Daily Archives: July 2, 2006

AUR#721 Jul 2 Thirty Richest Ukrainians; Naftogas: Begging For Billions; Profile Of Public Relations In Ukraine; Art Exhibition: Modernism In Ukraine, 1910-1930

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Akhmetov heads the list, Pinchuk second and Kolomoiskyi third
Most of top 30 people on the list engage in production of pig iron and steel


Mr. E. Morgan Williams, Publisher and Editor

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Return to the Index by clicking on Return to Index at the end of each article

Akhmetov heads the list, Pinchuk second and Kolomoiskyi third
Most of top 30 people on the list engage in production of pig iron and steel
Ukrainian News Agency, Kyiv, Ukraine, Friday, June 30, 2006

Daewoos Top Car Sales in Ukraine Jan-May 2006
Business Digest, Sofia, Bulgaria, Friday, June 30, 2006

Completion of unfinished Krivoy Rog iron ore beneficiation plant
Steel Business Briefing, London, UK, Friday, June 30, 2006

IMB Group Ltd, Kyiv, Ukraine, Thursday, June 15, 2006

Everything depends on the parliament adopting the required laws
By Tetyana Belchenko, Kyiv Weekly # 25 (211)
Kyiv, Ukraine, Wednesday, June 28, 2006

Ukrainian News Agency, Kyiv, Ukraine, Monday, June 26, 2006

Sharecast, London, United Kingdom, Friday, 21 Jun 2006

Shane Hickey, Irish Independent, Dublin, Ireland, Wed, Jun 21, 2006

New outlets scheduled for the summer in Ukraine, the Baltic states & Bulgaria
Julia Finch, City Editor, The Guardian, London, UK, Wed, Jun 21, 2006

Is NAFTOGAS going to live on credit till the end of time?
Alla Yeremenko
Zerkalo Nedeli on the web, Mirror-Weekly, No. 24 (603)
Kyiv, Ukraine, Saturday, 24-30 June 2006

Ukrainian News Agency, Kyiv, Ukraine, Friday, June 30, 2006

Associated Press, Ashgabat, Turkmenistan, Friday, June 30, 2006

By Sonia Oxley, Reuters, Hamburg, Germany, Saturday, July 1, 2006

Associated Press, Hamburg, Germany, Saturday, July 1, 2006

Stanislav Shumlianskyi, Molode radio chief, Molode Radio,
Wave of Ukrainina Music from Kyiv, Kyiv, Ukraine, June 2006

A profile of public relations in Ukraine
By Martin Nunn MCIPR, Chief Executive
Whites International Public Relations in Kyiv
PR Business weekly magazine, London, UK, June 19, 2006

Ukrainian News Agency, Kyiv, Ukraine, Thursday, June 29, 2006

First Major Exhibition of Early 20th Century Ukrainian Art in the U.S.
Comes to the Chicago Cultural Center July 22-October 15, 2006
Chicago Department of Cultural Affairs

Kyiv Committee of the Chicago Sister Cities International Program.
Chicago, Illinois, Friday, June 30, 2006

Dr. Abbas Bakhtiar, SCOOP Independent News
Wellington & Zuckland, New Zealand, Friday, 30 June 2006

COMMENTARY: By Lee H. Hamilton, President and Director of the
Woodrow Wilson Center, Former Congressman from Indiana and
former Chairman of the U.S. House Committee on Foreign Relations
Woodrow Wilson Center, Washington, D.C., Friday, June 30, 2006
Akhmetov heads the list, Pinchuk second and Kolomoiskyi third
Most of top 30 people on the list engage in production of pig iron and steel

Ukrainian News Agency, Kyiv, Ukraine, Friday, June 30, 2006

KYIV – Rinat Akhmetov, a businessman and parliamentary deputy, heads the
list of Ukraine’s richest people compiled by the Korespondent journal. The
list is published in the latest edition of the journal, the copy of which
Ukrainian News has obtained.

Korespondent estimates the value of [1] Akhmetov’s assets at USD 11.8

[2] Viktor Pinchuk (whose assets Korespondent estimates at USD 3.7 billion)
is the second on the list while [3] Ihor Kolomoiskyi (USD 2.8 billion) is
the third. They are followed by [4] Hennadii Boholiubov (USD 2.4 billion)
who is fourth and [5] Kostiantyn Zhevaho (USD 1.9 billion) fifth.

Next on the list are [6] Serhii Taruta and [6] Vitalii Haiduk (USD 1.7
billion each). [8] Dmytro Firtash and [9] Oleksii Martynov (USD 1.4 billion
each) complete the list of billionaires.

According to the Korespondent journal, [10] Valerii Khoroshkovskyi is the
tenth (USD 930 million). He is followed by [11]Volodymyr Matvienko (USD
890 million), [12] Vasyl Khmelnytskyi (USD 729 million), [13] Oleksandr
Yaroslavskyi (USD 709 million), [14] Viktor Nusenskis (USD 691 million),
[15] Oleksandr Slobodian (USD 629 million), and [16] Petro Poroshenko (USD
505 million).

Also on the list with assets worth less than USD 500 million are [17] Serhii
Tihipko (USD 483 million), [18] Mykola Yankovskyi (USD 442 million), [19]
Leonid Yurushev (USD 425 million), [20] Lev Partskhaladze (USD 399 million),
[21] Andrii Ivanov (USD 364 million), [22] Serhii and Oleksandr Buriak (USD
354 million), [23] Leonid Baisarov (USD 345 million), [24] Hennadii Vasyliev
(USD 345 million), and [25] Fedir Shpyh (USD 305 million).

The final five on the list are [26] Eduard Shyfrin (USD 274 million), [27]
Oleksandr Derkach (USD 244 million), [28] Ernest Haliev (USD 236 million),
[29] Oleksandr Rodnianskyi (USD 200 million), and [30] Valentyn Landyk
(USD 177 million).

Thus, people with assets worth at least USD 177 million are included on
the list.

This is the first time that the Korespondent journal is compiling a list of
Ukraine’s richest people. It compiled the list in conjunction with the Kyiv
Post English-language newspaper and analysts from the Dragon Capital
investment bank.

Analysts with the bank estimated the values of the assets based on their
experience in conducting such estimates for Forbes journalists list of the
planet’s richest 100 people.

Korespondent says that it encountered secrecy and complicated business
structures involving offshore companies during compilation of the list.
Korespondent is hoping that the desire of Ukrainian companies to integrate
into the world market will make them more open to the press in the future.

‘We attempted to break through the complete secrecy of most of the
candidates for inclusion on the list as well as to untangle the web of
offshore companies and employees,’ the journal said.

The journal notes that the values of the assets of Ukrainian enterprises
have increased since late 2004 as a result of the country’s greater level of
attractiveness to investment as a whole as well as the expansion of the
largest companies.

‘Most of the participants in the rating have intensively expanded their
vision recently,’ the journal said. The journal also said that the desire of
companies to become public has increased their values.

Most of top 30 people on the list engage in production of pig iron and
steel, following by people in the banking business. Seventeen of the people
on the list operate businesses in eastern Ukraine, including 9 in the Donbas

As Ukrainian News earlier reported, Forbes named three Ukrainian citizens,
including Akhmetov, among the world’s richest people in 2005.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
Daewoos Top Car Sales in Ukraine Jan-May 2006

Business Digest, Sofia, Bulgaria, Friday, June 30, 2006

South Korean Daewoo car sales topped the list of the ten best selling
foreign car makes in Ukraine with 18,260 units sold in the first five months
of 2006.

The ten most popular car models in Ukraine registered a growth of 91.2 pct
year-on-year to 57,559 units, with Kia showing the highest rate, five-fold
on the year, reaching 2,290 units between January and May 2006, up from
455 units in the year-ago period.

The most popular car model in Ukraine is Daewoo Lanos, with 13,260 units
sold in the period.

[1] Daewoo 18,260
[2] Chevrolet 12,314
[3] Skoda 6,382
[4] Mitsubishi 4,405
[5] Renault 3,406
[6] Opel 3,338
[7] Hyundai 2,609
[8] Toyota 2,300
[9] Kia 2,290
[10] Volkswagen 2,255

(Note: In 2005 new car sales in Ukraine grew 25.3 pct year-on-year
to 265,000 ranking it 12th among the top 15 car markets in Europe, the
Ukrainian News Digest reported.) http://www.autoweek.com.ua,
http://www.aiidatapro.com. -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
Completion of unfinished Krivoy Rog iron ore beneficiation plant

Steel Business Briefing, London, UK, Friday, June 30, 2006

A special commission which was considering suitors for the completion of
Ukraine’s unfinished Krivoy Rog iron ore beneficiation plant, has
recommended that the government accept a proposal from the
Metalloinvest/Smart group alliance, the state property fund’s spokeswoman
tells Steel Business Briefing.

Only two proposals were received for the GOKOR project, she says, the
other being from Mittal Steel. Ukraine’s cabinet of ministers will review
the recommendation and announce its decision very soon, SBB is told.

Outlining the basics of the proposal, Metalloinvest’s spokesman tells SBB
that, should Ukrainian cabinet of ministers make a positive decision, it
will retain 50%+1 share in the enterprise, total investment for completion
of which is estimated at $804m.

The work is projected to take place in two stages: first, a pelletizing
plant would be brought on stream, using iron ore from Metalloinvest’s
Mikhailovsky and Smart’s Inguletsky mines. It would produce an estimated
13.5m tonnes/year. A second stage will see GOKOR’s own ore concentrates
being converted into 10.5m t/y of pellets, he says.

The Metalloinvest/Smart alliance will also make provision for settling the
debt with the other two owners of the GOKOR – the Romanian and Slovak
governments. Originally, GOKOR was a three-way joint venture, but after the
fall of communism in Eastern Europe Ukraine was left “holding the baby”,
with the unfinished plant. The Romanian share is said to be 28% and the
Slovak 12%, Metalloinvest adds.

Metalloinvest is Russian businessman Alisher Usmanov’s holding company. It
controls Mikhailovsky GOK, Moldova Steel Works, Tulachermet and Ural Steel.
Victor Novinsky’s Smart Group owns Ukraine’s Makeyevka steelworks and
Inguletsky GOK. -30-
LINKS: info@steelbb.com; http://www.steelbb.com
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

IMB Group Ltd, Kyiv, Ukraine, Thursday, June 15, 2006

KIEV – IMB Group Ltd., Ukraine’s leading pure-play consumer lending
platform, announced today that Mr. Joel Epstein, the current Chairman and
CEO of AIG Consumer Finance Group, Inc, will join IMBG’s Board of Directors
as non-executive Chairman upon his retirement in July 2006. In conjunction
with the appointment, Mr.Epstein will be making a personal investment into
the shares of IMB Group.

As the Head of AIG Consumer Finance, Mr. Epstein was responsible for AIG’s
consumer lending operations in USA, Poland, Hong Kong, Taiwan, Mainland
China, Thailand, Philippines, Mexico and Argentina. The major AIG CFG
products include credit cards, mortgages, unsecured personal loans, sales
finance, auto loans, and deposits. In 2002-05, Mr. Epstein served
concurrently as AIG Country Manager for China, based in Shanghai.

