advantage, and has natural and
technological capabilities for taking more prominent positions on the energy
market,” Putin said. “We must use these positions in the interests of the
whole international community, but not to the detriment of our national
interests.”
                                      PRICE INCREASE
 Among the factors that likely led to the adoption of the energy strategy
three years ago are:

     [1] A dramatic increase in the price of oil and gas, which most

experts believe will not drop significantly in the foreseeable future
     [2] The West’s preoccupation with the war on terrorism and the
war in Iraq
     [3] Iran’s increasing international isolation diminished its hopes
that it could become an alternative supplier of natural gas in Eurasia

  In a nutshell, it became clear that energy as a policy tool was cheaper
than tanks and missiles; Russian energy policy is able to reach those
distant lands where the underpaid and demoralized Russian military would
never dare venture.
                                      THREATS PERSISTS
 Within weeks of his election as Russian president in March 2000, Vladimir
Putin signed the National Security Concept of the Russian Federation, which
subsequently became known as the Putin doctrine. This doctrine identified
the main international threats to Russia to be:

     [1] The possible appearance of foreign military bases and large
military contingents in direct proximity to Russia’s borders
     [2] The danger of weakening the political, economic, and military
influence of Russia in the world
     [3] The strengthening of military-political blocs and unions, above

all the eastward enlargement of NATO
     [4] The weakening of the integration processes in the Commonwealth
of Independent States (CIS)

 At the time the concept was drafted, Russia was still shaken by the
financial crisis of August 1998 and the disruption of economic relations
with the West. “Stratfor Global Intelligence” then commented that “the
Russians felt they had little to lose” and adopted a concept that allowed
for a nuclear first strike “in response to large-scale aggression using
conventional weapons in situations critical to the national security of the
Russian Federation.”

In some respects, Russia has succeeded since 2000 in reinforcing its
position vis-a-vis the CIS — and, thus, mollifying the threats. In 2000,
Russia moved rapidly to create the Eurasian Economic Community — a sort

of Greater East Asia Co-Prosperity Zone once promulgated by pre-World
War II Japan — which consists of Russia, Belarus, Kazakhstan, Kyrgyzstan,
Tajikistan, and most recently, Uzbekistan.

This Eurasian Economic Community, coupled with Russia’s active use of

energy politics in the region, has helped enhance Russia’s leading role in
Central Asia while achieving a certain reintegration of the CIS countries.

 In other respects, however, recent Russian behavior suggests that its
perceptions of external threats not only have remained unchanged, but also
have taken on greater urgency.

 The rise of international terrorism and the U.S. War On Terror radically
altered geopolitics and brought U.S.-led forces into Central Asia in order
to defeat Al-Qaeda forces operating in Afghanistan. Russia initially went
along with these Western intrusions into what had traditionally been its
sphere of influence, but by 2005 felt compelled to seek the removal of U.S.
bases from its periphery and reestablish its own security umbrella in the
region.

 Now, the feared and unwanted Western bases “in direct proximity” to Russia
in Central Asia that were established in the wake of 9/11 are in the process
of being partially dismantled. Uzbek President Islam Karimov has ordered the
United States to close down its bases in his country, while in Kyrgyzstan
the leases are being renegotiated.

In other areas, however, the threat has grown. The victory of the Rose
Revolution in Georgia in November 2003 and the Orange Revolution in Ukraine
13 months later gave new impetus to those two countries’ aspirations to NATO
membership and the possibility that they might allow NATO bases on their
territory.

 This has evoked harsh comments from Russia’s military top brass. According
to a report by “The Moscow Times” on 2 December 2005, Yury Baluyevsky, the
chief of the General Staff, said: “Attempts are being observed to weaken the
commonwealth through recruitment of CIS states into NATO.” Baluyevsky

added: “Russia will defend its interests vis-a-vis this process.”

 It was not a coincidence that Baluyevsky made his remarks at the height of
the Ukrainian-Russian gas standoff, a conflict which many interpreted as
Russian pressure on Ukraine to abandon its pro-Western ways and return to
the Russian fold.   -30-
——————————————————————————————-
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]

========================================================
9.                    U.S. SPY BOSS WARNS ON RUSSIA TIES

Reuters, Washington, D.C., Thursday, February 2, 2006

WASHINGTON – A drive by Russian President Vladimir Putin’s to centralize
power could make Russia more inward-looking and make relations between
Washington and Moscow more difficult in coming years, U.S. intelligence
chief John Negroponte said on Thursday.

“Russia probably will work with the United States on shared interests, such
as counterterrorism, counternarcotics and counterproliferation,” Negroponte
said in testimony before the Senate Select Committee on Intelligence.

“Growing suspicions about Western intentions and Moscow’s desire to
demonstrate its independence and defend its own interests may make it harder
to cooperate with Russia on areas of concern to the United States,” he
added.

He said U.S. doubts about the country’s direction stem from “Putin’s drive
to centralize and assert control over civil society, growing state control
over strategic sectors of the economy and the persistence of widespread
corruption.

“Russia could become a more inward-looking and difficult interlocutor for
the United States over the next several years,” Negroponte concluded.

Negroponte, a career diplomat who became the U.S. director of national
intelligence last April, did not specify in which areas of U.S. interest
Russia could become more problematic.

Russia, which for the first time this year holds the presidency of the Group
of Eight industrialized nations, has proved an important partner for the
United States in addressing the nuclear programs of Iran and North Korea.

But the U.S. administration has also expressed concern about Putin’s
crackdown on nongovernmental organizations and his increased control

of the Russian media.

Secretary of State Condoleezza Rice recently faulted Russia for what she
called a “politically motivated” natural gas dispute with Ukraine last month
and warned Moscow that it had to play by international rules. -30-
——————————————————————————————-
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
10.                         WHY WE DON’T LIKE UKRAINE
Missing the empire is not just missing the territory, it’s missing the history

COMMENTARY: By Andrey Zorin
Professor of Russian History, Oxford University
Kommersant, Moscow, Russia, Wednesday, January 25, 2006

                         ARGUMENTS OVER THE EMPIRE
There is a new New Year’s lark in Russia. In the last weeks of the old year,
it assails Ukraine over Cape Tuzla, which no one had ever heard of before.
We tried to make them observe falsified election results and were sincerely
nonplussed at their unwillingness to do so.

We nearly quintupled the price of natural gas for them. And you always
have to make up for it in the new year. The regularity of those attacks and
the broad public support they received rule out the possibility that it was
all just someone’s incompetence or greed. The causes lie deeper.

It seems that the Russian public, right up to its political elite, is
beginning to realize that Ukraine’s statehood is an irreversible reality.

This is a painful process and it has certain characteristic complexes
associated with it, such as a separation complex and infantile resentment.

One of the reasons for this reaction is that the imperial syndrome is rooted
in the understanding of history that has reigned supreme in our national
consciousness for the last 200 years.

                           NEW COUNTRY, OLD HISTORY
When Peter I turned the state he ruled upside down, he was convinced that he
was creating a completely new power. However, his successors, still in the
18th century, felt the need to prop up their legitimacy with their ancient
origin and they began to propagate the myth of the single chain of historic
succession that connected Kievan Rus with the Moscow kingdom and the
St. Petersburg empire.

Karamzin’s “History of the Russian State” gave the Romanov pretensions
canonicity. A quarter of a millennium of history, from the fall of Kiev to
the Standoff on the Ugra, was written off as Tatar and Lithuanian-Polish
occupation. Some modern ideologues try to do approximately the same
thing with the Soviet period.

After October 1917, the Bolsheviks themselves tried to begin a “new era”
with a clean slate. But soon enough Stalin restored the traditional
historical mythology, setting the USSR on the timeline of Russian history –
from Kievan Rus to the Land of the Soviets.

The founding fathers of the Russian Federation do not even try to portray
themselves as founders of a new state. They prefer to play the role of
princes, kings, emperors and general secretaries all at the same time.

The result is that today Russian citizens are convinced that they are the
direct and sole bearers of a thousand-year-old tradition, a powerful shoot
surrounded on all sides by dried up branches.

                                 RIGHTS OF INHERITANCE
There have been many Russian states and each one of them had its own
history, and not one of them followed another directly. Great Novgorod,
the Golden Horde, the Great Principality of Lithuania (otherwise known as
Lithuanian Rus) were all Russian states, and there were many more.
Moscow was no more the successor of Kiev than Vilna or Kazan.

It is not quite as bad to speak of the Russian Empire as the successor of
the Kingdom of Moscovy. Here there was a dynastic and religious unity.

Between the Romanov empire and the USSR it is impossible to see any
connection. A state that changes its capital, symbols, borders, state
religion, political system and name becomes another state.

Of course, if some form of the state from the past is close to our heart, we
can declare ourselves its successor. At various stages of history, various
Russian states traced their genealogy to ancient Rome, Byzantium, classical
Greece, Germanic tribes and even, as we recall from Soviet textbooks,
Urartu.

There is nothing wrong with that. But it is a good idea to keep in mind that
our neighbors have rights of inheritance as well. They love to recall the
etymological meaning of “Ukraine” (“on the edge”) in Russia today. But the
question of who is on the edge and who is in the center of Rus is all and
only a matter of where you are looking from. About a year before the Orange
Revolution, a Kiev taxi driver, an ardent fan of Yushchenko, told me that he
felt that he was more Russian than people who live in the Urals.

                               THE BURDEN OF CONCEIT
Unfortunately, these are not abstract considerations. In the consciousness
of the modern Russian, Ukraine is increasingly taking the place of Poland as
the unfaithful brother, betraying its Slavic origins for the West. We see
what that perception has led to in Russian-Polish relations.

The past is not primogeniture passing to the single lawful heir. It is a
symbolic resource that everyone can use when they need it. It cannot be
monopolized, and attempts to do so can be ruinous.

Fortunately for states and peoples, there is another way. Norway was first a
province of Denmark, and then of Sweden, and obtained its independence
only at the beginning of the 20th century. Relations between the three
states are simple and calm today, and their geographical, cultural and
linguistic ties are underpinned by a multitude of successfully functioning
institutions.

And this is in spite of the fact that Norway refused to join the EU and
Sweden did not join NATO. And the imperial past has not prevented
Russia from building adequate relations with Finland.

Looking at the history of national statehood as a chain of direct succession
uniting a mythic past with the present, we almost unavoidably exaggerate
our own place in it.

The Kingdom of Muscovy was enthralled with that conceit, seeing itself as
the Third Rome and, maybe to a slightly lesser extent, so was the Russian
Empire and, in hyperbolic proportions, the Soviet Union. The price for such
ambitions was huge every time.   -30-
———————————————————————————————
LINK: http://www.kommersant.com/page.asp?idr=527&id=643367
———————————————————————————————
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================

11.              FULFILLING VOW,  MERKEL LOOKS EAST
             Restoring Germany’s pivotal role as Europe’s largest country
                             and one situated in the middle of Europe.

