AUR#654 Yushchenko’s Political Orbits; Romanian President In Kyiv; Ag Reform; Gas Price Fixed For Five Years?; UkrGazEnergo; Orange Boomerang

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 654
Mr. E. Morgan Williams, Publisher and Editor  
Washington, D.C., Kyiv, Ukraine, MONDAY, FEBRUARY 6, 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.             “VIKTOR YUSHCHENKO’S POLITICAL ORBITS”
ANALYSIS & COMMENTARY: By Serhiy Leshchenko
Ukrayinska Pravda web site, Kiev, in Ukrainian 30 Jan 06
BBC Monitoring Service, UK, in English, Sunday, Feb 05, 2006

2. UKRAINE DOESN’T LIKE CRISES, IT DOESN’T FEAR THEM EITHER
INTERVIEW: With Yuri Yekhanurov, Prime Minister Ukraine
By: Sergei Bakumenko for Washington Profile
Washington Profile, Washington, D.C., Thursday, February 2, 2006

3.   ROMANIAN PRESIDENT CONSIDERS UKRAINE’S PROPOSAL
            ON BLACK SEA JOINT VENTURE FOR GAS DRILLING
Rompres news agency, Bucharest, in English, 3 Feb 06
BBC Monitoring Service, United Kingdom, Friday, Feb 03, 2006

4. PRESIDENT OF ROMANIA: UKRAINE IS A FRIEND TO ROMANIA
EDITORIAL: By Mihai Hareshan, Nine O’Clock
Your English language daily newspaper online edition
Bucharest, Romania, Sunday, February 5, 2006

5.   SITUATION OF ROMANIAN MINORITY IN UKRAINE UNDER
                 PRESIDENT BASESCU’S MAGNIFYING GLASS
      The second day of President Traian Basescu’s visit was dedicated to
       contacts with the Romanian community in the neighbouring country
By Cornelia Munteanu, Nine O’Clock
Your English Language Daily Newspaper Online Edition
Bucharest, Romania, Monday, January 6, 2006

6UKRAINIAN PRESIDENT CALLS FOR AGRICULTURAL REFORM 
Era, Kiev, Ukraine in Ukrainian 1600 gmt 4 Feb 06
BBC Monitoring Service, UK, in English, Saturday, Feb 04, 2006

7BURMESE EXILE RADIO REPORTS ARRIVAL IN RANGOON OF
        MISSILE LAUNCH PADS AND CARRIERS FROM UKRAINE
Democratic Voice of Burma, Oslo, Norway in Burmese 2 Feb 06
BBC Monitoring Service, UK, in English, Monday, Feb 06, 2006

8.   MITTAL STEEL TO UP OUTPUT IN UKRAINE, KAZAKHSTAN
Grigori Gerenstein, Dow Jones Newswires

Moscow, Russia, Monday, February 6, 2006

9UKRAINE: CONSTRUCTION MATERIALS INVESTMENT FORUM
                     Made in Ukraine event: March 23-24, 2006 in Kyiv
The Action Ukraine Report (AUR) #654, Article 9
Kyiv, Ukraine, Monday, February 6, 2006

10MOODY’S AFFIRMS BANK NRB’S (UKRAINE) B2/NP FOREIGN
           CURRENCY AND E+ FINANCIAL STRENGTH RATINGS
            POTENTIAL ACQUISITION BY RUSSIA’S SBERBANK
Press release from Moody’s Investors Service
Dow Jones Newswires, Friday, February 3, 2006 

11UKRAINE STILL WARY OF ‘GAS WAR’ DEAL WITH MOSCOW
Agence France Presse (AFP), Kiev, Ukraine, Monday, Feb 6, 2006

12.   UKRAINE’S DEFENCE MINISTER SAYS GAS AGREEMENT
                      WITH RUSSIA NOT LONG TERM DEAL

ITAR-TASS, Moscow, Russia, Saturday, February 4, 2006

13UKRAINIAN PRESIDENT’S CHIEF OF STAFF OLEH RYBACHUK
      HAILS GAS DEAL AS “VICTORY”, PRICE FIXED FOR 5 YEARS
          President Yushchenko has no family members in RosUkrEnergo
UT1 State TV, Kiev, in Ukrainian 2010 gmt 3 Feb 06
BBC Monitoring Service, UK, in English, Friday, Feb 03, 2006

14GAS TRADING COMPANY ROSUKRENERGO DENIES FIXED

        GAS PRICE FOR NEW JOINT VENTURE UKRGAZENERGO
                     Price will depend on the price of Turkmen gas
Interfax-Ukraine news agency, Kiev, in Russian 2219 gmt 2 Feb 06
BBC Monitoring Service, UK, in English, Friday, Feb 03, 2006

15.                 “UKRGAZENERGO: FIRST IMPRESSIONS”
Company set up in non-transparent way, urges government control over JV
ANALYSIS & COMMENTARY
: By Ihor Lutsenko
Ukrayinska Pravda web site, Kiev, in Ukrainian 3 Feb 06
BBC Monitoring Service, UK, in English, Sat, Feb 04, 2006

16.             UKRAINE: TERMS OF NEW GAS DEAL UNCLEAR
           RosUkrEnergo made the monopolist of gas supplies to Ukraine
By Jan Maksymiuk, Radio Free Europe/Radio Liberty (RFE/RL)
Prague, Czech Republic, Friday, February 3, 2006

17.                 MOSCOW CHANGES TACTICS IN UKRAINE
           Kremlin wants Yushchenko to dismiss the “nationalist” Minister

          of Foreign Affairs Borys Tarasyuk after the parliamentary elections.       
ANALYSIS & COMMENTARY: By Vladimir Socor
Eurasia Daily Monitor, Volume 3, Issue 24
The Jamestown Foundation, Wash, D.C. Friday, Feb 3, 2006

18.                  UKRAINE TURNS BACK TO MOSCOW AS
                         ORANGE REVOLUTION IS BETRAYED
From Jeremy Page in Kiev, The Times Online
London, United Kingdom, Friday, February 3, 2006

19.                           THE ORANGE BOOMERANG

COMMENTARY: By Sergei Kiselev
The Moscow News, Moscow, Russia, Wed, February 1-7, 2006

20.   46.5 MILLION HRYVNIAS FOR ST. SOPHIA RESTORATION
The Day Weekly Digest in English, #2, Kyiv, Ukraine, Tue, Jan 31, 2006
========================================================
1
           “VIKTOR YUSHCHENKO’S POLITICAL ORBITS”

ANALYSIS AND COMMENTARY: By Serhiy Leshchenko
Ukrayinska Pravda web site, Kiev, in Ukrainian 30 Jan 06
BBC Monitoring Service, UK, in English, Sunday, Feb 05, 2006

President Viktor Yushchenko has a variety of inner and outer circles of
people he trusts and relies on, a Ukrainian website has said. These are
people more or less close to him through personal connections or their
position as state officials. Although Yushchenko makes strategic decisions
independently, he can be influenced by those close to him, the website said.

The following is the text of the report by Serhiy Leshchenko entitled
“Viktor Yushchenko’s political orbits” published on the Ukrayinska Pravda
website on 30 January; subheadings have been inserted editorially:

On 23 January 2005 Viktor Yushchenko swore the presidential oath, and on

4 February his first government and team of governors were formed. By the
anniversary of the change of regime Ukrayinska Pravda tried to fathom who
the current leadership of the country is. We present the orbits of closeness
to Yushchenko and influence on his political decisions.

[Picture showing Yushchenko’s head surrounded by heads of various people

in various orbits around him.]

NOTE:  the numeration does not reflect the degree of influence and is not

a rating of closeness.

1. Viktor Yushchenko. 2. Kateryna Yushchenko [Yushchenko’s wife]. 3.
Mykhaylo Doroshenko [editor of Ukrayina Moloda]. 4. Oleh Rybachuk [head

of presidential secretariat]. 5. Yuriy Yekhanurov [prime minister]. 6. Petro
Yushchenko [Yushchenko’s brother]. 7. Vira Ulyanchenko [Yushchenko’s
personal assistant]. 8. Iryna Herashchenko [Yushchenko’s press secretary].
9. Ivan Vasyunyk [first deputy head of presidential secretariat]. 10. Borys
Tarasyuk [foreign minister].
 
11. Anatoliy Kinakh [secretary of the National Security and Defence Council –
NSDC]. 12. Oleksandr Kyreyev [head of the State Tax Administration].
13. Ihor Tarasyuk [head of the Directorate for State Affairs]. 14. Viktor
Pynzenyk [finance minister]. 15. Viktor Baloha [emergencies minister].
16 Arseniy Yatsenyuk [economics minister]. 17. Yuriy Lutsenko [interior
minister]. 18. Oleksandr Tretyakov [adviser to Yushchenko]. 19. Pavlo
Alyoshyn [State Guard Directorate chief]. 20. Serhiy Bondarchuk [MP,
general director of the Ukrainian arms trade monopoly Ukrspetseksport].
 
21. Mykola Martynenko [head of the pro-Yushchenko Our Ukraine parliamentary
faction]. 22. Yevhen Chervonenko [former transport minister]. 23. Petro
Poroshenko [former NSDC secretary]. 24. Davyd Zhvaniya [former emergencies
minister]. 25. Roman Bezsmertnyy [Our Ukraine Bloc’s campaign manager].
26. Oleksandr Omelchenko [Kiev mayor]. 27. Ivan Plachkov
[fuel and energy minister]. 28. Oleksiy Ivchenko [head of Ukraine’s oil and
gas monopoly Naftohaz Ukrayiny]. 29. Yuriy Klyuchkovskyy [MP]. 30. Yuriy
Pavlenko [family, children and youth minister].
 
31. Vyacheslav Kyrylenko [deputy prime minister]. 32. Kseniya Lyapina [MP].
33. Viktor Bondar [transport minister]. 34. Serhiy Holovatyy [justice minister].
35. Anatoliy Hrytsenko [defence minister]. 36. Ihor Drizhchanyy [head of SBU
– Security Service of Ukraine]. 37. Oleksandr Medvedko [prosecutor-general].
38. Oleksandr Morozov [MP and head of the State Savings Bank of Ukraine].
39. Viktor Kapustin [MP]. 40. John Herbst [US ambassador to Ukraine].
 
41. Borys Bezpalyy [government spokesman in parliament]. 42. Pavlo
Ihnatenko [environment minister]. 43. Stanislav Arzhevitin [deputy emergencies
minister and chairman of the board of directors of the Azhio bank]. 44.
Volodymyr Shandra [industrial policy minister]. 45. Volodymyr Stelmakh [head
of the National Bank of Ukraine – NBU]. 46. Anatoliy Matviyenko [deputy head
of the presidential secretariat]. 47. Serhiy Taruta [Donetsk-based
businessman]. 48. Hares Youssef [businessman and Yushchenko’s former
adviser].

Previously the newspaper Zerkalo Nedeli regularly depicted the orbits of
influence and closeness to [former President] Leonid Kuchma. And the

Russian magazine Itogi made the first “orbits” in the post-Soviet space.
In general, the tradition of representing the political Olympus in this way is
also encountered in the Western press.

What is Yushchenko’s entourage? The fact that the current president is
easily influenced by his close comrades-in-arms was and remains an
instrument of counter-campaigning at the election. That is the case, but
only partly. Indeed, Yushchenko listens to the people he trusts.

Indeed, in his work he often relies on his entourage and gives them the
right to take decisions independently and not bother him with redundant
details. Indeed, at times the Kuchma principle operates – decisions are made
that are pressed by the last visitor to the presidential office.

But Yushchenko for the most part makes strategic decisions by himself. The
clearest example of that was his dismissal of the [Yuliya] Tymoshenko
government – no-one can say that someone was lobbying for it. Although, of
course, his comrades-in-arms played not the least part in ensuring that
Yushchenko understood the need to dismiss the prime minister.

It is worth stressing that our orbits are political and that there are no
people there from Yushchenko’s entourage whom he considers close but who

do not play any role in politics. For example, the sculptor Anatoliy Haydamaka
or the artist Ivan Marchuk.

Well-informed people say that Yushchenko’s problem is that it is fairly easy
to become part of his entourage.

“You just have to set yourself the aim of becoming friends with Yushchenko.
And then you strive to get yourself a place close to Yushchenko. After that,
sooner or later, you’ll reach your goal. Because everyone who wanted to
become friends with Yushchenko did so,” Ukrayinska Pravda was told by a
member of Our Ukraine who well knows the mechanism of functioning of the
president’s team and who is also a member of our “orbit”.

                    IMPORTANCE OF PRESIDENT’S FAMILY 
Davyd Zhvaniya is an illustration of this. He stood on the Our Ukraine list
at the last election, but Yushchenko learned to recognize him only when
meeting him in parliament. This did not prevent Yushchenko two years

later from making Zhvaniya the godfather of his favourite son Taras.

Although, truth be told, apart from a talent for making friends with
Yushchenko, you also need something else – the ability to keep that
friendship. Zhvaniya was unable to do that and now he is very far from the
first person in the state.

Oleh Rybachuk is the opposite case. He has been together with Yushchenko

for 14 years. Rybachuk has always been in Yushchenko’s orbits; it’s just that
sometimes he gets closer to the current president and sometimes further
away.

The head of state’s closest people are his family, but talk about the
influence of Kateryna Yushchenko on politics is exaggerated. Although, it is
true, she plays the role of contact with the American diaspora.

Of course, a very great deal depends on the “first lady” in the life of the
head of state, not least his mood. So Kateryna Yushchenko has been depicted
in our orbits in the form of a satellite – the Moon.