Mr. Epstein joined AIG after a distinguished 24-year career at Chase, from
which he retired in 1998. At the time of his retirement he was an Executive
Vice President. He started his career at Chase’s Head Office in New York in
1974. From 1976 to 1984 he worked in Taiwan as a commercial loan officer
and in Mainland China as Chase’s country manager. He returned to the US in
1984 to move into the Consumer Banking area.

Since 1984, he has held numerous positions at Chase including President of
Chase Personal Financial Services (jumbo mortgages and home equity),
President of Chase Auto Finance (auto dealer finance, auto loans and
leases), Latin America Regional Executive for Consumer and Private Banking,
Retail Banking Executive for Manhattan branches, Retail Marketing Executive,
and International Consumer Finance Executive.

Mr. Epstein holds a BA (1967) and MA (ABD, 1971) from Princeton University,
where he completed the Russian Studies program. He speaks Russian, Chinese,
French, and Spanish.

Commenting on his appointment, Mr. Epstein said: “I am tremendously excited
to be joining the Board of IMB Group and am honored to have been selected as
a Non-Executive Chairman. As the only pure play consumer finance platform
in Ukraine, without legacy problems, IMBG has the potential to set the gold
standard for good corporate governance, product quality, customer service,
and shareholder returns.

I believe that the market potential in Ukraine is enormous, and expect the
consumer finance industry in Ukraine to expand rapidly for years to come. I
am looking forward to playing a role in IMBG’s growth and development.”

Mr. Gregory Krasnov, IMB Group CEO, said: “We are very excited about Mr.
Epstein’s decision to join us. We believe that our success in attracting
someone of Mr. Epstein’s caliber to the non-executive Chairmanship role
serves as a validation of our strategy, and will give additional comfort to
our investors. Mr. Epstein’s decades of senior emerging markets consumer
finance experience will be an incredible asset to the Group from the point
of view of strategy, know-how, and financing.”

IMB Group Ltd. is Ukraine’s leading pure-play consumer lending platform,
offering mortgages, POS loans, credit cards, and deposits. IMB Group owns
100% stakes in IMB, a mortgage bank, and Family Credit, a consumer lending
intermediary. IMB Group is backed by Horizon Capital. -30-
E-Mail: research@dragon-capital.com.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
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Everything depends on the parliament adopting the required laws

By Tetyana Belchenko, Kyiv Weekly # 25 (211)
Kyiv, Ukraine, Wednesday, June 28, 2006

Ukraine completed talks with 47 members of the Working Group on reviewing
Ukraine’s request for acceptance into the World Trade Organization. All that
remains to be done is the signing of protocols on mutual access to goods and
services markets with Kyrghyzstan and Taiwan. All the issues with Taiwan
have been agreed upon. With Kyrghyzstan, on the contrary, new problems
have arisen.

The main obstacle is strictly internal and boils down to the country’s
parliament adopting 17 new laws. Yuriy Yekhanurov, Acting Premier of
Ukraine, believes that Ukraine will become a member of the WTO by the end
of this year. In his opinion, everything depends on the parliament adopting
the required laws.

Borys Tarasyuk, Minister of Foreign Affairs of Ukraine, is confident that
Ukraine can complete the process of WTO accession as soon as a new
government is formed.

In order to speed up the process of Ukraine’s entry into the WTO, a
resolution of the Cabinet of Ministers assigned the “bodies of the central
executive authority to assist in adopting laws” required to enter this

Earlier, Sergio Marchi, Head of the Working Group on Ukraine’s Entry to
the WTO, stated that the talks with Ukraine “are in their final stage” and
the only thing left to do is “pass the necessary laws”. However, the number
of bills that need to be approved was increased from 6 to 17.

Besides certain draft laws regarding customs duties on the export of ferrous
and non-ferrous scrap metal, live cattle and raw leather products were
repeatedly rejected by the previous parliament, the list includes some
documents that the Cabinet had earlier tried to push through the Verkhovna
Rada in the form of one document.

At the same time, the Cabinet of Ministers claimed that several absolutely
new laws must be adopted. This is the result of the obligation Ukraine took
upon itself when it signed certain bilateral agreements.

For example, this refers to an agreement introducing a quota of 260,000
tonnes of imported raw sugar trading with Australia and cancelling the
limitation of foreign capital in the publishing industry, one of the demands
of the U.S. The draft law, which introduces certain changes to the process
of registering medicines, was most likely the result of an agreement with

Unexpected for all parties, Kyrghyzstan put forth its demand to Ukraine to
reduce import customs duties on agricultural products during the talks about
Ukraine’s entry to the World Trade Organization.

Valeriy Pyatnytskiy, Deputy Minister of Economy, said that during the talks
Kyrgyzstan agreed to take up the issue of paying off accumulated debts of
US $27 mn to the former Soviet Union separately. The debt issue was
Kyrghyzstan’s main demand to Ukraine. Now, Kyrghyzstan has set new
conditions for Ukraine – namely, to reduce import customs duties for
agricultural products, in particular for sugar and meat.

As the Ukrainian delegation informed, the level of proposed rates
contradicts previously made arrangements with other member countries of the
WTO. Besides that, Ukraine and Kyrghyzstan have an agreement regarding a
free trade zone, which envisages duty-free trade.

“If the inquiries related to those commodities that Kyrghyzstan produces and
does not export, then it is clear that we will respond accordingly. It is
absolute nonsense to agree to such concessions. If Kyrghyzstan thinks it can
continue to insist on an agreement regarding a free trade zone, then this is
not an economy,” stated Pyatnytskiy.

Experts believe that when all bilateral talks are complete, the number of
draft laws that should be adopted will increase. Serhiy Teryokhin, former
Minister of the Economy and a people’s deputy for the Yulia Tymoshenko
Bloc, believes that the increasing number of draft laws will make it more
difficult to push them through the parliament.

“WTO entry is a political issue. It has little to do with economics.” He
said that the pace of adopting laws will set the date of the next session of
the working group, which is tentatively scheduled for the fall. Until that
time, the parties will only hold informal meetings

The World Trade Organization was created in 1993 at the round of talks on
tariffs, which were first held in 1986 especially to replace the General
Agreement on Tariffs and Trade (GATT). Today, 150 countries are a part of
the WTO. The last country to enter the WTO was Tonga in December 2005
(ratification is scheduled to take place in June 2006).

Officially, the process of Ukraine’s entry into the WTO began on November
30, 1993, when the Secretariat of GATT received a request from Ukraine to
join this organization. On December 17, 1993 the working group was created
to consider Ukraine’s application.

After the request was accepted and taking into account the decision made by
the General Council on January 31, 1995, the working group on accepting
Ukraine as a member of GATT was transformed into a working group overseeing
Ukraine’s entry into the WTO. This working group consists of 40 member
countries of the WTO.

Bilateral agreements with member countries of the working group were started
in 1997. We can see from international experience that there are four main
topics in these talk processes: commodity tariffs, agriculture, services and
harmonizing legislation. -30-
LINK: http://www.kyivweekly.com/?art=1151437864
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

Ukrainian News Agency, Kyiv, Ukraine, Monday, June 26, 2006

KYIV – The European Bank for Reconstruction and Development may provide
EUR 40 million to the Barlinek company (Poland) for building a line producing
parquet and by-products in Vinnytsia. This follows from a statement by the
EBRD, the text of which Ukrainian News has obtained.

According to the report, the production line will consist of a saw mill,
facility producing parquet and by-products, as well as a base producing
biological fuel. Also under the project, the funds will be channeled into
raising the effective use of production resources.

The EBRD does not disclose the final investment amount or date of the
Board of Directors meeting that will consider the question of allocating the

As Ukrainian News earlier reported, in April Barlinek-Ukraine, a
Polish-Ukrainian joint venture based in Vinnytsia, commissioned a
EUR-3-million wood-processing factory in Vinnytsia.

The factory puts out fabricated wood block flooring. Its design capacity is
enough for processing 45,000 square meters of wood annually. Raw materials
are to be supplied to the factory by forest sector enterprises in western

For this project, the Polish company set up a limited liability joint
venture company called Barlinek-Ukraine, and acquired two buildings on the
premises of Vinnytsia’s aircraft plant.

Poland’s Barlinek announced its plans to invest another EUR 40 million into
the Vinnytsia-based plant to create the closed production cycle and triple
its capacity by 2008. In 2004, Barlinek manufactured EUR 54.5 million worth
of products. -30-
[ return to index] [Action Ukraine Report (AUR) Monitoring Service]

Sharecast, London, United Kingdom, Friday, 21 Jun 2006

LONDON – Ukraine focused oil and gas explorer Cadogan Petroleum
is expected to be valued at up to £150m when it floats on London’s junior
AIM on 4 July.

The group, an operator of pre-production and exploration gas and condensate
assets covering 121sq km of the Dniepr-Donets basin, is hoping to raise at
least £40m from the listing.

Cadogan, founded in 2005, said it intends to conduct a drilling and well
testing programme to develop its existing proven and probable (2P) reserves.

It also aims to facilitate conversion of significant volumes of its possible
category reserves and resources into 2P reserves categories. Nabarro Wells
is acting as adviser, with Fox-Davies Capital appointed as the firm’s
broker. -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
NOTE: Send in a letter-to-the-editor today. Let us hear from you.

Shane Hickey, Irish Independent, Dublin, Ireland, Wed, Jun 21, 2006

A GOVERNMENT trade mission has started in the Ukraine in an attempt
to boost Irish exports. Led by Minister of State for Trade Michael Ahern
and Enterprise Ireland, the two-day mission aims to develop exports in the
telecoms, healthcare and international consultancy sectors.

While Irish exports to Ukraine grew by one-third to 23m last year,
Enterprise Ireland believes that they can grow further in line with other EU

“We are particularly interested in developing business opportunities in
wireless and fixed-line telecoms and internet technology, healthcare and
pharmaceuticals, quality consumer goods.

“We are also interested in international consultancy and services in areas
ranging from education and training to project management, financial
services and construction,” Mr Ahern told a dinner last night.

Along with Enterprise Ireland, 19 Irish companies and state agencies are
taking part in the mission, including Glanbia, a number of colleges, and Aer
Rianta International.

So far, Irish-owned software companies have not made a serious impact on the
Ukrainian market, and organisers are aiming for more software companies to
enter it in light of the trade mission. A series of meetings will take place
today between members of the delegation and their Ukrainian counterparts.

The mobile phone market has been targeted as a potential opportunity for
wireless technology companies. The Ukraine has the fastest growing mobile
phone market in Europe, which has seen its subscriber base double since 2005
to 32m.