By Judy Dempsey, International Herald Tribune (IHT)
Paris, France, Thursday, February 2, 2006

BERLIN – When Angela Merkel became chancellor nearly three months ago,
she promised Germany’s eastern neighbors that Berlin would not go over
their heads on any decisions that affected their interests.

Politicians and opposition leaders from Eastern Europe, Ukraine, Belarus
and other countries were skeptical, taking the view that any new chancellor
usually spent the first year or so focused on domestic rather than foreign
policy.

Feeding their skepticism was the fact that former Chancellor Gerhard
Schröder, a Social Democrat, had close links with President Vladimir Putin
of Russia. Schröder was reluctant to speak out about human rights violations
in Russia and showed little interest in the countries of the former Soviet
bloc.

But 12 weeks later, these same officials acknowledge their surprise at the
speed with which Merkel and her foreign policy chief, Christoph Heusgen,
have reoriented Berlin’s foreign policy, restoring Germany’s pivotal role as
Europe’s largest country and one situated in the middle of Europe.

“We are not talking just about a change in tone,” said Rainer Linder, an
expert on Belarus at the German Institute for International and Security
Affairs. “Relations with our eastern neighbors have been intensified in such
a short space of time.”

The change is palpable as officials from the region flock to the German
capital.

On Thursday, Merkel met in Berlin with Alexander Milinkevich, leader of the
democratic opposition in Belarus, who is running against President Alexander
Lukaschenko in elections scheduled for March 19 despite censorship and
widespread intimidation in one of the region’s last bastions of communist
rule.

President Mikhail Saakashvili of Georgia was in town as well in the hope of
gaining support from Berlin for closer ties with the European Union and with
NATO.

On Friday, the new German foreign minister, Frank-Walter Steinmeier, will
act as host of a German-Baltic meeting with his counterparts from Estonia,
Latvia and Lithuania. Hungary’s president, Laszlo Solyom, will be making a
state visit during the weekend, too.

In an interview before he saw Merkel, Milinkevich said the meeting meant a
lot. “It shows she recognizes our democratic movement and our wish to have
a free Belarus,” he said. “But just as important, I feel this meeting will
give me more security and protection. You know, journalists and opposition
figures disappear in Belarus.”

Germany will also provide concrete assistance at a time when the Kremlin –
which fears that Belarus could go the same way as Georgia and Ukraine,
where popular revolts toppled authoritarian leaders – is supporting the
present hard-line leadership.

Germany’s international radio station, Deutsche Welle, will broadcast
programs into Belarus during the run-up to the election and Berlin will
spend E3 million, or $3.6 million, in support of nongovernmental
organizations over the next three years.

Anatoly Lebedko, leader of the opposition United Civic Party, said
Germany was finally adopting a clear strategy toward Belarus.

“As the largest and most important country in Europe, Berlin can influence
policy in the European Union and adopt a more balanced relationship with
Russia,” said Lebedko, who accompanied Milinkevich. “Merkel is more
willing to speak out for our interests. And of course the big difference
with Schröder is that Merkel does not call Putin ‘Volodya, my friend.'”

Saakashvili, meanwhile, said his main aim was to win support for the regions
of the Black Sea and the volatile northern Caucasus.

“We want to involve Russia in finding negotiated settlements to conflicts in
this region,” he said at a meeting of the German Marshall Fund of the United
States. “That is where German foreign policy could play a role by supporting
human rights and starting a political dialogue.”

Zygimantas Pavilionis, political director of the European department at
Lithuania’s Foreign Ministry, said Merkel was already making a big
difference to the region.

“There is more and more willingness by Germany to engage us in policy,”
Pavilionis said in an interview. “This is a natural role for Germany. We are
quite closely consulted. We appreciate this transparency.”

Polish diplomats, who openly criticized Schröder’s close relationship with
Putin, said they, too, noticed a big change under Merkel. After she visited
Warsaw in December – her first visit eastward and a month before a trip to
Moscow – Merkel created a German-Polish committee to discuss energy
issues.

Before Merkel traveled to Moscow, the German ambassador in Warsaw
briefed the Polish Foreign Ministry on what she planned to discuss with
Putin (the talks touched on human rights, energy and the situation in
Belarus).

The day after her visit, a senior Polish diplomat was briefed by the
chancellery, to Warsaw’s evident satisfaction.

“The atmosphere,” said Pawel Swieboda, head of the European department

at Poland’s foreign ministry, “is so much better.”  -30-
————————————————————————————————-
LINK: http://www.iht.com/articles/2006/02/02/news/berlin.php?rss
——————————————————————————————-
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
    If you are receiving more than one copy of the AUR please contact us.
========================================================
12.                 RUSSIAN NEIGHBORS’ PUTIN JITTERS

COMMENTARY: By David A. Mittell, Jr., Providence Journal
Providence, Rhode Island, Thursday, January 19, 2006

DNIPROPETROVSK, Ukraine – Almost like a Marxian dialectic, Mikhail
Gorbachev produced his antithesis in Boris Yeltsin, who produced his
antithesis in Vladimir Putin.

Mr. Yeltsin came to prominence in 1988, when, as Moscow Communist
Party boss, he was so outspoken for reform that President Gorbachev
replaced him. The dismissal only served to make him the more popular
symbol for reform. His finest hour came in 1991, when he mounted a
tank in Moscow to defy the coup d’état against a vacationing Mr.
Gorbachev.

In that moment of theater, Mr. Yeltsin was the antagonist, Mr.
Gorbachev supine. He soon wielded power as president of the Russian
Federation; within four months, Mr. Gorbachev was a president without
a country.

Liberty was thus unleashed in Russia, unrehearsed by uncooperating
actors. Throughout the vast country people are now free to come and
go, to quit a full-time job or take on a part-time one, or to display
religious symbols openly — acts that were against the law from 1917 to

1991.

Quickly after 1991, President Yeltsin’s erratic, besotted behavior, and
the oligarchy of former communists and venture-klepotocrats he would
preside over, became evident. After years of chaos, including the shelling
of parliament by Mr. Yeltsin’s government, and a guerrilla war in
Chechnya, Russians craved authoritative, sober leadership.

From the very circumstances of his rise to the presidency, Vladimir Putin
has been an enigma. Named prime minister by Mr. Yeltsin, in 1999, he
achieved instant popularity by his handling of an apparent terrorist
bombing that leveled a Moscow apartment building. Mr. Putin blamed
Chechens,abrogated a fairly stable truce, and instigated a new Russian
offensive against the Muslim Chechens.

Mr. Putin also made a deal with Mr. Yeltsin whereby he exchanged the
prime ministry for the presidency, and Mr. Yeltsin exchanged the
presidency for political oblivion and immunity from prosecution for
crimes he may have presided over.

The double switch was a master stroke, and the military offensive unified
the country and consolidated Mr. Putin’s power. There was just one
problem: Chechens’ responsibility for the apartment bombing was never
established. For the Russian judicial system still isn’t independent. At the
order of the executive, its “findings” can be what Mr. Putin’s
renationalized television stations say they are.

Yet since 1999, the apartment bombing has been used as a pretext for six
 more years of destruction — reminding Russia’s neighbors of 19th Century
imperial pogroms and of 20th Century Soviet collectivizations. And like
innumerable Soviet and czarist wars, Mr. Putin’s in Chechnya has also
killed a great many Russian soldiers.

Despite this, and despite his egregious treatment of most of the other 14
former Soviet republics, Mr. Putin seems to retain a highdegree
of personal popularity. This can be attributed to four factors:

   [1] A serious, decisive, internationally admired persona.
   [2] Economic stabilization and the beginning of real growth after
the chaos of the Yeltsin years.
   [3] New wealth and investment, as Russia has moved to exploit
her oil reserves.
   [4] The persistence of the Chechen threat and President Putin’s
ability to manipulate it.

Mr. Putin’s line is that the war in Chechnya is of a piece with the global
war on terrorism — something President Bush has been eager to agree
with. Since the apartment bombing made him president, there have been
three major Chechen attacks, each with a degree of mystery.

In 2002, armed Chechens took hostages in a Moscow theater. I was in
the region at the time and watched the stand-off play out on Russian
television. When a “rescue” was announced, followed by the statement
that “anyone who says the authorities caused hostages to be killed would
be wrong,” followed by “and no one is saying that!” — the Russian-
speakers watching with me discerned at once that many of the hostages
were dead.

The following year, female Chechen suicide bombers blew two commercial
airliners out of the sky, leaving dozens dead. Then, in 2004, Chechens
laden with explosives occupied a school in the city of Beslan, leading to
the deaths of hundreds of children when the explosives were detonated.

In Ukraine, and in other post-Soviet republics, the persistent rumor mills
have it that — either intentionally or through bungling — the Putin
government itself shot down the two planes and set off the explosives in
Beslan.

These rumors obviously can’t be accepted uncritically. Rather, they can
be taken as reflecting a sound inference in the 14 non-Russian post-Soviet
republics that how Russia does treat its Chechens under the leadership of
Mr. Putin is how it would treat them if it once again had the chance.

Russophone minorities in those countries, as well as linguistic majorities,
express that fear. As one mother in Russian-speaking Dnipropetrovsk said
to me two years ago: “With my Ukrainian nationality I know that my son
isn’t going to die in Chechnya.”  -30-
——————————————————————————————-
NOTE:  David A. Mittell Jr. is a member of The Journal’s editorial board.
Contact: dmittell@projo.com
——————————————————————————————-
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
             Send in a letter-to-the-editor today. Let us hear from you.
========================================================
13. TYMOSHENKO CONDEMNS YUSHCHENKO FOR CONSIDERING A
           COALITION GOVERNMENT WITH VICTOR YANUKOVYCH
             Only the president would be orange, all the others would be blue

By Stefan Wagstyl, East Europe Editor, Financial Times
London, United Kingdom, Friday, February 3 2006

Yulia Tymoshenko, the former Ukrainian prime minister, yesterday attacked
President Viktor Yushchenko for considering a coalition government with
Viktor Yanukovich, his arch-enemy in the Orange Revolution, saying such
moves would lead the country into “a political dead end”.

She warned her former ally that a coalition with Mr Yanukovich, his rival in
the disputed 2004 presidential election, would lead to a takeover of power
by Mr Yanukovich’s forces.

Speaking to the FT in London, she said: “If such a coalition is created only
the president will be orange and all the others will be blue (Mr
Yanukovich’s colour). The president will be hostage to other politicians.”

Ukraine’s warring parties are preparing for crucial parliamentary elections
next month in which the three principal groupings are the Yulia Tymoshenko
bloc, Mr Yushchenko’s Our Ukraine and Mr Yanukovich’s Regions party.

