AUR#661 Macroeconomic Situation Update By SigmaBleyzer; USA-Market Economy Status For Ukraine?; Uzhgorod; Hetman Capital; Bird Flu

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 661
Mr. E. Morgan Williams, Publisher and Editor  

Washington, D.C., Kyiv, Ukraine, THURSDAY, FEBRUARY 16, 2006
                           ——–INDEX OF ARTICLES——–
         Clicking on the title of any article takes you directly to the article.               
Return to the Index by clicking on Return to Index at the end of each article
1. UKRAINE – MACROECONOMIC SITUATION – JANUARY 2006
REPORT AND ANALYSIS: By Olga Pogarska and Edilberto Segura
SigmaBleyzer Emerging Markets Private Equity Investment Group
Kyiv, Ukraine, Thursday, February 16, 2006

2         USA – MARKET ECONOMY STATUS FOR UKRAINE?
      High level U.S. Department of Commerce team arrives in Kyiv today
By E. Morgan Williams, Publisher & Editor
The Action Ukraine Report (AUR)
Washington, D.C., Thursday, February 16, 2006

3BUSH ADMINISTRATION SEEKS TO FINISH WTO NEGOTIATIONS
       WITH UKRAINE, RUSSIA, KAZAKHSTAN & VIETNAM IN 2006
                           U.S. is close to an agreement with Ukraine 
By Bruce Odessey, Washington File Staff Writer
USINFO.STATE.GOV, U.S. Department of State

Washington, D.C., Wednesday, February 15, 2006

4                             BANKING ON UKRAINE
New competitors bring a breath of fresh air to Ukraine’s banking business.
EDITORIAL:
Kyiv Post, Kyiv, Ukraine, Wednesday, Feb 15 2006

5.   ALFA LAVAL TO DELIVER 13 PROCESSING LINES TO THE
 ILYICHEVSK OILS & FATS INDUSTRIAL COMPLEX IN UKRAINE
          Plant is the largest of its kind in Ukraine and Eastern Europe.
Business Wire, Stockholm, Sweden, Wednesday, Feb 15, 2006

6.   UKRAINE’S PRYVATBANK GROUP BUYS U.S. COMPANY IN
         WEST VIRGINIA THAT PRODUCES SILICOMANGANESE
Ukrainian News Agency, Kyiv, Ukraine, Thursday, February 9, 2006

7WORLD BANK, FINANCE MINISTRY SELECT THREE BANKS TO

Ukrainian News Agency, Kyiv, Ukraine, Thursday, February 9, 2006

8.    UKREXIMBANK PLANS TO BORROW $600 MILLION IN THE
               INTERNATIONAL MARKETS, MOSTLY IN EUROS
Ukrainian News Agency, Kyiv, Ukraine, Wed, February 8, 2006

9ONION DOMES AND CELLPHONES IN UZHGOROD, UKRAINE
    Thanks to new visa regs Uzhgorod has experienced an influx of visitors.
Uzhgorod’s real draw, however, isn’t its museums, but warmth of its citizens
By Michael Benanav for The New York Times
New York, New York, Sunday, January 29, 2006

10. 11TH ANNUAL FOLK ART AND CULTURE TOUR OF UKRAINE
                 With folk art specialist Orysia Tracz, August 1-16, 2006.
The Action Ukraine Report (AUR), Washington, D.C., Thu, Feb 16, 2006

11BATURYN, FAMOUS AND REVERED CAPITAL OF HETMANS,
               IS BEING RESTORED ON AN ENORMOUS SCALE

                      Baturyn will become a Ukrainian tourist mecca.
The Day Weekly Digest in English, #4, Kyiv, Ukraine, Tue, Feb 14, 2006

12 INDEPENDENT READER OFFER: ‘THE CRIMEAN EXPRESS’
                  Travel through Russia, Belorus, Ukraine, Moldova
The Independent, London, United Kingdom, Wed, Feb 15, 2006

13.          SEBASTOPOL – A RUSSIAN FORTRESS IN UKRAINE
Le Monde newspaper, Paris, France, Wednesday, 15 February 2006

                    OPERATING IN UKRAINE BY END OF 2006
Interfax-Ukraine, Kyiv, Ukraine, Monday, February 13, 2006

15.          SKILLS EXODUS WORRIES POLISH EMPLOYERS
  Pressing gov to allow them to recruit more skilled workers from Ukraine.
By Stephan Wagstyl in London, Financial Times
London, United Kingdom, Wednesday, February 8 2006

16UKRAINE ‘FORCED” TO AGREE TO RUSSIA’S INSPECTION
                        OF MEAT AND DAIRY FACTORIES 
UNIAN news agency, Kiev, in Ukrainian 1506 gmt 15 Feb 06
BBC Monitoring Service, UK, in English, Wednesday Feb 15, 2006

17UN BIRD FLU CHIEF WARNS OF UKRAINE BIRD FLU THREAT

By Mara A. Bellaby, Associated Press (AP)
Kiev,Ukraine, Wednesday, February 15, 2006

18UKRAINE IS “ON THE VERGE OF SECOND ENERGY CRISIS”
     Must make ready for a general rise in energy prices in the coming years.
REGNUM Correspondent, Regnum News Agency
Moscow, Russia, Wednesday, February 15, 2006

19ESTABLISHING RULE OF LAW AND FIGHTING CORRUPTION
              Meeting with Yurii Lutsenko, Minister of Interior of Ukraine
Carnegie Endowment for International Peace (CEIP)
Washington, D.C., Friday, February 10, 2006

20.   FORMER PM YANUKOVYCH BLAMES PRES YUSHCHENKO
                    FOR ECONOMIC SLOWDOWN IN UKRAINE
Associated Press (AP), Kiev, Ukraine, Tuesday, February 14, 2006

 
21VIKTOR YANUKOVYCH: UKRAINE MUST PRESERVE SPECIAL
       RELATION WITH RUSSIA IN OUR ECONOMIC STRATEGY
   Goals must not be at the expense of historic and cultural ties with Russia
Interfax – Russia, Kyiv, Ukraine, Tuesday, February 14, 2006
 
22DON’T BE APATHETIC”-THREAT OF “LITTLE RUSSIANIZATION”
       Most important problem in Ukrainian society, threat to national security
By Yulia Katsun, The Day Weekly Digest in English, #4
Kyiv, Ukraine, Tuesday, February 14, 2006
 
23BELARUS: CANDLES, DENIM, AND THE 16TH OF FEBRUARY
         Political opposition in Belarus will take on a dramatic tone when
    denim-clad youth assert their rights along candle-lit streets, February 16.
COMMENTARY:
By Celeste A. Wallander, Director and Senior Fellow,
Russia and Eurasia Program, Center for Strategic and International Studies
Washington, D.C., Wednesday, February 15, 2006
 
24.             UKRAINE: PRESIDENT MEETS OLYMPIC TEAM
          The athletes asked Yushchenko to sign their flag, and he wrote:
       “I wish you success! Ukraine loves you and is proud of you! Win!”
Press office of President Victor Yushchenko
Kyiv, Ukraine, Friday, 3 February, 2006
 
25 HORROR CRASH FOR UKRAINE LUGE TEAM AT OLYMPICS
Talek Harris in Turin, Italy, Agence France-Presse (AFP)
Turin, Italy, Thursday, February 16, 2006
 
26. UKRAINE’S FIRST LADY MEETS WITH SURVIVOR OF 1932-1933
GENOCIDE FAMINE & WAR VETERAN GRYGORIY GERASHCNENKO
            In 1932-1933, he lived in the village of Yablunivka, Kyiv region.
Press office of President Victor Yushchenko
Kyiv, Ukraine, Friday, February 3, 2006
========================================================
1UKRAINE-MACROECONOMIC SITUATION-JANUARY 2006

REPORT AND ANALYSIS: By Olga Pogarska and Edilberto Segura
SigmaBleyzer Emerging Markets Private Equity Investment Group
Kyiv, Ukraine, Thursday, February 16, 2006

                                       SUMMARY
[1] Despite early concerns about Ukraine’s economic situation in 2005,
the country ended the year with a relatively good performance overall.

[2] In 2005, gross domestic product (GDP) grew by 2.4% year-over-year
(yoy); the deceleration from the previous year was primarily due to a high
base effect, unfavorable external conditions and a reduction in public
investments.

[3] Fiscal performance in 2005 was better than expected at the beginning
of the year. Despite sizable increases in fiscal expenditures, the record
high growth of budget revenues allowed for a year-end fiscal budget with a
reasonable 2% of GDP deficit, in accordance with IMF recommendations.

[4] Year-end consumer inflation decelerated to 10.3% yoy, lower than
initially expected.

[5] Despite the deteriorating merchandise foreign trade balance, the current
account showed a reasonable 2.7% of GDP surplus due to strong services
foreign trade.

[6] The impact of the recent gas price increase on the Ukrainian economy,
though significant, will not be as damaging as initially projected.

[7] International rating agencies kept Ukraine’s ratings unchanged but
expressed some concerns.

                                  ECONOMIC GROWTH
According to preliminary data, GDP grew by 2.4% yoy in 2005, underpinned
by strong private consumption growth. For the first nine months of 2005,
private consumption increased by a real 17% yoy (up from 15.7% yoy in the
respective period last year), stimulated by sizable social payments and
easier access to bank credits.

At the same time, robust domestic demand stimulated imports, which
increased by a real 3.3% yoy over the period, while exports declined sharply
by 10.5% yoy negatively affected by April’s national currency appreciation
and unfavorable external conditions.

Political turbulence at the end of 2004/beginning of 2005 and several
controversial measures by the new government (such as re-privatization,
attempts to introduce price regulations) may have affected investor
sentiment and caused a temporary delay in investment projects.

However, we believe that the decline in gross fixed capital formation by a
real 1% yoy during the first nine months of the year was primarily due to a
cut in public investments. In 2004, investments in fixed capital financed
from state and local budgets almost doubled in nominal terms compared
to the previous year, [1] representing a very high base for comparison.

The revision of the state budget at the beginning of 2005 envisaging a
further increase in social payments and large profit deductions by
state-owned enterprises [2] may have resulted in sharp decline of public
investments. Thus, unfavorable external conditions, a high base effect and
sluggish investment activity were the major reasons of the GDP growth
deceleration in 2005.

On the supply side, 2005 GDP growth was driven by fairly good
performance in the transportation sector, the extractive industry and
manufacturing. During December, growth in these sectors accelerated,
bringing the cumulative growth rates to 8.1%, 4.4% and 3% yoy, respectively.
The decline in wholesale trade and construction and a considerable slowdown
in the industrial sector were responsible for economic growth deceleration
in 2005.

In particular, value added in wholesale and retail trade (accounting for
about 12% of GDP) declined by 8.3% yoy according to preliminary data.
Poor wholesale trade performance may be attributed to deceleration in
domestically-oriented industries, a reduction in the number of trade
mediators and a decline in exports.