While Russia is still the country’s biggest trading partner, Germany, France
and Italy have all increased trade to the Ukraine in the past decade. With
the Irish economy growing faster than most EU countries, the strong euro
meant there were some difficulties in exporting to countries like the
Ukraine, said Mr Ahern. -30-
LINK: http://www.unison.ie/irish_independent/
[ return to index] [Action Ukraine Report (AUR) Monitoring Service]
New outlets scheduled for the summer in Ukraine, the Baltic states & Bulgaria

Julia Finch, City Editor, The Guardian, London, UK, Wed, Jun 21, 2006

Marks & Spencer is understood to be planning an ambitious international
expansion programme that will see it opening an overseas store every week
for the next three years.

The scale of the expansion scheme – some 150 new outlets – is substantially
greater that the group had so far indicated. At the time of the store
chain’s recent annual profits announcement chief executive Stuart Rose said
he had plans for 25 to 30 new overseas stores. The programme will take the
total number of M&S international outlets to more than 350.

The vast majority of the new stores will be franchised operations, where M&S
sets out how the stores should look and sells its branded goods, but accepts
no responsibility for the running of each store.

However, some of the new outlets are likely to be directly owned by M&S,
marking a new strategy for Mr Rose, who is less than halfway through a
pounds 570m plan to refurbish M&S’s UK outlets.

M&S operates in 29 countries and Hong Kong. It has 198 franchised outlets
together with 19 directly owned stores in Hong Kong, Gibraltar and Ireland.

UK retailers have a chequered history in their attempts to export UK high
street brands abroad. Among those to have tried to expand overseas and
failed are Next, Dixons, J Sainsbury and Boots.

But in recent years an increasing number of retailers have turned to
franchises to extend their brand without risking shareholders’ cash. Among
those using franchises are Debenhams and Mothercare, which have both opened
stores in India with local partners.

Of the M&S franchised stores 65 are in the Asia-Pacific region, 60 in
Europe, 45 in Central Europe with the balance in central Asia and the Middle
East. The new expansion scheme includes more stores in India – where M&S
currently has nine out lets – and Russia. The UK chain opened two stores in
Moscow last year.

The chain’s franchise partner in India is the privately-owned Planet Retail,
which is also partnering Next and Debenhams across India. Planet Retail
recently spelled out plans to have 130 shops operating in less than a year –
more than double its current 59.

There are no plans to open in mainland China, although M&S is considering
following other retailers, such as B&Q and Tesco, which are established

Yesterday M&S refused to provide details of its decision to increase the
scale of its international business, other than to confirm that new outlets
were scheduled for the summer in Ukraine, the Baltic states and Bulgaria.
There will also be five more directly-owned stores in Ireland.

Last year M&S’s international business – which is headed by finance director
Ian Dyson – contributed 9% to group profits.

This summer M&S will open its largest international franchise outlet yet –
in Dubai. The outlet, operated by partner Al Futtaim, will be 52,000 sq ft –
about twice the size of a standard British supermarket – and will stock a
wider range of M&S goods than other franchises, which focus on adult
clothing. The Dubai store will include childrenswear and home furnishings.

Some of the new overseas outlets could include M&S’s food ranges. After a
store opened recently in Geneva, the group was inundated with requests for
the store to include food.

M&S used to own and operate 38 stores across France, Germany and Spain, but
they were closed down in 2001 by previous chairman Luc Vandevelde when the
retailer ran into problems.

The M&S chief executive – who once headed M&S’s European business – last
month described Mr Vandevelde’s decision to pull out of Europe as an
“unfortunate reversal” and “a mistake”.

At the time he made it clear that he had no immediate plans for a return to
the continent but added: “Watch this space. I wouldn’t rule it out.
[return to index ] [Action Ukraine Report (AUR) Monitoring Service]
Is NAFTOGAS going to live on credit till the end of time?

Zerkalo Nedeli on the web, Mirror-Weekly, No. 24 (603)
International Social Political Weekly
Kyiv, Ukraine, Saturday, 24-30 June 2006

Having contributed UAH 10 billion to the state budget last year, the
National Joint Stock Company NAFTOGAS UKRAINY is now asking the
Cabinet of Ministers for a USD 1 billion subsidy, arguing that otherwise
Ukraine will have to do without gas next winter.

In the meantime, ironically, the former NAFTOGAS CEO initiated the
publication of a yearbook entitled, “A History of Independence in the Energy
Sector 2005.” No country name is indicated in the title. Could it be a book
about this particular man’s “independence in energy sector?”

By a strange concourse of events, it was in early 2005 that Olexiy Ivchenko,
now an MP, declared, “I want to turn NAFTOGAS UKRAINY into a showcase
illustrating what effective state management is about and how the state
should make profit.”

Illustrate he did, indeed! Now the NJSC is asking for USD 1 billion from the
state budget, most probably to recover from the damage caused by the former
CEO’s “effective management.”

On 20 June 2006, a board meeting was held in NJSC NAFTOGAS UKRAINY
to discuss prospects for the next heating season. An interested reader would
find lots of remarkable things in the minutes.

Let us start with the most problematic area – underground gas storage.
According to NAFTOGAS, it had 13 billion cubic meters of gas in the
underground storage tanks last season. The company plans to pump for storage
4.857 billion of cubic meters of gas in April-October 2006, but it has
neither funds for purchasing this amount of gas, nor gas reserves for
filling the underground tanks.

More upsetting still, the trend over the last few years has been to extract
from underground tanks much more gas than was pumped into them in the
previous seasons, which means there is almost no gas reserve left in there.
The government still has some time for urgent intervention before the
heating season starts, but NJSC NAFTOGAS UKRAINY, alas, has no gas.

Under January agreements, the RosUkrEnergo company is to supply 40 billion
cubic meters of Turkmen gas in the first half of 2006. It is also supposed
to supply 15 billion cubic meters of Uzbek and Kazakh gas (should the
pipeline capacity and GASPROM allow it to do so). Ukraine annually produces
about 18 cubic meters of its own gas.

You will remember that in April a Joint Venture UKRGAS-ENERGO was
established to act as a major supplier of imported gas to Ukraine. It is
through this joint venture that RosUkrEnergo will supply the remaining 32
billion cubic meters of gas.

The NJSC and its subsidiaries will have to make do with 18 billion cubic
meters of the nationally produced gas to cater to the population,
municipalities, budget-funded institutions and heating plants, although
their estimated total need is at least 30 billion cubic meters, plus another
7 billion cubic meters for the operation of Ukraine’s gas transportation

This does not include industrial enterprises, which have long stopped
relying on the NJSC and deal with imported gas suppliers directly or via gas
traders. The reserve of gas produced in Ukraine was used up last autumn and
winter. So we will repeat, emphatically: NAFTOGAS has no gas at its

What can be done about it now that the time is ripe for filling underground
gas storage tanks? Where can the NJSC get the gas and at what price? How can
it pay for the already consumed gas?

NAFTOGAS UKRAINY seems to have found a solution described in a letter
by its acting CEO I.Vasiunyk to acting Prime Minister Yu.Yekhanurov dated
8 June 2006:

“Dear Yuriy Ivanonych:

In view of the negative tendencies relating to the imported natural gas
supplies to Ukraine, the Company is forced to ask for your advice and

According to the trilateral Agreement of 04.01.06 and the Technical Contract
RosUkrEnergo AG Company is to supply Ukraine in 2006 with 59.2 billion
cubic meters of natural gas, of which 32.0 billion cubic meters will be sold
through the Private JSC UKRGAS-ENERGO.

Additionally, in order to build up the active gas volume in underground gas
storage tanks, RosUkrEnergo AG is to pump into them 5 billion cubic meters
of gas that will later be transported to Europe.

In Q1 2006, NJSC NAFTOGAS UKRAINY received 16.5 billion cubic meters
of imported gas worth USD 1,567.5 million. The company’s current debt to
RosUkrEnergo AG for the supplied gas is USD 581.9 million. The debt accrued
due to the following factors.

[1] First, imported gas is supplied to the social sphere consumers at a
price lower than the purchasing one: In Q1 2006, while the purchasing price
was USD 95 per 1000 cubic meters, over 1,118 million cubic meters of
imported gas were supplied to the population at UAH 185 (equivalent of USD
36.6) per 1000 cubic meters, and budget-funded institutions bought 590
million cubic meters at UAH 288 (equivalent to USD 57.0) per 1000 cubic
meters. Thus the company’s direct losses from gas sales to this consumer
category exceeded USD 237 million.”

The question is why the NAFTOGAS UKRAINY subsidiaries sold imported
gas to this “consumer category” in Q1 2006 making a loss of USD 237 million?

Yet let us continue reading this amazing document:

[2] “Second, NJSC NAFTOGAS UKRAINY, for want of an approved financial
plan for 2006, could not borrow funds for purchasing gas.

Since 3 April 2006, the Private JSC UKRGAS-ENERGO has been supplying
imported gas to Ukraine. It requires that NAFTOGAS UKRAINY make advance
payments for the gas to be supplied. As the company had insufficient working
capital, the gas purchase-sale contract between NJSC NAFTOGAS UKRAINY and
Private JSC UKRGAS-ENERGO for April was not signed before mid May.

A similar situation was observed in May and June 2006. As of 29 May 2006,
the company’s debt to UKRGAS-ENERGO is USD 25.5 million, which is why the
latter refuses to sign the gas agreement with NJSC NAFTOGAS UKRAINY”.

In other words, the NJSC has no gas resources, and the country has no gas
balance whatsoever, except on paper. But paper gas will not heat us in

Now, start paying special attention:

“The Private JSC UKRGAS-ENERGO’s refusal to sign agreements with NJSC
NAFTOGAS UKRAINY renders it impossible to both supply natural gas to the
social sphere consumers (budget-funded institutions, municipal heating
plants, etc) and provide gas to compressor systems pumping gas to consumers
in Ukraine and European countries.

As per the estimated annual balance of gas supply and distribution, 18.6
billion cubic meters of natural gas are to be pumped into underground gas
storage tanks in 2006, including 8.1 billion cubic meters in Q2. Since in
April-May 2006, Ukraine received only 7.86 billion cubic meters of imported
gas instead of the planned 10.4 billion cubic meters, relevant monthly
schedules of gas pumping into underground holders were not met.

We expect that in June RosUkrEnergo AG and Private JSC UKRGAS-ENERGO
will again supply less gas than scheduled: 3.99 billion cubic meters instead
of 5.3 billion cubic meters provided for in the Technical Contract. Thus, in Q2
Ukraine will receive (and be able to pump into its underground gas tanks)
some 3.3 billion cubic meters less than planned.”

ZN commentary:

We would like to quote from Article 5 of the Private JSC UKRGAS-ENERGO
Statute entitled “Company Aims and Scope of Work.” Paragraph 5.1 reads as
follows: “The Company’s main aim is to purchase, sell and supply imported
gas in the volume required for securing Ukraine’s annual balance of natural

In his letter to acting Prime Minister Yekhanurov, I.Vasiunyk claims that
the Private JSC UKRGAS-ENERGO is incapable of securing Ukraine’s
balance of natural gas.

