AUR#731 Jul 12 For A European Energy Alliance; Energy Security Action Plan For G8; EU: Ukraine In Sorry State; What Happens If Regions Party Comes To Power?

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ACTION UKRAINE REPORT – AUR
An International Newsletter, The Latest, Up-To-Date
In-Depth Ukrainian News, Analysis and Commentary

Ukrainian History, Culture, Arts, Business, Religion,
Sports, Government, and Politics, in Ukraine and Around the World

ACTION UKRAINE REPORT – AUR – NUMBER 731

Mr. E. Morgan Williams, Publisher and Editor
PUBLISHED IN WASHINGTON, D.C., THURSDAY, JULY 13, 2006

——- INDEX OF ARTICLES ——–
Clicking on the title of any article takes you directly to the article.
Return to the Index by clicking on Return to Index at the end of each article

1. FOR A EUROPEAN ENERGY ALLIANCE
COMMENTARY: By Yulia Tymoshenko
The Wall Street Journal Europe, New York, NY, Thu, July 13, 2006

2. UKRAINE’S ENERGY SECURITY AS AN ACTION PLAN FOR THE G8
Impossible to secure stable supplies of natural gas to Europe
without a just and lasting settlement of the Ukrainian-Russian gas conflict
ANALYSIS AND COMMENTARY:
Oleksandr Chalyi, Ambassador
Extraordinary & Plenipotentiary, Ex-First Deputy Foreign Minister of Ukraine
Zerkalo Nedili On The Web, Mirror-Weekly No 26 (605)
International Social Political Weekly, Kyiv, Ukraine, Sat, 8 – 14 July 2006

3. THE GOVERNMENT ERRS, THE CONSUMER PAYS
Raising domestic gas rates by 85%

By Vitaliy Kniazhansky, The Day Weekly Digest
Kyiv, Ukraine, Tuesday, Date: July 11, 2006

4. TWENTY DAYS TO RULE
Recent Naftogas head Oleksiy Ivchenko appointed head of its supervisory board.
He is also a member of Parliament & both jobs at the same time is against the law.

ANALYSIS & COMMENTARY: By Alla Yeremenko
Zerkalo Nedili On The Web, Mirror-Weekly No 26 (605)
International Social Political Weekly
Kyiv, Ukraine, Saturday, 8 – 14 July 2006

5. U.S. PLEDGES HELP IN GAS TALKS WITH RUSSIA
US Ambassador Taylor meets with American Chamber of Commerce in Kyiv
Maryan Poloviy, Kyiv Weekly, Kyiv, Ukraine, Wednesday, Jul 12, 2006

6. UKRAINE BUYS RUSSIAN NUCLEAR FUEL FOR SEVEN REACTORS
Interfax-Ukraine news agency, Kiev, in Russian 12 Jul 06
BBC Monitoring Service, United Kingdom, Wed, Jul 12, 2006

7 . FOUR UKRAINE GAS FIRMS CHANGE RUSSIAN HANDS
United Press International (UPI), Kiev, Ukraine, Wed, July 12, 2006

8. OIL AND GAS-RICH RUSSIA NOT FOR TURNING BY WEST
Nobody thinks that Russia can be stopped from veering
ever further from the path of democracy.
By: Chris Stephen in Moscow, Irish Times
Dublin, Ireland, Wednesday, Jul 12, 2006

9. NO ECONOMIC STRATEGY, NO COALITION
COMMENTARY: By Pavlo Prokopovych
Kyiv Post, Kyiv, Ukraine, Thursday, Jul 13 2006

10. EU SAYS UKRAINE IN “SORRY STATE” AND UKRAINIANS
DESERVE A BETTER GOVERNMENT THAN THEY ARE GETTING
Reuters, Brussels, Belgium, Wed, July 12, 2006

11. WHAT WILL HAPPEN IF THE PARTY OF REGIONS
COMES TO POWER?
COMMENTARY: By Stephen Velychenko
Kyiv Post, Kyiv, Ukraine, Thursday, July 13, 2006

12. COALITION: RELOADED
From anti-crisis to a new crisis
By Yuriy Dokukin, Kyiv Weekly, Kyiv, Ukraine, Wed, July 12, 2006

13. COWARDICE OR CONSPIRACY
Whether the president’s reluctance to act is due to cowardice, conspiracy,
or a martyr complex, Ukraine is badly in need of a leader. If Yushchenko
can’t even save himself, what can the nation expect from him?