Construction reported a 6.6% yoy decline in value added, affected by
sluggish investment activity. Despite a good harvest this year, value added
in agriculture grew by 0.8% yoy in 2005. The deceleration compared to the
previous year may be attributed to a high base effect and negative
developments in cattle breeding during 2005 (reduction in cattle stock and
milk production.)

In December, industrial output growth accelerated to 5.3% yoy, bringing the
cumulative growth to 3.1% yoy. The deceleration from an impressive 12.5% yoy
in 2004 was due to the slowdown in manufacturing to 3% yoy in 2005 (down
from 14.6% yoy last year.) The main industries that drove down manufacturing
production were metallurgy and machine-building.

In October, metallurgical production rebounded and accelerated to 5.3% yoy
in December, which may be attributed to considerable deceleration in the
decline of world steel prices in the last four months of the year.

However, this was not enough to compensate for considerable deterioration in
the previous months; thus for the whole year metallurgy reported a 1.5% yoy
decline in output. Machine-building production continued to pick up,
expanding by 17.2% yoy in December. Considerable acceleration in the last
two months of the year may be attributed to revived external demand for
aerospace and military machine-building products.

Cumulatively, however, machine-building production decelerated to 7.1% yoy
in 2005, down from the explosive 28% yoy in 2004. On the upside, benefiting
from strong domestic and external demand, food processing advanced by
13.7% yoy in 2005, up from 12.4% yoy in 2004.

According to the agreement between Ukraine and Russia on January 4th 2006,
the new price of imported 34 billion m3 gas to Ukraine will be $95 per 1000
m3 at the Russian-Ukrainian border as of the beginning of 2006. This is a
significant increase from $50 per 1000 m3 for Russian gas in 2005. At the
same time, it will be partially covered by a 47% increase in the transit fee
to $1.6 per 1000 m3 100 km.

In 2006, Ukraine also plans to get about 22 billion m3 of Turkmen gas under
a separate contract at an average price of $55 per 1,000 m3, which means
approximately $90 per 1,000 m3 at the Ukrainian border. Since the cost of
Turkmen gas was about $65 per 1,000 m3 at the Ukrainian border in 2005, the
average price increase of total imported gas is estimated at about 42% yoy.

As a result of our analysis, the impact of the gas price increase on the
Ukrainian economy, though significant, will not be as damaging as initially
projected. In particular, we believe that GDP growth in 2006 will be
negatively affected by 2-3 percentage points from the originally forecasted
rate of 5% yoy, thus remaining similar to the 2005 rate of 2.5% yoy.

In the medium term, however, the overall economy may be boosted by
increased investments in energy saving technologies and faster adjustment
of tariffs to cost-recovery levels.

                                          FISCAL POLICY
Despite the economic growth slowdown in 2005 and sizable increases in fiscal
expenditures, the consolidated budget posted a moderate deficit of UAH 7.74
billion (about $1.5 billion) according to preliminary data released by the
Ministry of Finance, which is equivalent to less than 2% of estimated
full-year GDP. Favorable budget performance was achieved thanks to the
record high growth in budget expenditures backed by elimination of a number
of tax privileges and exemptions.

In 2005, consolidated budget expenditures increased by a nominal 40% yoy
to UAH 141.5 billion ($28 billion), the lion’s share of which was directed
to finance generous social programs. According to the budget amended at
the beginning of 2005, the government not only maintained social obligations
made in the run-up to the presidential election in the fall 2004 but even
increased them.

In particular, minimum wage and pension were increased by 40% and 16.5%
respectively in 2005, while the average pension was raised by 28% yoy.
The other social benefits (such as benefits for childbirth, disability,
etc.) were also substantially increased. As a result, budget expenditures
represented about 34% of estimated 2005 GDP, up from 29.4% of GDP
in 2004.

At the same time, budget revenues increased by an impressive 46.5% yoy to
UAH 134 billion ($26.5 billion). In 2004, budget revenues grew by about 21%
yoy and were supported by impressive GDP growth at 12.1% yoy.

The government estimates regarding a substantial budget revenues increase
(which were considered very ambitious at the beginning of the year)
materialized due to elimination of a number of tax privileges and
exemptions, including those to free economic zones, larger profit deductions
from state-owned enterprises, de-shadowing of the economy, advance
payments of enterprise profit tax and some accumulation of VAT refund
arrears.

As a result, consolidated budget revenues as a percent of estimated 2005
GDP increased to a record high 32% (for comparison, the respective ratios
were 26.5% and 28.2% of GDP in 2004 and 2003, respectively.)

In 2005, the government financed the fiscal deficit primarily through
privatization receipts, which were at a record high level due to the
successful privatization of Kryvorizhstal (later renamed Mittal Steel Kryvyj
Rih). Although Ukraine issued new debt instruments in 2005, the funds were
predominantly directed to reduce the cost of previous borrowings.

As a result, the stock of public debt declined by about 4% yoy (8.5% yoy
if expressed in national currency) to $15.5 billion at the end of 2005, or
about 18.8% of estimated GDP. In particular, external public debt declined
to $11.7 billion, or about 14.3% of estimated GDP.

At the same time, due to continuing growth of external private debt by more
than 66% yoy at the end of September 2005, total external debt advanced by
18.7% since the beginning of the year to $23.3 billion, or 28.5% of
estimated full-year GDP. Although this rate is among the lowest in Central
and Eastern European countries, rapid growth of external private debt raises
concerns.

Fiscal outlook for 2006 remains rather uncertain. At the end of December,
the parliament adopted the 2006 budget calling for a deficit of about 2.5%
of GDP and envisaging further increases in social payments. At the same
time, the budget was based on 7% yoy GDP growth (which was considered
unrealistic even before the gas dispute) and unchanged prices for imported
gas.

The increase in gas prices will affect the fiscal situation through lower
GDP growth. Considering the likely shortfall of budget revenues and possible
larger expenditures on subsidies to households and affected industries, the
consolidated fiscal deficit may well exceed the 3% of GDP threshold
considered sustainable by international organizations.

At the same time, due to consolidation of budget funds in a unified treasury
account, the government may efficiently manage the fiscal balance via the
tight control over expenditures. Therefore, we believe that the fiscal
deficit will be maintained at about 3% of GDP in 2006.

                                  MONETARY POLICY
In 2005, consumer inflation reached 10.3% yoy, decelerating from 12.3%

yoy a year before. At the beginning of 2005, inflationary pressures were
generated by considerable fiscal loosening in the fall of 2004 and political
uncertainties at the end of 2004/beginning of 2005. During the second and
third quarters, inflation was primarily driven by a number of supply side
shocks (such as an increase in world crude oil prices, shortages of meat and
sugar) and an increase in utility tariffs.

Administrative intervention in price setting mechanisms for particular goods
was generally inefficient but lessened tensions on the respective markets.
The deceleration in the fall should be primarily attributed to a high base
effect and absorption of supply side shocks helped by stabilization of world
crude oil prices, reduction of import tariffs, etc. Consumer inflation also
benefited from the decreasing pressure from producer prices. In 2005, the
producer price index (PPI) decelerated to 9.5% yoy, down from 24.2% yoy
last year.

Foods, which account for about 65% of the consumer basket, became 10.7%
yoy more expensive in 2005. Considerable deceleration in December (down
from 13.2% yoy in the month before) was mainly due to a high base effect.
Food prices were affected by expansionary fiscal policy, which encouraged
consumption particularly by lower income groups (thus shortly translated
into higher demand for foods), and supply side shocks.

Despite a 24.5% yoy increase in gasoline prices in 2005, the non-food price
index was mainly on a declining trend, reporting a 4% yoy increase for the
whole year. However, high gasoline prices affected transportation tariffs,
which surged by 25.5% yoy. Coupled with a 13.6% yoy increase in the cost
of public utilities, service tariffs reported 15.8% growth, almost twice as
high as in 2004.

Before the gas dispute, the government forecasted inflation to decline to
8.7% yoy in 2006, although international and domestic experts were more
cautious, forecasting inflation at about 10% yoy. High oil prices in 2005
may continue to pressure inflation in 2006 as a spillover effect on other
prices. The increase in the price for imported gas will also pressure
transportation and utility tariffs.

Although the decision to raise gas and electricity tariffs for households
from the beginning of 2006 was abolished, they will most likely be raised
after March’s parliament elections. In addition, loose fiscal policy in 2006
will add to inflationary pressures. As a result, we believe consumer
inflation will be in the range of 13-14% yoy at the end of 2006.

At the same time, inflation could have been much higher in 2005 if the NBU
did not appreciate the national currency by about 4.8% in mid-April 2005.
The appreciation reduced the cost of imported goods and restrained the
growth of monetary aggregates. At the same time, uncertainties related to
the forthcoming parliamentary elections and the gas issue resulted in
depreciation pressures at the beginning of 2006. In particular, the cash
exchange rate depreciated to an average UAH/$5.15 in mid-January.

However, the official exchange rate was kept unchanged at UAH/$5.05,
though the central bank had to intervene on the forex market to maintain it
by selling about $800 million of its international reserves. Most likely, in
order to calm inflationary pressures and the speculative tone of the foreign
exchange market, the NBU will maintain exchange rate stability at least
during the first half of the year. Nevertheless, to avoid an abrupt drop in
international reserves, the exchange rate will be allowed to gradually
depreciate to about UAH/$5.2.

In 2005, monetary policy did not change substantially from the previous
year. The accommodative monetary policy was aimed at lessening inflationary
pressures generated by sizable foreign exchange interventions and vigorous
consumption growth (stimulated by rapid expansion of bank loans to the
private sector, among other things.)

In particular, the NBU tightened reserve requirements to commercial banks
several times during the year, increased its refinancing rate to 9.5%, and
sterilized commercial bank liquidity in the amount of UAH 17.2 billion ($3.4
billion). During January-October, the average growth rates of the monetary
base and money supply were 35.5% and 36.4% yoy, respectively.

However, by the end of the year, the growth of the respective aggregates
sped up to 53.8% and 54.8% yoy.  The acceleration in the last two months
of the year may be attributed to the low base effect and considerable fiscal
loosening at the end of the year.

Although deposit rates declined from 9.2% at the beginning of the year to
7.7% at the end of 2005 and was well below the average inflation rate,
deposits grew at a robust 60% yoy in 2005, underpinned by growing
disposable income and growing confidence in the banking sector.

Considerable acceleration during November-December (up from average
growth of 39% yoy during January-October) was due to a low base effect.
Last year, inflation expectations and political uncertainty resulted in
massive withdrawals of deposits. At the same time, high deposit growth

and strong money demand were the driving forces of lending expansion.

Commercial bank loans to the private sector increased by almost 62% yoy,
although the growth was more moderate during the year (38.8% yoy on average
for January-November). At the same time, a number of restrictive NBU
measures, introduced during August-September, resulted in a gradual increase
in lending rates to 14.3% in December, up from 13.6% yoy in July.