“The Turkmen party does not fulfill its contract with NJSC NAFTOGAS
UKRAINY for gas supplies to Ukraine, selling the contracted gas to the
Russian Private JSC GASEXPORT. In order to guarantee Ukraine’s gas balance,
it is necessary either to have the Turkmen gas supplies resumed in the volume
11.0 billion cubic meters or to purchase this volume additionally from other

Striving to enhance Ukraine’s dependence on gas supplies from Russia, the
OJSC GASPROM is likely to obstruct any gas contract between our company
and the Turkmen party. Therefore the best option is signing an additional
direct agreement with RosUkrEnergo AG, although in this case the gas price
could be a problem.

Failure to supply imported gas in the volume envisioned in the estimated
annual balance will disorganize the domestic gas market and have grievous
implications for the 2006/2007 heating season. The main gas pipeline
capacity at the point of entry in Ukraine is limited, so it will be
impossible to compensate for the gas shortage in underground gas tanks with
direct gas supplies from Russia and to maintain the gas supplies to Europe
at the agreed level.

Under the circumstances, the Ukrainian party will have to use gas from the
transit flow and give Russia cause to accuse Ukraine of stealing gas and
being an unreliable trade partner.

This will, undoubtedly, bring about a crisis in gas supplies to Ukrainian
consumers in the next heating season and jeopardize the country’s security
in the energy sector.

Concerned about these developments, NJSC NAFTOGAS UKRAINY and
the Ministry for Fuel and Energy submitted to the Cabinet of Ministers their
proposals to rectify the situation.

Given the significance and magnitude of the problem, we hope that you will
second our proposal on providing state funding (credit) of up to USD 1
billion to NJSC NAFTOGAS UKRAINY. It will enable the company to pay
its debt to RosUkrEnergo AG and purchase additional gas volumes for filling
underground tanks, thus stripping the Russian counterparts of the pretexts
to reduce gas supplies for Ukrainian consumers.

We would also like to inform you that by the end of June 2006 NJSC NAFTOGAS
UKRAINY will have gotten a 500-million-dollar loan from ABN-AMRO (the loan
processing is at the final stage now). This loan will allow the company to
repay part of the budget funding that we are requesting to buy gas reserves
for underground holders.”

We feel obliged to remind our readers that two weeks ago the Ministry of
Finance established a limit for loans to the NJSC at USD 200 million.

Is NAFTOGAS going to live on credit till the end of time?

“The proposed measures will enable the company to take a firm and effective
stance at gas negotiations with Russian and Turkmen counterparts and to
ensure steady gas supplies to Ukrainian consumers during the next heating

Yours sincerely,
I.Vasiunyk, Acting Chair of the Board”

End of the story.

P.S. According to our source in the Cabinet of Ministers, Yuriy Yekhanurov
held a government meeting last Friday (might be his last in the capacity of
prime minister) and nominated Olexiy Ivchenko, former CEO of NJSC
NAFTOGAS UKRAINY, as Chair of the company’s supervisory board.
The ministers blackballed the candidate, reportedly, because he is an MP.
However, the vacancy remains open.
LINK: http://www.mirror-weekly.com/ie/show/603/53753/
[ return to index] [Action Ukraine Report (AUR) Monitoring Service]

Ukrainian News Agency, Kyiv, Ukraine, Friday, June 30, 2006
KYIV – The Cabinet of Ministers has appointed Oleksandr Bolkisev as
the board chairman of the Naftohaz Ukrainy national joint-stock company.
Acting Prime Minister Yurii Yekhanurov’s spokesman Valentyn
Mondrievskyi announced this to journalists, citing a decision that was
made at a Cabinet of Ministers meeting on Friday.

Until his appointment, Bolkisev was the director-general of the Haz
Ukrainy gas company, which is a subsidiary of Naftohaz Ukrainy.
As Ukrainian News earlier reported, the Fuel and Energy Ministry recently
proposed that the Cabinet of Ministers appoints Bolkisev as a board
chairman of Naftohaz Ukrainy. Naftohaz Ukrainy appointed Bolkisev as
its acting board chairman on May 12.
The Cabinet of Ministers relieved Oleksii Ivchenko of the post of board
chairman of Naftohaz Ukrainy on May 11 based on a resignation letter he
submitted in connection with his election into the parliament.
Naftohaz Ukrainy monopolizes transportation of natural gas via transit
pipelines and crude oil via oil pipelines. It is also a major extractor and
seller of natural gas and a major extractor of crude oil in Ukraine. -30-
[ return to index] [Action Ukraine Report (AUR) Monitoring Service]

If you are receiving more than one copy of the AUR please contact us.

Associated Press, Ashgabat, Turkmenistan, Friday, June 30, 2006

ASHGABAT, Turkmenistan – Turkmenistan on Friday said its natural gas
contract with Ukraine for 2006 was invalid, as it continues to pressure
Ukraine to pay about 50% more than what it currently pays for Turkmen gas.

Ukraine’s fuel and energy minister, returning to Kiev after talks in
Ashgabat, said the two sides “agreed on nothing,” but denied that the 2006
contract had been annulled.

Turkmenistan’s gas supplies have taken on even greater importance for
Ukraine after a bitter dispute in January with Russia over gas prices, but
Kiev has repeatedly stalled on agreements to pay off debts, and Turkmen
officials have repeatedly criticized Kiev.

In a statement, Turkmenistan’s Foreign Ministry said Russian state-run gas
monopoly, OAO Gazprom (GSPBEX.RS), hadn’t issued a license for Turkmen
gas to travel through Russia to Ukraine, even after Ukraine and Turkmenistan
signed the 2006 contract, thus making the contract outdated.

Gazprom controls the only transit route for Turkmen gas exports to other
ex-Soviet states and Europe.

“Turkmenistan proposed Ukraine sign a contract on gas deliveries to Ukraine
for the fourth quarter at a price of $100 per thousand cubic meters of gas,”
the statement said. “It was also proposed that Ukraine urgently acquire a
license to transit the volume of gas to be provided by the contract across

Ivan Plachkov told reporters that Ukraine was insisting that Turkmenistan
supply its gas until year’s end at the current price – $60 per 1,000 cubic
meters. “The contract has not been annulled,” he told reporters at the Kiev

Meanwhile in Moscow Friday, Gazprom’s top executive warned that Ukraine’s
threat to review a controversial supply deal could lead to a new natural gas
crisis, seven months after a price fight between Russia and its ex-Soviet
neighbor temporarily disrupted gas flows to Europe.

CEO Alexei Miller also cautioned that Kiev’s gas bill could rise if his
company is forced to pay more for the Central Asian gas it sells on to

Under the current deal, Ukraine receives all of its imported natural gas at
$95 per 1,000 cubic meters from an intermediary company, RosUkrEnergo –
a joint venture between Gazprom and Centragas Holding AG.

According to the agreement, Gazprom sells Russian and cheaper Central Asian
gas to RosUkrEnergo, which then sells it at the blended price of $95 to
Ukraine. Previously, Ukraine had paid $50 for gas from Russia.

However, Turkmenistan, a main supplier of the gas that Gazprom sells to
RosUkrEnergo, has sought to increase its prices from the current $65 per
1,000 cubic meters to $100, raising fears that the cost could be passed on
to Ukrainian consumers.

The gas-rich Central Asian country has warned that it will cut exports to
Russia if Gazprom doesn’t accept the new price by September – a move that
could further pinch Ukraine’s supplies. -30-
[ return to index] [Action Ukraine Report (AUR) Monitoring Service]
Send in a letter-to-the-editor today. Let us hear from you.

By Sonia Oxley, Reuters, Hamburg, Germany, Saturday, July 1, 2006

HAMBURG – Debutants Ukraine bowed out of the World Cup proud of
reaching the quarter-finals although their style has won them few admirers.

Coach Oleg Blokhin’s side exited the tournament after a 3-0 defeat by Italy
on Friday but they had already surpassed their aim of qualifying from Group
H and return home satisfied.

Among the dark horses after an impressive qualifying campaign in which they
became the first European team to clinch a place at the finals, Ukraine
never really sparkled on the pitch but they nevertheless managed to grind
out results.

“We are completely happy with our performance,” said Blokhin. “We did very
well for the first time. “We made it to last 16, to the quarter finals. As a
coach I’m really happy with their performance.”

Ukraine’s campaign got off to a bad start with a 4-0 thrashing by Spain but
they bounced back to beat Saudi Arabia by the same score and reached the
second round after a pedestrian 1-0 win over Tunisia in their final group

They then beat Switzerland on penalties in the second round after a tedious
scoreless draw to reach the quarter-finals.

Blokhin repeatedly faced questions from reporters asking wby the team’s
football was so dull, lacking any flair in midfield and usually focusing on
a rather defensive approach. He said he liked their style and pointed to the

They probably showed some of their best moves during a 15-minute spell
against Italy when they were only 1-0 down, and if one of the two shots that
hit the woodwork had found the net it could have been a different game

In the end Ukraine’s main problem was a lack of quality and depth in the
squad. Although boasting one of the world’s best strikers in Andriy
Shevchenko, they lacked the playmakers to feed him decent passes and he
never really showed his best form.

Shevchenko agreed that there had been some class missing from the side but
said he was proud to be part of it. I’m so happy to play with these lads in
this team,” the striker said. “Ukraine gave a good account of themselves at
the World Cup.”

Now they have made their mark on the world stage, the Ukrainians vowed that
they would be back again. There is a good future for the Ukrainian team,”
said Blokhin with a glow of satisfaction. -30-
[ return to index] [Action Ukraine Report (AUR) Monitoring Service]

Associated Press, Hamburg, Germany, Saturday, July 1, 2006

HAMBURG – Ukraine left its mark on the World Cup by how long it lasted, if
not for its style of soccer. Not that coach Oleh Blokhin was bothered. “This
is football, it’s not the Bolshoi ballet.”

Though Blokhin was complaining about what he felt was heavy-handed
refereeing at the tournament, his comment also accurately summed up the
nation’s approach to the game.

The fledgling country scraped its way to the quarter-finals at its first
World Cup with soccer that was hardly mesmerizing or artistic but simply got
the job done.

However, Ukraine’s old-fashioned Soviet-style of soccer, known as
“collectivism,” took the team as far as it could go before it capitulated
3-0 to a more polished and creative Italian side in the quarter-finals.

“It would have been difficult for us to draw, never mind win. We faced a
very good Italy team who deserved to win,” said star striker Andriy
Shevchenko. “They exploited the opportunities created by their star players.
We did everything in our power and we played with a lot of courage.

“Ukraine isn’t a team with a lot of skill, but we have heart. We tried to
attack and score for 90 minutes, but it didn’t happen. Let’s give credit to
a great Italian team, but we’re also content with our World Cup because we
got to this point.”

When Ukraine arrived at the tournament, it dismissed the suggestion its team
was Shevchenko and 22 unknowns, but in the end it proved to really be a
one-man team that lacked international experience with most members playing
with Ukrainian clubs.