Yushchenko’s family is the place where he “offloads” all the problems at
work; the children are the main anti-depressants, and his general feeling
depends on this lifting of stress. [Picture of Yushchenko and his son Taras]

The role of the family in Yushchenko’s life became especially strong after
his poisoning.

The second circle of closeness to Yushchenko is formed by three very
different people: Mykhaylo Doroshenko, Oleh Rybachuk and Yuriy

Yekhanurov.

                            DOROSHENKO’S INFLUENCE 
The influence of Mykhaylo Doroshenko, who is an unofficial adviser to
Yushchenko and editor of the newspaper Ukrayina Moloda, has a long history.
They are both from Khoruzhivka [village in Sumy Region where Yushchenko
comes from].

Doroshenko is the bearer of a rural Weltanschauung close to Yushchenko; he
sees in him his support. Apart from that, Doroshenko is an old friend of
Yushchenko, whom he can tell about his personal problems.

“Let’s say that Yushchenko has toothache. And he, like a normal person,
needs someone to talk to about it. Mykhaylo Doroshenko is such a person,”
Ukrayinska Pravda was told by a representative of the president’s entourage.

There is another trait typical of Doroshenko that many people do not like:
he is constantly with Yushchenko, pressing him to get his problems sorted
out. Sometimes this even strains the head of state himself. Ukrayinska
Pravda was told by one of the president’s comrades-in-arms that some years
ago he had occasion to hear what almost amounted to a plea from Yushchenko:
“Please do what Misha [diminutive of Mykhaylo] wants! You understand, when I
wake up in the morning I want to see my wife’s face, not that of Mykhaylo.”

Doroshenko has his own office in the presidential secretariat and is one of
the closest lobbyists at Yushchenko’s side, and he “sorts out questions”
even at a petty level.

Doroshenko’s enemies have grave doubts that he does this disinterestedly.
“Misha deals with whatever comes into his hands, he does not stand aloof
from appointments at the level of head of medical directorate in some
district of a most remote region. It looks as if Misha will soon be
appointing the managers of pharmacies,” Ukrayinska Pravda was told by
someone familiar with Yushchenko’s political close circle. [Picture shows
Yushchenko with Doroshenko close to him]

Doroshenko is not liked by pragmatists in Yushchenko’s entourage, since his
“help” is often not just incompetent but also such as to discredit the head
of state.

For example, the Syrian Hares Youssef six months ago was “the president’s
investment adviser”, about whose reputation Yushchenko was informed by the
SBU.

Hares got to the president precisely thanks to Doroshenko. To start with, he
took part in some of Kateryna Yushchenko’s programmes. Later, it increased:
Hares dealt with President Yushchenko’s stay during his participation in the
world economic forum in Davos in 2005. It proved possible to remove Hares
from his position only after Oleh Rybachuk’s arrival on Bankova [Street
where presidential secretariat is located]. Now this figure is located in
the most remote part in the “orbit”.

It also seems that Doroshenko was the first person to introduce Yushchenko
to Dmytro Firtash, a person who figures in the working scheme of the
Rosukrenergo [gas] firm of dubious repute.

                                     THE ELDER BROTHER 
The influence of Petro Yushchenko is not so intense. The president’s elder
brother is also someone whom the head of state can rely on in personal
problems.

Petro Yushchenko is a very devout person, and he reinforces this component
in his brother’s life. But at the same time, he does not shun business and
lobbying.

Via Petro Yushchenko, for example, during the revolution attempts were made
to build relations with the future president by the Luzhniki group [named
after the famous stadium in Moscow] of Russian State Duma [parliament]
deputy Aleksandr Babakov, which owns several electricity generating
companies in Ukraine and the Premier Palace hotel [Kiev’s only five-star
hotel].

Many years ago Petro Yushchenko was a co-owner of the First Investment

Bank, which now belongs to the “Luzhniki people”. [Picture shows Viktor
and Petro Yushchenko]

In general, there can be no doubt that Petro Yushchenko’s business
structures ended 2005 with a much better result than in the previous five
years.

Some months ago a saying was doing the rounds in the presidential
secretariat: “the president’s Arab-Israeli friends”. They meant that Hares
represented the Arab side, while the Israeli side was represented by
businessman (?Ofer Kertsner), who is called a representative of the
interests of [Israeli businessman] Mikhail Chernoy.

Ofer’s contacts are supported through Petro Yushchenko and Mykhaylo
Doroshenko. It is known that the Israeli businessman has interests in the
long-suffering village of Kozyn near Kiev [scandalously known for allegedly
unlawful sale of expensive land]. He also helped the president’s treatment
in Switzerland [as published] after his poisoning [during presidential
election campaign in September 2004].

                               THE VASYUNYK FACTOR 
As “big lobbyists”, Doroshenko and Yushchenko Sr naturally could not have
ignored the country’s oil and gas sphere. They form a special orbit with the
supervisor of Naftohaz in the head of state’s entourage, the first deputy
head of the presidential secretariat, Ivan Vasyunyk. Not long ago he
increased his influence on the industry by appointing his brother Ihor as
deputy head of the company [Naftohaz Ukrayiny].

Their business past links the Vasyunyk brothers with the head of Naftohaz,
Oleksiy Ivchenko, and his deputy Andriy Lopushanskyy (the latter are
godfathers to each other’s children). [Picture shows Ivan Vasyunyk sitting
next to Ivchenko]

In general Ivan Vasyunyk after the corruption scandal [when former
presidential secretariat head Oleksandr Zinchenko accused senior officials
of corruption] became gradually closer to Yushchenko.

One manifestation of this was the appointment as construction minister of
yet another of Vasyunyk’s former business companions, Pavlo Kachur.

Vasyunyk’s influence is also strengthened by the fact that Rybachuk has
wriggled out of supervising strategic directions of work on Bankova to the
benefit of his first deputy. The latter now has a firm grip on almost all
the main services of the presidential secretariat.

The presence of people from Halychyna [western Ukraine] in power is

being strengthened through Vasyunyk – [Markiyan] Lubkivskyy (presidential
adviser and head of the main service of humanitarian policy), Koliushko
(presidential adviser and head of the main service of institutional
development policy) and Shlapak (head of the State Treasury).

         POWERFUL INFLUENCE OF VIRA ULYANCHENKO 
Alongside Mykhaylo Doroshenko, there is an orbiting complex consisting of
Vira Ulyanchenko and Iryna Herashchenko, which is also oriented towards the
first lady of Ukraine. The legendary Vira Ivanivna [Ulyanchenko] plays a big
role in Yushchenko’s entourage, while his press secretary moves calmly in
her wake.

Ulyanchenko’s permanent place of work is the Supreme Council [parliament],
and for Yushchenko she is an unofficial adviser. But at the same time she
has an office in the premises of the presidential secretariat. Such luxury
at the expense of the state budget is given to only three persons who are
not Bankova staff. Apart from her, there is also Doroshenko and Oleksandr
Tretyakov.

Ms Ulyanchenko, unlike Mykhaylo Doroshenko, gives preference only to the
elite – people who under the old regime were called “oligarchs”. She has
especially fine relations with Vadym Novynskyy (Smart-group) and Vitaliy
Hayduk ([Donetsk-based] Industrial Union of Donbass [IUD]).

Malicious tongues say that Novynskyy received control of the Inhulets ore
enrichment plant with the help of Ms Ulyanchenko’s husband, Viktor Ivchenko,
who was then a member of the State Commission for Securities and the Stock
Market.

The latest example of Ms Ulyanchenko’s lobbying was an unsuccessful attempt
to appoint Hayduk as deputy prime minister just before the new year 2006.
Among officials, she has very close relations with the governor of Mykolayiv
Region, Oleksandr Sadykov, dating back from the time when she headed the
Kiev office of the Black Sea maritime shipping company (Blasko), which was
serviced by Sadykov’s Yuneks-bank.

Ms Ulyanchenko also facilitated the advancement of her own husband’s career
ladder – Yushchenko appointed him head of the State Agency for Investments,
which it was decided urgently to create after the Kiev Davos. However, there
has not yet been any evidence of activity from that body.

Ms Ulyanchenko often acts for the president in negotiations, although she
does not always have a mandate for it. The principle has already been in
operation for many years: if someone among the powerful in this world wants
access to the president, but does not have the relevant contacts, then it is
best to go via Ms Ulyanchenko.

On the other hand, Ms Ulyanchenko is known for helping ordinary people who
come with their misfortunes to Yushchenko, making use of her connections for
this. In Ulyanchenko’s words, neither [tycoon MP Hryhoriy] Surkis, nor
[tycoon MP, Kuchma’s son-in-law Viktor] Pinchuk, nor [tycoon Rinat]

Akhmetov refuse her requests. [Picture shows Ulyanchenko with Pinchuk]

Iryna Herashchenko is Ms Ulyanchenko’s “loyal combat friend”. She has
unparalleled influence on the president in the question of information, and
through her vision of the process, she comes into conflict with Rybachuk.

Herashchenko’s latest victory is the appointment of Valentyna Rudenko as
presidential adviser and head of the main communications service of the
secretariat. Prior to that, Rudenko was a PR person for One Plus One TV in
the glorious times of the dictatorship of Medvedchukism on the channel
[Viktor Medvedchuk, Kuchma’s chief of staff, used to send secret media
coverage instructions to TV channels].

                                IHOR TARASYUK’S ROLE 
Ihor Tarasyuk, the head of the Directorate for State Affairs is fairly close
to Yushchenko. The president also values him as a representative of
successful national business (Tarasyuk is the owner of the Myronivka bakery
and the Nasha Ryaba [poultry] brand).

Ihor Tarasyuk makes sure that the president’s everyday life is comfortable,
although over the year he has not done much to advance the implementation of
Yushchenko’s dream of moving from Bankova to the premises of the Health
Ministry in Mariyinskyy Park.

Tarasyuk is also in charge of Yushchenko’s dream [museum] projects –
Arsenal, Sofia, Ukrainian House and Baturyn. Serhiy Taruta provided powerful
funding to the latter – the IUD allocated 10m hryvnyas to the restoration of
the hetman’s palace [in Baturyn]. Yushchenko likes Taruta as the most
civilized “oligarch” from the Kuchma times and also as a collector of
[ancient] Scythian and Trypillya culture.

But events around the gas agreements with Russia showed that in the orbits
Taruta is far from “the sun”. He expended a lot of effort to halt the
accords, but his influence on Yushchenko was minimal. He even admitted that
he was unable to have a simple telephone conversation with the head of
state.

  TRETYAKOV RECOVERS FROM CORRUPTION SCANDAL 
Of the “heroes” of the corruption scandal, [Yushchenko’s former first aide]
Oleksandr Tretyakov remained closest to “the body”. He is also an example

of rapidly getting close to the president that was halted only by the autumn
political crisis.

Tretyakov found himself in Yushchenko’s team in 2001 thanks to former
Foreign Trade Minister Andriy Honcharuk. He got on to the Our Ukraine list
thanks to financial contributions. In parliament he joined the Together
group created by Yushchenko’s closest comrades-in-arms. Oleh Rybachuk

and [Yushchenko’s wife] Kateryna Chumachenko became the godfather and
godmother of his children.

And in 2004 Tretyakov received the seal of financial director of the future
president’s election campaign. Of decisive significance for further events
was the fact that Tretyakov accompanied Yushchenko for treatment in Austria
[after poisoning], and on return gave him his own building. Thus he became
the first aide to the head of state, about whose omnipotence legends were
formed six months ago.

At the same time, Tretyakov takes the president’s requests fairly close to
heart. After his dismissal, he was able to gain the status of an adviser to
Yushchenko and kept his office in the secretariat, from where he also
“covers” his friend, the governor of Kirovohrad Region, Eduard Zeynalov.

Tretyakov has now joined the election campaign of Our Ukraine. He is the
head of the control directorate and has handed over his office on Spaskyy
Street for the needs of the bloc’s central HQ. [Picture shows Tretyakov with
Mr and Mrs Yushchenko]

                              PRESIDENT’S SECURITY MAN 
Tretyakov has excellent relations with the head of Yushchenko’s guard, Pavlo
Alyoshyn. The influence of this person is fairly specific: the president’s
security depends on him.

Alyoshyn was Yushchenko’s personal bodyguard for almost five years and as
part of his service mission he accompanied the future leader of the nation
everywhere – at home, in his car, at work. From that they formed excellent
relations; the president trusts him as a human being.

Alyoshyn is now creating a favourable environment, making it possible, for
example, in violation of the rules of security, for the president himself to
sit at the wheel.

Alyoshyn also has another powerful instrument – communications. Yushchenko’s
mobile phone has an attachment to his bodyguard, who is appointed by the
president’s head of the guard [Alyoshyn]. And so, it often depends on
Alyoshyn whether to connect the head of state with a caller or to say that
he “is resting” or “at a meeting”.

Another of Tretyakov’s friends, Serhiy Bondarchuk, is at a fair distance
from Yushchenko. Bondarchuk is the head of Ukrspetseksport and a friend of
Kuchma’s first aide, Serhiy Lyovochkin.

Six months ago it was fashionable to compare how successfully Tretyakov was
repeating Lyovochkin’s path. Enemies have always said that Tretyakov got
hold of new financial flows with the help of his predecessor, who stayed in
luck, and with whom Tretyakov got close precisely thanks to Bondarchuk.

Enemies are now happily making a full check on the opaque Ukrspetseksport,
looking for monetary holes that, God forbid, provide a comfortable existence
for the president and his entourage.