                 INTERNATIONAL TRADE AND CAPITAL
In November, Ukraine’s merchandise foreign trade continued to deteriorate.
For the second time this year, exports reported a decline, contracting by
0.2% yoy. At the same time, imports grew by almost 19% yoy. Cumulatively,
imports grew much faster than exports (up by 24.6% yoy and 5.6% yoy,
respectively). As a result, the cumulative trade deficit reached $1.34
billion at the end of November.

Robust growth of imports this year should be attributed to import
liberalization (in particular, reduction of a number of import tariffs and
simplification of customs procedures), vigorous domestic demand and

high world crude oil prices. In addition, the launch of an extensive
anti-smuggling campaign aimed at legalizing “grey imports” may also
contributed to the growth of imports.

At the same time, sharp exports deceleration is associated with weakening
of external demand for Ukrainian metallurgical products, higher production
costs (mainly due to the increase in cargo transportation tariffs) and
national currency appreciation.

The mentioned factors eventually resulted in a current account deficit of
$200 million in the third quarter of the year, though cumulatively it
remained in surplus due to large positive balances generated in the first
half of the year. According to preliminary estimates, the current account
balance was still positive at about $2.2 billion (or 2.7% of estimated 2005
GDP) at the end of the year, but the surplus was more than three times
narrower than last year.

By product breakdown, the growth of metals exports decelerated to 10.7%
yoy for the period, down from more than a 50% yoy increase in 2004. The
deceleration was due to declining world steel prices caused by the
introduction of China’s new metallurgical capacities. At the same time,
metals remained the largest contributor to Ukraine’s merchandize exports
growth as the industry accounted for about 41.5% of total exports.

To a large extent, however, the declining trend of exports growth should be
attributed to drastic deterioration in exports of machinery and equipment.
Since the beginning of the year, exports of these commodities declined by
almost 8% yoy in contrast to the impressive 30.4% yoy increase in 2004. On
the import side, energy resources (the weightiest item in total merchandise
imports) decelerated to 7.2% yoy (down from 8.6% yoy over January-
October), thus explaining the declining trend of total imports growth.

The recent increase in imported gas prices will substantially affect
Ukraine’s foreign trade performance in 2006. The most significant effect
the increase will be felt by export-oriented industries such as metallurgy
and chemicals, which together account for more than 50% of Ukraine’s
total exports.

Although it is very likely that the profitability of metallurgical companies
will decline considerably while the chemical enterprises will find
themselves on the edge of profitability, the impact of the gas price
increase will be lessened by relatively high international prices on these
commodities.

In particular, although world steel prices are forecasted to continue to
decline in 2006, the trend will be much flatter than in 2005 and world steel
prices will be considerably higher than in 2003. World prices for chemical
products are forecasted to increase slightly.

On the import side, the gas price increase will result in a worsening
merchandise foreign trade balance, which will be partially covered by a
larger surplus in foreign trade of services due to increased transportation
tariffs. Therefore, the current account will run a deficit, though a rather
small one at about 1% of forecasted 2006 GDP.

    OTHER DEVELOPMENTS AND REFORMS AFFECTING
                           THE INVESTMENT CLIMATE
In mid-January, the major international agencies – Fitch and S&P – affirmed
Ukraine’s long-term foreign and local currency ratings, though Fitch
changed the outlook from Positive to Stable.

The major reason for keeping the ratings unchanged in spite of the
challenges (related to GDP growth deceleration in 2005, the impact of the
imported gas price increase on economic growth and political uncertainties)
was low public and external debt ratios, the central bank’s high
international reserves and the rather modest current account deficit
forecasted for 2006.  -30-
———————————————————————————————–
                                         FOOTNOTES:
[1] As a result, the share of fixed capital investments financed from state
and local budgets increased from about 11% in 2003 to more than 15%
in 2004.
[2] According to State Statistics Committee, more than 30% of total
fixed capital investments were carried out by state-owned enterprises.
————————————————————————————————-
Dr. Edilberto Segura is Director & Chief Economist, SigmaBleyzer and
President, Advisory Board, The Bleyzer Foundation. Olga Pogarska is
an economist with The Bleyzer Foundation. Rina Bleyzer Rudkin with
SigmaBleyzer is the editor.
————————————————————————————————-
NOTE: To see the entire SigmaBleyzer Ukraine Macroeconomic Situation
report for January 2006 in a PDF format, including several color charts
and graphics click on the following link:
     http://sigmableyzer.com/files/Ukr-Monthly_Ec_Report_01_06.pdf
————————————————————————————————–
CONTACT: Olga Pogarska, Kyiv, opogarska@sigmableyzer.com.ua
———————————————————————————————

[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
2.      USA – MARKET ECONOMY STATUS FOR UKRAINE?
      High level U.S. Department of Commerce team arrives in Kyiv today

By E. Morgan Williams, Publisher & Editor
The Action Ukraine Report (AUR)
Washington, D.C., Thursday, February 16, 2006

WASHINGTON – Ukraine has been working to receive Market Economy
Status from the U.S. government for several years.  From all indications
around Washington this may actually happen very soon.

A high level U.S. Department of Commerce team, headed by the number
two person at the department, Deputy Secretary David Sampson, was
reported to have left Washington on Wednesday afternoon and will
arrive in Kyiv today.

Experts in Washington on Ukrainian matters believe that this is a very
positive sign that Market Economy Status could be granted to Ukraine
even yet this week.

At a press conference in Dnipropetrovsk, Ukraine, yesterday, President
Victor Yushchenko said in a few weeks the United States would recognize
Ukraine as market economy, according to the President’s press-office.

The president reiterated that Ukraine had observed all necessary procedures
and answered all questions posed by the American side. “Professional
comments about economic materials received from Ukraine make us hope
Ukraine will be recognized as market economy in a few weeks,” he said.

News reports from Kyiv Wednesday said that presidential advisor,
Kostiantyn Tymoshenko, chief of the main service of external policies of
the Secretariat of the President of Ukraine, also stated that Ukraine hopes
the United States of America will grant it the market economy status in
March.

According to Tymoshenko, “the American side didn’t forget the matter
and the US Department of Commerce is working it out”. “According to
the information we possess the issue will be shortly settled”, he said.

The U.S. Department of Commerce delegation from Washington was
reported to have included, in addition to Deputy Secretary David
Sampson and his chief of staff, the Assistant Secretary for Import
Administration, David Spooner, and his senior advisor, and the
Commerce Department’s top Ukraine specialist, Christine Lucyk,
Senior Policy Advisor, Office of Russia, Ukraine and Eurasia for the
International Trade Administration (ITA).

 
The U.S. Department of Commerce team will have a series of
meetings with top officials in the Ukrainian government.
The American Chamber of Commerce in Ukraine (ACC) will host the
Deputy Secretary of the U.S. Commerce Department Dr. David A.
Sampson at a general membership meeting on Friday, February 17,
from 5:00 p.m. to 6 p.m. in Kyiv.

According to the American Chamber of Commerce in Ukraine website
(
http://www.amcham.kiev.ua/), “Dr. Sampson will brief the membership
about trade and economy related issues from the perspective of the
United States. Deputy Secretary Sampson is the most senior Commerce
Department official to visit independent Ukraine sending a signal that the
United States stands ready to work closely with Ukraine to further
develop strong trade and economic ties.”

Ukraine was expecting to be granted the market economy status by the
USA by Thursday, February 16. Maybe that will actually happen or
happen soon thereafter.
  -30-
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3. BUSH ADMINISTRATION SEEKS TO FINISH WTO NEGOTIATIONS
       WITH UKRAINE, RUSSIA, KAZAKHSTAN & VIETNAM IN 2006
                           U.S. is close to an agreement with Ukraine
 
By Bruce Odessey, Washington File Staff Writer
USINFO.STATE.GOV, U.S. Department of State

Washington, D.C., Wednesday, February 15, 2006

WASHINGTON – The Bush administration wants to complete World Trade
Organization (WTO) accession negotiations with Russia, Ukraine, Kazakhstan
and Vietnam in 2006 and get congressional approval for those agreements,
U.S. Trade Representative Rob Portman says.

In February 15 testimony before a House of Representatives committee,
Portman said the United States is close to an agreement with Ukraine and

“I hope we’re close” to one with Russia.

Under U.S. law, WTO agreements with these countries require approval by
Congress to grant permanent most-favored-nation (MFN) status, also called
normal trade relations.  MFN is the principle that all the benefits of trade
provided to one country must be provided to all countries that receive MFN
status.

“These can be tough votes,” Portman told the Ways and Means Committee,
recalling the 2000 votes on China’s accession. “I would love to have all
four of these come before the Congress to move them forward even this

year,” he said. “That may be ambitious, but I think it’s in our interest to get
these countries into the rules-based WTO system.”

Representative Clay Shaw, Republican chairman of the Ways and Means
Subcommittee on Trade, warned that continued piracy of copyrights and
patents could jeopardize agreement with Russia, which is pressing to
conclude negotiations before President Vladimir Putin hosts the annual

Group of Eight (G8) leading industrialized countries’ meeting in July.

“The Putin administration has not used the necessary political capital to
acknowledge the problem or to take the proper steps to shut down pirates,”
Shaw said.  “I hope that you and President Bush will remain tough with the
Russians in ending the pirate and counterfeit practices that have plagued
Russia.

“Unless Russia adopts domestic enforcement laws, dismantles organized

crime and commits itself to the rule of law,” he said, “I think consideration
of permanent normal trade relationships in Congress will be highly
controversial.”

Portman testified to the committee after the administration released its
2006 trade agenda.  He identified the agenda priorities as enforcing
existing trade agreements, finishing the WTO trade negotiations and
advancing bilateral free-trade agreements (FTAs).

Negotiations for an FTA with South Korea announced February 2 and

expected to commence in May hold the biggest potential for increasing
U.S.exports among all pending FTAs.  House members raised a number
of issues, especially on Korean barriers to autos and agriculture, including
rice. 
 
Portman said that the Koreans understand that any FTA negotiation with
the United States has to achieve a comprehensive agreement, including
agriculture. “It’s [agriculture is] going to have to be dealt with,
including rice,” he said.

Portman said he hopes Congress will soon approve completed agreements

with Oman and Peru. He called an FTA agreement with Panama “very close”
and said he aims to complete FTA negotiations this year with Colombia,
Thailand and the United Arab Emirates.  He said he hopes to be able to
launch negotiations this year with Malaysia and called negotiations with
Egypt possible.

The administration push for concluding WTO negotiations and wrapping

up FTAs in 2006 reflects the expiration in July 2007 of the president’s trade
promotion authority (TPA), otherwise known as fast track, to negotiate
trade agreements.

Under TPA, Congress restricts itself only to approve or reject a negotiated
trade agreement, within strict time limits and without amendments. Congress
allowed TPA to lapse from 1994 to 2002.

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4.                             BANKING ON UKRAINE
  New competitors bring a breath of fresh air to Ukraine’s banking business.