Ukraine opened its World Cup debut with a 4-0 loss to Spain, clearly
overwhelmed and outclassed by the longtime soccer power. It took it out on
Saudi Arabia, and regained some of its composure and confidence with a 4-0
win. Then it struggled against Tunisia, grinding out a defensive 1-0 victory
over the Africans to become only the third team since the tournament
expanded to 32 in 1998 to reach the second round after losing its first
game. Ghana also did it this year.

Ukraine held unbeaten Switzerland to 0-0 after 120 minutes, then showed the
heart and nerve it is so proud of to win 3-0 in the decisive penalty

Though Ukraine is home to 1999 Champions League semifinalist Dynamo Kiev,
the country has struggled to make its mark internationally. Many of the key
players in the Soviet national team hailed from Ukraine, but with the 1991
breakup of the Soviet Union, they chose to play for Russia.

Though the nation broke away from Soviet rule, Blokhin and the national team
are still committed to the archaic style of so-called collectivism, a system
where no single player dominates the team’s attack but players team up to
gain control of the ball, and to make fast counterattacks in groups.
Emphasis is on defence and fitness.

Ukraine’s Soviet past was also evident in the stern, uncompromising face it
showed in Germany. Blokhin’s near total ban on contact between his players
and outsiders is reminiscent of the secrecy that the Soviet system was once
famous for.

He rarely allowed reporters to watch his team train and, barring a few
exceptions, access to players was restricted to game-days only. Blokhin’s
own news conferences were infrequent and rarely translated. When they were,
it was into German only. When the international press argued that no one
understood, team spokesman Igor Miroshnyschenko replied: “That’s not our

Though reaching the quarter-finals as a newcomer – however achieved – is an
accomplishment, there will be no more lenience when Ukraine returns to the
international stage as a team versed in the ways of the World Cup.

“We are disappointed to go home,” said Ukraine goalkeeper Oleksandr
Shovkovskyi. “We had a lot of expectations but after a few days, we will
realize what we have achieved. We’re very happy with this given this was our
first World Cup.

“We’ve learned a lot and we’ve still got a lot to learn and now we must
qualify for Euro 2008. We have tasted the big times and we are hungry for
more.” -30-

[ return to index] [Action Ukraine Report (AUR) Monitoring Service]

Stanislav Shumlianskyi, Molode radio chief
Molode Radio, Wave of Ukrainina Music from Kyiv
Kyiv, Ukraine, June 2006

KYIV – Molode radio, the Wave of Ukrainian Music from Kyiv, has started
broadcasting on the Internet. You could listen to radio of Ukrainian songs
and Ukrainian-language programs from our web site — www.molode.com.ua.

Two channels are available – 32 and 128 kbit/sec. Recommended programs —
Winamp or Windows media player.

Molode radio is the only Kyiv radio station that broadcasts solely Ukrainian
music 24 hours a day. It started broadcasting in April 2005 and was founded
by a group of Kyiv Mohyla Academy students and alumnus.

Launching online broadcasting, the Molode team makes Ukrainian Radio
available for listeners outside Ukraine who are interested in contemporary
Ukrainian music of different styles (rock, rap, reggae, hip-hop, pop,
disco). Molode radio plans to become the source of vivid spoken Ukrainian
language — for all those who learn or plan to learn it. There are also
programs about fashion, Ukrainian and foreign music and politics on Molode.

Support the young Molode radio by sending this information to your friends
or placing it on your web site or e-mail listing. Your help is now very
important to us.

All the best from Kyiv,
Stanislav Shumlianskyi, Molode radio chief
[return to index ] [Action Ukraine Report (AUR) Monitoring Service]
A profile of public relations in Ukraine

By Martin Nunn MCIPR, Chief Executive
Whites International Public Relations in Kyiv
PR Business weekly magazine, London, UK, June 19, 2006

Three years ago if you asked Mr Average to show you Ukraine on the map the
majority would have waved a finger over Siberia landing in middle Asia or up
near the Artic circle: Ukraine is not very good at its own PR. Ukraine’s
little known history however has had a major impact on European

In the 10th Century Kyiv was the 3rd largest centre of Christendom outside
Rome with a university of some 5,000 students. It was Ukrainians of the
‘Kyivan Rus’ that founded the fortress of Moscow as a trading centre with
the Vikings and named the lands around it ‘Rusia’, something the Russians
prefer to forget. It was the Ukrainian armies that kept the Mongol hordes
out of Europe and the Zaparozhia Cossacks that first used parliamentary
democracy as we know it today.

Ukraine was the last country of the former Soviet Union to accept Bolshevism
and for its resistance was purged first by Stalin and then by the Nazi’s
losing over 26 million people (52% of the population) between 1922 and 1945.
Ukraine re-declared its independence in 1991 and this proved to be the final
straw in the collapse of the Soviet Union.

To understand the scale of the problems inherited by the early governments
you need to understand the centralist policies the Soviet system. In 1991
there were no direct international flights, you had to fly via Moscow, even
internal flights had to go North to come South.

All international telephone calls went via Moscow, the railways, ports,
police, customs and the military were controlled through Moscow. Even the
national television news had to be transmitted to Moscow three minutes
before the hour as it had to be broadcast via the former Soviet network and
anything Moscow didn’t like was invariably ‘accidentally’ lost.

The country was in virtual ruin as a result of 20 years of neglect. Few
politicians had any real experience of government so independence was
a bit like giving a country the size of France to a small town council and
expecting them not to make mistakes, thus in 15 years they’ve done
remarkably well.

Public relations as we know it in the west is a product of our secure
democracies, the rule of law, the acceptance of standards and a fairly
sophisticated commercial and public society therefore it is not really
surprising that PR has taken a while to develop in this reborn nation.

I first went to Ukraine in 1992 as the director of the National Public
Education Programme in Market Reform. Within four months we had
established the Press Club of Economic Reform touring the key cities
explaining the market economy to a rather bewildered press corps.

Their enthusiasm was electrifying and over the following months they
generated over 650 pages of detailed media coverage. As one journalist
put it “Now we are free and can write what we want without fear of the
authorities or the censors”. Ukraine seemed to be on the right track at

The western advertising agencies arrived in late 1994 to service the needs
of primarily the tobacco and FMCG companies who were the first on the scene
and had massive budgets by Ukrainian standards. Within a year ‘PR’ got
difficult as the newspapers and television suddenly found that advertising
agencies were prepared to pay for articles in the same way that they paid
for advertising. This is not to say that the western advertising agencies
were wholly to blame.

As the local agencies realised that they could earn commissions of both
advertising and article placement it was in their interests to promote both.
Inexperienced clients both Ukrainian and western simply took it as the norm
and paid up. Most of the international agencies simply saw Ukraine as
another dot on the map. Management control and ethical standards were not
issues unless the client complained.

Whilst the media owners thought they were in heaven, the journalists hated
it as they found themselves sent out to interview company directors simply
because they had bought half a page and wanted to see their picture in
print. Journalism went into decline and what had started out as the
promising voice of democracy rapidly turned into cheap, unbranded
advertising disguised as journalism.

Sadly the same is true today with over $40,000,000* spent ‘officially’ in
2005 on what I euphemistically called “paid PR”. Nobody knows the real
figure but if the ‘grey’ market in other industries can be used as a guide
then it is at least double. So who’s paying all this money, certainly not
just misguided local companies and politicians? (* Source: Advertising
coalition Ukraine Advertising Report 2005)

Some 70% of all advertising in Ukraine is controlled by western based or
western managed companies, so it’s fairly safe to assume that a very large
proportion of the ‘paid PR’ total originates from the same source despite
the fact that many of these companies have internal ethics policies that ban
such practices.

This situation is also not helped by the fact that there are two public
relations Associations in Kyiv; the smaller ‘Ukraine Association of Public
Relations’ affiliated to the ICCO and CIPR promoting ethical practice,
education and international standards and the larger ‘PR Liga’ that promotes
the status quo with an ethics code that any self respecting company should
refuse to sign.

Sadly the PR Liga is supported by the Burson Marsteller, Ogilvy & Mather
and Daniel Edelmann affiliate offices which makes a bit of a mockery of their
parent companies’ laudable international statements on ethical practice.

Perhaps the international PR giants, in the pursuit of worldwide coverage,
should take a much more responsible position with regard to their affiliates
and make sure that if they are going to fly the corporate flag they also tow
the corporate line.

Whilst President Yushchenko proudly declares that Ukraine now has a free
press with no government interference his statement belies the fact that
‘industry’ is still free to buy what ever they choose and as the majority of
the senior business hierarchy now sit in either the national parliament or
local governments nothing has really changed.

It all comes down to the Ukrainian advertising law which states that any
mention of a company, brand or product in the media is ‘advertising’
irrespective of journalistic licence. Thus if the President makes a speech
and mentions your company, the media can ‘technically’ send you an invoice
for reporting what he said: so much for freedom of press.

The European Business Association in conjunction with the UAPR and the
Advertising Coalition are now lobbying to have the law changed but not
surprisingly parliamentary Deputies seem to be resisting the change.

In the mid 1990’s as soon as it became common knowledge that you could buy
what ever space you wanted in the media, companies used this new found abuse
of journalistic licence to attack their competitors. The practice is
commonly referred to here as ‘Black PR’. Black it maybe but PR it certainly
is not. The only way to describe it is 21st century commercial propaganda
combined with corrupt journalism. At this time almost anybody with a lap
top computer and a mobile phone was a PR man.

Agencies sprang up like autumn mushrooms charging virtually nothing in fees
as they were making up to 30% commission on all the stories they placed.
Even today it is common practice for PR agencies to be referred to the
advertising department to discuss items of corporate news which makes the
process of legitimate PR all the more difficult and time consuming.

The Russian economic crash of 1998 had a similarly devastating effect on the
industry as most of the western companies pulled out their experienced
expatriate staff and left their PR and marketing to young and inexperienced
Ukrainian executives who were frankly at the mercy of their advertising
Around this time another unpleasant phenomenon appeared that of the ‘kick
back’ where agencies would ensure their cash flow by greasing the palms of
marketing managers. This happens in just about every country but the impact
in Ukraine was massive. Executives who had been earning $350 dollars a
month were suddenly paying cash for $50,000 motor cars and buying
apartments in chic parts of town.

One well known PR agency was rumoured to have been charging their client
$100,000 a month in fees and kicking back $90,000 to the general director.
Not bad at a time when the average state salary was less than $75 a month.
The UAPR added a special clause in their code of ethical practice to close
loopholes in the interpretation of the CIPR and ICCO codes on this topic.

For those who insisted on sticking to internationally accepted principles
life got very difficult for two reasons, firstly, few of the new breed of
marketing directors actually understood anything about real PR and secondly
the advertising agencies tried to corner the PR market claiming it to be
just another form of advertising.

But the situation is now slowly changing. New magazine sales have begun to
exceed newspaper sales which had remained relatively static for almost a
decade. In 2005 we carried out a simple research project to ascertain
average newspaper readership in Ukraine and key European countries.