The corruption scandal worked out badly for Mykola Martynenko. Once a very
close comrade-in-arms and even a neighbour of Yushchenko in the parliament
chamber, he is now far off. His fall started with a scandal over the Kiev
footwear factory, despite all Martynenko’s attempts to convince people that
he had nothing to do with it.

The “big child” Yevhen Chervonenko took his dismissal from the Transport
Ministry hard. But the sentimental feelings that Yushchenko has for him
returned him to power as governor of Zaporizhzhya. Moreover, the president
chose for him a region not alien to Chervonenko. His friendship with the
owner of Zaporizhstal [Zaporizhzhya-based steelworks], Eduard Shyfrin, will
help the governor to find his feet in the new town.

                      POROSHENKO’S FALL FROM GRACE 
The corruption scandal hit Petro Poroshenko hardest – over the six-month
period Yushchenko spoke by phone only twice to his close friend. And they
met only once, and that – only for a few minutes.

But along with all that, the former security council secretary [Poroshenko]
retains his mediated influence through people whom he managed to place in
the vertical chain of power. [Picture shows Poroshenko]

Poroshenko had started moving away from Yushchenko even when his

prospects as security council secretary were under no threat. Some tried to
remove him through jealousy, others through a perception that his stay
alongside was lowering the head of state’s rating.

And also because even diplomats started complaining about Poroshenko in
summer. In particular because, according to information from some sources,
German ambassador Dietmar Studemann in a one-to-one meeting with

Yushchenko raised questions regarding his close comrade-in-arms
[Poroshenko].

What is more, the topic of Poroshenko was allegedly raised even during the
president’s conversation with EU High Commissioner Javier Solana.

Davyd Zhvaniya found himself furthest away from the list of “dear friends”.
He has figured in many scandals: the [temporary] disappearance [in Kiev] of
[Russian MP] Rybkin, the poisoning of Yushchenko and the [alleged] funding
of [Yushchenko’s presidential] election campaign by [exiled Russian tycoon
Boris] Berezovskiy.

His desire to have close guardianship of the head of state’s family also
played against Zhvaniya [allusion to a scandal involving Yushchenko’s eldest
son Andriy whom Zhvaniya reportedly gave expensive presents].

Zhvaniya’s friend Roman Bezsmertnyy is closer to Yushchenko. He has taken

on a task beyond his powers – the victory of Our Ukraine at the [March 2006]
parliamentary races.

Many years ago Bezsmertnyy was Yushchenko’s favourite. But he will be
unlikely to renew his prestige to the full amount after in summer 2004, in
the heat of the election, Bezsmertnyy disappeared for a week and did not get
in contact. There is information that in a search for Yushchenko’s then
election HQ chief [Bezsmertnyy], his comrades-in-arms even broke the doors
of his apartment.

The capital’s mayor, Oleksandr Omelchenko, is far from Yushchenko but not
from Mykola Martynenko, who is the leader of the Kiev cell of Our Ukraine. A
year ago Martynenko criticized the Kiev authorities and dreamed of becoming
city chief. But now the two of them have managed to reach understanding, and
as a result the mayor received the status of a candidate for OUPU [Our
Ukraine People’s Union] at the election for city mayor.

      CHIEF OF STAFF RYBACHUK’S LAID BACK ATTITUDE 
The second big centre of influence in Yushchenko’s entourage is the head of
the presidential secretariat, Oleh Rybachuk. This long-standing
comrade-in-arms of the head of state is endeavouring to be the guardian of
European traditions in the administration, and as a condition of his joining
the administration he put the cleansing of Yushchenko’s team, a declaration
of his family’s income, multiple channels of information [for the president]
and publicity.

But Rybachuk does not manage to achieve everything, and he does not win all
corridor wars. As an example, there is the story of the appointment of the
head of [state television channel] UT1, when he organized a competition, but
its results had no effect on Yushchenko’s final decision.

At the same time, Rybachuk’s critics point to his shortcomings – the fact
that he is not a workaholic, his spontaneity and inconsistence. He has not
become the person that he should be in that post – the president’s
chancellor.

“Rybachuk gets burned up by some idea, and fully devotes himself to it
alone. And when he gets bored with it, he drops it. An example is the
briefings that he has not been conducting for a long time now,” says one
representative of Yushchenko’s entourage.

Rybachuk likes a free working style and works according to Reagan’s
principle: “a desk clear of papers always means a fresh head”. Sometimes
this irritates the president. At the same time, he understands that he has
very few such loyal comrades-in-arms that have a fine reputation in the West
and are not counting on personal gain.

Rybachuk has not bad relations with Viktor Pinchuk, but this in no way
influenced the court decision to expropriate from Kuchma’s son-in-law
[Pinchuk] first [steel giant] Kryvorizhstal and then the Nikopol Ferroalloys
Plant.

One can place Economics Minister Arseniy Yatsenyuk in the notional orbit of
Rybachuk’s influence: the secretariat head recommended him for the job.

Yatsenyuk belongs to a group of young politicians with whom Yushchenko
sympathizes. Some people even say that Yatsenyuk is one of the president’s
new favourites and hence has very broad prospects. [Picture shows Yatsenyuk
with Yushchenko]

Rybachuk also lobbied for the appointment of Justice Minister Serhiy
Holovatyy, who took on the job of treating what was virtually Yushchenko’s
biggest headache – the tenure of [Svyatoslav] Piskun as prosecutor-general.

Mykola Poludyonnyy is a comrade-in-arms of Holovatyy and at the same time
close to Rybachuk; he is a presidential adviser and head of the main service
for legal policy of the presidential secretariat.

Rybachuk helped Ihor Drizhchanyy become head of the SBU. He in turn has

not bad relations with Oleksandr Morozov and Mykola Martynenko.

Morozov, the current head of the Savings Bank, is a long-standing comrade of
Rybachuk; together they managed the financial side of Yushchenko’s 2002
election campaign.

In turn, [Defence Minister] Anatoliy Hrytsenko has close contacts with
Rybachuk from the time when the latter headed the office of presidential
candidate Yushchenko and the present defence minister was sitting in the
office opposite and was deputy head of the election campaign. Hrytsenko got
the job with the help of Morozov and Martynenko, who are also friendly and
are members of the supervisory board of Hrytsenko’s Razumkov Centre [think
tank].

The defence minister is working actively on the implementation of one of the
main tasks of Yushchenko’s presidency – joining NATO. At the same time,
opponents say, the head of state has privately expressed displeasure at the
commercial activity of Hrytsenko’s ministry in selling land.

Apart from that, one can also ascribe to Rybachuk’s orbit the head of the
state-owned Eksimbank, Viktor Kapustin.

The head of secretariat works in constant contact with the US ambassador to
Ukraine, John Herbs, and also diplomats of leading European countries.
Through him the positions of Western governments can be made known to
Yushchenko in a matter of minutes.

Another person whose views gravitate towards Rybachuk is the only
presidential aide who is head of his office, Andriy Kyslynskyy. What is
more, a friend of Kyslynskyy, a member of the National Council for TV and
Radio, Andriy Miroshnychenko, heads Kateryna Yushchenko’s Ukraine-3000

fund.
               PRIME MINISTER YEKHANUROV’S GROUP 
Prime Minister Yuriy Yekhanurov, who is also very close to the president,
has his own conventional group in Yushchenko’s entourage. He finds it
comfortable working one to one. Yushchenko forgot the constant daily
altercations that he had with Tymoshenko. That is why he still very much
hopes to keep Yekhanurov as prime minister after the election. The head of
government himself also aspires to that, although he understands that he
came to job in October temporarily.

Emergencies Minister Viktor Baloha is in Yekhanurov’s orbit not far from the
president. He is linked with the current president by the memory of the time
when Baloha, when he was governor of Transcarpathian Region under Kuchma,
broke with the USDPU [United Social Democratic Party of Ukraine led by
Kuchma’s former chief of staff Viktor Medvedchuk] and joined Yushchenko’s
side.

Apart from that, life itself makes frequent contacts between this official
and the head of state – in Ukraine one constantly comes across, if not bird
flu, then the calamity in Alchevsk [town in eastern Ukraine left without
heating for weeks during an extremely cold spell of weather].

Baloha’s deputy in the Emergencies Ministry, the former head of the Azhio
bank, Stanislav Arzhevitin, works close to the president. They are united by
common hobbies – last year Yushchenko appointed Arzhevitin secretary of the
council of Ukrainian Cossacks.

The government team includes a group of young people whom Yushchenko sees

as a growth prospect. He likes the above-mentioned Arseniy Yatsenyuk, Deputy
Prime Minister Vyacheslav Kyrylenko, Transport Minister Viktor Bondar and
Youth and Sports Minister Yuriy Pavlenko. A little further out is Ecology
Minister Pavlo Ihnatenko, who so far has been memorable only for the fact
that he is the most unnoticed official.

Kseniya Lyapina is right there in the constellation of the ambitious new
generation. She came to Yushchenko’s attention for her stormy energy during
his premiership. Thus, back in 2000 she became his adviser.

An ability for sober-minded thinking and for being able to express his ideas
comprehensibly served Borys Bezpalyy in good stead. He has recently started
appearing on Bankova. After the change of government he became the cabinet’s
representative in parliament.

Industrial Policy Minister Volodymyr Shandra is a relative of Oleksiy
Khakhlyov, the husband of [Yushchenko’s daughter] Vitalina Yushchenko.
However, Shandra, despite this status of his, is in a fairly remote orbit.
This is testified by the fact that on the Our Ukraine list this official
came in at 115th place.

Among some participants of this orbit of Yushchenko there is also an
unexpected combination: the wives of Rybachuk, Shandra, Tretyakov, Pavlenko
and Ihnatenko have set up a sort of club of carefree officials’ wives, which
is well known in Kiev cafes and restaurants.

Among other officials close to Yushchenko there is Foreign Minister Borys
Tarasyuk, which is explained by their long-standing relations and also the
president’s active foreign policy life. Evidence of their close ties is the
recent appointment as presidential adviser of Tarasyuk’s deputy in the
People’s Movement [Rukh], Vasyl Kuybida.

There is also a story of many years of stable close relations with
Yushchenko of Finance Minister Viktor Pynzenyk and the head of the State

Tax Administration, Oleksandr Kyreyev.

Despite criticism for caution and indecision, Kyreyev has been in
Yushchenko’s orbit for over a decade.

Sources say that the explanation should be sought in the fact that at one
time in his youth Kyreyev saved Yushchenko’s life in the mountains. And
supposedly it is precisely since then that the president had his spinal
injury. [Picture shows Yushchenko with Pynzenyk and Kyreyev]

Yushchenko’s neighbour in the [village outside Kiev] Bezradychi dachas, Fuel
and Energy Minister Ivan Plachkov, is not terribly close to him, although
they are in regular contact over Ukraine’s energy and gas problems.

                            KINAKH’S STRONG POSITION 
NSDC Secretary Anatoliy Kinakh is a much more regular visitor to the head

of state. And the reason for this is not only the fact that he has an office on
Bankova.

Kinakh, when he was first deputy prime minister, constantly accompanied
Yushchenko on foreign visits. The president respects the person whom, in
principle he may not have liked – because it was Kinakh who replaced him

as prime minister [in 2001]. Because then it was truly a tragedy for
Yushchenko.

It is also not surprising that the present closeness of Kinakh causes
jealous looks from his predecessor Petro Poroshenko.

Yushchenko’s orbit was recently entered because of their jobs by the deputy
head of the presidential secretariat, Anatoliy Matviyenko, and the head of
state’s representative in parliament, Yuriy Klyuchkovskyy. But they are far
away.

The same holds true for the chairman of the National Bank, Volodymyr
Stelmakh, who was offered a place on the list of Our Ukraine, but turned it
down, hoping to stay in his post of chief banker. However, sources on
Bankova do not rule out the possibility that after the election the
66-year-old Stelmakh will go into well-earned retirement.

Security people form the last group in Yushchenko’s entourage. The closest
of them is Yuriy Lutsenko, whom Yushchenko likes, but also, it happens,
criticizes for slow reform of the police. Prosecutor-General Oleksandr
Medvedko is furthest away by dint of his short term in office, and also
because before his appointment he was virtually unfamiliar to Yushchenko.

They say that Medvedko’s appointment was also supported by Lutsenko. At
least, he opposed another candidate – Vasyl Prysyazhnyuk. Medvedko and
Lutsenko are linked with Petro Poroshenko. But given his gradual loss of
influence, that link is weakening.

It is said that when Zerkalo Nedeli published its orbits, the figures in it,
with slide gauges in hand were measuring their closeness to the president.

There is a recommendation to those people not to forget that these cartoons
have a notional nature. And that yesterday’s outsiders can very quickly
become favourites – and the reverse.
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2. ‘UKRAINE DOESN’T LIKE CRISES, IT DOESN’T FEAR THEM EITHER”
                Ukrainian Prime Minister Yuri Yekhanurov sounds off on the
                            recent Ukrainian-Russian natural gas dispute.

INTERVIEW: With Yuri Yekhanurov, Prime Minister Ukraine
By: Sergei Bakumenko for Washington Profile
Washington Profile, Washington, D.C., Thursday, February 2, 2006

Washington Profile: What’s your assessment of the current crisis in
Ukrainian-Russian relations? Is this a logical succession of events, a
random incident or something else?