Under a deal hammered out during the Orange Revolution between Mr

Yushchenko and former president Leonid Kuchma, power is being transferred
from the presidency to parliament so the new parliament will, for the first time,
control the formation of the government.

In the immediate aftermath of the Orange revolution, Ms Tymoshenko and

Mr Yushchenko planned to fight this election together. But they split last
summer when Mr Yushchenko sacked Ms Tymoshenko as prime minister,
a move that has left Mr Yushchenko isolated.

The president put out feelers to Mr Yanukovich, resulting in a temporary
agreement for Mr Yanukovich’s party to confirm Mr Yushchenko’s new prime
minister, Yuri Yekhanurov. Now there is talk in Kiev of the formation of a
broad post-election coalition between Mr Yushchenko, Mr Yanukovich and

some smaller parties.

Ms Tymoshenko referred to such a coalition as the “axis of security”. She
condemned plans for it as “an enormous mistake”. Referring to the
personalities of the cautious Mr Yushchenko and the aggressive Mr
Yanukovich, she said it would be “clear who would dominate”.

Ms Tymoshenko said the ideal solution would be to recreate her partnership
with Mr Yushchenko before the polls but said a post-election coalition was a
“realistic” option. She dismissed suggestions that Mr Yushchenko was in a
strong position because he could play her off against Mr Yanukovich.

“Mr Yushchenko doesn’t have a choice between me and Mr Yanukovich

because a deal with Mr Yanukovich would be a total loss of power for him.”

She said she agreed with Mr Yushchenko on his economic and foreign policies
but had split over the problems left behind by Mr Kuchma such as powerful
business groups and unsolved crimes.

Ms Tymoshenko warned westerners not to underestimate the strength of the
reactionary forces in Kiev, represented by Mr Yanukovich, adding that
democracy was still at risk and the risk was “not small”.

Ms Tymoshenko repeated earlier criticism of the deal reached by Ukraine in
the recent gas dispute with Russia. The agreement, which has still to be
finalised, gave a monopoly of gas supplies to RosUkrEnergo, a company with a
“murky background”. The proposed volume of gas was insufficient creating a
risk that Moscow would be able to put pressure on Kiev “every month” in
arguments about extra supplies.  -30-
——————————————————————————————-
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
14.               “NOW WE’VE REALLY COME AWASH……”
                   Law on Ukraine’s side in lighthouse row with Russia

ANALYSIS & COMMENTARY: By Volodymyr Kravchenko
Zerkalo Nedeli, Kiev, Ukraine, in Russian 21 Jan 06; p 1, 3
BBC Monitoring Service, UK, in English, Friday, Jan 27, 2006

The recent skirmish over a lighthouse in Yalta points to deeper strains in
Ukrainian-Russian relations, a weekly has said. It said that Russia gains
significant psychological advantages from having its flag fly above the
lighthouse and that its being replaced by a Ukrainian flag would “be a
symbol that the Russian fleet’s departure from the peninsula is
unavoidable”.

The devil is in the details of the agreements between the sides which each
side interprets differently, it said. Kiev’s arguments that the Russian
Black Sea Fleet is illegally occupying the lighthouse are backed up by some
key clauses in bilateral agreements, the paper noted. A mid-February meeting
on the issue should go some distance in resolving this issue of Ukrainian
property rights, it concluded.

The following is an excerpt of the article by Volodymyr Kravchenko, entitled
“Now we’ve really come awash…”, published in the Ukrainian newspaper
Zerkalo Nedeli on 21 January, subheadings appear as published:

Friday the 13th brought a new helping of tension to Russian-Ukrainian
relations which were already strained. This time the conflict arose over a
navigational-hydrographical provision [NHP] site in Crimea which is

occupied by the Russian Black Sea Fleet.

We are talking about the lighthouse in the Yalta commerce port: acting on
the excuse that lighthouse chief Viktor Polishchuk’s pass to the port
territory had expired, last week the security services at the enterprise did
not allow him onto the site. Meanwhile, employees of the Sevastopol
affiliate of the Derzhhidrohrafiya state enterprise under the Ukrainian
Transport and Communications Ministry broke the locks and entered the
territory of the lighthouse.

After the mass media reported on these actions of the Derzhhidrohrafiya
employees, members of the Ukrainian student organization Brotherhood also
stepped up their activities. They began to picket several NHP sites which
are occupied by the Russian Black Sea Fleet (the lighthouse on Sarych cape,
and the Mars-75 radio navigation station in Henychesk), demanding their
return to Ukraine. (Russian servicemen say the Ukrainians did not just
picket these sites, they also tried several times to get inside them.)

One must give just dues: over the past few years, Kiev, together with the
help of the Foreign Ministry and the Derzhhidrohrafiya state enterprise (a
decision by the Ukrainian government in 1998 gave it management of the NHP
sites), has consistently worked at restoring its property rights to Crimean
lighthouses.

This was the state policy which the Ukrainians were trying to achieve at the
negotiating table and in the halls of commercial courts. This need was
underpinned by several reasons.

[1] First, according to the UN convention on maritime law, a coastal state
has responsibility for the safety of shipping in its territorial waters. And
that is hard to do when the state does not control navigation and
hydrographical sites. (It is enough to say that the hydrographical service
of the Russian Black Sea Fleet has turned off part of the lighthouses
several times over the past half year (Morskiy, Okunivka and Karantynniy),
and also several light signs (Skalistiy, Priboyniy, Peresyp, Pirs number 8,
Yevpatoriya, Sevastopol and Yalta).

[2] Second, both under the administration of [previous president] Leonid
Kuchma and today when [current President] Viktor Yushchenko’s team is in
power, official Kiev has tried to bring order to the functioning of the
Russian Black Sea Fleet on Ukrainian territory. Our country has now restored
its property rights to 64 lighthouses and light signs. But these attempts
have come up against stiff resistance from both the commanders of the Black
Sea Fleet and Russian political leaders…[ellipsis as published]

                                  SHOWING OF THE FLAG 
Several days after the incident in the port of Yalta, an anonymous source at
Derzhhidrohrafiya explained the actions of his colleagues to [the Ukrainian
news agency] Interfax-Ukraine, by saying the Russian fleet had illegally
been holding onto the lighthouse, since it had no rental agreement with
either the [Ukrainian] State Property Fund [SPF] or with the Transport and
Communications Ministry.

Besides, according to current Ukrainian law, lighthouses cannot be rented
out. The source also related that while the Yalta port was in the course of
taking an inventory, it became clear that the leadership of the lighthouse
had no agreement with the port on consuming electricity, and that there was
also no agreement on payments for renting the land [on which the lighthouse
stands]. As a result, the port was left directly with all the expenditures.

The Derzhhidrohrafiya employee also pointed out that the lighthouse needed
major repairs which had not been carried out for over 40 years. Because of
this, many additional mechanisms which should ensure its uninterrupted work
if the need arises, had completely broken down.

So if the Yalta lighthouse had not been taken for service by specialists
from the Derzhhidrohrafiya affiliate in Sevastopol, it was inevitable that
there would be breakdowns in its work which could lead to unexpected
consequences for shipping in the region. [Passage omitted: These arguments

do not satisfy Russia.]

The answer in return from Russia to the events of last week was not only
stepping up the aggressive information campaign, during which Russian
politicians, unabashed in their expressions, again accused official Kiev of
not adhering to signed agreements, but also stepping up the activity of
pro-Russian organizations in Crimea, which organized pickets “in defence

of the lighthouses of the Black Sea Fleet”.

At the same time, the Russian Black Sea Fleet command escalated the
conflict: it adopted a decision to strengthen security at those 35
navigation hydrographical sites in Crimea which Russian Black Sea Fleet
sailors are using today.

And not only personnel from the marines, but armoured units, too. For
example, an armoured personnel carrier appeared at Sarych Cape. And though
it later left the site’s territory, its very appearance is unquestionable
evidence that the Russians (the command of the Russian Black Sea Fleet, and
the Russian political leadership) are ready to consciously exacerbate the
situation and violate basic agreements on the Black Sea Fleet.

After all, dislocating military units and machinery is allowed only with the
agreement of the Ukrainian side (clause 5, Article 15 of the agreement on
the status and conditions of the location of the Russian Black Sea Fleet on
Ukrainian territory). And that was simply not done.

Commenting on the decision, Russian Defence Minister Sergey Ivanov said that
the security forces at Russian Black Sea Fleet sites “have all the authority
which is envisioned by the Statute of garrison and watch service of the
armed forces of the Russian Federation”. And he added: “I won’t get into the
details”.

We remind our readers that among other things, the statue mentioned above
envisions the man on watch should shoot to kill when a violator intrudes on
a secure site and refuses to obey commands. And he can shoot without warning
“in cases of obvious attack on himself or on the secured site”.

The value of the NHP sites is defined for the Russian Black Sea Fleet and
Russian politicians by several points. First, lighthouses have military
significance for Russian armed forces: in cases of aggravated situations in
the region it is with their help that the Russian Black Sea Fleet can be
secured in place.

Second, one must not forget the psychological effect the Kremlin and
pro-Russian organizations have from the presence of the Russian flag on NHP
sites. Today this is a sign of Russia’s military and political presence on
the peninsula. And consequently, returning these sites to Ukraine means more
than simply lowering the flag. That will be a symbol that the Russian
fleet’s departure from the peninsula is inevitable. And that is just what
Moscow would like to avoid…[ellipsis as published]

So who then is right in this heated “lighthouse conflict”? We shall try to
figure out those arguments which are used by each side proving that they

are right.
                            WHERE IS THE DEVIL HIDING? 
In the current conflict both the Ukrainians and the Russians cite the
Ukrainian-Russian agreement on dividing the Black Sea Fleet, and also
appendices numbers 2 and 3 to this agreement. In particular, the press
service of the Russian Black Sea Fleet insists: “The Yalta lighthouse,
pursuant to clause 15 in Appendix 2 to the agreement on dividing the Black
Sea Fleet, is a site of the Russian Black Sea Fleet from the time of signing
of the agreement on the fleet in 1997″.

“The Yalta lighthouse has the status of military camp number Ya-13, and is
found in Appendix 2 which contains a list of those sites rented to the
Russian Federation”, explains aide to the Russian armed forces command, Igor
Dygalo. He also said again that “Russia, in accordance to the agreement on
mutual payments, makes annual rental payments in good faith to the Ukrainian
side”.