Whilst in the UK average adult newspaper readership exceeded ten pages per
day in Ukraine it is less than half a page and this in a country with one of
the highest education and adult literacy rates in the world. Magazines on
the other hand enjoy a readership per copy of between five and eight to one

The combination of paid journalism, poor marketing and political
interference has all but killed off many newspapers in Ukraine as the public
no longer have faith or trust in their journalists and vote with their

Today the old school newspapers find it difficult to sell more than
80,000 copies per issue and have advertising volumes at below 10%, whilst
magazines are flourishing with 100 page editions, circulations in the
hundreds of thousands and advertising running at over 50%.

Old style newspaper publishers have been foisted by their own petard and the
industry is only now being saved by new publications such as the newspapers
‘Kommersant’, ‘Delo’, and the business news magazines ‘Companion’ and
‘Expert’ that recognise the real power and attraction of independent

The worst offenders however are the TV companies who charge for everything,
thus the national news tends to consist of :politics, what the President had
for lunch, the football results and 10 to 15 minutes of commercial
propaganda, no wonder viewing audiences are so spectacularly low as the
public can now easily recognise the propaganda.

The Ukrainian Publishers Association however working with the UAPR recently
requested copies of the UK’s National Union of Journalism Code of Ethics to
use as a model for the future, so there is hope.

But the problems are really deep rooted. Last summer I was asked to lecture
to final year journalism students at the International University. My first
question was: “Which of you will sell me the front page of your newspapers?”

All 35 students put up their hands: And which of you will let me write the
article? The same hands shot into the air. So if I can buy the front page
and write the article why do we need journalists:? You could have heard a
pin drop.

The same is true of PR education. Whilst Communications Studies is the
largest subject by student numbers in the UK, in Ukraine fewer than four
universities have course in PR and communication and most of these are
taught by tutors with no commercial experience using text books written in
the Soviet era. Even today there are very few credible books on PR in the
local languages.

The gap was, for a while, filled with every form of crackpot course possible
in ‘modern PR techniques’ most of which did more harm than good in providing
a completely distorted view of the industry and promoting ‘paid journalism’
as the norm.

To combat this the ‘UAPR’ in conjunction with the ‘International Institute
of Business’ in Kyiv approached the ‘CIPR’ (Chartered Institute of Public
Relations in London) and have for the past two years been teaching the
Advanced and Diploma level CIPR certificates to packed houses and surprise,
surprise nearly all the graduates seem to get new and better paid jobs
almost immediately after graduation.

As a result other leading business schools are now taking PR and reputation
management seriously in their curricula and the ‘Companion’ publishing house
have recently approached ‘Kogan Page’ about translating all their PR books
into Ukrainian.

So what of the future? Ukrainians learn fast and many company executives
are now questioning the effectiveness of their paid PR policies and PR
departments particularly as ethical PR companies are achieving a much higher
and more effective return on investment.

Publications are beginning to understand that ethical PR companies can be an
excellent source of quality independent news and this coupled with good
journalism actually increases circulations and advertising revenues increase
far faster than paid journalism receipts.

Large Ukrainian companies considering IPO now recognise that you can’t buy
the international business media so they have to take their reputations more
seriously and most off all young Ukrainians searching for competitive
advantage are looking beyond the quick buck.

Even the government is now realising that a good reputation is essential in
attracting foreign investment, so as far as PR in Ukraine is concerned
despite getting it totally wrong in the past it is very likely to succeed in
the not too distant future. -30-
Member of the Chartered Institute of Public Relations
ICCO representative in Ukraine
Founding Member of the Ukraine Association of Public Relations
Chairman of the European Business Association PR Committee
Member of the Foreign Investment Advisory Council to the President
of Ukraine, International Image of Ukraine Committee
Senior lecturer in public relations practice at the International Institute
of Business in Kyiv
Accredited Journalist at the Ministry of Foreign Affairs of Ukraine
Honorary Member of the Kiev Union of Journalists,
Chief Executive, Whites International Public Relations, Kyiv
Contact: martin.nunn@wipr.com.ua
LINK: PR Business Limited: http://www.prbusiness.co.uk
FOOTNOTE: Subheadings inserted editorially by the Action Ukraine
Report (AUR).
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

Ukrainian News Agency, Kyiv, Ukraine, Thursday, June 29, 2006

KYIV – The 4th World Forum of Ukrainians will be held in Kyiv August 18
through 20. Acting Deputy Prime Minister Viacheslav Kyrylenko’s press
service reported this to Ukrainian News, with reference to a meeting of the
forum’s steering committee.

On June 27, the Ukrainian part of the organization committee fro the
preparations and the holding of the forum endorsed the concept and the plan
of events in the frames of the preparations for the forum. A total of 1,730
delegates will take part in the work of the forum, according to specified

“These will be representatives of all countries, where Ukrainians live.
Post-Soviet space countries will be represented by unions of Ukrainians from
each country,” Kyrylenko said. He said the distinction of the forum would be
higher attention to the problems of the eastern diaspora including in Russia
and to the modern labor migrants.

Deputy Foreign Minister Mykola Maimeskul told the press that 450 delegated
from 400 unions and organizations of Ukrainians abroad that are members of
the Ukrainian World Coordination Council would take part in the forum.

There will be about 500 guests at the forum, he said. There will be almost
100 reporters and almost 900 participants in the closing festival, he said.

He said the main aim of the forum would be to discuss the problems of
Ukrainians abroad and the opportunities for the cooperation between them and

He said the preparation period before the forum would include nine
roundtables, one of which would address the starvation in Ukraine in
1932-1933. Maismeskul said the roundtable would entail an appeal from the
participants of the roundtable to the world community with a request to
recognize the starvation the genocide of the Ukrainian people.

He said the forum participants would be granted free visas. He said there
were no problems in the preparations for the forum and the forum organizers
were ready to listen to the constructive criticism. “We see no barriers in
the preparations,” he said.

As Ukrainian News earlier reported, The 3rd World Forum of Ukrainians took
place in Kyiv August 18 through 21, 2001.

In December 2005, the Cabinet of Ministers replaced Oksana Bilozir with
Kyrylenko as head of the Steering Committee of the 4th World Forum of
Ukrainians. Earlier, Yuschenko announced the idea to create a Department of
Ukrainian Diaspora Affairs under the Cabinet of Ministers. -30-
[ return to index] Action Ukraine Report (AUR) Monitoring Service]
You are welcome to send us names for the AUR distribution list.
First Major Exhibition of Early 20th Century Ukrainian Art in the U.S.
Comes to the Chicago Cultural Center July 22-October 15, 2006

Chicago Department of Cultural Affairs
Kyiv Committee of the Chicago Sister Cities International Program.
Chicago, Illinois, Friday, June 30, 2006

CHICAGO – The Chicago Department of Cultural Affairs announces the first
major exhibition of early 20th century Ukrainian art in the United States.

Crossroads: Modernism in Ukraine, 1910-1930 will be on display at the
Chicago Cultural Center in the fourth floor Exhibit Hall, 78 E. Washington
Street, from July 22 through October 15, 2006. Admission to the exhibition
is free.

This outstanding exhibit of 21 Ukrainian avant-garde artists includes
approximately over 70 works gathered by Professor Dmitirii Dmytro Horbachov,
an international expert on this period and Nikita Lobanov-Rostovsky, from
private collections, the National Art Museum of Ukraine, the Theatre Museum,
the Museum of Folk Art of the Ukraine, and the Art Museum of Dnipropetrovsk.

Anatolii Melnyk, General Director of the National Art Museum of Ukraine,
provided organizational assistance in Ukraine and John Bowlt, Professor at
the University of Southern California, served as editor of the exhibition

The exhibition has been organized by the Foundation for International Arts
and Education with the National Art Museum of Ukraine. It is presented by
the Chicago Department of Cultural Affairs and the Kyiv Committee of the
Chicago Sister Cities International Program.

The national tour is sponsored by The Boeing Company, The Trust for Mutual
Understanding, Nour USA Ltd., Konstantin Grigorishin and Aerosvit Airlines.
Additional financial support has been provided by Oleksandr Tabalov, Mykola
M. Shymone, Dean Buntrock and Chadbourne and Park, LLP.

“Crossroads explores the role of Ukraine in the development of the
avant-garde movement,” said Gregory Knight, Deputy Commissioner/Visual
Arts of the Chicago Department of Cultural Affairs.

“It includes works by well-known artists like Kazimir Malevich, Alexandra
Exter and David Burliuk and introduces American audiences to previously
unknown Ukrainian artists including Yasyl Yermylov and Oleksandr

The international avant-garde movement that reached its peak during the
first three decades of the twentieth century included many influential and
innovative artists from Ukraine. As elsewhere in the former Soviet Union,
these artists were often persecuted and executed in the 1930s and their
works were banned or destroyed.

According to local experts, nearly 2,000 of these works were confiscated
by the government during the late 1930s, and only 300 remain today. This
exhibition presents the best of these works, many of which have only
recently been viewed outside of Ukraine.

Writing in the exhibition catalog, Mr, Lobanov-Rostovsky noted: “This
exhibit is designed to show an American audience the talent and unique
nature of Ukrainian avant-garde art and to help understand that the artists
are, indeed, Ukrainian, not Russian, a difference not always appreciated in
the West. Moreover, the exhibition is equally important because it will
also help Ukrainians acquaint themselves with their own cultural heritage.”

The public is invited to learn more about the exhibition with a full
schedule of events listed below that have been organized to accompany the
exhibition. All are free, unless otherwise noted.

[1] Lunchbreak: Classical Mondays; Monday, July 31, 12:15pm;
Preston Bradley Hall, Chicago Cultural Center
The MAVerick Ensemble present a classical program inspired by the
exhibition, featuring the music of Boris Lyatoshynsky and Virko Baley.

[2] Gallery Talk: Thursday, August 17, 12:15pm
Exhibit Hall, Chicago Cultural Center
With Jane Friedman, Chicago-based independent scholar.

[3] Contemporary Ukrainian Cinema Festival: Wednesday, August 23 –
Friday, August 25, 7:30pm; Gallery 37 Rooftop, 66 E. Randolph Street.

This festival features a selection of some of the best works by Ukrainian
filmmakers produced over the last five years with film introductions by Dr.
Yuri Shevchuk, lecturer of Ukrainian language and culture at Columbia
University and founder and director of the Ukrainian Film Club of Columbia

The festival is organized by the Department of Cultural Affairs, the Kyiv
Committee of the Chicago Sister Cities International Program, with
participation of the Ukrainian Film Club and the Ukrainian Studies Program
of Columbia University.