Yuri Yekhanurov: I am not inclined to characterize the events surrounding
the settlement of the Ukrainian-Russian gas affair as a crisis. The
Ukrainian government was guided by a slightly different set of motivations.
For us, they were the following: securing the country’s gas balance,
finding an economically sound price, establishing a mechanism for setting
market prices, sticking to contractual relations, remaining profitable and
ensuring the gas transit system’s uninterrupted operations.

I am fully aware that the difficult course of negotiations was linked to,
among other things, the fact that Russia’s actions were driven by different
concerns. That was evident from the general tone of commentary emanating
from the Russian media. However, the final compromise was reached on the
basis of the ideas Ukraine had supported all along: Included in the 4
January agreement was wording on the price, transit costs, time schedule
and volumes; no mention was made of the two sides’ political priorities.

If, however, you insist on posing your question in terms of a crisis, I
will say that no one has yet to devise a way of settling conflict without
crisis, particularly when several parties with different interests are
involved.

The current Ukrainian government does not like crises, but it doesn’t fear
them either. In the gas dispute with Russia, Ukraine did not seek to
aggravate the situation, but it also did not avoid discussing problematic
issues.

I acknowledge that our attitude toward the situation at the end of 2005
with respect to Ukrainian-Russian gas relations was ambiguous. On the one
hand, we had no problems with many of the arrangements, especially as they
related to pricing. On the other, we knew very well that the patriarchal,
opaque, barter nature of our relationship was not viable and was in
conflict with today’s realities.

We accepted Russia’s desire to introduce market principles into our energy
relations. In that respect, our intentions were in agreement. We were
prepared to embark on a far-reaching dialogue, and assumed that given the
seriousness of the task this dialogue would be complex and lengthy. We also
hoped that it would be conducted in a professional and competent manner.

We were completely opposed, however, to our negotiation partner deciding
all unsettled points before the talks even began. We were told directly to
forget about existing agreements, accept an instantaneous, almost fivefold
increase in gas prices, say ‘thank you’, and get along with our business.

If it makes any sense to talk about a crisis, its origins, in my judgment,
can only be found in [Russia’s] unilateral refusal to hold a productive,
objective dialogue. Hence, we faced a situation that took on the
characteristics of a crisis that Ukraine didn’t cause.

Washington Profile: What role did politics play in the “gas crisis”?

Yekhanurov: It’s difficult for me to say, since the Ukrainian government
was led by the motivations I mentioned earlier. At an operational level, we
had to resolve tens, if not hundreds, of concrete action-oriented problems,
primarily of a technical nature. That doesn’t mean we didn’t think about
the universal implications of the situation.  We were completely aware that
the basic values of our independence were threatened.

But it’s important to understand one thing: universal values do exist; there
is no such thing as abstract values. What is economic sovereignty? It’s not
just a symbolic gesture made by a nation’s delegation head at the
negotiating table.

True economic sovereignty exists when a nation’s authorities are able to
duly resolve all critical economic issues internally, taking into
consideration all national interests, including foreign policy issues. That

was our attitude.

On the other hand, the basis of any state’s policies is its economic
sovereignty. In this sense, the Ukrainian government really did express a
certain political position when, under the conditions of a sudden cut in
gas supplies, it scrambled to keep the nation’s industrial sector on an
even keel and stabilize society.

I don’t want to comment on Russia’s political motivations. I think Western
governments have already drawn the right conclusions.

Washington Profile: Does the compromise reached with Gazprom serve
Ukraine’s interests? How permanent do you believe the current arrangement
for gas supplies is?

Yekhanurov: The very word “compromise” suggests partial conformity with
our interests. A compromise is reached when no one party to an agreement
obtains exactly what they had hoped for.

Concerning the price, I think we did as well as we could; particularly
considering Ukraine concluded contracts for gas over the next couple of
years at a comparatively low price (given the market conditions), a price
that no one else in Europe (with the exception of Belarus ­ which is a
completely different story) has obtained. All in all, we are satisfied with
the amount of gas imports stipulated by the 4 January agreement, as it will
allow us to close the year without a deficit.

We are less satisfied with other conditions of the agreement. For example,
the Russians introduced the plan to use the intermediary Rosukrenergo as
the gas supplier. Needless to say, we thought there were other options. But
our negotiation partners didn’t offer any reasonable alternatives.

Above all, we are concerned about the question of guarantees. Can
Rosukrenergo fulfill all its price and capacity obligations over the next
five years? For us, this is a key question that must be answered decisively
in the affirmative. Of course the fact that this intermediary was proposed
during official negotiations represents Russia’s indirect guarantee for the
company’s future actions. No other conclusion can be logically drawn.

But indirect guarantees concerning such issues are not sufficient. So we
will consider the question of guarantees closed only after corresponding
agreements based on the framework agreed to on 4 January have been signed.
Our principal objective now is to harmonize and conclude these agreements.

Washington Profile: Considering last year’s events, do you believe Ukraine
is headed toward Russia, the West, or in a direction all its own?

Yekhanurov: Ukraine has chosen its own path. This path leads toward Europe.
I also want to stress that when we talk about European integration, we are
not talking about a choice between civilizations. That choice was made
hundreds of years ago: Ukraine was, is, and will always be a European
country.

We are talking about joining the pan-European space and all of its
European institutions. This is the foreign policy dimension. There is also
a domestic implication. Here, I have in mind the achievement of European
living standards and Europe’s level of economic and social development.
Both of these dimensions are closely interrelated.

Concerning relations with Russia, I don’t want our current movement toward
the EU to be construed as an intention to distance ourselves from Russia.
For the most part, our countries are at odds only about the way we want to
interact with Europe: While Ukraine has expressed a desire to join the EU,
Russia has not.

Washington Profile: It’s believed that there are economic and scientific
areas of knowledge that Russia and Ukraine are only able to excel at if
they pool their resources and work together. What are the prospects for
such cooperation, and to what extent does it depend on political factors?

Yekhanurov: In this era, no major industry or branch of knowledge can
flourish without cooperation from the international scientific community.
I’m not talking about the production of any specific product. (Clearly
Ukraine, like many other countries, can independently meet the country’s
needs in terms of nails, for instance.) Here I’m referring to far-reaching,
important spheres of the economy.

To illustrate this, consider the natural gas sector. Ukrainian engineers
have explored many Russian gas fields; Ukrainian drilling equipment and
pipeline infrastructure are used in Russian gas production and
transportation, respectively. You have to agree that given this reality,
some observers’ use of the expression “Russian gas” ­ where stress is
placed on the first word ­ is not appropriate. Not to mention that any
product once purchased becomes the property of the buyer; hence, it is
more correct to speak of “Ukrainian gas originating from Russia (or
Central Asia).”

I can say that in matters of scientific and industrial cooperation with its
neighbors, the Ukrainian government is guided entirely by pragmatic
considerations. We welcome any mutually beneficial form of cooperation.

At the same time, we recognize the special status of our ties with the
Russian Federation, which have been determined by well-known historical
circumstances.

The only thing we are opposed to is someone monopolizing cooperation
with us; just as we avoid this in our relations with other nations. And, of
course, the high level of political dialogue between our countries
constitutes an additional incentive to develop the kind of cooperation to
which you are referring.

Washington Profile: What will Ukraine look like two decades from now?
What do you want Ukraine to become?

Yekhanurov: In two decades’ time, I would like to see a Ukraine that is a
full-fledged member of the European community and, at the same time,
enjoys stable, amiable relations with Russia.

In twenty years my grandchildren will be fully grown. I hope that political
and social circumstances will be such that they won’t even consider leaving
Ukraine. Ours is a wonderful country with an impressive history. It
deserves a wonderful future. That’s what we are creating today. I believe
in this.  -30-
———————————————————————————————
[Russian text: http://www.washprofile.org/ru/node/4474]
LINK: http://www.washprofile.org/en/node/4473
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[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
3.  ROMANIAN PRESIDENT CONSIDERS UKRAINE’S PROPOSAL
          ON BLACK SEA JOINT VENTURE FOR GAS DRILLING

Rompres news agency, Bucharest, in English, 3 Feb 06
BBC Monitoring Service, United Kingdom, Friday, Feb 03, 2006

KIEV – President Traian Basescu called interesting a proposal by his
Ukrainian counterpart Viktor Yushchenko that Romania and Ukraine jointly

use the Black Sea continental shelf with respect to gas drilling, according to
Rompres special correspondent Andreea Rotaru.

Basescu said in an address to the students of Petru Movila Academy in Kiev
that Romania is considering this proposal, adding that Bucharest would give
an answer in the period ahead about Romania’s participation in the
exploitation of the continental shelf.

“At this moment, Romania is prospecting. We have four offshore gas rigs –
two for prospecting and two for drilling, with one of the drilling rigs
being in the Mediterranean at present. We think Viktor Yushchenko’s proposal
is interesting and we are considering it”, Basescu said during a two-day
official visit to Ukraine he is paying on 2-3 February.

During talks with Basescu on Thursday, Yushchenko put forward the idea

of setting up a Romanian-Ukrainian joint venture to jointly drill for gas in
the Black Sea, this being a solution likely to guarantee alternative energy
sources both for Romania and Ukraine.  -30-
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NOTE: Romania Macroeconomic Situation Report from SigmaBlezyer,
  http://sigmableyzer.com/files/ROM_Monthly_Ec_Report_11_05.pdf
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4. PRESIDENT OF ROMANIA: UKRAINE IS A FRIEND TO ROMANIA

EDITORIAL: By Mihai Hareshan, Nine O’Clock
Your English language daily newspaper online edition
Bucharest, Romania, Sunday, February 5, 2006

On the 2nd and 3rd of February, the President of Romania, Traian Basescu,
made an official visit to Ukraine, invited by his counterpart, Victor
Yuschenko. This forth encounter this year of the most senior dignitaries of
the two neighbouring countries took place in the context of dynamic
developments in the Ukrainian politics.

[1] Firstly, there are some facts worthwhile mentioning, such as the
consequences of the ‘gas war’ that broke out earlier this year, when Russia
ceased the gas supply to Ukraine for a few days, showing that it does
possess a redoubtable weapon in its relations with its post-Soviet
neighbour. The truce that ended that ‘war’ has been extensively denounced
in Ukraine, and the Parliament started a political crisis when casting a
non-confidence vote against the Cabinet.

Concurrently, before the election of the Parliament next month, a trend has
become visible of the pro-Russian ‘party’ growing in the opinion polls, to
the detriment of the ‘orange’ side led by President Yuschenko. Moreover, the
latter has been sending out signals of drawing closer to Kremlin, probably
as part of a tactical move meant to neutralise the Russian influence on
domestic politics.

[2] Secondly, a majority of Western political commentators agree that the
Ukrainian President is now going through the most difficult period since
December 2004 when he won the elections. Those analysts are speaking of
a crisis among the institutions of the Ukrainian state and especially of a
relative state of isolation of President Yuschenko before the upcoming.
legislative elections.

They are quoting the influential stand taken on the Presidency of the
National Security and Defence Council, Moscow’s main partner on delicate
dossiers such as the gas crisis or the ‘five plus 2’ negotiations on the
Transdiester issue, that had registered another failure at the end of last
month.

The summary context described above suggests that President Basescu’s
visit to Ukraine could be seen as a veritable political support granted to
the president of our neighbour, elevating his profile in the domestic
political arena and consolidating his position as a major factor in the

mapping of the national strategy of Ukraine.

The fact that the Romanian president, during his visit, repeatedly stressed
his support for Ukraine’s orientation towards the west, also promoted by
Yuschenko, for the countries accession to NATO, first and foremost, is a
reflection of this major significance the meeting of the two officials might
have. The dossiers approached during the talks and the agreed solutions
meet the standards of an otherwise normal official visit.

The bilateral relations with sensitive issues about the Black Sea
continental shelf, the Bastroe canal and the national minorities in both
countries, those regarding the regional security: the crisis in
Transdniester mostly, the developments in the region and the mutual
relations were the main topics of the talks held by the two delegations
(where the foreign ministers also attended).

A Presidential Mixed Commission was set up as ‘a mechanism dealing with
punctual matters), including three committees (for regional, European and
Euro-Atlantic security, for co-operation in the fields of culture, education
and minorities and for environmental protection and sustainable
development).

The meaning of this new mechanism is that it is taking to the highest level
of approach and decision-making the sensitive issues of the two states,
while stimulating an open and constructive dialogue.

For example, during the visit a decision was made that, in parallel to the
proceedings of the International Court of Justice from the Hague, called by
Bucharest to decide on the matter of the continental shelf of the Black Sea,
bilateral negotiations would also be conducted to identify a solution, which
most certainly is a notable progress in this dossier.

The Ukrainian proposal of joint operation of 12,000 sqm of the continental
shelf may also suggest a broader and comprehensive solution for the entire
dossier. The Ukrainian proposal of co-operation in extracting uranium in
Ukraine could be placed in the same context.

From the statements and action of the Romanian President during this visit
it can also be guessed that he is promoting a strategy aiming to link the
various bilateral matters for the purpose of resolving them to suit the best
interest of both sides.

He spoke of an equal opportunity policy in the minorities area or – in
Yuschenko’s approach – the principle of symmetry or an European solution
to the issue in Transniester, by guaranteeing local autonomy but not
changing the status quo of the borders. In fact, the very setting up of the
Presidential Mixed Commission seems to be the reflection of the same
strategic line of thinking pursued by President Basescu.