This document is seen differently in Kiev where they place emphasis on the
fact that Appendix 2 talks about sites and land plots in Sevastopol, while
Appendix 3 [refers] to those outside it bounds. Official representative of
the Ukrainian Foreign Ministry, Vasyl Filipchuk has this to say about the
text of the appendix: “The Yalta lighthouse is in Yalta, that is, outside
the bounds of Sevastopol. A complete list of all the sites that Ukraine has
given to Russia for temporary use beyond the boundaries of Sevastopol is
given in Appendix 3 of the agreement on dividing the Black Sea Fleet dated
28 May 1997.

But the Yalta lighthouse is not included in this list. Appendix 2 to this
agreement, to which the Russian Black Sea Fleet press service refers without
grounds, contains only a list of those sites which are temporarily given to
Russia within the boundaries of the city of Sevastopol. NHP sites, in
particular the Yalta lighthouse, are not included in that list and any
additional Ukrainian-Russian agreement concerning their transfer for
temporary use by the Russian side is non-existent”.

As far as sites in Yalta, appendix three mentions only two – communications
and rebroadcast post number 830 and the Yalta military sanatorium.

We point this out: while the Russians do not emphasize that Appendix 2
speaks of sites within Sevastopol, the representatives of official Kiev, in
turn, painstakingly avoid public mention of site Ya-13. At the same time, in
Appendix 2, in clause 15 “Sites of hydrographical service (used jointly)”,
sub-point 2 “Management of district number 47 of the hydrographical service,
together with the management of ocean expedition number 23″ the military
camp Ya-13 really is there; Ukrainian experts who were once involved in the
negotiation process told Zerkalo Nedeli it means the Yalta lighthouse.
[Passage omitted: original agreement could have been more explicit.]

In unofficial commentary representatives of the Ukrainian authorities,
explaining the position of official Kiev, say they do not know what Ya-13
means, since there was no inventory of sites occupied by the Russian Black
Sea Fleet in Crimea. However, when Ukrainian bureaucrats publicly say the
Yalta lighthouse is not mentioned anywhere, this gives the Russians reason
to accuse Kiev of lying.

For example, like Sergey Ivanov did a few days ago. There is no doubt that
such silence weakens Ukraine’s position in the information campaign, and
places our country in the less winnable position in the eyes of philistines.
The recent “discussion” between Russian MP Konstantin Zatulin and Ukrainian
First Deputy Foreign Minister Anton Buteyko on Kanal 5 television is a
bright example of this.
                                    KIEV’S ARGUMENTS 
And in our opinion, Kiev’s position – insisting that the Russian Black Sea
Fleet is illegally holding NHP sites, in particular the Yalta lighthouse –
is based on serious legal arguments which are hard for the Russians to
counter. In any case, such a conclusion can be drawn by analysing the texts
of the Ukrainian-Russian agreement on the Black Sea Fleet as well as
Appendix 2.

In clause 2 of Article 2 of the agreement on the Black Sea Fleet it reads
that “the list and parameters of sites used by the Russian Fleet in the city
of Sevastopol are contained in appendix number two”. Further, clause 15 of
Appendix 2 notes that “the list of navigation equipment, sites and
infrastructure of the hydrographical services of the Black Sea Fleet, which
are on Ukrainian territory will be finally agreed upon in the framework of
an agreement between Ukraine and the Russian Federation on
navigational-hydrographical and weather stations for securing safety on the
Black and Azov seas”.

One must not forget that clause 5 of Article 8 of the agreement on the
status and conditions of the Russian Black Sea Fleet being located on
Ukrainian territory reads that a separate agreement will define the order of
Kiev and Moscow using the NHP system in the Black and Azov seas. But

that agreement was never signed. Even though Ukrainian and Russian
diplomats once prepared several drafts of this agreement.

All of the above gives us the full right to state that the list of NHP sites
given in Appendix 2 is of a preliminary nature. And the conclusion can be
drawn that the Russians are not renting them, but, taking advantage of the
unregulated issue, are occupying them for free. Since there is no valid
Ukrainian-Russian agreement that gives NHP sites to the Russian side to

use and consequently, the Russian Black Sea Fleet command has no
legal grounds to use the lighthouses or other means of navigation.

Moreover, in 2002, [Ukrainian] parliament passed a law on the order of
allowing and conditions for the presence of units of the armed forces of
other countries on the territory of Ukraine, which made it senseless to
prepare an agreement on navigational sites and renting them out. For

clause 3 of Article 17 of this law reads: “sites and means…[ellipsis as
published] of the national system of navigation and hydrography which
provide for the safety of shipping in the territorial waters of Ukraine
cannot be rented out”.

And pursuant to clause 1, Article 6 of the agreement on the status and
conditions of the Russian Fleet’s presence on Ukrainian territory, the
Russian Black Sea Fleet is obliged to adhere to Ukrainian legislation. In
light of all the above, the Russians cannot use the argument that the Yalta
lighthouse is noted on one of two maps.

In any case, the economic courts of Ukraine, which the Ukrainian side has
appealed to (in particular, representatives of the prosecutor’s office)
adopted a ruling on NHP sites in our favour. And although Sergey Ivanov
calls these courts “country bumpkin”, the Russian side was present at these
court proceedings defending the Russian position and was familiar with the
decisions made.

Nevertheless, the Russians continue to hold onto NHP sites. They say that
the arguments about the Yalta lighthouse and other NHP sites are
international and cannot be decided unilaterally making use of the court
system in Ukraine or decisions taken on an internal government level. And,
appealing to Ukrainian-Russian agreements, they suggest that the matter be
resolved at a meeting of the sub-commission on the Black Sea Fleet.
                                        SO, LET’S TALK? 
The latter is fine by Kiev, which has been trying unsuccessfully for several
years to hold such a meeting while the Russians have been putting it off
with all sorts of excuses. And this was especially active after the Russian
side lost the legal basis for renting NHP sites on the Crimean coast. And
with things not being legally regulated, this played into the hands of the
Russians. Yes, Moscow officially recognized Ukraine property rights to NFP
sites.

In particular, [current Russian ambassador to Ukraine] Viktor Chernomyrdin,
in a letter to then-Ukrainian prime minister Yevhen Marchuk dated 6 February
1996, when he was [Russian] prime minister, and also in such a document as
“News for Sailors” from 1996, 1998 and 2000. However, in practice the
Russian side does not recognize this right. Moreover, although the Russians
say that these sites are used jointly, they still do not allow Ukrainians
onto navigational-hydrographical sites.

It is expected that the issue of navigational-hydrographical provision will
be discussed by the sub-commission on Black Sea Fleet issues under the
intergovernmental Yushchenko-Putin commission. It is supposed to take

place on 16-17 February.

And at this meeting Ukrainian diplomacy will attempt to resolve the issue of
Russia renting a number of land plots in Sevastopol and other Crimean
districts as well as issues linked to the navigation systems. And of course,
to unambiguously state that though the agreement with the Black Sea Fleet
will not be denounced, the Russian Fleet will need to quit Ukrainian
territory in 2017.

[Passage omitted: Russia will try to use the current pre-election situation
in Ukraine to its advantage. President Yushchenko has not taken a clear,
public stand.]

Meanwhile, it is worth remembering that the matter is not confined to a
simple attempt to “create order at home”. The ability of the Ukrainian
authorities to control the presence of a foreign state’s military formations
on Ukrainian territory depends on the resolution of many issues linked to
the presence of the Russian Black Sea Fleet in Crimea. And that also defines
the international authority of our country, which has been seriously damaged
recently.   -30-
——————————————————————————————-
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
15. UKRAINE TRANSPORT MINISTRY PLANNING TO ATTRACT USD
600 MILLION IN INVESTMENTS FOR 2006 RAILROAD DEVELOPMENT

Ukrainian News Agency, Kyiv, Ukraine, Thursday, February 2, 2006

KIYIV – The Transport and Communications Ministry is planning to attract
about USD 600 million in investments in modernization of infrastructure and
purchase new rolling stock for the railway industry in 2006. Transport and
Communications Minister Viktor Bondar announced this to journalists. Sixty
percent of the money will be internal capital while 40% is expected to come
from foreign investors.

In addition to investments in the railway industry, the Transport and
Communications Ministry expects investments in each of the sectors
controlled by it to amount to USD 200-250 million in 2006.

Bondar said that the Transport and Communications Ministry presented the
most powerful projects in the area of transport and communications during a
meeting of an investment council that took place on February 2. However,
according to him, this is far from being all the proposals that the ministry
is prepared to make to potential investors.

As Ukrainian News earlier reported, the Transport and Communications
Ministry intends to buy 5,000 freight cars, 156 passenger cars, 25
locomotives, and 15 diesel trains for the railroads in 2006.

The ministry has drafted financial plans for railroads until the year 2017.
The ministry also intends to start implementing a program for introduction
of high-speed trains (with a speed of 250-300 kilometers per hour) in 2006.

The Transport and Communications Ministry previously planned to introduce
high-speed trains with a speed of up to 200 kilometers per hour by the year
2016 to connect Kyiv with most regional centers and the Crimea. About 10
such trains are presently in operation in Ukraine.  -30-

——————————————————————————————-
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
16. ITALIAN ANTONIO MERLONI PLANS TO START PRODUCTION
     OF ARDO WASHING MACHINES IN IVANO-FRANKIVSK IN 2006

Ukrainian News Agency, Kyiv, Ukraine, Thursday, February 2, 2006

KYIV – Antonio Merloni, an Italian company that produces domestic
appliances, intends to start the mass production of Ardo washing machines
at the Ukrainian-Italian joint venture Ukrainian Domestic Appliance in
Ivano-Frankivsk in 2006.

Ivano-Frankivsk mayor Zinovii Shkutiak announced this in a live interview
with the local TV channel Third Studio on November 3, asked by Ukrainian
News. “In 2006, Antonio Merloni is planning to start large-scale production
of 800,000 washing machines per annum,” he said.

According to Shkutiak, the Italian company has already received a EUR 50
million credit and will invest it in its production in Ivano-Frankivsk. The
mayor also noted that Ukrainian Domestic Appliance has already purchased 12
hectares of land near the Ivita factory (Ivano-Frankivsk), which produces
domestic appliances, to locate production facilities.

“However, the Italian company is asking to sell 40 hectares more in the
district of the Khryplyn industrial center,” he said.

As Shkutiak said, Antonio Merloni is planning to build a full-fledged
factory on this land that would produce all kinds of domestic appliances.

A representative of Ukrainian Domestic Appliance told Ukrainian News that at
the moment, installation work and reconstruction of production premise are
being conducted at the factory, and the enterprise is receiving new
equipment. According to director general of Antonio Merloni -Valerio Fedeli
the company hopes that by the end of 2006 the plant will start to function.

As Ukrainian News reported, Antonio Merloni acquired a controlling stake in
the Ivita factory in 2003 and created Ukrainian Domestic Appliance on the
basis of its production facilities.