Tickets to the opening night of the film festival, catered by Fox and Obel,
are $15. The remaining nights of the film festival are free, but tickets are
required. To order tickets, please call 312-742-TIXS (8497) or visit
www.ticketweb.com .
Wednesday, August 23 – Mamay (Dir. Oles Sanin, 2003, 80min.)
Thursday, August 24 – Ukrainian Short Narrative Films
Friday, August 25 – Ukrainian Documentary Films

[4] Ukrainian Modernism, Identity, and Nationhood: Then and Now
Wednesday, September 27, 6pm; Exhibit Hall, Chicago Cultural Center.
This discussion explores the parallels in Ukrainian art and culture during
two pivotal eras, and the affects of the nation’s recently-achieved
sovereignty and dueling influences from Western Europe and Russia.

[5] Gallery Talk: Thursday, October 5, 12:15pm; Exhibit Hall, Chicago
Cultural Center With Gregory Knight, Deputy Commissioner/Visual
Arts, Chicago Department of Cultural Affairs.

[6] Special Lunchbreak Performance: Thursday, October 5, 12:15pm
Claudia Cassidy Theater, Chicago Cultural Center
Ukrainian pianist Alex Slobodyanik performs Chopin’s Scherzo op. 10
b Flat Minor, Lev Revutsky’s 5 Preludes and Prokofiev’s Sonata # 7.

Crossroads: Modernism in Ukraine, 1910-1930 is accompanied by a
four-color catalog, which will be available for sale at the Shop at the
Cultural Center. A complimentary brochure will be on hand at the
exhibition. Teacher materials are offered for local educators, and school
groups are encouraged to visit by calling 312.744.8032.

Following its premiere in Chicago, the exhibition will travel to The
Ukrainian Museum in New York. After concluding its American tour, the
exhibition will be displayed at the National Art Museum of Ukraine in Kyiv.

Expanded hours for summer at the Chicago Cultural Center began on April 1
and run through October 31. Viewing hours for Crossroads: Modernism in
Ukraine, 1910-1930 at the Chicago Cultural Center are Mondays through
Thursdays, 8 a.m. to 7 p.m.; Fridays, 8 a.m. to 6 p.m.; Saturdays 9 a.m . to
6 p.m. and Sundays, 10 a.m. to 6 p.m. The Chicago Cultural Center is closed
on holidays.

In Chicago, the exhibition is sponsored in part by generous support from
UA-TV, LLC, Selfreliance Ukrainian American Federal Credit Union, The
Heritage Foundation at First Security Federal Savings Bank, Hyatt
International Corporation and an anonymous donor.

This exhibition is supported by an indemnity from the Federal Council on the
Arts and Humanities. Additional support has been provided by the Mission of
Ukraine to the United Nations, the Embassy Ukraine in Washington DC and the
Consulate General of Ukraine in Chicago.

Exhibitions and related educational programming presented by the Chicago
Department of Cultural Affairs at the Chicago Cultural Center are partially
supported by a grant from the Illinois Arts Council, a state agency.
Transportation support is generously provided by United, Official Airline
for the Chicago Cultural Center.

For more information about Crossroads: Modernism in Ukraine, 1910-1930, call
312.744.6630. (TTY: 312.744.2947) or visit www.chicagoculturalcenter.org .
For information about the Chicago Sister Cities International Program, visit
chicagosistercities.com. Note to Press: Electronic Images Available Upon
Request. -30-
Contact: Jill Hurwitz, 312.742.1148 jhurwitz@cityofchicago.org
FOOTNOTE: Our special thanks to Marta Farion, Attorney, Chairman –
Chicago Kyiv Sister Cities Committee, for sending the AUR the news
release about the Ukrainian art exhibition in Chicago. AUR EDITOR
FOOTNOTE: Subheadings inserted editorially by the Action Ukraine
Report (AUR).
[ return to index] [Action Ukraine Report (AUR) Monitoring Service]

OPINION: Dr. Abbas Bakhtiar, SCOOP Independent News
Wellington & Zuckland, New Zealand, Friday, 30 June 2006

Francis Bacon once said that “he that gives good advice, builds with one
hand; he that gives good counsel and example, builds with both; but he that
gives good admonition and bad example, builds with one hand and pulls down
with the other”.

History of US-Russia relationship since the collapse of Soviet Socialist
Republics (USSR) in 1991 is one of first building friendship with one hand
then destroying it with the other. A close examination of available
documents and US actions since the fall of USSR reveals how President
Clinton and later President Bush, each in his own way, turned a major
friendly power into almost an enemy.

Russia has historically been a major power in Europe. It has a population of
142 million. It is the largest country in the world by land mass. With an
area of 17 million square kilometres, it is almost twice the size of the
next-largest country, Canada. Russia has advance military technologies,
enabling it to produce some of the most effective military products in the
world. It is the world’s largest oil producer and it is close to the world’s
largest oil reserves in the Middle East. It borders Japan, China, Middle
East (through Caspian Sea) and EU.

With the fall of the USSR, Russia went through a chaotic period. Its
industries, economy and defence forces had to be restructured. Russians saw
US as a friend; a country that they could form a lasting partnership with.
Kremlin doors were opened wide to Washington. Russians, eager to improve
their economy, were eager to embrace new ideas.

Who better to show them the way than the leader of the “capitalist world”.
So when the United States offered advice they accepted it wholeheartedly.
But as history shows those advices almost ruined the Russian Federation and
caused immense hardship to the Russian people.

In 2000, the extent of the American contribution to the Russian economic
decline became clear. A report commissioned by the United States House of
Representatives and produced by the leaders of six committees of the House,
produced a comprehensive picture of Clinton Administration’s involvement in
creating a system of corruption and oligarchy in Russia. The report listed a
number of “mistakes” by the Clinton administration in its dealing with
Russia. Some of those “wrong policies” are listed bellow.

[1] “A strong preference for strengthening Russia’s central government,
rather than deconstructing the Soviet state and building from scratch a
system of free enterprise

[2] A close personal association with a few Russian officials, even after
they became corrupt, instead of a consistent and principled approach to
policy that transcended personalities

[3] A narrow focus on the Russian executive branch to the near exclusion of
the Russian legislature, regional governments, and private organizations

[4] An arrogance toward Russia’s nascent democratic constituencies that led
to attempts at democratic ends through decidedly non-democratic means

[5] An unwillingness to let facts guide policy, or even to make mid-course
corrections in light of increasing corruption and mounting evidence of the
failure of their policies

By focusing on strengthening the finances of the Russian government and on
transforming state-owned monopolies into private monopolies, instead of
building the fundamentals of a free enterprise system, the Clinton
administration ensured that billions in Western economic assistance to
Russia would amount to mere temporizing.

The Gore-Talbott-Summers focus–on macro-management of the Russian
economy instead of the legal fundamentals that would permit individuals to
start businesses, grow a competitive market economy, and create a tax
base–doomed their “privatization” efforts to failure.

Worse, by using massive lending and aid to plug the gap in the Russian
central government’s operating budget, the Clinton administration exposed
these funds to theft and fraud” [1].

Of course by the end of Yeltsin administration situation had become so
critical that nothing short of a major restructuring of the system could
stabilise the situation. Putin was the right man for the job. He started by
restricting the activities of the oligarchs and stopped the corrupt and
uncontrolled “privatisation”. But the damage that was done under Yeltsin was
enormous and will take many decades to repair.

By the end of the Yeltsin presidency, the Russian people had lost all faith
in the capitalist system. The ordinary people often equated privatisation
with theft. As ordinary hard working Russians struggled to keep themselves
warm in the harsh winters, the rich spent astronomical amounts on luxury
yachts and villas abroad.

By encouraging uncontrolled privatisation, wholesale auctioning of important
government assets to a few corrupt friends, excessive borrowing, opening
local markets to imports, etc, Clinton Administration was destroying the
Russian economy. All considered, the Clinton era “intervention” in Russia
can be called disastrous for Russia. How much of these “mistakes” were by
design and how much it honest mistakes, we don’t know. But one thing is
sure; the Russians have learned a very good lesson.

The history of the Neocons is well known. Neocons are a group of people bent
on making the US the sole hegemon of the world. Barely a year after the
collapse of the USSR, this group published its plan on how the sole
superpower should act. The Defence Policy Guidance, crafted by the
then-Defence Department staffers I. Lewis Libby and Paul Wolfowitz at the
behest of Defence Secretary Dick Cheney set the agenda for the new world

“Our first objective is to prevent the re-emergence of a new rival. This is
a dominant consideration underlying the new regional defence strategy and
requires that we endeavour to prevent any hostile power from dominating a
region whose resources would, under consolidated control, be sufficient to
generate global power. These regions include Western Europe, East Asia, the
territory of the former Soviet Union, and Southwest Asia.

There are three additional aspects to this objective: First the U.S must
show the leadership necessary to establish and protect a new order that
holds the promise of convincing potential competitors that they need not
aspire to a greater role or pursue a more aggressive posture to protect
their legitimate interests.

Second, in the non-defence areas, we must account sufficiently for the
interests of the advanced industrial nations to discourage them from
challenging our leadership or seeking to overturn the established political
and economic order. Finally, we must maintain the mechanisms for deterring
potential competitors from even aspiring to a larger regional or global

The election of George W. Bush gave these people real power but not the
opportunity to implement their plans. The 9/11 attack on the US provided the
perfect opportunity and excuse. Soon after, they set about trying to deal
with the perceived future challenges to the US power.

One of those countries that have historically managed to challenge others
for supremacy in its region is Russia. This made Russia a natural target for
Neocons. It didn’t matter if Russia was friendly or not. Russia had the
capacity and desire to become a global power again. If not now, then perhaps
later it would.

When Vladimir Vladimirovich Putin took over the Russian Presidency in
December 1999, Russian economy was on the verge of collapse. The oligarchs
were in control of many important sectors of the economy and were trying to
extend their control even further. Those in Yeltsin’s administration had
hoped that by helping Putin they could control him.

But Putin, a former KGB officer and the first civilian head of SFB (former
KGB) had many other friends, such as the Siloviks (nationalists from
military and various powerful ministries who define themselves as defenders
of Russian national interest). Siloviks provided Putin with a
counter-balance to the oligarchs. With their backing, Putin began to
reassert the central government’s control over the country.

As Putin began his struggle to stabilise the country, the US began expanding
NATO. In March 1999, Czech Republic, Hungary and Poland joined NATO.
NATO was created in 1949 as (unofficially) a defence alliance against USSR
and was limited geographically to the Euro-Atlantic regions of the Northern

By late 1990s, with that threat gone, the talk across the Europe was about
the slow death of NATO. Since Russia did not threaten to invade any of these
countries, there was no reason for expanding NATO into Eastern Europe, so we
thought. Russia under Yeltsin was in the process of extreme decline and on
the verge of bankruptcy.

Russians of course saw this expansion as a threat but since they were hardly
in a position to stop it, reluctantly accepted it. Then came the 9/11 and
the war on terror. After 9/11, United States began to establish a number of
“temporary” bases in Russia’s “backyard” in the Caucasus. US placed troops
in Georgia, Uzbekistan, Tajikistan and Kazakhstan.