A friendly state – this is how the Romanian president referred to Ukraine.
And his visit to that country stands for the effort of improving that
relationship of mutual trust, with an express statement of the expectation
is that Kiev would fulfil its commitments. This is the kind of openness
Ukraine will have to give a commensurate response to.  -30-
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LINK: http://www.nineoclock.ro/index.php?page=editorial
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5.    SITUATION OF ROMANIAN MINORITY IN UKRAINE UNDER
                 PRESIDENT BASESCU’S MAGNIFYING GLASS
       The second day of President Traian Basescu’s visit was dedicated to
         contacts with the Romanian community in the neighbouring country

By Cornelia Munteanu, Nine O’Clock
Your English Language Daily Newspaper Online Edition
Bucharest, Romania, Monday, January 6, 2006

During his meeting with the representatives of the Romanian community in
Cernauti, the head of the Romanian state declared that he expects the day
when the Romanians living in Ukraine would have a representative in the Kiev
Parliament. President Basescu said that the Romanian authorities want the
respect granted by Romania to the minorities living on its territory to be
extended to the Romanians living beyond the borders of the country as well.

Traian Basescu admitted that neither the previous governments in Bucharest
had neglected the issue of the national minorities living in Ukraine but
added that through his presence in Cernauti, he intended to show that
Romanian currently conducts a much better oriented policy supporting the
Romanians who live abroad.

President Basescu urged the Romanians living in Ukraine who have got more
than 20 organizations today to unite in only one, to be more powerful, more
respected and better considered. He expressed the possibility for the young
Romanians in Ukraine to become scholarship holders of the Romanian state
and continue their university studies in Romania.

According to him, these youth could learn in Romania a number of aspects
pertaining to the European integration that might prove to be subsequently
useful in the process of Ukraine’s accession to EU.

In front a few hundreds of Romanians living in the Ukrainian locality of
Voloca, the President reported that both the Bucharest and Kiev authorities
agreed to appoint a Romanian diplomat to be in charge of the problems of
the Romanians living in Ukraine.

Upon his departure from Cernauti, President Basescu characterised his two
day visit to Ukraine as “a visit to a friendly state.” He expressed his
belief that after the elections due in Ukraine, time will come for a number
of issues to be enforced together with his Ukrainian counterpart Viktor
Yushchenko, so that the Romanian minority living in Ukraine could feel that
this country wants them and respects them.

“I assure all of you, the Ukrainian people and the Romanian minority, that
Romania’s major interest refers to Ukraine continuing its road westwards,
and this step is not taking place only in the interest of Romania but to the
benefit of the Romanian minority in Ukraine as well,” Traian Basescu
declared.

Also on Friday, in front of the students of the Kiev based “Petru Movila”
Academy, the Romanian head of state qualified as “interesting” the proposal
of his Ukrainian counterpart, Viktor Yushchenko, pertaining to the joint
exploitation by Romania and Ukraine of the gas extraction from the Black
Sea continental plateau.

He spoke to the students about the difficulties faced in the process of
European accession and at the end he introduced himself to the students
stating his age, civil condition and professional training. When he reached
the civil condition chapter, Basescu confessed laughingly that he has been
married for 30 years: “You realize what a patient man I have been, don’t
you?”   -30-
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http://www.nineoclock.ro/index.php?page=detalii&categorie=homenews&id=20060205-4787
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6. UKRAINIAN PRESIDENT CALLS FOR AGRICULTURAL REFORM 

Era, Kiev, Ukraine in Ukrainian 1600 gmt 4 Feb 06
BBC Monitoring Service, UK, in English, Saturday, Feb 04, 2006

KIEV – Ukrainian President Viktor Yushchenko has said that the government
will focus on agricultural reform in 2006. In a regular Saturday radio
address to the nation on 4 February, Yushchenko outlined the government’s
steps to boost the health, education, social and cultural areas and attract
investors to rural areas.

He pledged that rural residents in Ukraine “will see changes for the better”
this year. Yushchenko said that rural areas “will receive a record 8bn
hryvnyas” (about 1.6bn dollars) from the state budget for reform.

Agricultural producers will continue enjoying a “favourable tax climate”,
Yushchenko said. “I guarantee that we will not increase the tax burden until
rural areas get on their feet,” Yushchenko said.

Yushchenko said that the cabinet earmarked 2bn hryvnyas in state subsidies
to the Ukrainian agricultural sector. He urged the creation of a transparent
grain market to remove numerous intermediaries operating in rural areas to
the detriment of agricultural producers.

Yushchenko said that Ukraine’s entry into the WTO “will open up new export
corridors” to Ukraine and called on parliament to stop speculating on the
issue.

Yushchenko called on the Foreign Ministry and Ukrainian trade missions
abroad to find new markets for Ukrainian grain, meat and dairy products in
the CIS and Asia. “The situation with dairy exports, for example, to Russia
proves how dangerous it is to depend on a sole market,” Yushchenko said.

“Ukraine has been an agricultural centre of Europe since time immemorial. I
am confident that this leadership can and should be restored. I believe in
the revival of Ukrainian villages,” Yushchenko said, concluding the address.
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7. BURMESE EXILE RADIO REPORTS ARRIVAL IN RANGOON OF
         MISSILE LAUNCH PADS AND CARRIERS FROM UKRAINE

Democratic Voice of Burma, Oslo, Norway in Burmese 2 Feb 06
BBC Monitoring Service, UK, in English, Monday, Feb 06, 2006

OSLO – It has been learned that more missile launching pads and carriers
believed to be from Ukraine have arrived in Rangoon. A port authority
official who does not want to be identified said a Ukraine-registered cargo
ship arrived at Thilawa Port on 30 January. The official said he could not
give the exact name of the ship but he said the ship left Thilawa Port for
Yangon Port on 1 February.

When asked, another official from Yangon Port, who also does not want to

be named, said 10 missile launching pads and 10 eight-wheeled carriers in
containers were picked up by personnel from Hmawbi Air Base on 1
February.

The unidentified Yangon port official said the missile launching pads and
carriers arrived with 10 people who are believed to be Ukrainians. No other
confirmation has been obtained in regard to this report.  -30-

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8.   MITTAL STEEL TO UP OUTPUT IN UKRAINE, KAZAKHSTAN

Grigori Gerenstein, Dow Jones Newswires
Moscow, Russia, Monday, February 6, 2006

MOSCOW — The Ukrainian steel smelter Mittal Steel Krivoi Rog will increase
its steel roll output in 2006 by 20%, compared with 2005, to 7.2 million
metric tons, the Ukrainian government press service said.

The production of iron ore by Mittal Steel Co. NV (36194.AE) in Ukraine will
increase in 2006 to 18 million-20 million tons from 15 million tons in 2005.

The considerable increase in output will require additional investment, and
Mittal Steel is currently in talks with the European Bank for Reconstruction
and Development on a loan, the Ukrainian government press service said.

Also the Mittal Steel Temirtau smelter in Kazakhstan is planning to increase
its steel output to 6.2 million tons in 2006 from 5.1 million tons in 2005,
the company press service said. Mittal Steel has invested $1.5 billion over
the last 10 years in upgrading steel smelting at Temirtau.  -30-
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By Grigori Gerenstein; Dow Jones Newswires; gerenstein@hotmail.com
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9. UKRAINE: CONSTRUCTION MATERIALS INVESTMENT FORUM
                     Made in Ukraine event: March 23-24, 2006 in Kyiv

The Action Ukraine Report (AUR) #654, Article 9
Kyiv, Ukraine, Monday, February 6, 2006

KYIV – March 23-24, 2006, Kyiv will host Made in Ukraine: Construction
Materials Investment Forum, the second event in the “Made in Ukraine”
series organized by BIZPRO and the American Chamber of Commerce
in Ukraine.

The series is designed to highlight trade and investment opportunities in
Ukraine’s most promising industries. The first event, “Made in Ukraine:
Furniture and Home Furnishings Fair” (October 2005, Dnipropetrovsk,
Ukraine), was a matchmaking forum, introducing 35 of the best Ukrainian
producers of furniture and home furnishings to international and domestic
wholesalers, retailers and importers seeking new suppliers.

Made in Ukraine: Construction Materials Investment Forum will showcase the
most promising investment projects in the construction materials industry,
including strategic partnerships with Ukrainian enterprises from across the
nation, as well as green- and brownfield opportunities offered by regional
authorities. In addition, the forum will host a number of auxiliary events
aimed at strengthening the competitiveness of the Ukrainian construction
materials sector and addressing pressing sector issues, such as product
certification and standardization.

Organized in partnership with Ukrainian Building Materials, Made in Ukraine:
Construction Materials Investment Forum will be held within the framework
of the 5th International Festival “Building and Architecture 2006” at the
KyivExpoPlaza Exhibition Center (2-b Salutna Street, Kyiv Ukraine), March
22-26, 2006. The festival is the nation’s largest construction event, with
nearly 1,000 exhibitors occupying an area of 40,000m2.
                       INVESTMENT FORUM ORGANIZERS:
BIZPRO
– part of the U.S. Agency for International Development’s efforts to
improve the economic development of Ukraine, Moldova, and Belarus. In
Ukraine, BIZPRO develops strategic partnerships and helps the public and
private sector implement initiatives to improve Ukraine’s competitiveness in
the global economy.

American Chamber of Commerce in Ukraine – the premier international
business association in Ukraine uniting leading companies from 50 nations
across the globe. Established in 1992, the Chamber represents a majority
of the direct foreign investment in Ukraine and is focused upon adding
value to its membership by protecting their interests in Ukraine.

Ukrainian Building Materials (Ukrbudmaterialy) – the leading construction
materials concern in Ukraine uniting 115 factories and enterprises from
different subsectors of the industry, including glass, ceramic, walling
materials, dry building mixtures, non-ore building materials, roofing,
polymeric and sanitary-engineering materials.

Attendance at Made in Ukraine: Construction Materials Investment Forum
is free of charge for registered participants. For event details, please send

your inquiries to MadeInUkraine@dai.kiev.ua or by phone +380 44
490-3350 to Courtney Zukoski and Victoria Yakovleva.  -30-
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LINK: http://www.madeinukrainefairs.com/
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10. MOODY’S AFFIRMS BANK NRB’S (UKRAINE) B2/NP FOREIGN
          CURRENCY AND E+ FINANCIAL STRENGTH RATINGS
            POTENTIAL ACQUISITION BY RUSSIA’S SBERBANK

Press release from Moody’s Investors Service
Dow Jones Newswires, Friday, February 3, 2006 

LIMASSOL – Moody’s Investors Service has affirmed the B2/NP foreign

currency ratings and E+ Financial Strength Rating of Kyiv-based Bank NRB
(NRB) following the recent announcement that Russia’s Sberbank (Baa2
long-term foreign currency rating) intends to acquire a 100% stake in the bank.
The outlook for all ratings is stable.

Moody’s understands that, although Sberbank has yet to receive necessary
approvals from the Ukrainian and Russian regulatory bodies, the probability
that this transaction will materialise is relatively high, exerting positive
pressure on NRB’s B2 long-term foreign currency deposit rating which has
consequently become constrained by the B2 (stable) sovereign ceiling.

Therefore, any future upward movement in Ukraine’s sovereign ceiling is
likely to trigger a change in NRB’s foreign currency deposit rating up to a
level commensurate with the bank’s fundamental credit strength existing at
that time, factoring in the impact of the potential takeover of NRB by
Sberbank.

Moody’s will continue to monitor the progress of the transaction and, in the
event that the takeover takes place, will revisit NRB’s unconstrained
ratings.

With total IFRS-consolidated assets of US$111.6 million at year-end 2004,
NRB is among the smallest banks rated by Moody’s in Ukraine. It is
beneficially owned by the National Reserve Corporation (Russia) [not rated
by Moody’s] — a financial-industrial holding which also owns NRB’s sister
bank, National Reserve Bank (Russia).

Sberbank is the largest bank in Central and Eastern Europe, with total
assets of US$69 billion and shareholders’ equity in excess of US$5 billion
as at year-end 2004. It is majority-owned by the Central Bank of the Russian
Federation.  -30-
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11. UKRAINE STILL WARY OF ‘GAS WAR’ DEAL WITH MOSCOW

Agence France Presse (AFP), Kiev, Ukraine, Monday, Feb 6, 2006

KIEV = An agreement between Russia and Ukraine ending a recent
gas price war between the two neighbours has attracted fresh criticism from
analysts who doubt it holds the guarantees President Viktor Yushchenko’s
government has claimed.

A new round of secretive talks between Russian and Ukrainian officials that
ended Thursday has done nothing to reassure those who fear further
instability after Moscow abruptly cut supplies in a “gas war” in January.

“The Ukrainians can’t be considered a nation — they have allowed a group
of adventurers to conclude… doubtful agreements with doubtful persons,”
the online newspaper Ukrainska Pravda said.

The three-day cut of gas supplies to this ex-Soviet nation at the start of
January sparked debate across Europe as knock-on disruption was felt in
several European countries for which Ukraine is a gas transit route.

Since then much attention has been paid here to RosUkrEnergo, a joint
venture half owned by Russia’s Gazprom energy giant and half owned by
Austria’s Raiffeisen Bank on behalf of unidentified investors.

Under an agreement that at least provisionally resolved last month’s
stand-off, RosUkrEnergo will be responsible for all Ukraine’s gas imports
from both Russia and ex-Soviet Central Asia.

But suspicions about the deal mounted as a new joint venture was set up at
the latest talks in Kiev: UkrgazEnergo.

This company is jointly owned by Gazprom and Ukrainian utility Naftogaz
and will be responsible for selling gas on the Ukrainian market once it has
been shipped in by RosUkrEnergo.