In early 2005, the Italian company said it planned to invest EUR 50 million
in production of the Ardo brand of washing machines at the Ukrainian-Italian
joint enterprise called Ukrainian Domestic Appliance in Ivano-Frankivsk in
2005.

In 2004, Antonio Merloni already invested EUR 600,000 in the production and
delivered equipment worth EUR 436,000. The Dnipropetrovsk-based Nord

concern attempted to re-launch production of washing machines at Ivita in the
2000-2001 period. Production of automatic washing machines at Ivita started
in 1992, but it was later suspended.  -30-
——————————————————————————————-
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
17. SCANDINAVIAN SEB BANKING GROUP CONSIDERS BUYING
                              A SECOND BANK IN UKRAINE

IntelliNews – Ukraine Today, Kyiv, Ukraine, Thu, February 2, 2006

KYIV – The senior representative of SEB banking group Julius Niedvaras
said the group examines the possibility to buy another bank in Ukraine .
At the  same time Niedvaras underlined that SEB aims to establish its
representative offices in all regions of the country.

To remind you on Dec 14, 2004 SEB through its subsidiary Vilniaus
Bankas purchased medium sized Agio Bank, but during the 2005 Agio
 Bank did not expand its branch network.

IntelliNews supposes that if another bank is purchased the Scandinavian
group can merge the two and create a large financial institution. -30-

——————————————————————————————-
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
     You are welcome to send us names for the AUR distribution list.
========================================================
18.  EPAM SYSTEMS SOFTWARE COMPANY SECURES EQUITY
              INVESTMENT FROM SIGULER GUFF & COMPANY
EPAM software dev centers located in Russia, Belarus, Ukraine & Hungary.

Business Wire, USA, Wednesday, Feb 01, 2006

EPAM Systems, Inc. (http://www.epam.com), the number one provider of
software engineering outsourcing services in Central and Eastern Europe,
announced today that Siguler Guff & Company has made a significant
investment in EPAM equity.

To fully leverage EPAM’s position as the largest, most experienced provider
in the region, these additional funds will accelerate both organic and
acquisition based expansion of EPAM’s delivery capacity in Eastern Europe
as well as client facing consulting capabilities in US and EU.

EPAM CEO Arkadiy Dobkin said, “We chose Siguler Guff as our partner
due to their unparalleled experience investing in the region and long
history of venture investing in the US.”

“Siguler Guff is delighted to be working with the EPAM management team,”
said Drew Guff, Managing Director of Siguler Guff, “their organic growth
during the last 5 years put them in a regional leadership position at a
critical juncture when Central and Eastern Europe has gained visibility,
reputation and market share in the global services market. We hope to
accelerate EPAM’s growth, fully capitalizing on opportunities for regional
consolidation.”

                                     ABOUT SIGULER GUFF
Siguler Guff is a leading private equity management firm with over $3
billion under management since inception. Siguler Guff’s diversified private
equity business includes a leading private equity firm investing in Russia
and other countries of the former Soviet Union. It has been making
investments in the region since 1994, and currently has $350 million in
investable capital. For further information contact: Thomas McGowan

(212) 332-5126, thomasm@sigulerguff.com, www.sigulerguff.com.

                                    ABOUT EPAM SYSTEMS
EPAM Systems is a global provider of software engineering services. In
January 2005 EPAM was named No.1 of “Top 5 to Watch in Central and
Eastern Europe” and No.3 of “Top 10 Specialty Application Development
Leaders” categories on the global Offshore 100 list by neoIT and CMP’s
Managing Offshore.

Founded in 1993, EPAM maintains North American headquarters in Princeton,
NJ and European headquarters in Budapest, Hungary as well as support and
delivery operations in UK and Germany. EPAM software development centers
are located in Russia, Belarus, Ukraine and Hungary.

EPAM’s customer base includes industry leaders such as Reuters, London
Stock Exchange, Colgate-Palmolive, British Telecom, Empire and CareFirst
BlueCross BlueShields and Halliburton and technology leaders such as SAP,
Hyperion, BEA Systems and Microsoft. For further information contact:
press@epam.com EPAM Systems Irina Brukhman, 609-844-0400,
www.epam.com.  -30-

———————————————————————————————-
NOTE:  Siguler Guff is a member of the Ukraine-U.S. Business
Council in Washington, D.C.
———————————————————————————————-
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
19.                        UKRAINE RISK: RISK OVERVIEW

The Economist Intelligence Unit Limited
New York, New York, Thursday, February 2, 2006

                                       OVERALL ASSESSMENT
Operating risk in Ukraine is fairly high. The new leadership, which took
power early in 2005, is more committed than the previous one to attempting
to increase political transparency and uphold the rule of law. However,
reforming the political process takes time. In the mean time, the
bureaucracy will remain ineffective, and vested interests will still be in a
position to distort the commercial and administrative system.

Red tape will similarly remain pervasive, although the government is moving
more quickly than previous ones to ease the regulatory burden and simplify
procedures. Discrimination against foreign businesses was common in the
past; the new administration is improving on this, but concrete results will
only be noticed gradually.

Moreover, the new leadership’s plans to review past privatisation deals,
although now drastically scaled back, have increased uncertainty and raised
concerns over property rights. The tax system is unclear and unpredictable.
Infrastructure is inadequate.
                                            SECURITY RISK
Security risk in Ukraine is low. Armed conflict is not a concern. Although
ethnic tensions over Crimea persist, these are not expected to lead to
violent confrontations. The political crisis that followed the flawed
presidential election in 2004 fuelled inter-regional differences, but a
resort to violence remains unlikely, and there is no indigenous armed
activity of any kind. There is some hostility to foreign capital, but little
opposition to foreign business people as such, and they face no special
risks.

Violent crime is a concern for all businesses, as is the influence of
organised crime in Ukrainian politics and the economy. Foreigners have not
so far been targets of kidnapping but there have been attempts at extortion.
A rise in the number of physical attacks against foreigners was reported in
2005, although these were still isolated incidents.
                                  POLITICAL STABILITY RISK
The risk of political instability and social unrest is significant. Victor
Yushchenko came to power backed by a fragile coalition, the competing
interests of which have undermined political stability, leading the
president to sack the cabinet in early September 2005.

The new cabinet proved more cohesive, but was brought down by parliament

in January 2006 and now serves in a caretaker capacity. The cabinet’s sacking
adds to the considerable political tension already resulting from the
campaign for the March 2006 parliamentary election.

Moreover, sweeping constitutional changes, which shift powers from the
presidency to parliament, entered into effect at the start of 2006 and have
already proved they will fuel political instability. The constitutional
changes, combined with the poor prospects for any stable majority coalition
emerging in the new parliament after the election, will increase the
likelihood of further government reshuffles and even the possibilities of a
pre-term parliamentary election.
                    GOVERNMENT EFFECTIVENESS RISK
Government effectiveness risk is very high. The leadership and the
bureaucracy have traditionally performed poorly and erratically. Corruption
is widespread and red tape is pervasive. The policy confusion and often
dysfunctional interaction of the new reformist leadership in place since
early 2005 has confirmed how hard these faults are to address. Progress on
administrative reforms will continue to be slow, and vested interests are
still prominent in the public sector.

The introduction of constitutional changes at the start of 2006 has
strengthened parliament and the cabinet, in part by weakening the
presidency, and could eventually lead to a more effective political system.
However, political manoeuvring surrounding the shift to a new distribution
of power is likely to reduce government effectiveness over the short term at
least.
                            LEGAL & REGULATORY RISK
The legal process is not independent and the judiciary is easily cowed by
vested interests. Contracts are difficult to enforce and regulation is
neither impartial nor clear. Although it is possible for foreign firms to
win court cases, particularly at the higher levels, the judicial process
remains slow and inefficient.

Ukraine is dominated by powerful local players who have successfully
excluded foreign capital. The risk that foreign investors’ assets will be de
facto expropriated is low, but recent examples of this exist.

The outgoing government’s record on promoting competition and restraining
unfair competitive practices was poor. Although the new presidential
administration is more committed to a level playing field, reforming the old
system will take a while. Private property rights are still not well
protected. Local accounting standards are well below accepted levels in the
EU and the US.
                                  MACROECONOMIC RISK 
Ukraine’s economic growth decelerate d rapidly in 2005. Inflation has risen
but remains moderate, and the currency is stable. Although relatively strong
growth is expected over the forecast period, the economy is still
over-dependent on a few low value-added sectors. This increases the
economy’s susceptibility to price and demand swings, and its vulnerability
to anti-dumping charges abroad.

Moreover, low levels of investment raise further doubts over the
sustainability of the economic recovery. Fiscal policy has loosened over the
past year, leading to some risk of higher inflation. Further inflationary
pressures are to be expected as the government boosts incomes prior to the
2006 parliamentary election, and as price liberalisation is completed.
                        FOREIGN TRADE & PAYMENTS RISK
In the event of a financial crisis, foreign-exchange availability would
rapidly disappear–as was most recently apparent during the election-related
turmoil in late 2004. Discriminatory tariffs are a low risk but might be
imposed in the event of a grave economic crisis. There is a moderate risk of
excessive trade protection, and some capital controls are expected to remain
in place.

The central bank has loosened currency controls in recent years. Not least,
it abolished the requirement that 50% of export earnings be converted into
the domestic currency. The central bank has long been under pressure from
exporters eager to see swifter currency depreciation, but it has thus far
resisted these demands.
                                         TAX POLICY RISK
The tax system poses some risks for business, since the tax regime lacks
predictability and transparency. Parliament made some progress in 2003 in
amending tax laws, including passage of a flat 13% income tax rate, which
entered into effect at the start of 2004. Parliament attempted on occasion
to reduce the VAT rate (from 20% to 17%) under the previous president, but
was blocked by presidential veto.

The level of corporate taxation is moderate, having been lowered as of 2004
as part of a campaign to encourage tax compliance. However, at 25% it is
still higher than in many Central European economies. There is a persistent
risk that taxes will be enforced in a manner unfavourable to foreign firms
even if, in theory, they are non-discriminatory. An additional risk comes
from sudden changes in the tax environment that leave businesses little time
to adjust.
                                  LABOUR MARKET RISK
Labour market risk is moderate. Strikes are only common in the state sector
and scarcely affect foreign firms. Labour laws are tilted towards the
employee and against the employer. There is a shortage of managers and
employees with exposure to doing business in a market economy. Wage
compensation is slowly moving towards a system under which pay is related to
productivity rather than age. There is no risk that freedom of association
will not be respected.
                                         FINANCIAL RISK
Financial risk remains relatively high in Ukraine. The financial sector is
still underdeveloped, and there is little long-term finance available
domestically for the private sector. Few foreign firms would want to access
the small local financial markets. There is an inadequate local bond market,
while the illiquid stockmarket plays little role in providing equity
finance.