EDITORIAL: Kyiv Post, Kyiv, Ukraine, Thursday, Jul 13 2006

14. UKRAINE: STOP THE CARNIVAL
But Yushchenko has nobody but himself to blame. He had two years
to create a new system of political relations, make peace with his
opponents, and find a common language with the opposition.
Vitaly Portnikov, Radio Liberty commentator, for RIA Novosti)
RIA Novosti, Moscow, Russia, Wed, July 12, 2006


15. UKRAINE PRES SAYS PARTY UNLIKELY TO JOIN COALITION
Associated Press (AP), Kiev, Ukraine, Wed, July 12, 2006

16. UKRAINE’S PRO-DEMOCRACY REFORMS IN DOUBT
The pro-Russian leader ousted in ’04 is poised to regain
control as the Orange revolutionaries split
By Fred Weir, Correspondent of The Christian Science Monitor
Boston, Massachusetts, Wednesday, Jul 12, 2006

17. UKRAINE’S YUSHCHENKO WITHIN RIGHTS TO DISSOLVE
PARLIAMENT ANALYST SAYS
RIA Novosti, Moscow, Russia, Tue, July 11, 2006

18. UKRAINE: KYIV’S PRO-WESTERN POLICY IN DOUBT
By Valentinas Mite, Radio Free Europe/Radio Liberty (RFE/RL)
Prague, Czech Republic, Wednesday, July 12, 2006

19. NEW ANTI-GOVERNMENT RALLIES SET IN UKRAINE
United Press International (UPI), Kiev, Ukraine, Wed, July 12, 2006

20 . COUNCIL OF EUROPE OFFICIAL NOTES LACK OF PROGRESS IN
SOLVING KILLING OF UKRAINIAN JOURNALIST HEORIY GONGADZE

AP Worldstream, Kiev, Ukraine, Wed, Jul 12, 2006
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1
. FOR A EUROPEAN ENERGY ALLIANCE

COMMENTARY: By Yulia Tymoshenko
The Wall Street Journal Europe, New York, NY, Thu, July 13, 2006

Energy security is at the top of the agenda of the Group of Eight meeting
Russian President Vladimir Putin will host in Saint Petersburg this weekend.
Experience has taught us that market transparency and price stability are
the best ways to achieve this goal.

Invoking these principles, Russia tried to cast its attempts earlier this
year to quadruple the price of its gas exports to Ukraine as a just struggle
to obtain “market rates.” To some policy makers and investors not fully
familiar with the situation, this sounded only fair.

To be clear, neither Ukraine nor Russia disputed the necessity of measured
price changes. But unfortunately for Russia’s neighbors, the price of
Russian gas is not determined by market forces. Gazprom and its chairman,
Dmitry Medvedev, who also doubles as Russia’s first deputy prime minister,
call the shots.

Gazprom charges each neighbor a different price, a price largely determined
by that country’s relationship with the Kremlin rather than by supply and
demand or gas-transport calculations.

And so, as a result of its newfound independence from Russia after the
Orange Revolution, Ukraine suddenly had to choose between a fourfold gas
price hike or the interruption of its supplies. Similarly, Georgia was also
feeling Moscow’s wrath following the Rose Revolution and faced punishing
price increases as well. Belarus, however, a country still in strong
alignment with the Kremlin, continues to enjoy highly subsidized gas.

Ukraine and Georgia were not the only countries put at risk by Russian
brinkmanship. Other suppliers, such as Turkmenistan, geographically locked
into transit requirements through Russia, have also suffered. In Western and
Central Europe, the crisis caused significant price increases and concerns
about possible supply disruptions. It was most likely only the intervention
by the European Union and the United States that prompted Gazprom to turn
the gas back on.

Natural gas is probably the most vulnerable commodity when it comes to
supply disruptions. Expensive, fixed, interconnected pipelines lock
producers and consumers into a near-exclusive embrace. Thus, diversification
of natural-gas transportation is a long-term, multinational project that
requires enormous investments and political commitment.