Once the invasion of Afghanistan was over, US began the preparation for the
invasion of Iraq, a Russian ally. By this time the Russians were worried
that US not only was going to turn their temporary bases into permanent ones
but also trying to become a hegemon in the region as well. They tried their
utmost to stop the invasion of Iraq but failed to stop the US from achieving
its objectives.

In 2004 7 more countries: Bulgaria, Estonia, Latvia, Lithuania, Romania,
Slovakia and Slovenia joined NATO. NATO was now at the borders of the
Russian Federation. As the new members were being welcomed into NATO, other
countries were being “encouraged” to apply. This encouragement usually takes
the form of encouraging civil unrest and if possible revolution in the
target country, with the aim of installing a pro-American leadership.
According to Guardian these colour revolutions are directly supported by the
Western governments [3].

Georgia was thus encouraged and got its revolution. Then Ukraine which
houses the Russian Black Sea fleet at Crimea was encouraged. The same
encouragement is being given to various countries bordering Russia. There
are talks of Georgia and even Azerbaijan joining NATO. All this expansion
has required Russia to reassess its relationship with the West in general
and NATO in particular.

To start with Russia has started to strengthen its army by increasing its
defence budget. For example in 2005 Russia’s defence budget increased by
27,6% and again this year by 22% (taking inflation into account, these
numbers will be lower). The share of the Russian defence budget that goes to
purchase of new equipment this year is around – 70% (164 billion Rubles), up
from 60% in 2005 [4].

Russia is modernising its armed forces in a hurry. In 2004 only 14.2% of its
defence budget went for procurement of equipment. In 2006 that share went up
to 70%. New and better equipment, along with a smaller and more professional
army is going to give Russia better ability to protect its interest in the
region and internationally.

On the international arena, Russia has tried to strengthen its position by
joining forces with China through the Shanghai five. This grouping was
created in 1996 to address the “deepening military trust at the border
regions” and included Russia, China, Kazakhstan, Kyrgyzstan and Tajikistan.

In 2001 the group admitted Uzbekistan as the new member and then signed the
Declaration of Shanghai Cooperation Organization (SCO).In the same year
Russia and China signed the Treaty of Good-Neighbourliness and Friendly
Cooperation. In 2002 the official charter of SCO was signed by all members.
In 2004 Mongolia was admitted as an observer and in 2005 Iran, India and
Pakistan received their observer status.

SCO is evolving from a regional economic and security cooperation to
something else. If the observer states were to actually join the SCO, it
could become one of the most powerful organisations in the world. Russia and
Iran combined would have more energy reserve and production capacity than
any other nations on Earth. Population wise, the organisation would
represent the over 2 billion people.

Economically they would have the energy resources of Russia, Iran and
caucuses plus the manufacturing might of the Chinese and burgeoning service
industries of India. With the Russian space/military industrial complex
behind them they would become a formidable world power.

To counter this US has tried to bring India into its camp. The US, despite
all its declared goal of stopping the spread of nuclear weapons, welcomed
India into the nuclear club. US even offered to help India with its
“civilian” nuclear technology. But Indians have taken a wait and see

They are very concerned with their future energy supplies, and being close
to both Russia and China, don’t want to side with a group unless they are
absolutely sure that that group will win. Another problem is the Indian
internal politics. Will the majority of Indians accept the US lead in
international affairs?

This week, the US House International Relations Committee (HIRC) added a
markup (i.e., amendment) to the Bush administration’s proposal – HR 4794,
which is supposed to allow India to receive US nuclear technology. This
amendment requires India’s “full and active participation in United States
efforts to dissuade, isolate, and, if necessary, sanction and contain Iran
for its efforts to acquire weapons of mass destruction, including a nuclear
weapons capability (including the capability to enrich or process nuclear
materials), and the means to deliver weapons of mass destruction. [5]”

This is the beginning of US pressure on India to follow US foreign policy.
How much is India willing to oblige is something that only Indian parliament
can answer. Eventually India has three choices: stay neutral, join SCO, or
join the American camp.

The cold war II started in 1999 by expansion of NATO into the Eastern
Europe. The George Bush’s actions since then have pushed Russia and China
together. America’s invasion of Iraq, placing of troops in Caucasus,
expansion of NATO into the Baltic area and now the Iranian crises have
convinced both China and Russia that America’s grand strategy is to contain
both nations and ultimately (if possible) to create another colour
revolution in their countries as well.

America having reached the Baltic border of Russia is trying to reach its
central border through Ukraine. Ukraine is and will be the main focus of
attention for some time to come. The Russia’s only warm water naval base is
in Crimea (Ukraine). Losing that base will deal a heavy blow to the Russian
navy’s ability to operate in the region.

Another area of contention is the Caucasus. US having successfully brought
Georgia into its camp is focusing on other small nations in the region.
Control of oil in this region and the pipelines going through it, is of
vital importance to the US. Kazakhstan and Azerbaijan, having substantial
reserves of oil, are going to be the battle grounds for the opposing sides.
Kazakhstan is particularly important since it borders both China and Russia
and is the main launching pad for nearly all of the Russian space vehicles.

Iran is yet another major concern. An unfriendly Iran can assist the
Americans in creating tremendous problems for the Russians in their southern
republics. Iran is the key to the Persian Gulf and can act as a buffer
against the American advance from Iraq and Afghanistan towards the Russian
southern borders. Iran and Russia combined sit on 42% of the world’s natural
gas reserves.

Together they can create a very powerful energy cartel. It is doubtful then,
to assume that Russia will in future go along with US plans for a regime
change in Iran.

What will happen in the future is determined by the new American President,
and not President Bush. The current administration has turned a friendly
Russia into a strategic threat. The Neocons by looking hard for perceived
threats have created an environment in which many nations, Russia included,
do not feel safe. The continued American advance into the Russian backyard
and its attempt in reducing Russian power has triggered a resurgence of
nationalism in Russia. Russia will strive to strengthen its military.

By all likelihood, Russia and China will create the world second centre of
power opposing US hegemony. If Iran and a few other nations join in, we will
see a powerful alliance in the East that will not be so easy to
contain. -30-
1. United States House of Representatives 106 Congress, “RUSSIA’S
How the Clinton Administration Exported Government Instead of Free
Enterprise and Failed the Russian People”, Washington, D.C. 20515, 2006
2. New York Times, “Excerpts From Pentagon’s Plan: ‘Prevent the Re-
Emergence of a New Rival’ “, March 8, 1992, Sunday, Late Edition
3. Guardian Unlimited, “Orange revolution oligarchs reveal their true
colours”, October 14, 2005
4. WAREFARE.RU, “Russia’s Military Budget 2004 – 2006”,
5. The Tribune, “India must help contain Iran, says amended US Bill”,
June 28, 2006, Chandigarh, India
Dr. Abbas Bakhtiar lives in Norway. He is a consultant and a contributing
writer for many online journals. He’s a former associate professor of
Nordland University, Norway. Bakhtiarspace-articles@yahoo.no
LINK: http://www.scoop.co.nz/stories/HL0606/S00348.htm
[ return to index] [Action Ukraine Report (AUR) Monitoring Service]

COMMENTARY: By Lee H. Hamilton, President and Director of the
Woodrow Wilson Center, Former Congressman from Indiana and
former Chairman of the U.S. House Committee on Foreign Relations
Woodrow Wilson Center, Washington, D.C., Friday, June 30, 2006

This July, Russia will host the summit of the Group of 8 industrial nations
(G-8) in St. Petersburg. While the summit marks a step forward for Russia,
some critics of President Vladimir Putin have called for a boycott. What is
not open to question, however, is Russia’s importance to the United States
and the world.

For eight consecutive years, the Russian economy has enjoyed robust growth.
The last few years in particular have brought new wealth, largely due to the
high price of oil and gas. This growth has generated a higher standard of
living for many Russians, and helped foster a burgeoning middle class. After
the upheaval of the 1990s, Russia has also enjoyed political stability under
Putin, who remains a popular President.

Increasingly, this stability has led to more self-confidence on the world
stage, including an alliance with the United States in fighting terrorism.
2006 marks the first year that Russia has chaired the G-8, and Putin has
chosen to focus the agenda on energy, education, and health care. When the
summit of world leaders kicks off on July 15, it will be in St. Petersburg –
the historic city that has been refurbished with hundreds of millions of
government dollars.

Yet this progress is increasingly eclipsed as Putin rolls back democratic
institutions. Russia’s legislature is largely under Putin’s thumb through
the United Russia party, which has a monopoly on political power and is not
inclined to allow meaningful opposition. Non-governmental organizations
(NGOs) are regulated by the Kremlin, and many have been threatened or closed

The media – particularly television – is increasingly state-controlled. The
judicial system has lost much of its independence. And in an economy
characterized by significant government involvement, corruption is rampant.

This assertiveness extends abroad. Russia has tried to exert a measure of
control over several former Soviet Republics, and has used its considerable
oil and gas reserves as leverage. In January, for instance, Russia cut off a
major pipeline into Ukraine for several days while demanding that Ukraine
pay higher prices; conversely, the pro-Kremlin President of Belarus,
Alyaksandr Lukashenka, enjoyed cheap Russian oil and gas in the run-up to
his recent reelection.

Putin has also raised eyebrows in Washington by meeting with Hamas, and
failing to take a tough stand against Iran’s nuclear program (Russia has
helped Iran build a nuclear reactor).

These actions have chilled U.S.-Russian relations, which were on such solid
footing immediately after 9/11. While President Bush has maintained a close
working relationship with President Putin, some in the U.S. worry that
Russia’s long-term trajectory will move it away from democracy and
partnership with the United States. Vice President Dick Cheney recently used
strong language to criticize Russia, and Senator John McCain has called for
a U.S. boycott of the G-8 summit.

Despite these concerns, isolating Russia would only encourage its
troublesome behavior, while the right relationship with Russia will yield
advantages in our fight against terrorism, securing nuclear materials,
dealing with Iran and North Korea, and spreading trade and investment. Our
goal should be to further Russian integration with the West and institutions
like the G-8.

To that end, we should work with our European allies to deepen cooperation
with Russia in areas where we agree, such as counter-terrorism and securing
loose nuclear materials, and support membership for Russia in the World
Trade Organization. We should also encourage the development of Russia’s
energy sector, while standing strongly against Russia’s use of energy as a
tool to exert pressure.

Meanwhile, we should make clear that our long-term relationship depends upon
the health of Russian democracy and civil society. We should speak out in
support of Russian pro-democracy organizations, a free media, and free and
fair elections, and expand exchanges with the younger generation of
Russians – the first to come of age after the Cold War. We should point out
repeatedly that the incentives for a Russia integrated with the West far
outweigh the costs if Russia turns its back on the West.

With Russia, it is useful to take the long-view. For most of my 34 years in
Congress, St. Petersburg was called Leningrad, and was largely closed to the
West on the other side of the Iron Curtain. While we must stand up and speak
out against troubling Russian behavior, we should view it as a measure of
progress that we will be doing so in an economically revived city at a G-8
meeting. -30-
[ return to index] [Action Ukraine Report (AUR) Monitoring Service]
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