In 2004 the international Financial Action Task Force (FATF) removed

Ukraine from its blacklist of countries deemed not to be sufficiently vigilant
in confronting money laundering.
                                 INFRASTRUCTURE RISK
Infrastructure risk is high. Port facilities are extensive and have improved
over the past three years, but are in need of further upgrading. Air
transport provision has deteriorated, requires investment and is expensive
compared with other locations in the region. The distribution network is
erratic and below standard. The telecommunications system requires massive
investment.

The road network is large but in poor repair, with the railways suffering
from similar problems. Power generation capacity is sufficient, but power
cuts are possible at any time and non-payment for energy is a concern.
Information technology infrastructure is inadequate for a country with
Ukraine’s level of education.    -30-
——————————————————————————————
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
20.                              CHOCOLATE MANIA
  Ukraine hosts its first Korona Chocolate Festival by Kraft Foods Ukraine

Nadia Tysiachna, The Day Weekly Digest in English, #2, Tue, Jan 31, 2006

On Jan. 20-22 Kyiv’s Ukrainian House hosted the first Korona Chocolate
Festival organized by Kraft Foods Ukraine, owner of the Korona trade mark.
The organizers say that similar events pull crowds in Europe and America.

Every year tourists from far and wide descend on the Italian town of Perugia
to sample a smorgasbord of sweetmeats. Two years ago this festival drew a
record number of 900,000 gourmets and visitors. For a couple of day every
year the Belgian town of Verviers turns into the world’s sweetest town. At
one time it was home to 300 chocolate factories.

Festival visitors can familiarize themselves with the process of making
sweets, which apparently has long-standing traditions. France holds a
one-of-a-kind pageant to elect Miss Cocoa. It also features a fashion show,
where designers display clothing or accessories made of chocolate in
addition to regular cloth dresses or suits.

“We love Ukraine and explore Ukrainians’ culinary preferences,” says
Kraft Foods Ukraine CEO Yuriy Logush. “Korona was developed
specifically for the Ukrainian market. Its production was launched at our
factory in Trostianets in October 1995.

In those days, much like now, we faced a lot of competition from 26
confectioners, six or eight of which produced chocolate bars. But very
soon we won the hearts of consumers and in 1997 the original dark
chocolate Korona became the nation’s No. 1 brand.

We are holding onto the lead to this day because we buy high-quality
ingredients and maintain the highest production standards. After all, we
operate Ukraine’s only full cycle of chocolate production – from the
treatment of cocoa beans to ready products.

Proof that our technologies are the best is the fact that in 2001 we started
producing Milka chocolate in Trostianets. At the time only two factories
in Europe produced chocolate under this trade mark.” In the ten years
since the company’s creation it has produced an astounding 100,000 tons
of chocolate, or one billion chocolate bars.

“This is Ukraine’s first chocolate festival, and it is obviously up to the
leader in the domestic market to start this tradition,” says Sviatoslav
Komakha, the company’s candy marketing manager. “Korona is our
compatriots’ favorite chocolate. On the occasion of the brand’s tenth
anniversary we organized this feast for all chocolate lovers. We hope
that in a few years it will grow to match the one in Perugia.”

The festival’s opening ceremony took place on Jan. 20 in a circle of
colleagues, partners, and friends. The same day saw the presentation of
the world’s largest chocolate bar weighing three tons and measuring four
meters long and two meters wide. It immediately entered the Book of
Records of Ukraine.

Meanwhile, the biggest chocolate bar in the Guinness Book of Records
weighs only 2,280 kilograms. What is there to say? The chocolate creation’s
impressive size beckons: it’s not every day that you get to view a similar
masterpiece with a claim to international fame.

According to Komakha, it took 14 hours to assemble and an entire month to
prepare. “What makes this bar unique is that it is handmade. In creating the
chocolate bar, specialists at the Trostianets factory used methods that the
Aztecs and Mayas – the first people to use cocoa beans – used to build their
temples and pyramids. The bar consists of over 100 chocolate monoliths
molded together with hot chocolate.”

It looks as though it would have made a monumental sculpture. Chocolate
sculptures were unveiled by artists Oleksandr Volosenko and Volodymyr
Kuznietsov. Normally they work with gypsum, stone, wood, and even ice.

This was their first experience with chocolate. They used 40-kilogram
blocks of chocolate to sculpt a crown, cocoa bean, nude female torso
(the traditional inspiration for male artist), and an Indian chieftain.

They admit it was no simple task, as the material is fragile. Still, they
prefer dark chocolate to milk chocolate, as it is more consistent. From
them I learned that sculptures can be colored by adding food-grade dyes
Perhaps I should recommend this art form to my aunt, the famous
sculptor Khrystyna Kachaluba of Switzerland, where such festivals
must take place.

Next to this improvised studio is a boutique with a variety of candies
shaped like chess pieces, medallions, horseshoes, and hearts, which I
secretly choose. In my mind’s eye I picture a porcelain jewelry box tied
with a bright ribbon. Wouldn’t this make a nice gift? “Have you decided on
the hearts? I like them too,” says Yulia Mishchenko, the lead singer of the
band Talita Kum, reading my mind.

No matter what they say, we women are all alike in some ways. “Korona
has initiated a very positive festival,” says Yulia. “I learned lots of new
things about the history of chocolate, even though this has long been one
of my interests.” In fact, chocolate lore could be enriched at a nearby
installation, where visitors were learning the ABCs of chocolate making in
the form of an interactive computer game.

It starts with the story of the cocoa tree, which grows for three to five
years before blooms for the first time, and ends with the words: “Now we
temper the chocolate mass to give it a delicate flavor and then pour it into
molds.” The game provides a full account of the chocolate production
cycle.

On the opposite side of the showroom visitors could instantly test their
newly-acquired knowledge. A computerized machine designed to resemble
ancient Aztec stone monuments asked questions, like “How many times
a year are cocoa bean trees harvested?”

At a nearby window display of hot chocolate I join the athlete Stella
Zakharova. In conversation with her I learn that Korona was among the
sponsors of her rhythmic sport gymnastics tournament. I immediately recall
that not long ago this company sponsored Viktor Petrenko’s ice show in
Kyiv, “We Are the Champions,” which featured various generations of
Olympic figure skating champions.

The management of Kraft Foods Ukraine always stresses that as a national
producer the company feels an obligation to Ukrainian society, which is
why it often sponsors interesting events. The Empire of Cinematography
program on 1 + 1 Television was the first to dub foreign movies into
Ukrainian on Korona’s initiative. The company also sponsored the Gold
Crown International Opera Festival in Odesa and held the Crowning of
the Word literary competition for the sixth consecutive year.

Serhiy Arkhypchuk, the mastermind behind the Crowning of the Word
and the Gold Crown events, noted: “The atmosphere here is incredible!
During these freezing cold days the fiery Latin American dances are
especially exciting to watch, in particular the passionate tango,
international all-time hits performed by a mini-orchestra, and, of course,
the chocolate with an emphasis on its origins.

I am certain that many events with Korona’s involvement reflect the
management’s priorities and the company’s philosophy in general. We
have a lot people telling everybody how things should be done, but very
often their talk is useless. The efficient businessmen of Kraft Foods
Ukraine are an alternative to them.”

I ran into the popular Ukrainian fashion designer Lilia Pustovit just as she
was making a difficult choice: chocolate with almonds, hazelnuts, raisins,
wafer bits, or candied fruit? She had to decide quickly, as there were many
people who were keen to create their small chocolate artworks. Who knows,
maybe this will become a source of interesting, new recipes for Korona?

“I’m inspired by the visitors’ happy mood,” says Lilia. “They are filled
with nice and even blissful emotions. Perhaps chocolate does have magical
properties, which means that I am not ruling it out as an element in my
works. I am working on my winter-fall 2006-2007 collection, which will be
dominated by chocolate and maroon colors. I’m on the lookout for
everything that will match this range.”

In order to convey the atmosphere of this fairytale event to readers across
Ukraine in a more sensitive and credible way, the organizers announced a
journalism contest for the best publication. The jury includes Maksym
Rylsky, chairman of the board of the all- Ukrainian press club center
“Ukraina Forum,” National Union of Journalists chairman Ihor Lubchenko,
1+1 Television’s general producer Valeriy Oseledchyk, and others.

Four authors of the most original articles will win a trip to Cologne for an
international exhibition of chocolate products this May, and others will
receive consolation prizes. We all know how generous Korona’s
consolation prizes can be.

The festival in Kyiv drew many people: couples, families, and groups.
Everybody tried to create their own chocolate. After all, where else would
they get a similar opportunity? Book lovers bought books by Crowning
of the Word winners from past years.

Young people converged mostly on the boutique, as St. Valentine’s Day is
just weeks away. Little children demanded to be carried by their parents so
that they would not forget to buy some of their favorite sweets. I was moved
by one particular scene, which felt like a memory from my own childhood.

A girl of about five years old was following in her mother’s footsteps,
eating chocolate greedily and stuffing more into her pockets for later. She
was probably thinking: ‘What if the grownups change their mind and tell me
I can’t have any chocolate before supper?’

The first Korona Chocolate Festival was joyous and full of life. It radiated
an aura of wellbeing, sharpening one’s sense of style and, obviously, good
taste.  -30-
——————————————————————————————–
LINK: http://www.day.kiev.ua/156539/
——————————————————————————————–

NOTE:  Kraft is a member of the Ukraine-U.S. Business Council
in Washington, D.C. and the AMCHAM in Kyiv, Ukraine.
——————————————————————————————-
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
         Please contact us if you no longer wish to receive the AUR    
========================================================
21. AMERICAN POLITICAL CAMPAIGN EXPERTS WORKING FOR
                     SDPU(o), PARTY OF REGIONS AND PORA
    Working for Victor Medvedchuk, Victor Yanukovych, Rinat Akhmetov

LETTER TO THE EDITOR: From Katie Fox
Deputy Director – Eurasia, National Democratic Institute (NDI)
RE: Glavred.Info article on U.S. campaign experts working in Ukraine
The Action Ukraine Report (AUR), #653, Article 22
Washington, D.C., Friday, February 3, 2006

Morgan,

It has come to our attention that an article from Glavred.Info that was
posted in The Action Ukraine Report (AUR #650, article 3) contains
erroneous information about the National Democratic Institute (NDI).
The current activities of Andreas Katsouris, a former NDI representative
in Kyiv, have been wrongly associated with the Institute.

It is unfortunate that Mr. Katsouris’ visits to Ukraine soon after leaving
NDI’s employ have caused confusion.  However, Ukrainians should know
that Mr. Katsouris’ current activities as a private political consultant is
in no way related to the nonpartisan work of NDI.  Mr. Katsouris is no
longer associated with the Institute.