Other ways to reduce supply dependency include expanding gas storage
capacities, increasing consumption efficiency, increasing the domestic
production of both oil and gas, and developing alternative energy supplies
such as coal-bed methane. Additionally, a market in tradable liquefied
natural gas is rapidly emerging, making it more feasible to gradually
diversify the supply chain by importing gas from distant producers. Yet,
still more is required.

First, G-8 leaders should enforce energy transaction standards that require
open and transparent contracts in line with best business practices. This
will help dilute the global power of leaders who play the energy card to
achieve purely political goals.

We see such problems today in the operations of state-owned energy firms in
Latin America and through the use of opaque business intermediaries such as
RosUkrEnergo, the firm that played a central role in the questionable gas
deal between Ukraine and Russia.

Such arrangements diminish investor confidence and heavily burden countries
such as Ukraine that are attempting to break away from past corruption and
inefficiency.

Like the RosUkrEnergo deal, recent efforts in the Ukrainian parliament by
the Party of Regions of former Prime Minister Viktor Yanukovych, together
with the Communist and Socialist parties, to wrest control from a
Western-oriented Orange Coalition could be a throwback to this darker, more
opaque time under former President Leonid Kuchma.

It would slow investment and diminish energy security. Ukraine needs an
Orange Coalition to move forward, and Europe needs an Orange Coalition to
work toward greater transparency and more reliable energy interdependence.

In the end, energy security for all of Europe requires recognizing that the
linked nature of our supply and transmission systems makes us
interdependent. This is where a formal Energy Alliance of consumers and
suppliers could be useful. In this alliance, the nations of Europe would
guarantee the energy supplies of one another in the event of a major
disruption.

The international Energy Charter treaty, which emphasizes market access and
transparency, is a laudable effort. But it is insufficient in moments of
crisis. Our markets are simply not equipped to deal with unforeseen supply
disruptions, such as those caused by natural disasters or politically
motivated decisions.

The first critical step in an Energy Alliance would be to include Ukraine in
the current energy dialogue that exists between the EU and Russia. It is
self-evident that the country that hosts the majority of the transit of gas
shipments to Europe from Russia would be included in this dialogue,
especially in light of the events of this past January when Russia cut off
the gas to Ukraine and Europe.

Other countries that are critical to European supply and have faced similar
problems, such as Romania and Bulgaria, would be included as well.

Next, as a longer term solution, an institutionalization of an Energy
Alliance, perhaps under the auspices of the Energy Charter, would formalize
the relationship and call on members to engage in a multilateral forum when
one member experienced a natural or politically driven interruption of
energy supplies.

Formal membership would be initiated and a protocol of negotiations and/or
arbitration established. The goal would be that no one country would be left
alone to deal with a problem that affects everyone. Mechanisms like this
exist for every other political, economic and military area of interest —
why not energy? Interdependence is the order of the day, and we must deal
with this issue today on a multilateral basis.

It is our duty as leaders to chart a course for a secure energy future. If
we tolerate questionable dealing today for the sake of political expediency,
it will cost all of us more in the future. When the inevitable conflict
occurs, public confidence, political credibility and market reliability are
needlessly sacrificed — as has clearly occurred both in Russia and in
Ukraine.

Threats to energy security must be challenged and resolved on a multilateral
basis, with all stakeholders present. We are all depending on it. -30-
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Ms. Tymoshenko is a former prime minister of Ukraine.
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[return to index] [Action Ukraine Report (AUR) Monitoring Service]
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2. UKRAINE’S ENERGY SECURITY AS AN ACTION PLAN FOR THE G8
Impossible to secure stable supplies of natural gas to Europe
without a just and lasting settlement of the Ukrainian-Russian gas conflict

ANALYSIS AND COMMENTARY: Oleksandr Chalyi, Ambassador
Extraordinary & Plenipotentiary, Ex-First Deputy Foreign Minister of Ukraine
Zerkalo Nedili On The Web, Mirror-Weekly No 26 (605)
International Social Political Weekly, Kyiv, Ukraine, Sat, 8 – 14 July 2006

Everybody can see that it is impossible to secure stable supplies of natural
gas to Europe without a just and lasting settlement of the Ukrainian-Russian
gas conflict.

This issue is going to stand out during the G8 summit in St. Petersburg.
Some Ukrainian political leaders have stated their intention to revise gas
contracts with Russia; the USA and the EU have stated their support for
Ukrainian initiatives; the gas captains are engaged in separate backstage
talks; Vladimir Putin has accused the Western press of political pressure on
Russia.