EDITORIAL: Kyiv Post, Kyiv, Ukraine, Wednesday, Feb 15 2006

As the Post reported in a front page story, this week saw yet another major
bet placed on Ukraine from abroad – the third, in fact, within less than a
year. Ukrsotsbank was sold to Italy’s Banca Intesa in a transaction valued
at just over $1 billion.

Last year, a controlling stake in Aval was bought by Austria’s Raiffeisen
Banking Group for just over $1 billion, followed by the purchase of a 51
percent stake in Ukrsibbank by France’s BNP Paribas. The three Ukrainian
banks at hand rank among Ukraine’s five largest in terms of net assets and
branch network size.

Ever since the country gained independence, corruption and lack of
investment have been cited as the main obstacles to economic prosperity.
The sale of these top financial institutions to Western entities marks a big
step in addressing such issues.

Ukraine’s banking market is also, as a result, a quarter controlled by
experienced Western giants with the muscle and know-how to inject fresh
energy into a promising, though small, banking industry.

In the past, many Ukrainian business groups used their banks as so-called
pocket banks, serving their businesses by moving money in and out of the
country, financing investment projects, etc. These Western giants say they
are dedicated to developing banking in Ukraine, a goal they are more than
capable of achieving.

We hope they help lift Ukrainians out of the past and into the modern age
where credit cards and bank accounts are a custom, not an exception. More
sophisticated and transparent practices will help take the money out of the
shadows, fueling economic growth.

Looking down the road, Ukraine currently has more than 150 banks. Most

of these are small, and several are undergoing liquidation. With the influx of
large foreign banking groups, there is a need for Ukrainian banks to
consolidate to compete, sell out to bigger foreign players, or go under.

To survive, they will also be forced to adopt modern banking practices. The
benefits of these new competitors from the West should bring a breath of
fresh air to Ukraine’s banking business. -30-
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LINK: http://www.kyivpost.com/opinion/editorial/23871/

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5.    ALFA LAVAL TO DELIVER 13 PROCESSING LINES TO THE
  ILYICHEVSK OILS & FATS INDUSTRIAL COMPLEX IN UKRAINE
            Plant is the largest of its kind in Ukraine and Eastern Europe.

Business Wire, Stockholm, Sweden, Wednesday, Feb 15, 2006

STOCKHOLM – Alfa Laval – a world leader in heat transfer, centrifugal
separation and fluid handling – has received an order for 13 state-of-the-

art processing lines for a refining and modification plant for vegetable and
tropical oils. The total value is about SEK 110 million.

The processing lines will be used for refining and modification of seed oils
and tropical oils by the Ilyichevsk Oils & Fats Industrial Complex in
Ukraine. Delivery will take place during 2006 and 2007. Counting the number
of process lines and possibilities to produce various products the plant is
the largest of its kind in Ukraine and Eastern Europe.

Processing oils and fats makes it possible to have a large range of products
that are ready for use in the different food industries. It also ensures
that quality is retained during storage and transport to final application.
                      ALFA LAVAL IN VEGETABLE OIL
In December 2004 Alfa Laval released its new fats modification package,
including components and complete solutions for different oils and fats
processes like fractionation, hydrogenation, and interesterification.
Besides offering systems and individual components for oils and fats
modification Alfa Laval has a team of specialists who focus on design
and engineering projects.

Alfa Laval is a leading global provider of specialized products and
engineering solutions based on its key technologies of heat transfer,
separation and fluid handling. Alfa Laval’s worldwide organization works
closely with customers in nearly 100 countries to help them stay ahead in
the global arena.

Alfa Laval is listed on the Stockholm Exchange and, in 2005, posted annual
sales of about SEK 16 billion (approx. 1.8 billion euros). The company has
some 9,400 employees. For further information, please visit the Alfa Laval
website at www.alfalaval.com.

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Information brought to you by Waymaker http://www.waymaker.net
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6.  UKRAINE’S PRYVATBANK GROUP BUYS U.S. COMPANY IN
       WEST VIRGINIA THAT PRODUCES SILICOMANGANESE

Ukrainian News Agency, Kyiv, Ukraine, Thursday, February 9, 2006

KYIV – A group of companies close to Pryvatbank (Dnipropetrovsk) has
purchased company Highlanders Alloys LLC (the United States), which owns

a plant producing silicomanganese in New Haven (West Virginia). Ukrainian
News has learned this from a well-informed source. “Ukrainian experts have
already gone to America to set work going,” he said.

According to the source, the purchase of the plant was completed in January
2006; the talks were held since 2003. Highlanders Alloys owns a plant that
produces round 200,000 tons of silicomanganese per annum. The contract

cost is not to be announced. According to experts, it tops USD 60 million.

It is planned that Highlanders Alloys will use raw manganese materials to be
shipped to the United States from Ukrainian enterprises controlled by the
Pryvatbank Group.

As Ukrainian News earlier reported, according to Pryvatbank’s report for the
third quarter of 2005, the bank’s shareholders as of October 1 were Ihor
Kolomoiskyi and Hennadii Boholiubov, each of whom directly owned 38.76%

of the shares in the bank and indirectly – 16.29% each.

A group of companies close to Pryvatbank shareholders controls Stakhanov

and Zaporizhia ferroalloy plants, Ordzhonikidze and Marhanets ore mining and
dressing plants, which produce manganese ore.
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7. WORLD BANK, FINANCE MINISTRY SELECT THREE BANKS TO
SERVICE $250 MILLION PROJECT TO FINANCE SERVICE MARKETS
 
Ukrainian News Agency, Kyiv, Ukraine, Thursday, February 9, 2006

KYIV – The World Bank and the Finance Ministry have selected three banks –
Kredytprombank, Nadra Bank, and Pryvatbank – to service the World Bank’s
project of extension of access to finance service markets. The ministry’s
press service made the statement. According to the World Bank, within the
project it may grant Ukraine a loan of USD 250 million.

The project is aimed at provision of long-term loan resources to loaners in
rural areas, city halls, municipal property facilities. Loans will be
granted by commercial banks and other finance intermediaries to be selected
by the Ukrainian government and the World Bank.

As Ukrainian News reported earlier, in October 2005, the Finance Ministry
called a tender to select the banks to service the World Bank project for
extension of the access to finance service markets. Nineteen banks submitted
their bids. In November 2005, the Finance Ministry preliminarily selected
seven banks to service the project.

Ukraine has received over USD 4.5 billion in World Bank loans for
implementation of more than 30 projects since becoming a member of the

World Bank in 1992.  -30-
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8.   UKREXIMBANK PLANS TO BORROW $600 MILLION IN THE
              INTERNATIONAL MARKETS, MOSTLY IN EUROS

Ukrainian News Agency, Kyiv, Ukraine, Wed, February 8, 2006

KYIV – One of Ukraine’s largest banks, Ukreximbank (Kyiv), is planning to
borrow in international markets around USD 600 million before June this
year. Reporters learned this from the bank’s board chairman Viktor Kapustin.
He said he could not state an exact sum of the borrowing, but it would be
not less than USD 600 million.

According to Kapustin, the funds will be attracted in different currency
equivalents, but the dominating currency will be the euro. He said

Ukreximbank intends to organize accumulation of foreign assets in May.
In his opinion, by its size it will be one of the biggest loans in Ukrainian
practice.

As Ukrainian News reported earlier, on September 21, Ukreximbank sold

USD 250 million in Eurobonds to foreign investors.
U.K. investors bought 35% of the bonds, Swiss investors bought 25%, while
15% of the securities were purchased by Asian investors, 7% by German, 5%
by Greek, 3% by Italian and Austrian investors each. Investors from other
countries of Europe bought 4% of Ukreximbank’s Eurobonds.

In September 2004 Ukreximbank allocated five-year bonds for USD 150

million and an annual yield rate of 7.75%, and in January it additionally
allocated USD 100 million more. Western banks Dresdner Bank and UBS
were the bond placement managers.

The state owns 100% of the shares in Ukreximbank. The bank ended the year

of 2004 with a profit of UAH 90.158 million, and 2005 with a net profit of
UAH 180.546 million.  -30-
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9.  ONION DOMES AND CELLPHONES IN UZHGOROD, UKRAINE
 Thanks to new visa regs Uzhgorod has experienced an influx of foreigners.
Uzhgorod’s real draw, however, isn’t its museums, but warmth of its citizens

By Michael Benanav for The New York Times
New York, New York, Sunday, January 29, 2006

UZHGOROD, Ukraine – TUCKED against the rolling foothills of the

Carpathian Mountains, Uzhgorod is Ukraine’s gateway to the rest of Europe.
The city’s western edge abuts the frontier with Slovakia, while the border
with Hungary lies just 12 miles to the south.

It is a place where modern and old, pastoral and cosmopolitan overlap with
little chafing. Svelte young women in miniskirts, with cellphones, strut
down tree-lined cobblestone streets past pastel-plastered houses from
Hapsburg times. Elderly men and women sit in their courtyards cleaning
vegetables picked from their gardens as chickens bob around their feet.

BMW’s race past horses pulling families on wooden carts. At the central
marketplace, farmers sell produce and meats alongside vendors offering

fresh breads, wild mushrooms and household miscellany. Some ring up
customers on calculators, others still use abacuses.

Thanks to its location, travelers have long trickled through Uzhgorod, a
town of 130,000. But since new regulations for entry into Ukraine were
enacted this past summer – permitting American, Canadian, Japanese and
European Union citizens, among others, to visit for 90 days without a visa –
Uzhgorod has experienced an influx of foreigners.

Uzhgorod’s tour agencies, such as Sodis Karpathi, (38-031) 261 2323,
www.sodis.com.ua, which provides English-speaking guides for 40 hryvnia

an hour, or about $8, at 5.20 Ukraine hryvnia to $1, are already “busier than
ever,” according to Natalia Kolyavitska, Sodis Karpathi’s director.

Cafes are springing up all around the city’s Old Quarter – a charming
pedestrian-only zone of boutiques and churches. The best views of the
vibrant street life are from the patio of Tortilla Cafe, on the corner of
Corzo and Voloshina Streets (no phone), where espressos cost 2 hryvnia.

Restaurant Delfin, 3 Kyivskaya Naberezhnaya, (38-031) 261 4963, offers a
broad selection of regional specialties including borscht, grilled pork and
more esoteric dishes like “herring under fur coat” for 15 to 50 hryvnia.
From its roof, diners can watch residents fish and swim in the placid Uzh
River, which flows through the heart of town.

A new generation of tourist accommodations is opening its doors around
central Uzhgorod. At the friendly, clean Hotel Izumrud, 10 Malokamyana
Boulevard, (38-031) 261 3858, doubles cost 185 to 225 hryvnia. At the small
four-star Old Continent Hotel, 4 Shandor Petefa Square, (38-031) 266 9366,
doubles with handmade furniture and minibars are 450 to 580 hryvnia a night.

Among the city’s main attractions is the open-air Museum of Folk
Architecture and Life, 33A Kapitulna Street, (38-031) 223-6352, a 10-minute
walk from the center of town; 3 hryvnia. It features more than 30
traditional structures plucked from villages across Transcarpathia – the
Ukrainian province of which Uzhgorod is the capital.