Following Thursday’s talks, Ukrainian officials said the price agreed in
January for gas imports — 95 dollars per 1,000 cubic metres — would
remain in force for five years.

“It’s the lowest price among all the former Soviet republics with the
exception of Belarus,” said Naftogaz, insisting that only unforeseen
circumstances could prompt a price revision within five years.

Yushchenko, who has been embroiled in a political stand-off with
parliament over the deal, has insisted the deal is the best possible
compromise, in which “neither party lost”.

But Russian newspapers have noted the studious silence mainted by their
countries’ officials at the close of Thursday’s meeting on how long the
current price-tag would remain in place.

The Russian side earlier said the 95-dollar rate only applied until July 1,
after which the price could vary according to changes in the price of gas
from Russia and Central Asia.

Supplies from Central Asia — particularly Turkmenistan, but also
Uzbekistan and Kazakhstan — are key to the deal as Russian gas will be
mixed with cheaper Central Asian gas.

“Uzbekistan already increased from January 1 the price it charges Russia
for gas from 42 to 60 dollars. Turkmenistan is ready to raise its prices
too,” said an energy expert at Kiev’s Razumkov research centre,
Volodymyr Saprykin.

“It’s absolutely clear the price of 95 dollars can’t remain,” Saprykin said.

There was agreement from the director of the Centre for Energy Research,
Kostyantin Borodin: “In the second half of 2006 prices for Ukraine will
increase,” he said, predicting however a rise of not more than 10 percent.

For several Ukrainian newspapers the main problem with the current
arrangements is a lack of transparency.

“What guarantees are there that the agreed volumes will be delivered at
this price? For the moment there are none,” Ukrainska Pravda said.

The weekly Dzerkalo Tyjniya said the strangle-hold that UkrgazEnergo will
have on gas sales raises the prospect of the Russian-dominated venture
taking over shares in companies that have trouble paying their bills.

In addition to those agreements made public on Thursday, Kiev and
Moscow have concluded another six that were highly disadvantageous to
Ukraine, the weekly said.

The government’s press service confirmed to AFP the existence of “several
protocols” in addition to those publicised, but declined to give details.
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12.   UKRAINE’S DEFENCE MINISTER SAYS GAS AGREEMENT
                      WITH RUSSIA NOT LONG TERM DEAL
 
ITAR-TASS, Moscow, Russia, Saturday, February 4, 2006

MUNICH – Ukrainian Defence Minister Anatoly Gritsenko said the gas

agreement with Russia was not a long-term deal.
Speaking at the 42nd International Conference on Security Policy in Munich
on Saturday, Gritsenko said, “My Russian colleague Sergei Ivanov disagrees
that the use of gas is a weapon. I am of a different opinion.”

“Now the system of gas supplies works in a stable fashion. But this is not
a long-term agreement because it was concluded not the way it should be
done in the 21st century with the participation of a G8 member-state,” he
said.

“I am a defence not an energy minister and I would not like to touch this
sphere, but this issue was discussed here by many, from Georgian

President Mikhail Saakashavili to U.S. Senator McCain,” he said.

According to Gritsenko, the Russian-Ukrainian gas agreement is not

mutually advantageous because “Ukraine had not choice”.

“I am not blaming Russia. I can understand it. It has its own interests,”
the minister noted. At the same time, he believes that “there is nothing of

market principles in it”.

“We have the monopoly of RosUkrEnergo. Nobody knows this company

and who is behind it. It’s just several chairs and several computers,” he said.

“This is a big monopoly that supplies gas to Ukraine and Europe. Now this
is not a question between Ukraine and Russia. This is a question of the
energy security of Europe,” Gritsenko said.  -30-
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13. UKRAINIAN PRESIDENT’S CHIEF OF STAFF OLEH RYBACHUK
     HAILS GAS DEAL AS “VICTORY”, PRICE FIXED FOR 5 YEARS
          President Yushchenko has no family members in RosUkrEnergo

UT1 State TV, Kiev, in Ukrainian 2010 gmt 3 Feb 06
BBC Monitoring Service, UK, in English, Friday, Feb 03, 2006

KYIV – The head of the presidential secretariat, Oleh Rybachuk, has hailed
the signing of gas contracts between the Naftohaz Ukrayiny national company
and the Swiss-registered gas trader Rosukrenergo as a great victory for
Ukraine.

Speaking live in the “Point of View” talk show on Ukraine’s state-owned UT1
television on 3 February, Rybachuk echoed statements by top Naftohaz
representatives that the price of gas to be supplied to Ukraine had been
fixed in the deal at 95 dollars per 1,000 cu.m. for five years. Rosukrenergo
executives earlier today said the price for Ukraine might actually vary.

“I can say to the millions of Ukrainians watching us that we will have gas
until the end of this year and for the next five years. The price of this
gas has been guaranteed – 95 [dollars] both in digits and letters. I read
the contract today. It is for five years. I believe this is a great victory
for Ukraine,” Rybachuk said.

Rybachuk dismissed a statement to the contrary by Gazprom deputy head
Aleksandr Ryazanov quoted by interviewer Maksym Drabok. He said

Ryazanov had personally signed the deal stipulating the price.

“There is his signature under this contract. Five years and the price are in
the contract. Therefore, I think that Russia and the Gazprom representative
will undoubtedly be interested in fulfilling the contract. We have no reason
to call his signature and his obligations into question,” Rybachuk said.

He promised that Ukrainians would get exhaustive information about the

deal and Rosukrenergo next week.

“I should confirm once again that Ukrainians will receive detailed
information about what happened. The president has guaranteed that there
will be maximum publicity in this process. Next week you will see more than
one round table, more than one expert analysis, but the main characters in
the talks are now preparing for the most anticipated questions and answers.
Next week will be a week of information reports from experts,” Rybachuk
said. “Ukrainians will learn a lot from the horse’s mouth.”

He said that none of the representatives of the Ukrainian authorities or
their relatives had vested interests in the gas deal. “I know who is not
behind Rosukrenergo. Representatives of the present Ukrainian authorities
are not behind it,” Rybachuk said. “There are no family members there. This
may come as a great disappointment, but there is nothing [in the deal]
leading to the president’s family.”

Asked when the Ukrainian president will appoint an ambassador to Russia,
Rybachuk said that a candidacy had already been agreed and may be

appointed “within days or weeks”. Pressed by the interviewer, Rybachuk
revealed that this would be a politician rather than a career diplomat.

Asked whether the president will deliver an address to parliament next
Tuesday 7 February, Rybachuk told the viewers to wait until parliament’s
coordinating council meets on Monday to hold consultations on the issue.
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14.  GAS TRADING COMPANY ROSUKRENERGO DENIES FIXED

        GAS PRICE FOR NEW JOINT VENTURE UKRGAZENERGO
                     Price will depend on the price of Turkmen gas

Interfax-Ukraine news agency, Kiev, in Russian 2219 gmt 2 Feb 06
BBC Monitoring Service, UK, in English, Friday, Feb 03, 2006

KIEV – One of the executive directors of the Swiss company Rosukrenergo
A.G., Konstantin Chuychenko, has said that the company can review the price
of natural gas supplied to the joint venture Ukrgazenergo.

[Ukrgazenergo is a joint venture of the Ukrainian state oil and gas company
Naftohaz Ukrayiny and the Swiss-registered gas trading company

Rosukrenergo, which was formed on 2 February to supply Russian and
Central Asian gas to Ukrainian consumers.]

“The price can vary depending (on the price of Russian gas sold to
Rosukrenergo – Interfax-Ukraine),” Chuychenko told Interfax-Ukraine on

2 February in Kiev.

Asked about the procedure of price review for gas supplied to Ukrgazenergo,
Chuychenko said: “There is a procedure which is typical for such
international contracts.”

The other Rosukrenergo’s executive director, Oleg Palchikov, told
Interfax-Ukraine that there is no fixed price in a contract with
Ukrgazenergo. He said the price of gas for the joint venture will depend on
the price of Turkmen gas.

[The head of Naftohaz’s press service, Eduard Zanyuk, said at a news
conference on 2 February that the newly-formed joint venture Ukrgazenergo
has signed a contract with Rosukrenergo on supplies of Central Asian and
Russian gas to Ukraine. Under the contract Ukrgazenergo will buy 34bn cubic
metres of gas this year and up to 60bn cubic metres over the next four years
for the fixed price of 95 dollars for 1,000 cu.m. of gas.]

Palchikov also said that Ukrgazenergo is going to appeal to the national
energy regulatory commission to obtain a license for supplying gas under
flexible tariffs. -30-
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15.               “UKRGAZENERGO: FIRST IMPRESSIONS”
Company set up in non-transparent way, urges government control over JV

ANALYSIS & COMMENTARY: By Ihor Lutsenko
Ukrayinska Pravda web site, Kiev, in Ukrainian 3 Feb 06
BBC Monitoring Service, UK, in English, Sat, Feb 04, 2006

The newly created gas joint venture Ukrgazenergo, which has been set
up jointly by Ukraine’s Naftohaz and the Swiss-registered Rosukrenergo
company, must be placed under the control of the Antimonopoly
Committee and the National Commission for Energy Regulation, a
Ukrainian opposition newspaper has said.

The paper criticized the “non-transparent” way in which the new company
was set up and warns of the danger of allowing such a company with
“limitless power” to “twist the state around its little finger”.

It said there were no guarantees that the agreement on gas prices and
volumes would meet Ukraine’s requirements for gas imports at acceptable
prices and there was a danger these prices could be manipulated.

The following is the text of the article by Ihor Lutsenko entitled
“Ukrgazenergo: First impressions”, posted on the Ukrayinska Pravda
web site on 3 February; subheadings have been inserted editorially:
               JOINT VENTURE CARRIES NO GUARANTEES
If Ukraine had got together as a nation, and not a population,
Ukrgazenergo would not have been set up in Kiev on 2 February.

Officially, this joint enterprise will be under the equal control of its two
founders – the Naftohaz Ukrayiny national joint-stock company and the
Swiss-registered Rosukrenergo company.

This company would not have been in control of the most attractive part
of the Ukrainian gas market – industrial consumers – and [deputy head of
Naftohaz] Ihor Voronin, who was at one time suspected of corruption,
would not have been appointed acting chairman of the company’s board.

Therefore, an agreement has been signed between the joint venture and
Rosukrenergo to the effect that this company will supply Ukrgazenergo with
gas at a price of 95 dollars per 1,000 cu m for the period 2006-2010. In
2006 Rosukrenergo will sell the joint venture 32bn cu. m., in 2007 58bn and
from 2008-10 up to 60bn cu. m. annually.

In theory, this will meet Ukraine’s requirements for imported gas at
acceptable prices. But are where any guarantees that precisely these volumes
will be supplied, and at this price? At the moment, none at all.

The contract contains only penalties which the vendor must pay in the event
of failure to provide the goods – approximately one per cent of their value.

And that is all. If Rosukrenergo wishes to sell the gas intended for Ukraine
to Europe, then it will incur expenses of 95 cents per 1,000 cu m. This is
roughly half a per cent of the price of marketing the fuel in EU countries
and is an amount which can be disregarded.

Where are the guarantees that Gazprom will provide Rosukrenergo with the
necessary volumes of gas to sell it to Ukraine? Absolutely none whatsoever.

What will happen when Rosukrenergo is unable to fulfil its obligations to
the joint enterprise? Rosukrenergo will be in debt to the joint venture
(i.e. to its subsidiary structure) to the tune of 95 cents per 1,000 unsold
cu. m. It will pay, or not pay – it will make no difference – this sum is to
be paid to Ukrainian companies which have been left without gas.

Are where the guarantees that Rosukrenergo will not try to hike the price of
gas in the future because, say, of an increase in the price of Central Asian
gas, threatening to suspend supplies (and a one per cent penalty will not
stop anyone)?
                 MEMORANDA TO PRESIDENT IGNORED
The Ukrainians are not a nation because they have allowed a group of
adventurers to skirt around established procedures and enter into dubious
agreements with dubious people from Rosukrenergo. All 48 million
Ukrainian citizens, with the exception of a few of the president’s friends,
were virtually debarred from the talks.

The cabinet and parliament opposed this as much as they could, but
nevertheless nobody was interested in their opinion.

Analytical memoranda of the Finance and Economics Ministries to the
president were ignored. The memoranda spoke of the danger to the
Ukrainian economy posed by the creation of the joint enterprise and
the risks connected with the complex financial situation at Naftohaz.
Nevertheless, the opinion of these ministries was officially ignored.

These were not just remarks on procedure. This is a very bad omen,
because now only state-run mechanisms are protecting Ukrainian
consumers from the limitless power of this new joint venture. These
mechanisms, as the process of creating the joint enterprise has shown,
are not dependent on public control.

If, with the creation of the joint venture, they are now twisting the state
around their little finger, then that is how it is always going to be. And
there will be more than enough opportunities for the joint enterprise and
its Swiss founders to interfere in Ukraine’s internal affairs.

Already now, based on the incredibly non-transparent way in which
Ukrgazenergo was set up, it is clear that its head will be someone who will
be appointed by that lobby in the president’s circle which controls the
creation of the joint venture. This person will act, evidently, more in the
interests of Rosukrenergo than Naftohaz.

The main potential danger from his activities will be the manipulation of
prices and volumes of gas to be supplied to Ukrainian consumers, with the
aim of putting economic pressure, including bankruptcy, on some of them.
Thus, Ukrainian big business will be dependent on gas supplies which are
under the control of external forces.
                 NEW ENTERPRISE MUST BE CONTROLLED
To prevent this happening, the joint enterprise must be placed under the
control of the Antimonopoly Committee and the National Commission for
Energy Regulation. At the moment neither the weak public nor even the weak
president controls these two state bodies to a sufficient extent. It is not
difficult to guess how “carefully” they will watch the activities of the
joint venture.