In addition, Glavred.Info, in their article wrongly reported that Tetiana
Sobelieva, who is currently a candidate on a parliamentary list, receives a
salary from NDI. Ms. Sobelieva is not employed by NDI and receives no
salary from the Institute.

NDI continues to offer training to both government and opposition parties
to promote the growth of democratic institutions, including a pluralistic
party system.

Thank you. 

Katie Fox, Deputy Director – Eurasia
National Democratic Institute, 2030 M St. N.W. Fifth Floor
Washington D.C. 20036, 202-728-5682; katief@ndi.org
——————————————————————————————–
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
22.                                A MAN-MADE EDEN
     Cursed land or untouched paradise? Two decades after the Chernobyl
     disaster transformed dozens of communities into ghost towns, a book
                            by Mary Mycio assesses the damage.

BOOKREVIEW: By David R. Marples
RE: “Wormwood Forest: A Natural History of Chernobyl”
By Mary Mycio, Joseph Henry Press, 259 Pages. $27.95
Moscow Times, Moscow, Russia, Friday, January 27, 2006

The appearance last fall of “Wormwood Forest,” Mary Mycio’s absorbing
book about Chernobyl, coincided with the release of a controversial report
by several agencies of the United Nations and the governments of Russia,
Ukraine and Belarus on the environmental and health effects of the 1986
nuclear disaster.

Together, the two studies offer an antidote to more pessimistic analyses —
an indication that the effects of the accident might be less bleak than
initially predicted, and that a reassessment is warranted of the evacuated

areas and of medical casualties, both now and in the future.

That Mycio, a Kiev-based reporter and lawyer who also holds a degree in
biology, has been working on this book for some time is evident. Her
initial findings appeared in the Los Angeles Times almost 10 years ago,
and, in the preface, she describes how her research transformed her from
“adamant opponent of nuclear energy to ambivalent supporter” as she came
to understand that alternative forms of energy have also taken a heavy toll
on her ancestral Ukraine.

Rather than the expose of government lies she initially meant to write,
“Wormwood Forest” dwells on the wildlife, vegetation and people of
Chernobyl, alternating between explanation and storytelling in a way that
is easy to follow and frequently anecdotal.

The eight chapters are offered as a sort of travelogue, with the author
wandering from the Belarussian side of the border to the Ukrainian,
accompanied by various officials from the so-called Zone of Alienation,
an area of highly contaminated land extending 30 kilometers out from the
accident’s epicenter. The fourth reactor unit at the Chernobyl nuclear
power station exploded on April 26, 1986, as operators were testing whether
energy from turbines could continue to supply electricity and maintain
coolant flow for as long as it took to switch to diesel emergency power.

Mycio thoroughly explains the environmental damage that ensued as
radioactive material began migrating through the soil. Among the most
immediate social consequences was the widespread evacuation of extensive
areas of Ukraine, Belarus and Russia. Mycio takes a hard look at the merits
— or lack thereof — of the evacuation, asking which country actually
suffered the most.

There is no clear answer to that question. Mycio provides a detailed table
listing the people affected by Chernobyl through 2000 — 5.85 million in
all — and shows, surprisingly, that over 2 million were from Russia,
slightly more than the 1.94 million from Ukraine and 1.82 million from
Belarus.

In an objective and balanced assessment of the evacuation, she
concludes that although the initial exodus was necessary and had an
important impact on reducing radiation doses, the ones that took place
more than a decade after the disaster did more harm than good because
of the social and economic stresses involved.

Mycio is particularly informative when looking at animal life, and
particularly at the boars, deer, bison and various rodents that took
advantage of the absence of humans and proliferated in their new natural
habitat. Focusing on the successful breeding experiments with Przewalski’s
horses, she dispels the myth of genetic mutations, noting that if there had
been such mutations, these animals would have quickly died out. The
author’s descriptions of journeys into various parts of the zone to examine
these horses are never less than entertaining.

More sobering is her discussion of the water situation; strontium levels in
certain waterways doubled between 1986 and 1994. One of the many ironies
of the fallout is that, today, the highest exposure to radiation through
water consumption occurs not in Kiev but lower down the Dnieper River
where the water is used for irrigation. This gives the radioactive particles
a
suitable pathway into the food chain. Though there are no mutants among
mammals or fish, data collected 15 years after the accident showed all fish
exceeding official limits for radioactivity. The most dangerous area, close
to the reactor, is termed the “right-bank floodplain”: “Each of its five
square kilometers was contaminated with as much as 1,600 curies of cesium
and 450 curies of strontium.”

Mycio is at her best when she focuses on the human element, providing
poignant descriptions of the samosely, or voluntary settlers, who wandered
back to their homes in the wake of the accident. From some 1,210 samosely
in 1987, the number of settlers dropped to only about 300 by the start of
the 21st century. Yet people legally living outside the zone are not immune
to Chernobyl’s effects; radiation levels in the soil of some nearby areas
measure from 15 to 40 curies per kilometer. Mycio refuses to speculate on
the dangers, however, noting that much depends on the food consumed and
the environmental variations from one region to another.

The key problem — one that is implicit though understated in the UN report
— is that there is no consensus on the effects of small or chronic doses
of radiation. As Mycio notes, it is difficult to compare Chernobyl
populations with those that do not undergo regular screening. Not
surprisingly, the health effects appear far more evident in people who are
closely monitored. Further, it is almost impossible to distinguish deaths
due to Chernobyl-induced cancers from those arising from other factors.

Rarely will one find a book that covers so much ground while remaining so
accessible to the reader. Unfortunately, the lack of footnotes makes it at
times impossible to discern whence various data derive. In her breakdown
of the number of people affected by Chernobyl through 2000, for example,
Mycio uses categories such as “people living in contaminated territories”
and “invalids” without explaining what level of radiation constitutes a
contaminated territory and how an invalid is defined. Equally frustrating
is the table’s division of “liquidators,” or decontamination personnel,
into two separate lists, one clearly pegged to the years 1986-1987 but the
other (presumably for 1988-2000) not specified.

Similarly, some arguments are advanced and then left undeveloped,
particularly Mycio’s assessment of charitable associations and of the
health vacations offered to children abroad. The author criticizes Chabad’s
Children of Chernobyl project for bringing affected children to Israel for
medical treatment, calling it “a monumental waste of money” that would best
be spent on establishing medical institutions in the contaminated areas.

But is the same true for all charitable associations? And would such
international efforts be possible in Belarus, which traditionally has never
worked in harmony with non-governmental organizations and continues
to imprison scientists who disagree with its assessment of Chernobyl’s
impact? Mycio stops short of answering these and other important
questions.

While one can only admire the author for her fortitude in working in the
zone, the impression she leaves of a great nature reserve rising like a
phoenix from the Chernobyl ashes will surely be used to strengthen the
case of those who believe that the disaster’s consequences have been
exaggerated.

The historian might comment that the abandonment of
settlements that have existed for eight centuries is an eternal indictment
of nuclear energy. Mycio does not, and that is her privilege, but this
book, which has many merits, will not end the debate.  -30-
——————————————————————————————-
David R. Marples is a professor of history at the University of
Alberta and the author of three books on the Chernobyl disaster.
——————————————————————————————-
LINK: http://www.themoscowtimes.com/stories/2006/01/27/105.html
——————————————————————————————–

[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
23.                               OUR THERMOPYLAE
                Paying sacred tribute to the 300 young heroes of Kruty

By Ihor Siundiukiv, The Day Weekly Digest in English, #2
Kyiv, Ukraine, Tuesday, January 31, 2006

Everyone who has studied ancient history remembers the 300 Spartan

heroes, who died in 480 BC in Thermopylae Gorge but stopped the
advance of the Persian invaders.

In critically reconsidering Ukrainian history and lightening the heavy
burden of mistakes, shortcomings, illusions, and even crimes, we
nevertheless have no right to forget that there will always be a place in
our legacy for heroic feats that resemble the act of the Spartans. In other
words, there have always been hundreds and thousands of Ukrainians

ready to sacrifice their life for the Motherland.

On Jan. 29, 1918, 300 young Ukrainians, including Kyiv high school students
and fighters from a few Cossack detachments and militia forces, were
surrounded near the railway station of Kruty (Chernihiv oblast, near
Bakhmach). Most of them were high school students between the ages of

16 and 18.

Those boys were prepared to give their lives in order to halt the Bolshevik
troops of Muraviyov and Antonov-Ovseenko, who were advancing on Kyiv.

They were all killed: nobody managed to break free.

Paying sacred tribute to the heroes of Kruty and honoring the memory of
these members of the Ukrainian Pantheon of Glory, we cannot avoid asking
ourselves the question: why was there no one but those 300 young heroes
defending Ukraine’s nascent statehood.

After all, at this very time the Central Rada was working day and night
enacting fundamental documents, including the Fourth Universal. The Kruty
tragedy may be unconditionally understood only in the overall context of
developments that transpired in Ukraine in 1918.

The fact of the matter is that the Central Rada’s socialist leadership
sincerely believed (fatal illusion!) that it was possible to successfully
defend independence by political rather than military means, forgetting that
in the real, harsh world the course of events is determined by military
force in particular.

By demobilizing the greater part of the Ukrainized units (300,000 men!) that
were ready to serve the new government in the summer and fall of 1917, the
Central Rada made a fatal mistake. A negative role was also played by the
political “neutrality” of the former Ukrainian soldiers, who headed for
their villages, succumbing to the notorious psychology of “it’s not my
affair.”

The Day to Commemorate the Heroes of Kruty is a day of Glory and at

the same time a warning: in this world there have been, are, and will be many
adversaries (I would rather not use the word “enemies”) of our real
independence. History and politics are a struggle of interests. Let us not
forget this.  -30-
———————————————————————————————
LINK:  http://www.day.kiev.ua/156520/
———————————————————————————————
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
24.                NEW BOOK: “AN ORANGE REVOLUTION”

             By Askold Krushelnycky will be published in UK on March 14
 
By E. Morgan Williams, Publisher & Editor
The Action Ukraine Report (AUR), #653, Article 24
Washington, D.C., Friday, February 3, 2006
 
WASHINGTON – An outstanding book about recent historical events
in Ukraine, “An Orange Revolution” by Askold Krushelnycky, will be
published in the United Kingdom on Tuesday, March 14th.  The book
will be published by Harvill Secker/Random House. For those interested
in Ukraine and for those who participated in the Orange Revolution
this book will one not to miss. 
 
Askold told me about the new book he was writing when we met in
New York City almost one year ago.  He contacted me last week to
say the book was finally finished and a publication date has been set. 
Askold has been involved in Ukraine for many years, was based in
Kyiv during one of his assignments, and was a journalist reporting
from Ukraine before and during the Orange Revolution.
 