The museum’s centerpiece is 16th-century St. Michael’s Church, with a

roof and onion-domed steeple covered in wooden shingles. Next door is
Uzhgorod Castle, an imposing fortress that housed the regents of the
Hapsburgs. Much of it now contains exhibits about Uzhgorod’s history
and Carpathian wildlife. Closed Tuesday; 4 hryvnia.

Uzhgorod’s real draw, however, isn’t its museums, but the warmth of its
citizens. Easily approachable, they happily engage in spontaneous
conversation with visitors. “We want to meet new people and share ideas,”
said Marija Vovk, a 24-year-old who works for the People’s Union – the
political party behind Ukraine’s 2004 Orange Revolution. “We’re ready for
the world to come to Uzhgorod.”
-30-
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LINK: http://www.nytimes.com/2006/01/29/travel/29surf.html
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10. 11TH ANNUAL FOLK ART AND CULTURE TOUR OF UKRAINE
               With folk art specialist Orysia Tracz, August 1-16, 2006.

The Action Ukraine Report (AUR), Washington, D.C., Thu, Feb 16, 2006

WASHINGTON – The 11th annual Folk Art and Culture Tour of Ukraine

will be an entertaining, enjoyable, enlightening tour of a country full of rich
and ancient history and culture, now celebrating its 15th year of
independence since the break-up of the Soviet Union. The 11th Tour will
take place between Tuesday, August 1 and Wednesday, August 16th.

There will be great shopping, museums, food, Ukrainian hospitality, and
serendipity. Tour also included festive visits to master folk artists and
special sites.  You don’t have to be Ukrainian to come along. There will

be a limited number of participants.

The places to be visited include: Kyiv, Kaniv, Pereyaslav-Khmel’nytskyi,
Kam’ianets-Podil’s’kyi, Khotyn, Chernivtsi, Kolomyia (visits to Carpathian
Mountain villages, Kosiv, Yaremche, others), Ivano-Frankivs’ke, Lviv,
Vienna (overnight on return).

The tour leader, Orysia Tracz, from Winnipeg, Manitoba, Canada, is a
recognized authority who writes and speaks on Ukrainian folk art and
culture.  This is her 11th tour.

The price is $3,670 Canadian (air, hotels and meals in Ukraine, most

museum admissions).  Connections from other North American and other
cities can be arranged.

For information about the tour contact Orysia Tracz, dorohy@gmail.com.
For travel information contact Irene Zadravec [17 years experience],

Thomas Cook – Regent Travel, toll-free: 1-877-772-1277, fax
(204) 988-5109; mnowensky@thomascook.ca [attention: Irene].  -30-
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11. BATURYN, FAMOUS AND REVERED CAPITAL OF HETMANS,
              IS BEING RESTORED ON AN ENORMOUS SCALE
                      Baturyn will become a Ukrainian tourist mecca.

The Day Weekly Digest in English, #4, Kyiv, Ukraine, Tue, Feb 14, 2006

The government of Ukraine is studying the question of granting national
status to the historical and cultural preserve “Hetman’s Capital” in
Baturyn, Chernihiv oblast, reports ForUm, quoting Vice-Premier
Vyacheslav Kyrylenko.

“Very soon, not only Ukrainians but foreigners will see a revived Baturyn,
the famous and revered capital of the hetmans, which will become a

Ukrainian tourist mecca,” he told journalists during an away-ministerial
conference in Baturyn.

Kyrylenko said that the conference participants discussed the accelerated
construction of new gas-, heat-, water-supply and telecommunications
facilities in Baturyn as well as the unveiling of new architectural and
historical monuments. A report drawn up by the vice-premier’s press service
emphasizes that this historical monument began to be revived in 2002 on the
initiative of the then Prime Minister Viktor Yushchenko.

That year the Cabinet of Ministers adopted a special comprehensive program.
Construction costs were estimated at UAH 12 million. In the two past years
the state budget has allocated UAH 5.6 million for this purpose, and there
are plans to provide a special subvention worth several million hryvnias
this year.

“The bulk of the funds are supposed to come from patrons of the charitable
foundation “Hetmans’ Capital,” Kyrylenko said.

Incidentally, the media have reported that bureaucrats are still toying with
the idea of establishing a president’s residence in Baturyn. Was this idea
coordinated with the patrons who made donations to the preserve?

According to museum curator Tetiana Rebrova, up to 32 million hryvnias
were remitted to the foundation’s account in 2005. “Baturyn is being
restored on an enormous scale. All the work is supposed to be completed

by 2007,” Rebrova noted.  -30-
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LINK: http://www.day.kiev.ua/157450/
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12.    INDEPENDENT READER OFFER: ‘THE CRIMEAN EXPRESS’
                  Travel through Russia, Belorus, Ukraine, Moldova

The Independent, London, United Kingdom, Wed, Feb 15, 2006

LONDON – Travelling for fourteen-days between 3 to 17 June 2006 and 2

to 15 June 2007, from St Petersburg during its ‘white nights’ period and
Moscow to Crimea, this is a journey to delight.

The “Crimean Express” will take you from the iconic splendour of St
Petersburg and Moscow, to Minsk and Brest in Belorus, Lvov (Ukraine)

and Kishinev (Moldova). Heading south you arrive at the Black Sea and
Odessa before continuing to the Crimean Peninsula to visit Yalta and the
Tsars summer palace at Livadia’ the site of the 1945 Yalta conference, the
‘Swallows Nest’ (pictured) and much more.

In Balaclava from a hill overlooking the ‘Valley of Death’ you will remember
the “Charge of the Light Brigade” before arriving in the Ukrainian Capital
of Kiev.

The ‘Crimean Express’ is hauled by the Trans-Siberian Express train. The
Independent has arranged special prices, including flights, from pounds
2,995 travelling in Heritage class and pounds 5,995 in Gold Class.

Heritage class cabins feature two side-by-side beds, luggage storage and

are air-conditioned. Located at the end of each carriage are toilet facilities
and purpose built shower car is provided.

Gold class has twin or double beds, ultra modern furnishings, en-suite
facilities, power shower, DVD with plasma screen, air conditioning and
under-floor heating. Prices include return flights from London, taxes,
hotels and on-train accommodation, all meals including drinks, all
transfers, all off train excursions, and the services of an experienced tour
leader.

An English-speaking doctor will also travel on the train. Telephone: 0161
928 9410 or email independent@gwtravel.co.uk

This holiday is operated by GW Travel Ltd, Atol 3408, a company

independent of Independent News and Media Plc. For more information
write to The Independent Offer, GW Travel Ltd, Denzell House, Denzell
Gardens, Altrincham, Cheshire WA14 4QF.  -30-
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13.     SEBASTOPOL – A RUSSIAN FORTRESS IN UKRAINE

Le Monde newspaper, Paris, France, Wednesday, 15 February 2006
On one of the quays of Sebastopol, stuck between two Russian warships,
fishermen spin their lines into the Black Sea. About twenty battleship grey
vessels gradually rusting, are at anchor. Everywhere huge cranes seem to
hold the sea at the end of their cables.

In the streets, groups of sailors in black uniforms wander about in pairs in
day time and arm in arm at night. On the hill overlooking the harbour, not
far from the statue of Lenin, the Russian flag floats in the middle of a
forest of antennae above the Head Quarters of the navy. The same colours
are to be found on most of the important public buildings, eclipsing the
yellow and blue of the Ukrainian flag.

At the foot of the statue of General Totleben, a hero of the tzarist era,
Glafira Iemeljanova, broom in hand replies to an odd question; “Of course
Sebastopol is a Russian town!”. Even though the maps tell a different story,
Glafira has no doubts about it. At 50 years old she feels Russian in every
fibre of her being although her passport says she is Ukrainian. Glafira was
born in the Urals, which her parents left in 1977 for the Crimean coast. In
Soviet times the frontiers between republics were only fictional. The sudden
independence of the Ukraine in 1991 left her on the “wrong ” side. Since
then every day Glafira “prays to God for Mother Russia”.

Supported by local politicians, the Kremlin has known how to use this
irredentism during periods of tension with the Ukraine. As when it was a
question of sharing out the fleet stationed in the port. Or of negotiating
in 1997 the twenty year lease, which allows the Russian navy to stay put.

In exchange for a rent of 100 million dollars, some 400 war ships and
16,000 Russian sailors  are based in the various bays of this irregular
coastline. The top secret base at Balaclava, which sheltered the Soviet
nuclear submarines has been dismantled. It is now a tourist attraction.

Everything in this museum-town is intimately linked with the history of
Russia. The Tsarina Catherine the Great constructed the port in 1783, 12
years after the annexation of the Crimea. Ice free all year round, this
haven with a complex of bays sheltered the Imperial fleet. From then on a
pact of blood would unite it with the saga of Russia. First of all with the
Crimean War in 1854 and 55. Besieged for eleven months by a British,

French, Turkish and Piedmontese coalition, the garrison finally abandoned
the fortress. This heroic defeat has become a moral victory in the in the
annals of Russia. The Panorama Museum tells the story.

On the promenade, Nina Filimonova, who sells knick knacks to make ends

meet, wipes a way a tear as she talks of her “dog’s life”. Born at Rostov 70
years ago she moved to Sebastopol in 1949. She has kept her medals from
the Communist era and a nostalgia for the “of a time when bread was less
expensive”. She is indifferent to the authorities in Kiev, “they make me
tired”. She looks instead towards Russia. “But, at my age, how could I hope
to start life over again over there”.

Alexandra Christov, aged 67, comes out of the Diorama, the museum of the
Second World War on Sapun hill. It was the site of a battle between the Red
Army and the Wehrmacht, idealised through propaganda. From October 1941
until July 1942 the fortress underwent a terrible siege and fell into the
hands of the Germans. When in 1944 it was recaptured house by house in May
1944 it was just a pile of rubble. Two hundred and fifty thousand Russian
soldiers died there and Sebastopol was made a hero town of the Soviet Union.

Stalin organised the rebuilding of the city. Then he set about re-peopling
it with deserving Communists from the interior of Russia. The colonisation
started by Catherine II was carried on. At the end of an immense upheaval,
almost all of the population of 330,000 were of Russian origin.

In the Soviet era, the city was closed to foreigners because of its
strategic importance. It was cut off from the outside world by a tight
police cordon. At the Gontcharnoïe frontier post there were interminable
delays. The NKVD and then the KGB were everywhere. The residents

could only invite their family and close friends after getting a pass.

“The town was special in the time of the URSS, it still is today”, confirms
Alexandre Christov. He too arrived with his parents in 1950. He hums a
popular song about Sebastopol the Russian, “sacred place of our history

and of our land”, he insists. Stanislav Zidkov chews sunflower seeds at the
Artillery landing stage, favourite strolling place for the local inhabitants
and for the thousands of tourists who are now free to visit. Born in
Sebastopol, this 67 year old man worked in Moscow at the time of
independence.