It is the country’s big businesses, who will be the first to suffer from the
new gas scheme, who are mainly to blame for the fact that the industrial gas
market in Ukraine is now virtually lost. They ought not to wait or try to
get an answer from the president, as [Serhiy] Taruta and [Vitaliy] Hayduk
from the Industrial Union of the Donbass did, but they should use their
initiative and support the government.

They have proved incapable of acting together with the people and the
administration. After all, the country’s oligarchs are heroes only in the
struggle against their own people. Well, maybe it is now payback time for
them.

If Ukrgazenergo gets its freedom to establish prices and volumes of gas for
sale, then Naftohaz, like the Ukrainian parliament, the president’s
secretariat and the Supreme Council may be shut down. The state anthem
and emblem of Ukraine may remain – for the time being.  -30-
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16.       UKRAINE: TERMS OF NEW GAS DEAL UNCLEAR
           RosUkrEnergo made the monopolist of gas supplies to Ukraine

By Jan Maksymiuk, Radio Free Europe/Radio Liberty (RFE/RL)
Prague, Czech Republic, Friday, February 3, 2006

Officials in Kyiv announced on 2 February the finalization of a gas deal
from January, under which Ukraine is now to receive gas from Russia at $95
per 1,000 cubic meters. According to Kyiv, the price of $95 is to remain
unchanged for five years. However, RosUkrEnergo, a Swiss-based company
that was made the monopolist of gas supplies to Ukraine, signals that this
is not quite so. Does this mean that the Russian-Ukrainian gas war has not

yet ended?

On 2 February, Naftohaz Ukrayiny, Ukraine’s gas transportation company,
signed an accord with the Swiss-based gas trader RosUkrEnergo in Kyiv on
the creation of a joint venture to sell gas in Ukraine. Both companies were
obliged to do so by a framework gas agreement of 4 January, under which
RosUkrEnergo became the monopolist of gas supplies to Ukraine for the
next five years.

Ukrainian Prime Minister Yuriy Yekhanurov praised the five-year accord as
advantageous for Ukraine. But he told journalists that he is also fully
aware that the document may be bitterly criticized by his political
opponents: “My future political career is not important here. It is
important that it will be warm in your apartments tomorrow. In summer
you may curse me to your souls’ content. But in winter you may find a
good word for me.”
                                        JANUARY DEAL 
On 4 January, Naftohaz Ukrayiny, RosUkrEnergo, and Gazprom signed a
deal whereby Ukraine is to obtain 34 billion cubic meters of gas in 2006
from Russia for $95 per 1,000 cubic meters — up from $50 in previous years.

The deal also provided for the creation of a joint venture between Naftohaz
Ukrayiny and RosUkrEnergo to sell gas in Ukraine and share profits from it.

Critics of the deal said it was valid for only the first six months of the
year as regards the gas price for Ukraine, simultaneously pointing out that
it set the gas transit tariff for Gazprom for five years. Such critics also
slammed the government for making RosUkrEnergo — a murky intermediary
created by Gazprom — the monopolist responsible for gas supplies to
Ukraine.

On 10 January, Ukraine’s parliament, the Verkhovna Rada, passed a
no-confidence motion in Yekhanurov’s cabinet over the gas deal. Yekhanurov
and his ministers, however, have remained in office due to a constitutional
reform that took effect on 1 January and effectively prevents the current
legislature from appointing a new cabinet.

The joint venture created on 2 February, named UkrGazEnergo, has a
charter capital of 5 million hryvnyas ($1 million) with stakes shared evenly
between its founders. The same day UkrGazEnergo and RosUkrEnergo
signed a contract under which Ukraine is to obtain 34 billion cubic meters
of gas in 2006 and some 60 billion cubic meters annually in 2007-2010.

Naftohaz Ukrayiny spokesman Eduard Zanyuk told journalists in Kyiv on
2 February that neither gas storage facilities nor gas pipelines in Ukraine
will be included in UkrGazEnergo’s charter capital. Zanyuk was thus
addressing the common fears in Ukraine that Moscow is using gas price

as a weapon to gain control over Ukraine’s gas transportation network.
               DISAGREEMENT OVER FIVE-YEAR TERM 
In a no less important statement Zanyuk announced that the new gas price
for Ukraine will remain stable for five years: “Responding to questions
from skeptics in Ukrainian political circles, we announce that the gas
price defined in this contract is fixed for five years and is $95 for 1,000
cubic meters.”

If this is really so, then the new contract represents a major victory for
Kyiv, which had initially been promised the price of $95 per 1,000 cubic
meters just for the first half of 2006. The victory seems to be even more
significant if one takes into account that the gas price for Ukraine is
lower than that charged by Gazprom for all other post-Soviet countries
except Belarus. For example, Gazprom set the new gas price for Moldova
and Georgia at $110 per 1,000 cubic meters.

However, the same day, RosUkrEnergo managers, Konstantin Chuichenko

and Oleg Palchikov, cast doubt on Zanyuk’s words. Chuichenko said the
price may be changed depending on the price of Russian gas for
RosUkrEnergo. In his turn, Palchikov asserted that there is no “price formula”
included in the contract, adding that the price for Ukraine will depend on the
price of Central Asian gas in the total gas volume supplied to the country.

And Andriy Halushchak, Naftohaz Ukrayiny’s representative on the
UkrGazEnergo supervisory board, admitted that a change of the gas price
may actually take place, but only after mutual consent from both sides. If
there is no such consent, he added, the sides should appeal to court.

Thus, it seems that the deal does not end the gas supply controversy
between Kyiv and Moscow and may lead to a renewed row in the longer
run, particularly if Turkmenistan, a major gas source for Ukraine, moves to
increase its price for RosUkrEnergo.

It should also be expected that the gas supplies will continue to be a
topical issue for the opposition in the ongoing parliamentary election
campaign in Ukraine. There is still a mystery surrounding the owners of
RosUkrEnergo, which came into the global spotlight on 4 January. And this
latest gas contract, instead of dispelling this mystery, has added some of
its own.  -30-
——————————————————————————————-

[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
17.               MOSCOW CHANGES TACTICS IN UKRAINE
          Kremlin wants Yushchenko to dismiss the “nationalist” Minister
         of Foreign Affairs Borys Tarasyuk after the parliamentary elections.
           
ANALYSIS & COMMENTARY: By Vladimir Socor
Eurasia Daily Monitor, Volume 3, Issue 24
The Jamestown Foundation, Wash, D.C. Friday, Feb 3, 2006

According to as yet unconfirmed but largely credible reports on February 2
from Kyiv, officials in the presidency and government have authorized the
immediate signing of a gas agreement and six attachments with Russia.

Those documents are said to ensure Russian monopoly use and possibly
partial control of Ukraine’s gas transit system, as well as Russian supply
monopoly and price-setting power in Ukraine, for many years to come.

The reported development, seen against the backdrop of a crisis of state
institutions in Ukraine (see EDM, January 31), suggests that Moscow’s
tactics have moved beyond the “gas attack” to inside dealings with some
key Ukrainian office holders.

From the Kremlin’s standpoint, the crisis of governance in Ukraine opens a
strategic opportunity to roll back the Orange Revolution’s democratic gains
and re-assert Russia’s economic and political influence in the country.
While advancing that strategic goal in the run up to the March parliamentary
elections in Ukraine, Moscow has changed its tactics in mid-stream.

Initially, Moscow envisaged a prolonged cutoff in gas supplies. This was to
hit hard at Ukraine’s economy, discredit President Viktor Yushchenko and
his Our Ukraine bloc irreparably with the electorate, turn Europe against
Ukraine by charging that Kyiv was “stealing” Europe’s gas from the transit
pipelines, and set the stage for transferring those pipelines from Ukrainian
to shared Russian-Ukrainian jurisdiction.

Kremlin-controlled media and the officially licensed punditry laid those
goals bare and rejoiced in anticipation of the “punishment” to Yushchenko’s
team at the parliamentary elections.

Those tactics changed markedly, however, on the advice of several Kremlin
consultants, preeminently Gleb Pavlovsky, Sergei Markov, and Vyacheslav
Nikonov. Although these consultants were partly responsible for the defeat
of Moscow’s policy in the 2004 Ukrainian presidential election, they now
argued that policy must not be guided by considerations of revanche or
“punishing” Yushchenko.

In articles and interviews during late December and January — and
undoubtedly in internal channels to the Kremlin — they argued that the
initial choice of tactics was bound to misfire: Ukrainian voters would blame
Russia for excessive price hikes and supply cuts; a rally-around-the-flag
syndrome would ensue in Ukraine; Orange political fortunes would be lifted
by a second wind from their slump; Ukraine’s eastern regions, strongholds
of Russia-oriented parties, would be the hardest hit by the “gas attack;”
Europe would ultimately side with Ukraine against Russia; and, the longer
the confrontation, the higher the political costs to Russia and its allies
in Ukraine.

These consultants called for resuming gas supplies to Ukraine at prices
fixed in Moscow and working flexibly with several political forces in
Ukraine. They anticipate that Yushchenko and Our Ukraine would have to
contend with stronger oligarchic and pro-Russia groups in the new
parliament.

Accordingly, these Kremlin consultants recommended political accommodation
with a weakened Yushchenko and using this relationship in the post-election
period to advance Russia’s objectives in Ukraine. This tactic corresponds
with Yushchenko’s own attempts to reach out to the Kremlin for support to
his embattled presidency.

The preliminary gas agreement signed on January 4, the demonstrative
meeting between Russian President Vladimir Putin and Yushchenko in
Astana on January 11 (with the promise of a follow-up meeting), and the
scheduled creation within the next few days of a Russian-Ukrainian gas
company based on the notorious RosUkrEnergo, are the landmarks of this
process thus far.

The Kremlin has significantly toned down its anti-Orange Revolution
propaganda and ceased it altogether with regard to Yushchenko.

However, it wants the latter to dismiss the “nationalist” Minister of
Foreign Affairs Borys Tarasyuk after the elections. Moscow is also
signaling readiness for a political deal with Yulia Tymoshenko as part of a
post-election coalition government, though ruling out her return as prime
minister.

While continuing to place a major stake on defeated presidential candidate
Viktor Yanukovych, according to Pavlovsky, Russia needs the enfeebled
Yushchenko as a “partner who controls and to some extent influences state
policy and can make decisions.

And so Russia works a lot with Yushchenko. [However], his weakness is
turning into a problem for Moscow, [which] needs a strong partner in
Ukraine” (Glavred, January 26). Thus, the perceived decline in Yushchenko’s
authority seems to raise the question whether he can deliver on
understandings that Moscow says it may be working out with him. -30-
———————————————————————————————–
(Survey based on Russian and Ukrainian media coverage of pre-election
developments in Ukraine, January 2006)(http://www.jamestown.org)
——————————————————————————————-
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18.                 UKRAINE TURNS BACK TO MOSCOW AS
                        ORANGE REVOLUTION IS BETRAYED

From Jeremy Page in Kiev, The Times Online
London, United Kingdom, Friday, February 3, 2006

THE last time The Times saw Viktor Yanukovych, the burly former
convict and then Prime Minister of Ukraine looked like a broken man.

His victory in a presidential election had just been overturned after a
fortnight of massive protests centred on Kiev, the Ukrainian capital.

Viktor Yushchenko, who led the Orange Revolution and went on to win
theelection re-run, was being hailed around the world as a democratic
hero who had wrenched the country of 47 million people out of Russia’s
stifling embrace. Mr Yanukovych was vilified as a Kremlin stooge.

Just over a year later, however, Mr Yanukovych had a defiant gleam in
his eye as he met The Times in his newly refurbished office in the centre
of Kiev.

And with good reason. He is not just back at the forefront of Ukrainian
politics: he is on the verge of snatching back power from under the noses
of the Western governments that so enthusiastically embraced the Orange
Revolution.

“It is high time to end incompetence,” he says in a slick new campaign
advertisement. “Together we will win for the sake of Ukraine.”

His Party of the Regions, which advocates closer ties with Russia, is
leading all opinion polls before parliamentary elections on March 26. His
personal ratings also outstrip those of his rivals. And since Parliament,
rather than the President, chooses the Prime Minister under constitutional
reforms introduced on January 1, he is now a front-runner to assume what
will be the nation’s most powerful post.

The West may have won the geopolitical battle over Ukraine in 2004. But,
with less than two months until the elections, analysts say, it appears to
be losing the war.

“In 2005 this country went from one crisis to another,” Mr Yanukovych,
56, told The Times.

“People got used to worrying all the time about what’s going to happen
tomorrow. People are tired of this instability. All they see from this
Government is populism and unprofessionalism.”

The fault lies principally with the business leaders who bankrolled the
Orange Revolution, analysts say.

Mr Yushchenko took power promising an end to the corruption, human
rights abuses and economic bungling that had plagued Ukraine under his
predecessor, Leonid Kuchma.

He pledged to lead Ukraine into the EU and Nato, tearing it out of Russia’s
strategic orbit for good. But within a few months infighting and
allegations of corruption tore his team apart and in September he sacked
the Government of his revolutionary partner, Yuliya Tymoshenko.

“The fundamental mistake was a lack of coherent political strategy,” said
Yuri Yakymenko, a political analyst at the Razumkov Centre in Ukraine.
“Right from the start they were competing for position in the parliamentary
elections.”