Askold Krushelnycky has mainly been employed as a staff journalist
for British newspapers, including the “Sunday Times,” “The Mail on
Sunday,” and “The European.” Has been based in New Delhi, Moscow,
and Kyiv. Was one of the first Western journalists into Afghanistan with
the mujahedin after the Soviet invasion. Currently writes as a freelancer
for RFE/RL, “The Independent,” and “The Chicago Tribune.”
 
As soon as additional information is available it will be published in
The Action Ukraine Report (AUR).  Our congratulations to Askold
for undertaking the task of writing about the Orange Revolution, for
completing the manuscript and now for the publication of his book. 
——————————————————————————————–
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
25. THE POLITICS OF PUBLIC LANGUAGE-USE OR WHY ENGLISH
                   SHOULD BE UKRAINE’S SECOND LANGUAGE

COMMENTARY: Stephen Velychenko, Resident Fellow,
CERES, Research Fellow, Chair of Ukrainian Studies,
Munk Center, University of Toronto, Ontario, Canada
The Action Ukraine Report (AUR) #653, Article 25
Washington, D.C., Friday, February 3, 2006

On January 29 Dmytro Pavlychko again warned Ukrainians about the threat of
Russian becoming the official second language. At a time when the educated
in every country in the world, including China and Russia, are learning
English as a second language, because English is the de facto
world-language, Ukraine’s neo-soviet Russophile politicians threaten to
isolate the country from the rest of the world with their Russian language
legislation and  throw Ukraine back culturally 100 years.

Continued use of Russian for business and in the public sphere would send
the message that “capitalism speaks Russian;”  it would reinforce Russophile
orientations and  the notion that Ukrainian is only suitable for domestic
use. Russian as a second language would mean educated Ukrainians who want
contact with the world would have to learn a third language.

Although the language issue is overshadowed in the domestic media by
well-merited concern over poverty and corruption,  and foreign neo-liberal
commentators ignore cultural issues because they think them irrelevant,  the
economics and politics of public language-use  in Ukraine should not be
overlooked as language-use is related to political orientations.

Fifteen years after independence public life, business and the media is
still Russian-speaking outside Ukraine’s three westernmost provinces. At the
beginning of this century, In a country where  20% of the  population were
Russian speaking Russians, 33% were Russian speaking Ukrainians and 47%

were Ukrainian speaking Ukrainians;  10% of Ukraine’s annual published book
titles, 12% of its magazines, 18% of its TV programs and 35% of its
newspapers were in Ukrainian ( O. Kuts, Movna polityka v derzhavotvorchykh
protsessakh [Kharkiv, 2004] 119)

The government does not enforce its language legislation. All government
employees must speak Ukrainian, but most don’t and continued to be paid
nonetheless.  Whether or not foreign corporations use Ukrainian inside their
stores is ignored. MacDonald’s does use Ukrainian on its menus. Baskin
Robbins does not.

As of 2004, teachers still used Russian in “Ukrainian language” schools,
some of which also had separate Russian language classes. Much more than

the legally permissible 50% of TV programming is in Russian.

The neo-soviet Russophile dominated parliament, for its part, has refused to
follow the lead of the Russian government and abolish taxation on domestic
publications, thus keeping Russian-language  products  in Ukraine cheaper
than Ukrainian – or English-language products.

The fact  that Ukrainian speakers buy  fewer books and audio visual products
than Russian speakers because  they are poorer also plays a role here.
Perhaps Ukraine’s moguls could   produce and sell Ukrainian-language
audio-visual products and books for less than Russian- language products
and  finance a Ukrainian- language mass culture, but they  do not seem to
have tried.

It is  thought that as much as 80% of Ukraine’s media is owned either by
Russians or Russophile Ukrainian citizens. Sixteen years after independence,
however, no one really knows who owns Ukraine’s media. In 2006 the Ukrainian
Helsinki Union, funded by Soros’s Renaissance Foundation, was able to reveal
partial information about 10 stations.

Foreign companies, of which 3 are Russian,  own all or part of at least 9,
individuals unknown own all or part of 3, and one is partly owned by a
Russophile Ukrainian oligarch. (maidan.org.ua/static/news/1138094819.html,

“Khto volodie efirom- toi volodie Ukrainoiu?”)

Mass-circulation Russian-language dailies like Bulvar, Kievskie vedomosti
and Fakty i kommentarii are not merely sympathetic to neo-soviet Russophile
politicians. They regularly belittle, ridicule and mock things Ukrainian,
and highlight Russian rather than Ukrainian pop- stars, movies and
television programs.

Ukrainian-language  anti-Russian opinion is limited to low-run fringe
publications. Russian popular newspapers and domination of the public
sphere, however,  does not promote political loyalty to Russia. What it does
do is promote Russophile/CES orientations thereby reinforcing the old
imperial Russian  tie and impeding the creation of new ties with  the rest
of world — which speaks English.

Logically, there is no necessary correlation between language-use and
loyalties. Scots, Irish, Indians, Americans, Australians, and Canadians,
have all expressed their nationalisms in English. Corsicans and Bretons have
used French, and Latin Americans have used Spanish. Ianukovych and

Ukraine’s Communist Party leaders even speak Ukrainian when they must,
and use it as a medium for  neo imperial/ neo-soviet  ideas.

On the other hand, no one can ignore that few of Ukraine’s Russian speakers
support political reincorporation into Russia and that almost none have
emigrated to Russia since 1991. Ukrainian Russian- speakers can be as pro-
EU as Ukrainian -speakers, Russian -speaking Ukrainians can be Ukrainian
patriots, and Russian-speaking eastern Ukrainian political leaders sooner
see themselves as representing a territorial region than a Russian-speaking
population.

Russian-speaking Kiev voted overwhelmingly for Iushchenko in 2004 and
Russian speakers were as critical of Putin’s gas price-rise policy as were
Ukrainian speakers. Historically, however, Russian was not  a medium for
Ukrainian national ideas and today  Russian is rarely used to publicly
promote Ukrainian national ideas or integration with the EU.

Consequently, to the degree that the correlation  between Russian
language-use and pro- Russian political/cultural orientations, though not
political loyalties, remains high, Russian as Ukraine’s second language
would reinforce Russophile/CES orientations.

Russian language-use in business and the public-sphere  will return
Ukrainian to its pre- 1991 status  a second-rate medium suitable only for
folk-culture and market-place bartering.

Russian language-use, in short, impedes Ukraine’s integration with the EU
and the rest of the world. Teaching Russian as a second language in

Ukraine’s schools will isolate it from the rest of the world. Teaching
English would not.    -30-
—————————————————————————————-
Stephen Velychenko, Resident Fellow, CERES, Research Fellow,
Chair of Ukrainian Studies, Munk Center University of Toronto,
Devonshire Place, Toronto M53 3K7: velychen@chass.utoronto.ca
——————————————————————————————-
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
      If you are receiving more than one copy of the AUR please contact us.
========================================================
               “THE ACTION UKRAINE REPORT – AUR”
                                        An Agent Of Change
         A Free, Not-for-profit, Independent, Public Service Newsletter
              With major support from The Bleyzer Foundation
 
  ARTICLES ARE FOR PERSONAL AND ACADEMIC USE ONLY
         Articles are Distributed For Information, Research, Education
                        Discussion and Personal Purposes Only
                             Additional readers are welcome.
========================================================
      SigmaBleyzer/The Bleyzer Foundation Economic Reports
                  “SigmaBleyzer – Where Opportunities Emerge”

The SigmaBleyzer Emerging Markets Private Equity Investment Group
and The Bleyzer Foundation offers a comprehensive collection of documents,
reports and presentations published by its business units and organizations.
 
All publications are grouped by categories: Marketing; Economic Country
Reports; Presentations; Ukrainian Equity Guide; Monthly Macroeconomic
Situation Reports (Romania, Bulgaria, Ukraine).
 
You can be on an e-mail distribution list to receive automatically, on a
monthly basis, any or all of the Macroeconomic Situation Reports (Romania,
Bulgaria, Ukraine) by sending an e-mail to mwilliams@SigmaBleyzer.com.
               “UKRAINE – A COUNTRY OF NEW OPPORTUNITIES”
========================================================
   UKRAINE INFORMATION WEBSITE: http://www.ArtUkraine.com
========================================================
    “WELCOME TO UKRAINE”- “NARODNE MYSTETSTVO”

            (Folk Art) and ContempoARTukraine MAGAZINES
For information on how to subscribe to the “Welcome to Ukraine” magazine
in English, Ukrainian Folk Art magazine “Narodne Mystetstvo” in Ukrainian, 
or ContempoARTukraine in English please send an e-mail to
ArtUkraine.com@starpower.net. Complete information can be found at
========================================================
   “THE ACTION UKRAINE REPORT- AUR” – SPONSORS
            “Working to Secure & Enhance Ukraine’s Democratic Future”
1.   THE BLEYZER FOUNDATION, major sponsor

Additional supporting sponsors for the Action Ukraine Report (AUR) are:
2.   UKRAINIAN FEDERATION OF AMERICA (UFA)
3.   KIEV-ATLANTIC GROUP
4.   ESTRON CORPORATION
5.   UKRAINIAN LEGAL GROUP,
6.   BAHRIANY FOUNDATION, INC
7.   VOLIA SOFTWARE
8.   UKRAINE-U.S. BUSINESS COUNCIL
9.   UKRAINIAN AMERICAN COORDINATING COUNCIL (UACC),
10. U.S.-UKRAINE FOUNDATION (USUF)
11. WJ EXPORT-IMPORT
12. EUGENIA SAKEVYCH DALLAS
========================================================
TO BE ON OR OFF THE FREE AUR DISTRIBUTION LIST
If you would like to read THE ACTION UKRAINE REPORT- AUR,
around five times a week, please send your name, country of residence,
and e-mail contact information to morganw@patriot.net. Information about
your occupation and your interest in Ukraine is also appreciated. If you do
not wish to read THE ACTION UKRAINE REPORT please contact us
immediately by e-mail to morganw@patriot.net.  If you are receiving more
than one copy please let us know so this can be corrected. 
========================================================
                        PUBLISHER AND EDITOR – AUR
Mr. E. Morgan Williams, Director, Government Affairs
Washington Office, SigmaBleyzer
Emerging Markets Private Equity Investment Group
P.O. Box 2607, Washington, D.C. 20013, Tel: 202 437 4707
Mobile in Kyiv: 8 050 689 2874
mwilliams@SigmaBleyzer.com; www.SigmaBleyzer.com
—————————————————————————–
Chairman, Executive Committee, Board of Directors
Ukraine-U.S. Business Council, Washington, D.C.
========================================================
          Power Corrupts and Absolute Power Corrupts Absolutely.       
========================================================
return to index [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
Advertisements

Leave a comment

Filed under Uncategorized

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s