Now a Russian citizen he comes back regularly to visit the grave of his
father, a Russian from the Far East and of his mother a Ukrainian. “It is
the same blood that runs through our veins, we are all Slavs, brothers
and sisters. This kinship, not unrelated to domination, goes
back to 1654, when Ukraine was attached to Russia. In 1954 to celebrate the
tercentenary of the event, Nikita Khrushchev, then at the head of the Soviet
Union, gave the Crimea to the Ukraine as a present. An honorary transfer
which was to cause a fracture when the empire broke up.

“Thanks for nothing” moans Vladimir, born in Vladivostock and arrived in
the town aged eight. At the time of Ukrainian emancipation, the Crimea also
seceded before coming back into the Ukraine. All through the 1990s, the
sound of boots echoed round the town. An opinion poll in the middle of the
decade showed that 70% of the population wanted to either independence
or to rejoin Russia.

In the middle of a crisis over the price of gas, the Ukrainian government
threatens not to renew the lease of the Russian fleet. Discussions on the
terms of the present contract are to start next week. The Ukrainians want

to increase the rent. This trial of strength, as well as Kiev’s threat to join
NATO threatens the Russian military presence.

The inhabitants of Sebastopol are against the fleet leaving, which they
regard as a safeguard. “It is inconceivable” thinks Vladimir, stressing that
half the squares in the town are named after Russian admirals. A visit to
the museum of the Black Sea Fleet is sufficient to understand the  close
ties between the port and the fleet.

The youngsters of Sevastopol are not inclined to nostalgia; They do not have
the same ties with their powerful neighbour, from whence their parents and
grandparents come. As in other states freed from Moscow’s control, they

fear becoming second class citizens in the new Ukraine, in the making. The
progression of the Ukrainian language is particularly a cause of anxiety.

Helena Chebotariova, aged 19, is not sure of her future in Ukraine. She
would like to get a Russian passport “because life seems better there”. She
is studying civil engineering at Sevastopol, where her parents moved thirty
years ago. “To be able to use the Russian language freely is essential to
  me” she says. She, like many others, wants it to become a second national
language.

Tatiana Tarasenko, aged 21, and her fiancé Alexeï Mironov, aged 22, give the
example of Belgium and Canada to support this claim. Both studied Russian
in a University affiliated to Moscow, before working in a marine research
institute. They fear this career path could harm them from now on. The
couple feel “more Russian than Ukrainian”. They have nothing against
integration with Europe as long as it does not mean a break with their
Eastern friend.

They did not like the  “orange revolution” which brought to power a pro
western President in December 2004. “It cut us off from Russia”
says Alexeï. Like 89% of the people of Sevastopol they voted for Victor
Ianukovitch, the pro Russian candidate. They will vote for the Party of the
Regions in the March parliamentary elections. They talk of the abyss that
now separates the East and West of the country. “We have more and more
difficulty talking with our friends in Kiev,” says Tatiana sadly.

Dimitri Fedorov, is proud of being a non conformist. He supported the
“orange revolution” and says he does not like Putin. A 24 year old designer
of internet sites, a Russian speaker and born in Sevastopol he explains the
one sided atmosphere all around him. “People don’t want to think for
themselves. They are traditional. They react instinctively to everything
that happens”. But in Sevastopol (“town worthy of respect” in Greek) it

is very difficult to detach oneself from the weight of history. -30-
[Translated by Robert Harneis]
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14. FINNISH-MADE PENDOLINO HIGH-SPEED TRAIN MAY START

                      OPERATING IN UKRAINE BY END OF 2006

Interfax-Ukraine, Kyiv, Ukraine, Monday, February 13, 2006

Kyiv – Ukrainian national rail company Ukrzaliznytsia is planning to launch
the first Finnish-made Pendolino high-speed train by the end of 2006,
Ukrzaliznytsia head Vasyl Hladkykh told journalists last week.

“An instruction has been issued that by the end of the year one Pendolino
train must be operating in Ukraine,” he said. According to him,

Ukrzaliznytsia technicians will go to Finland to hold talks next Sunday.

Speaking about the route of the train, he said: “It makes sense for the
Pendolino train to operate on the southern railway network.” He said the

purchase of another four similar trains is planned for 2007, one of which
may be built in Ukraine.

As head of Southern Railway Viktor Ostapchuk explained, Ukrzaliznytsia

plans to purchase one used Pendolino train, which will cost approximately
EUR 20-25 million. Pendolino trains can travel at up to 300 kilometers per
hour. -30-
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15.       SKILLS EXODUS WORRIES POLISH EMPLOYERS
  Pressing gov to allow them to recruit more skilled workers from Ukraine.

By Stephan Wagstyl in London, Financial Times
London, United Kingdom, Wednesday, February 8 2006

At the New Szczecin Shipyard, which dominates the the north-western

Polish port of Szczecin, workers are disappearing to work in western
Europe in such large numbers that managers can barely cope.

Out of a payroll of 5,500 workers, 1,200 left last year – most of them
experienced welders, fitters, electricians and other skilled craftsmen who
were impossible to replace.

Jacek Tatarowicz, the production director, says: “On some days, five or
seven people would disappear without warning. The people who leave are
people with 10 years or more experience. We have to take on inexperienced
youngsters. This costs us a lot but we will carry on training new workers.”

West European yards have long sought to employ experienced Polish

shipyard workers but the demand has multiplied since Poland joined the
European Union in May 2004 and labour restrictions were lifted in Sweden,
the UK and Ireland.

Other employers hiring specialised craftsmen also face problems. Hanna
Dabrowska, the personnel director of Hochtief Polska, the Polish subsidiary
of Germany’s Hochtief construction group, says: “We feel the effects of the
opening up of European labour markets because we have to compete in terms

of job offers not only with Polish employers but with, for example, those in
Britain and Ireland.”

However, with nearly 3m unemployed, Poland is still far from suffering from
a general shortage, even of skilled workers. Also, while European Union
enlargement has contributed to the recruitment difficulties of some
employers, serious weaknesses in the Polish labour market are at least as
important.

According to the government’s statistical office, 14 per cent of Polish
employers reported recruitment problems in the last quarter of 2005,
compared with 8 per cent in the first quarter of 2004.

The period coincides with a cyclical recovery in the Polish economy,

which has helped cut unemployment from 20.6 per cent to 17.3 per cent.
Economists estimate that perhaps half this 500,000 drop is accounted for
by migration and half by people finding work at home.

Employers say the biggest cause of labour shortages in skilled trades is a
decline in vocational education since Communist times.

Miroslaw Kulesza, the owner of a Warsaw plumbing company, has just lost

his latest young recruit, who moved to London to work in a bar. But he is
not worried about emigration rather about inadequate training. “Young people
finishing their studies don’t know anything. They have to be trained and
that takes four or five years.”

Economists point to poor domestic labour mobility in Poland, which prevents
people from moving even 50 kilometres for work, and a low level of
employment. Half of all Poles of working age are not working – and are
instead drawing unemployment or sickness benefit. An unknown number of

these are working in the black economy or abroad while retaining their social
payments.

The government’s statistical office says employers report particularly acute
recruitment difficulties in construction, furniture making and the
engineering industries – such as shipbuilding. Employers are pressing the
government to allow them to recruit more skilled workers from Ukraine.

The Polish Chamber of Physicians and Dentists estimates about 3 per cent

of members have applied for certificates to have their credentials recognised
abroad. In some specialisms, it is 10 per cent.

The labour ministry says there are no shortages in “strategic sectors” such
as medicine but if emigration continues at the present rate they could
emerge in the future.  -30-
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16.  UKRAINE ‘FORCED” TO AGREE TO RUSSIA’S INSPECTION
                        OF MEAT AND DAIRY FACTORIES 

UNIAN news agency, Kiev, in Ukrainian 1506 gmt 15 Feb 06
BBC Monitoring Service, UK, in English, Wednesday Feb 15, 2006

KIEV – Ukraine has been forced to agree to Russia’s demand to carry out

an inspection of Ukrainian dairy and meat production facilities be taken,
the head of the Agricultural Policy Ministry’s press-service, Oleksandr
Horobets, said in an interview with UNIAN today.

[On 20 January, Russia banned meat and dairy imports from Ukraine

allegedly due to the violation of veterinary requirements by Ukrainian
exporters.]

According to Horobets, it transpired during today’s round of talks [in
Moscow] that Russia wants to inspect the Ukrainian facilities. The

Ukrainian side “can do nothing but agree”. He added that Russia views
one of the meat factories, which makes minced meat, as the biggest
problem. The name of the enterprise has not been revealed. -30-
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17. UN BIRD FLU CHIEF WARNS OF UKRAINE BIRD FLU THREAT

By Mara A. Bellaby, Associated Press (AP)
Kiev,Ukraine, Wednesday, February 15, 2006

KIEV – The United Nations’ top official for bird flu warned Wednesday

that Ukraine is at high risk of further outbreaks of the disease and said it
must be ready to cope with human infections.

“The threat is still there,” David Nabarro, the U.N. coordinator for
combatting bird flu, said during a visit to the Ukrainian capital. “Avian
influenza will continue to come to Ukraine … health services must be ready
and prepared to deal with people who are infected with avian flu and to be
ready for the possible arrival of human-to-human transmission.”

The lethal H5N1 strain of bird flu was recorded in Ukraine’s Crimean
Peninsula in December. The virus has spread to 24 villages, and another 18
have recorded suspicious numbers of deaths among domestic fowl. H5N1

can be deadly to humans, but no human cases have been confirmed in
Ukraine. Officials fear the virus will spread in the spring when birds start to
migrate.

Gudjon Magnusson, a World Health Organization official, said Ukraine was
among five countries in or bordering Europe that have recorded large
outbreaks.

The others are Russia, Kazakhstan, Romania and Turkey. Magnusson said

those major outbreaks differed significantly in scope from the “sporadic
outbreaks in migratory birds” found in other European countries such as
Italy and Greece. “It is up to us to see that avian flu doesn’t become an
epidemic in Europe,” he said.

Ukraine has asked for more help to prepare its laboratories and other
diagnostic tools in the case of another major outbreak or the appearance of
human infections. President Viktor Yushchenko also offered the country’s
assistance to other nations that are just starting to cope with bird flu.

Nabarro praised Ukraine’s response, citing its speed and the coordination
between different agencies. His words appeared aimed at critics who
complained that the appearance of dead birds in Crimea was initially kept
secret, and that the response was disorganized and chaotic.

Meanwhile, Christina Carlson, a U.N. specialist working in the former Soviet
Union, said that experts had studied the capacities of hospitals in Crimea
to deal with cases of human infection and found “they have sufficient
capacity to handle such cases if they will come up.”  -30-
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18.  UKRAINE IS “ON THE VERGE OF SECOND ENERGY CRISIS”
    Must make ready for a general rise in energy prices in the coming years.