The problems were not just internal, however. Many Ukrainians feel they
did not receive the support they had anticipated from the West. The EU
quickly poured cold water on Mr Yushchenko’s promises to join the body
and instead awarded Ukraine the nebulous prize of “market economy status”
last year.

“If there had been a definite signal on EU membership it would have been
better for Yushchenko,” Mr Yakymenko said .

President Putin said this week that the United States had given Ukraine
just $174 million (£98 million) in aid last year, compared with between $3
billion and $5 billion that Kiev had received in subsidies from Moscow.

Ukraine says it hopes to join Nato by 2008 but Western diplomats say that
is unrealistic given popular opposition to the idea and the complexity of
integrating technical standards. Russia, meanwhile, has been flexing its
economic muscles to remind Ukrainians of their continued dependence
on their former imperial and Soviet masters.

It has studiously avoided backing any individual politician since its
explicit support for Mr Yanukovych’s presidential campaign backfired
so badly. But it severely undermined Mr Yushchenko when it cut off
Ukraine’s gas supplies on New Year’s Day in a pricing dispute widely
seen as punishment for the Orange Revolution. Russia also banned
imports of Ukrainian meat and dairy products last month.

The net result is that Mr Yushchenko is losing support in western and
central Ukraine, his traditional strongholds, while Mr Yanukovych is
consolidating his in the south and east. Yuri Yekhanurov, Mr Yushchenko’s
Prime Minister, predicted last week that their Our Ukraine party would
triumph in the elections and form a coalition government. The question is
with whom.

The latest polls give the Party of the Regions 25 per cent of the vote, Our
Ukraine 15 per cent and Mrs Tymoshenko’s bloc 12 per cent. Some
analysts predict that Mr Yushchenko will resolve his differences with Mrs
Tymoshenko to form a new Orange coalition. If that fails, he could have
to link up with the Party of the Regions, or face an opposition coalition
led by Mr Yanukovych. Either of the latter would entail significant
changes, especially on foreign and defence policy.

Mr Yanukovych has polished his image in the past year with the help of an
American PR consultant, who has helped to gloss over his convictions for
robbery and assault in 1969 and 1970, and his alleged links to organised
crime.

He now says that he supports Ukraine joining the EU­ a change of tune
since 2004. He rants less about how Western agents orchestrated the
Orange Revolution or supplied protesters, as his wife once claimed,
with psychotropic oranges and felt boots. But he still strongly opposes
Ukraine joining Nato. He advocates making Russian an official language,
and supports the creation of an economic bloc with Russia, Belarus and
Kazakhstan.

“Ukraine should be a bridge between the EU and Russia,” he says.
“This Government has only driven us apart from Russia, while failing
to bring us closer to Europe.”  -30-
—————————————————————————————–
LINK: http://www.timesonline.co.uk/article/0,,13509-2022311,00.html
——————————————————————————————-
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
19.                            THE ORANGE BOOMERANG

 
COMMENTARY: By Sergei Kiselev
The Moscow News, Moscow, Russia, Wed, February 1-7, 2006

The majority of Ukraine’s population is disappointed in their President,
especially by the fact that the leader of the Orange Revolution has been
implicated in a number of corruption scandals

Analysts believe that Viktor Yanukovich’s political comeback is the result
not so much of his successes as Viktor’s Yushchenko’s failures. Although
he is often portrayed abroad as a democratic reformer striving to bring
Ukraine closer to Europe and the United States, his reputation suffers at
home. “He has a Gorbachev Syndrome,” The New York Times wrote.
“He looks better abroad than he does at home.”
                                                  CRONYISM
There seem to have been fewer corruption scandals during Leonid Kuchma’s
entire 10-year presidency than during Yushchenko’s first year in office.
All reforms promised by the Orange Revolution leader probably began to
falter the moment he filled Cabinet and gubernatorial (regional government)
positions with the godparents of his children (Petro Poroshenko, secretary
of the National Security and Defense Council; Oksana Bilozir, the minister
of culture and tourism); business cronies (David Zhvania, the minister for
emergencies; Oleksandr Tretyakov, the president’s top aide; Yevhen
Chervonenko, the minister of transport and communications), and relatives
(Yuriy Pavlenko, the minister of family, youth and sport; Yaroslav
Yushchenko, Viktor Yushchenko’s nephew, deputy governor of the Kharkiv
region). This is just a partial list.

Yushchenko has failed to separate business from politics – something that
he vowed to do as an aspiring presidential candidate. When they secured
high-level state and government positions, businessmen, who had been
harassed by Kuchma for supporting Yushchenko, immediately began to make
up lost ground. The first corruption scandal erupted days after a new
Cabinet was appointed, when Justice Minister Roman Zvarich threatened to

resign unless the ban on the re-export of gasoline (his family business) was
lifted.

Next, it turned out that Roman Zvarich, a former U.S. citizen, had never in
fact been a professor of law in the United States nor did he even have a
degree in law. Nonetheless, he retained his post. Then it was established
that sugar prices in Ukraine had gone up because Petro Poroshenko, who was
in charge of national security and in control of a large chunk of the candy
industry, was not interested to see the import of low-cost sugar cane.
Incidentally, all of these people are now on the electoral list of the Our
Ukraine bloc that is close to Yushchenko.

Ukraine was also shaken by the furor created by the hard-hitting exposes in
the media alleging that Yushchenko’s son Andriy drives a $160,000 BMW and
frequently slaps down rolls of $100 bills at trendy restaurants. Asked
about this at a news conference, Yushchenko said that he advised his son to
“find that restaurant check … shove this check under that journalist’s
snout and then sue.” Then Oleksandr Zinchenko, Yushchenko’s former chief
of staff, caused a big stir by alleging corruption within Yushchenko’s inner
circle.
                                  TIMOSHENKO’S LEGWORK
On the first anniversary of the Orange Revolution, Yushchenko reported to
the Ukrainian parliament on the implementation of his “Ten Steps toward the
People” election program. Local reporters quipped that those 10 steps had
been made with Yulia Tymoshenko’s feet: Reducing the term of compulsory
draft service in the armed forces to one year and tripling financial
support for enlisted men; raising pensions to the countrywide subsistence
level; doubling teachers’ salaries; doubling allowances for orphans;
increasing childbirth allowances 17 times (now young women will get more
than $1,500 per each child they give birth to); and finally,
re-privatization of the Krivorizhstal metal plant, which was bought dirt
cheap by Leonid Kuchma’s son-in-law, causing the country a loss of
about $5 billion – one-fifth of last year’s state budget.

An experienced politician, Yulia Tymoshenko managed not only to make the
“presidential steps” but also ensured that the Ukrainian people remember to
whom they owe the real improvement in their living standards. Experts
believe that this is the main factor in Yushchenko’s declining ratings amid
the growing popularity of the “iron lady.”

It is true that the Ukrainians’ attitude toward their president has also
been affected by the latest round of rumors and speculation that the
opposition timed for the upcoming parliamentary election: e.g., when he
became president, Yushchenko worked hard to hush up the investigation of
his purported poisoning; that Boris Berezovsky funded his election campaign
in 2004, also writing a version of his inauguration address; and that
Yushchenko’s mother-in-law traveled from Philadelphia to Kiev for the
inauguration ceremony on a charter flight paid for by businessman Dmitry
Firtash, the right-hand man of Semen Mogilevich who is on the FBI’s wanted
list, but recently took part in discussing the Russian-Ukrainian gas
agreement in Moscow.

In short, the Orange boomerang that Yushchenko threw at corrupt officials
in the form of his “All Felons Will Be Jailed!” calls never hit anyone. As
it turns out, only Yushchenko was hit.
                                          GAS TROUBLE
The last straw came with the release of a report that the natural-gas
agreement between Gazprom, Naftohaz of Ukraine, and the Ros-UkrEnergo
utility, unfavorable for Ukraine, was mediated by Petrohaz, a company
registered in the United Arab Emirates and purportedly owned by Petro
Yushchenko, the president’s elder brother. It was reported that two hours
before the agreement was signed, RosUkr-Energo had wired the company
$53 million through Raiffeisen Bank. It is also noteworthy that the
Ura-inform building, a private news agency that reported details of the
deal, was gutted by a suspicious fire the same night.

It only remains to be added that the likeness of an elderly and gloomy
Taras Shevchenko on the 100-hryvnya bill will soon be replaced with an
image of the poet in his younger days against the backdrop of the heroine
of his poem Katerina. Some people say that this picture is amazingly
reminiscent of Viktor Yushchenko as an undergraduate, while Katerina
recalls the Ukrainian first lady, Katerina Chumachenko.
                                              OPINION
[1] Konstantin Zatulin, director, the Institute of CIS Studies:
The people who carried out the Orange Revolution simply jeopardized the
process of nation-building. After all, the real goal of the Orange
Revolution – as last year showed – is not democracy, but “Ukraine above
all” and a final separation from Russia. For all of last year, the “Orange”
ruling authorities divided Ukraine, not consolidated it. Can one really
hope for reconciliation and compromise if the president and his associates
continue to divide the country into “outlaw” Ukraine (the east and south)
and “true” Ukraine that wears national costume and practices wild-hive
beekeeping and wood-carving, as does Yushchenko on New Year’s eve.

Today, the “Orange” rulers, despaired of winning a victory in an open and
fair fight, are trying to wear Boris Yeltsin (c. 1993) shoes. Forced to
assume failure in the upcoming parliamentary election, Yushchenko has
mounted an attack on the legislative branch of government. He insists on
scaling down political reform and would also like to dissolve parliament.
The search for new pretexts to escalate tensions and up the ante in
relations with Russia well fits into the establishment’s aggressive style.

Russia’s objectives should be clear: To prevent Ukraine’s consolidation as
a state that is hostile to Russia, under the influence of forces in
opposition to Russia both within and outside Ukraine, thus preventing
Ukraine from turning into another Poland and avoiding the return of the
Time of Troubles.

Russia’s task is to help promote democracy in Ukraine. Federalism,
Jefferson used to say, is just a territorial form of democracy. Meanwhile,
Russian as the second state language in Ukraine is a form of national
democracy. This is what the main political struggles in Ukraine will center
around in 2006.

[2] Viacheslav Igrunov, Director, the International Institute

for Humanitarian-Political Studies:
The Orange Revolution inspired many Ukrainians, giving them confidence
in their right to decide their country’s future. This does not only apply to
those who came to Independence Square. Just as in the west of the country,
people in southern and eastern Ukraine realized that their will, their
choice could really make a difference. And although during the past year,
popular support for the new ruling authorities has halved, the population’s
civic activism is still remarkably high for a post-Soviet state.

Western countries, which hailed Yushchenko’s victory, opened new
opportunities for Ukraine. The United States graduated it from the
Jackson-Vanik Amendment, while the EU recognized Ukraine as a market
economy, indicating that as of now, it sees it as a democratic state. It
would, however, be naive to think that these changes have put Ukraine on
the home stretch for democracy. Politically motivated dismissals and
lawsuits, the declining efficiency of the administrative apparatus, and the
reemerging trend to crowd out Russian – all of this points to some serious
contradictions in the ongoing political processes. As for the scale of
problems caused by a worsening of its relations with Russia, it has yet to
be fully appreciated.

Still, Ukraine has not made any irreversible moves. There is a chance that
it will resume a special relationship with Russia, using cooperation to
modernize its economy and society. In his state-of-the-nation address, the
Ukrainian president said: “It is now time for an ‘economy of knowledge,’
when intellectual resources bring far greater benefits than do natural
resources.” This is also true for Russia. Yet once Ukraine, which has shed
the illusions about its huge natural resource potential, now has an
opportunity to make a breakthrough into a postindustrial world, leaving
oil-dependent Russia far behind.  -30-
——————————————————————————————-
LINK: http://english.mn.ru/english/issue.php?2006-4-16

——————————————————————————————-
FOOTNOTE:  The Spin From Moscow Goes Round and Round
and On and On.  AUR Editor.
——————————————————————————————-
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
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20.    46.5 MILLION HRYVNIAS FOR ST. SOPHIA RESTORATION

The Day Weekly Digest in English, #2, Kyiv, Ukraine, Tue, Jan 31, 2006

KYIV – A total of 46.5 million hryvnias will be allocated for the
restoration and rehabilitation of the historical and cultural preserve

“Sophia Kyivska” in 2006, reports http://www.for-ua.com, citing the
press service of the Ministry of Construction, Architecture, and Municipal
Housing Services.

According to the press service, this is the first time in the history of
independent Ukraine that such a large sum will be spent on the restoration
of St. Sophia’s. For this purpose the state budget will part with five
million hryvnias, or one-fifth of the appropriations intended for the
restoration of monuments.

The municipal budget will furnish 26.5 million, and the Donetsk region will
supply 15 million in the form of philanthropic contributions. The project’s
top priority tasks include the restoration of the metropolitan’s building on
the premises of St. Sophia.

The engineering networks must be completely replaced immediately. Several
unique monuments of mosaic art are in dire condition. “Therefore, it is very
important to choose a technology that will make it possible to preserve for
ages the unique mosaic art that we inherited from ancient times.

Today our shrine requires serious restoration and rehabilitation,” reports
the press service. According to the preserve’s estimates, the restoration
requires some 250,000 hryvnias, an amount that Sophia Kyivska can ill
afford.  -20-

——————————————————————————————-
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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
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      Power Corrupts and Absolute Power Corrupts Absolutely. 
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return to index [The Action Ukraine Report (AUR) Monitoring Service]
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