REGNUM Correspondent, Regnum News Agency
Moscow, Russia, Wednesday, February 15, 2006

Ukraine is “on the verge of the second energy crisis.” By the autumn 2006
the gas price in the country will reach $110, and then – $230 and more per
1,000 c m, says Yevgeny Fomichev, head of the energy management
department of Odessa National Polytechnic University, Director of the
Odessa Regional Center for Energy Saving and Energy Management.

He expressed this view during the Feb 14 meeting of the Porto-Franco
reforms press-club concerning energy saving technologies, reports
REGNUM correspondent.

Fomichev believes that the gas crisis will force the Ukrainian government
to concentrate on the problem and to try to solve it. He says that the gas
price is rising because Ukraine “has always used cheap gas and has done
nothing to save it.”

WTO membership will make things even worse, as the local producers will
not be able to rival with the West on the market of commodities, which are
much cheaper there due to energy saving technologies.

Fomichev notes that even if used such technologies will pay off in no
earlier than 3-5 years, provided that the country is truly committed and
there are favorable legislative conditions, such as soft loans, tax
respites, etc. “Meanwhile, our state officials are just talking that the
country needs energy saving, but are doing nothing to make it possible and
profitable for the companies.

In the past three years of its work the State Committee on Energy Saving has
drafted a number of bills but none of them has been approved by the Supreme
Rada,” says Fomichev. He is sure that “in any case, Ukraine will never again
go back to the $50 price.” Ukrainian media reports the government to have
set the $110 maximum price for 1,000 c m for 5 years.

Ukrainian Economy Minister Arseny Yatsenyuk says that the government has
decided to draft a bill on gas consumption limits “with the use of energy
saving technologies.” “This scheme is similar to the one applied in the
electricity system – when above-limit consumption is fined,” explains
Yatsenuk.

“We need to urgently flatten out the home prices, while the population, who
will theoretically pay more, will have to be compensated in full from the
budget in the form of energy subventions,” says Yatsenuk.

He says that gas export licensing is being introduced in Ukraine. “The
maximum gas price the Ukrainian economy can afford is no more than $110,
while any talk of other prices is absolutely unacceptable and will lead the
economy to a crisis” – a conclusion the Economy Ministry has come to as
a result of its consultations with representatives of industrial
associations.

“This decision was made to limit the gas sale by any entities in Ukraine and
to prevent the use of unregulated tariffs by them. Thereby the state has
obliged itself and all the other entities not to exceed $110/1,000 gas price
for 5 years,” says Yatsenyuk.

This is not a recommendation but an obligation for both state bodies and
private companies. Ukraine must also make ready for a general rise in
energy prices in the coming years.  -30-
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LINK: http://www.regnum.ru/english/590538.html
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19. ESTABLISHING RULE OF LAW AND FIGHTING CORRUPTION
           Meeting with Yurii Lutsenko, Minister of Interior of Ukraine

Carnegie Endowment for International Peace (CEIP)
Washington, D.C., Friday, February 10, 2006

On February 10, 2006, the Carnegie Endowment for International Peace
hosted a meeting entitled “Establishing the Rule of Law and Fighting
Corruption,” with Yurii Lutsenko, Minister of Interior of Ukraine. Carnegie
Senior Associate Andrew Kuchins chaired the session. Lutsenko’s remarks
are summarized below.

Declaring, “My aim is to be Lutsenko, not Derzhinsky [the famously brutal
founder of the organization that became the Soviet KGB],” Lutsenko
stressed the need to observe the law in investigating and prosecuting
corruption.

“Many people want to see Kuchma, Yanukovich, and Medvedchuk in
court, but throwing ‘enemies’ in jail would not have been consistent with
the Orange Revolution,” he said.

Lutsenko outlined the legal and practical obstacles confronting his
anti-corruption efforts. While Lutsenko has broad authority over the
police, corruption involving high level civilians is the responsibility of
the Prosecutor General’s office, held until recently by Kuchma-aligned
Svyatoslav Piskun. Lutsenko also bemoaned Ukraine’s outdated Soviet
anti-corruption legislation.

In response to a question about the Melnichenko tapes (which established
the involvement of former President Kuchma in the murder of journalist
Heorhiy Gongadze), Lutsenko noted they are not admissible in court and
Melnichenko has sought to avoid testifying.

Lutsenko said the government’s biggest mistake in the fight against
corruption was allowing the passage of a law granting immunity to deputies
in regional legislatures. According to Lutsenko this has attracted
criminals to politics.

Despite these difficulties, Lutsenko insisted he has made progress against
corruption, citing the 3500 police who failed an examination and the 600
corruption cases launched against police. Lutsenko called the Orange
Revolution an “anti-criminal revolution” and said the new government
needed to change people’s idea of the authorities.

He also commented on the political situation in the country ahead of the
parliamentary elections in March, trying to put a bold face on the
diminished prospects of President Yushchenko’s “Our Ukraine” coalition.

Lutsenko avoided criticizing ousted Prime Minister Yulia Tymoshenko and
instead accented her adherence to the “Orange” principles of democracy and
independence. He said Tymoshenko would realize that people “want to be
asked to be united.” With this remark Lutsenko seemed to hint that “Our
Ukraine” still hopes to form an alliance with Tymoshenko to prevent
Yanukovich from forming the next government.

Under recent changes to the Ukrainian constitution the President has the
power to dissolve the parliament if the contending parties fail to form a
government. Citing this power and Tymoshenko’s “reasonableness,”
Lutsenko confidently declared there will be no revanche.

According to Lutsenko the March elections will be very different from
others Ukraine has seen since independence.  He said 5500 election fraud
cases have been brought since the Orange coalition took power and 1.3
million “dead souls” (names of deceased or invented people) have been
purged from voter lists, mostly in the Russian-speaking Donetsk region.
                                         Q&A SESSION
Q: People are concerned about the gas deal and its lack of transparency.
Will your ministry examine these agreements?

Lutsenko: This is a matter for the security services and the Prosecutor
General. But as a cabinet member, I can say the gas pipeline is the
keystone of the Ukrainian economy. . We didn’t give up one meter of pipe,
as our neighbors did, and we still have the cheapest price for gas. Ukraine
was thought to be addicted to cheap gas and the price of the drug was the
independence of our country. It is hard to raise the price slowly, but this
is the right process. Nobody will develop coal and oil if gas remains so
cheap. I know nothing about the founders of RosUkrEnergo [the shady
intermediary involved in the recent Russian-Ukrainian deal].

Q: Would you comment on the Socialist campaign pledge to nationalize the
Nikopol Ferroalloy Plant? What is your view on nationalization and
privatization?

Lutsenko: Tymoshenko’s call to nationalize thousands of enterprises damaged
the economy. [Head of the State Property Fund Valentina] Semenyuk acts
under the law. There will be no nationalization, only legal procedures
against criminal privatization. There are criminal cases against Viktor
Pinchuk, who used his connections to Kuchma to buy enterprises cheaply.

The auction price of Krivoryzhstal [a steel works recently bought by Lakshmi
Mittal in a transparent privatization process] was twenty times higher than
the aggregate of all previous privatizations.
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Summary prepared by Matthew Gibson, Junior Fellow with the Russian and
Eurasian Program at the Carnegie Endowment for International Peace.
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20.  FORMER PM YANUKOVYCH BLAMES PRES YUSHCHENKO
                  FOR ECONOMIC SLOWDOWN IN UKRAINE

Associated Press (AP), Kiev, Ukraine, Tuesday, February 14, 2006

KIEV – Former Ukrainian prime minister Viktor Yanukovych Tuesday

criticized President Viktor Yushchenko for the country’s economic
slowdown.

Yanukovych, who lost his presidential bid following the mass protests of

the Orange Revolution, also pledged to restore stronger growth within six
months if his party triumphs in next month’s crucial parliamentary election,
to be held March 29.

“Yushchenko has turned out to be unable to conduct a rational and
intelligent policy,” Yanukovych said. “It will take us probably six months
to eliminate the consequences of the damage.”

The economy has slumped since Yushchenko came to power, but he has

insisted that the situation was turning around. In 2004, when Yanukovych
was prime minister, Ukraine recorded 12% economic growth, though some
have doubted the accuracy of the economic data.

Yushchenko’s government has made some progress in fighting corruption and
creating jobs, but many Ukrainians feel disappointed. Yushchenko’s allies
have demanded that Yanukovych explain several murky privatization deals,
including the 2004 sale of flagship steel mill Kryvorizhstal.

Meanwhile, Yushchenko risks losing influence in the elections, which will
see some presidential powers being transferred to parliament, under
constitutional reforms adopted earlier. Among the powers parliament will
gain will be the right to name the prime minister and some cabinet members.
Numerous polls have suggested that Yushchenko’s party, Our Ukraine, could
finish a distant second behind Yanukovych’s Party of the Regions. -30-
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21. VIKTOR YANUKOVYCH: UKRAINE MUST PRESERVE SPECIAL
       RELATION WITH RUSSIA IN OUR ECONOMIC STRATEGY
   Goals must not be at the expense of historic and cultural ties with Russia
 
Interfax – Russia, Kyiv, Ukraine, Tuesday, February 14, 2006
 
KYIV – The Ukrainian Party of Regions favors preserving Ukraine’s special
relationship with Russia, party leader and former Prime Minister Viktor
Yanukovych said.

“Preserving our special relationship with Russia is another priority in our
economic strategy. The Party of Regions stems from the objective reality:
Russia is Ukraine’s strategic partner, including membership in the Common
Economic Space,” Yanukovych said on Tuesday at a presentation of the
economic strategy of the Ukrainian development developed by his party.

At the same time, special relations with Russia does not exclude close and
fruitful cooperation with the West, he said. “We keep on working at an
Action Plan that Ukraine and the European Union jointly adopted and moving
to the EU membership, speaking about implementing the Copenhagen Criteria,
rather than the timetable for joining the EU. However, we must not aspire to
this goal at the expense of historic and cultural ties with Russia,”

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22. DON’T BE APATHETIC”-THREAT OF “LITTLE RUSSIANIZATION”
       Most important problem in Ukrainian society, threat to national security

By Yulia Katsun, The Day Weekly Digest in English, #4
Kyiv, Ukraine, Tuesday, February 14, 2006

Three civic associations – Yevhen Chykalenko Club represented by
Volodymyr Panchenko; Citizens’ Platform represented by Vasyl Boichuk,
and the all-Ukraine civic action “Don’t Be Apathetic,” represented by
Oleksandr Polozhynsky and Serhiy Prysiazhny – are urging politicians to
make public their stands on the implementation of Ukrainian interests in
the spheres of language, culture, and information, and on ways to over-
come linguistic discrimination against Ukrainians.

These civic organizations, none of which is taking part in the election race
or represents the interests of any political forces, revealed the contents
of their open letter to the general public, politicians, and the government
at a press conference held last Tuesday in Kyiv.

They want to draw public and official attention to what they believe is the
most important problem in Ukrainian society: Little Russianization, which
is a major threat to our national security.

The authors of the letter note that in the process of the continuing
linguistic and cultural Russification of Ukrainians, increasingly obvious
Ukraine-Little Russia contours are emerging of a postcolonial territory
without its own national identity.

Therefore, the government, society, and politicians must be keenly aware
that what we have now is the clear and present danger of the liquidation of
the Ukrainian people as a historical substance.

The letter also states that they must realize that all the main ills of
Ukrainian society are the consequences of Ukraine’s lasting colonial status
under the rule of an empire that had essentially different basic values.
According to the participants of the press conference, a crucial mistake was
made when the state failed to provide conditions for the renewal of the
positions of the Ukrainian language.

According to Vasyl Boichuk, there is always a shortage of Ukrainian-language
publications at news stands and kiosks; it is always difficult to buy
Ukrainian copies of bilingual periodicals; in cities in eastern and southern
Ukraine the right of the Ukrainian-speaking population to obtain periodicals
in their mother tongue is being completely ignored.

“Current statistics show that for every Ukrainian there are 50 copies of
Ukrainian-language newspapers and over 400 Russian-language ones,” says
Boichuk, adding that tens of millions of Ukrainian-speaking citizens can not
watch films in Ukrainian.

Panchenko noted that Ukrainian remains the language of instruction in
educational institutions, while at the Verkhovna Rada there are a number of
bills on record protecting the Russian language.

In his opinion, the state has failed to foster the revival of the genuine
history of the Ukrainian people. To this day Ukrainians do not have a solid
and unbiased record of their national history free from Russian myths and
stereotypes.

Polozhynsky said that another threat is that the programs and principles of
the political forces that have a chance to enter the new Verkhovna Rada do
not contain clear-cut principles relating to the Ukrainian language,
history, and Ukrainians as a nation in Ukraine.

In addition, all political forces that seemed to be championing Ukrainian
interests in the fall of 2004 appear to have departed from Ukrainian
positions on the level of programs and declarations.

These civic organizations are therefore appealing to Ukrainians to demand
from politicians and the state concrete projects and solutions relating to
the development of Ukraine for the benefit of Ukrainians.

According to Panchenko, their message contains no aggressive statements
with regard to other nationalities. On the contrary, this idea may serve to
unite all Ukrainians who really care about Ukraine’s immediate future,
regardless of their ethnic origin.  -30-
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LINK: http://www.day.kiev.ua/157426/
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23. BELARUS: CANDLES, DENIM, AND THE 16TH OF FEBRUARY
         Political opposition in Belarus will take on a dramatic tone when
    denim-clad youth assert their rights along candle-lit streets, February 16.

COMMENTARY: By Celeste A. Wallander, Director and Senior Fellow,
Russia and Eurasia Program, Center for Strategic and International Studies
Washington, D.C., Wednesday, February 15, 2006

On February 16th, pay attention to the signs of weakness in the last
dictatorship in Europe.  Look for tens of thousands of Belarusians lighting
candles and wearing denim in an assertion of their rights to express their
opposition to the current regime in that country.

Despite efforts by the authoritarian regime in Belarus to eliminate
competitors and insure that President Alyaksandr Lukashenka will rule for
another term after show elections on March 19, political and social activism
is awakening in that country.

The most recent credible independent polls show the number of Belarusian
voters certain to vote for Lukashenka hovers around 40%, not the 70-80%
that the regime’s polling agency reports.  Committed support for the main
competing candidate, Alyaksandr Milinkevich, has tripled to nearly 18%
despite the complete absence of information on his candidacy in the
monopoly of the state-controlled media.

Some 40% of Belarusian citizens remain undecided, a fact particularly
interesting in light of the fact that solely through grassroots organizing
and small opposition publications, knowledge of Milinkevich has grown
from around a quarter of those surveyed to three-quarters of respondents,
and those viewing him favorably has risen from less than 5% to nearly
35% of those responding.

Clearly, in a free and fair electoral competition that met international
standards guaranteeing that citizens can choose their leader in truly
democratic conditions, we would be witnessing an exciting political
process.

Instead, because of the perception that the Lukashenka regime will repress
any opposition forces and certify fraudulent results after March 19th,
international attention to political change in Belarus, a regime Secretary
Condoleezza Rice has called “the last dictatorship in Europe,” has been
lacking.

But the international policy community and global media should be paying
attention, and most immediately on February 16th.  Beginning in October,
the Belarusian social and political opposition came together to designate
the 16th of each month as a Day of Solidarity with political prisoners,
independent journalists, and social and political activists repressed or
“disappeared” by the regime.

On the 16th of each month, thousands of Belarusian citizens turn off their
lights at 8pm, and light candles as a symbol of freedom and democracy.

Each month, more and more Belarusians have taken part in the silent
affirmation of their political rights.  Young people have joined the
movement as well by wearing denim, a symbol of aspirations for a modern

Belarus integrated with Europe and the global community.

While the regime retains powerful forces to repress dissent and control the
political process, the signs of political and social change are there for
those who care to pay attention.  -30-
——————————————————————————————–
NOTE: To learn more about CSIS’ work on Belarus, click on
http://www.cssis.org/ruseura/belarus/ or contact Alina Tourkova,
email: atourkova@csis.org, phone: (202) 775-3259, Washington.
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24.       UKRAINE: PRESIDENT MEETS OLYMPIC TEAM
         The athletes asked Yushchenko to sign their flag, and he wrote:
      “I wish you success! Ukraine loves you and is proud of you! Win!”

Press office of President Victor Yushchenko

 Kyiv, Ukraine, Friday, 3 February, 2006

KYIV – President Victor Yushchenko, First Deputy Chief-of-Staff Ivan
Vasyunyk and Youth and Sports Minister Yuriy Pavlenko met with our
Olympic team that will represent Ukraine at the 2006 Winter Olympics in
the Italian city of Turin.

The Head of State emphasized the significance of the Olympic Games and
remarked that this competition of the international community combined
physical struggle and desire to promote profound human values.

“I think humanity no longer looks at the Olympics through the prism of
sports. I think we all see the games consolidate and change the world and
strengthen nations,” he opined.

Addressing the athletes, Yushchenko stressed they were all going on a vital
and “extremely responsible” mission to represent the independent country
with “century long traditions” to prove that we have gifted athletes that
can win and professional coaches that can train them.

The President wished them Olympic triumphs in Turin. “Millions of
Ukrainians will watch you compete and they will pray for your efforts.

I would like to ask you to preserve Ukraine in your hearts. I want you to
fulfill all your abilities and wish you victories and eternal faith, love
and hope,” he said.

Then the President asked if they were satisfied with their training
conditions and wanted to learn about their most pressing problems. He
particularly said over the past three years the Tysovets Olympic Center
had been reequipped to meet their needs and demands and pledged to
build and renovate other training grounds.

National Olympic Committee President Serhiy Bubka, who attended the
meeting, told him there were not many problems to prepare the team for
the Olympics and said they were all willing to fight. Today, at 6 PM, the
athletes will take part in a send-off ceremony in Kyiv’s Independence
Square. Bubka also said most of them were already in Turin preparing
for the competitions.

The President said he had signed an order to establish a National Sports
Council. He will personally head it. Its members are: Vitaly Klytchko,
Serhiy Bubka, Ivan Vasyunyk, Vyacheslav Kyrylenko, Yuriy Pavlenko,
Volodymyr Brynzak, and Oleksandr Volkov.

He suggested that they should hold their first meeting after the Olympics.
Yushchenko believes the council should formulate a plan to develop sports
in 2006 and carry out specific programs. “I am convinced in 2006 we will
launch key sports programs,” he asserted.

Then the Head of State and his wife were presented with Ukraine’s Olympic
uniform. The athletes asked Yushchenko to sign their flag, and he wrote: “I
wish you success! Ukraine loves you and is proud of you! Win!”
————————————————————————————————–
LINK: http://www.president.gov.ua/en/news/data/1_5932.html
——————————————————————————————–
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
25.            HORROR CRASH FOR UKRAINE LUGE TEAM 

 

Talek Harris in Turin, Italy, Agence France-Presse (AFP)
Turin, Italy, Thursday, February 16, 2006

TURIN, Italy – UKRAINE doubles luge slider Roman Yazvinskyy was

injured in a horrific crash as the notorious Cesana Pariol Olympic Winter
Games track claimed another victim.

Yazvinskyy took a heavy blow to the head when his sled plunged into
the roof of the final curve at high speed, tipped sideways and
ploughed into another wall, snapping a runner into pieces.

“He is conscious but he hit his head so you have to be careful about
his condition,” a policeman at the scene said, adding that
Yazvinskyy would be taken for immediate treatment at a medical
centre. Yazvinskyy’s partner, Oleg Zheberetskyy, limped away in

obvious pain.

The crash was just the latest in a series of chilling spills on the
course where America’s Mark Grimmette and Brian Martin also saw
their Olympic dream end in tatters.

The US pair, gunning to complete their Olympic medals collection
with a gold, strayed too high up a left wall on their opening run
and were dumped on to the track at high speed in another spectacular
wipeout.

The US stars, who won bronze in Nagano 1998 and silver in Salt Lake
City four years ago, did not appear to be badly injured and walked
away from the crash. Dmitriy Khamkin and Vladimir Boitsov of Russia

also fell victim to the daunting course.  -30-
——————————————————————————————-
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
26.  UKRAINE’S FIRST LADY MEETS WITH SURVIVOR OF 1932-1933
GENOCIDE FAMINE & WAR VETERAN GRYGORIY GERASHCNENKO
            In 1932-1933, he lived in the village of Yablunivka, Kyiv region.

Press office of President Victor Yushchenko
Kyiv, Ukraine, Friday, February 3, 2006

KYIV – Ukraine’s First Lady Kateryna Yushchenko met with genocide
famine survivor and WWII veteran Grygoriy Gerashchenko. The senior
citizen told her about the 1932-33 genocide famine and his war experience.

When Mr. Gerashchenko learned the Ukraine 3000 Foundation collected
witness testimonies about the famine, he asked them to record his memories.
In 1932-1933, he lived in the village of Yablunivka in the Kyiv region.

During the meeting, Ms. Yushchenko said “the country that forgets tragic
pages and lessons of its history is destined to repeat them again.” “I
personally consider the famine to be the most tragic topic in our history,”
she said and then shared her parents’ memories about the disaster.

Mr. Gerashchenko took part in military operations in Finland. As a marine,
he also fought in Odessa and Sevastopol. As a tank division soldier, he
participated in the Stalingrad battle and many other battles in Romania,
Bulgaria, Yugoslavia, and Hungary. He liberated Vienna and was in Prague
on May 9, 1945. Gerashchenko was later decorated with many orders and
medals.

The Ukraine 3000 Foundation collects and records famine witness
testimonies. Their stories are really important to learn the truth about
that period. The Foundation wants the world community to recognize the
1932-33 famine as a genocide killing up to ten million Ukrainians.  -30-
————————————————————————————————-
LINK: http://www.president.gov.ua/en/news/data/5_5951.html

————————————————————————————————-
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