Only Ukraine’s top leadership has kept calm and seems to be in no hurry to
state its official stance on the Ukrainian gas issue which the St. Petersburg
summit is going to address.

Does Kyiv have an action plan to offer the G8? What does it expect from the
G8 summit? What is its position and what are possible ways to settle the
Ukrainian-Russian dispute?

In other words, what official signals should Kyiv give the G8 leaders so
that they can hear, understand us and help to justly resolve the dispute in
the interests of all interested parties?

SIGNAL 1: Call for help. Ukraine should honestly admit that it is unable
to resolve all energy problems with Russia without external help. Putin’s
latest emotional statements show that it is equally difficult for Russia to
objectively approach these problems.

In other words, the Russo-Ukrainian gas relations should be internationalized
and considered as one of the key aspects of European and even global energy
security. It is in Ukraine’s interests to create a common European energy space
as soon as possible.

SIGNAL 2: Ukraine should insist on building gas relations with Russia
exclusively on market principles. This should concern the price Russia
charges Ukraine for natural gas and the price Ukraine charges Russia for
pumping it to Europe and storing it in underground storage.

It is illogical and unjust to demand that Ukraine buy natural gas at a
European price under a short-term contract while transporting and storing it
at low CIS tariffs under long-term contracts. Ukraine has a right to demand
the application of unified rules based on the European Energy Charter.

SIGNAL 3: Ukraine is ready for transparent dialog with Russia and the EU.
All secret negotiations mediated by corrupt structures should be stopped.
The disadvantageous and even shackling gas contract with Russia is nothing
to boast about.

It is known that Ukraine’s Naftogaz and Russia’s Gazprom are still engaged
in intensive secret talks. The civilized world will never understand us if
we verbally declare European approaches to our gas relations with Russia and
use Byzantine methods in practice.

SIGNAL 4: Ukraine has a right to receive the necessary amount of natural
gas at European market prices and undertakes the transport of the necessary
amount to the EU at European market prices. This demand is not just
rational. It also comes from many provisions in Russo-Ukrainian
intergovernmental agreements, including the October 7, 2002 agreement on
strategic cooperation in the gas sector.

SIGNAL 5: Ukraine requests urgent expert assistance from the G8 to calculate
the market price of Russian natural gas to be sold at the Ukrainian border
and the tariffs for transporting and storing Russian natural gas by Ukraine.

SIGNAL 6: Ukraine should request the G8 to facilitate long-term (5-10-year)
contracts for Russian natural gas supplies with a definite pricing formula
and a concrete transition period. Of course, the same should concern the
tariffs for transit and storage.

Ukraine’s economy certainly needs a transition period to adapt to market
prices and is historically entitled to demand it.

For seven or eight years before 2000, Gazprom sold natural gas at $80 per
1,000 cubic meter to Ukraine, which was much lower than to European
consumers. The Kremlin experts lie, saying that Russia has been
“subsidizing” Ukraine for its 15 years of independence.

SIGNAL 7: Ukraine intends to resolve all present and future disputes in
gas relations with Russia exclusively through the legal mechanisms of
international arbitration. Until there are relevant verdicts, the current
status quo should not be changed. This is a generally accepted rule, without
which stable and predictable intergovernmental and commercial relations are
impossible.

SIGNAL 8: Ukraine calls on all sides interested in stable transit of
Eurasian natural gas to the EU to refrain from political or economic
pressure and to solve all current and possible disputes within the
Russia-Ukraine-EU triangle.

In the first place, this call should be heeded by Germany, France, Italy,
and the UK. They can hardly weather this winter “in trenches”.

SIGNAL 9: Europe’s energy security is inseparable and may not be
guaranteed without Ukraine’s.

It would be a big mistake if the G8 summit regarded Ukraine just as an
object in EU-Russia gas relations. Neither supplier nor consumer countries
can build their energy security at the expense of transit countries.

In other words, if the G8 turns a deaf ear to Ukraine and its gas problems,
the situation may take a dangerous and unpredictable turn. “Even a hare, if
cornered, bites.”

SIGNAL 10: Ukraine regards its energy security as an inalienable part of
its national security. Russia, the USA, the UK, and France undertook to
guarantee its energy security when it renounced its nuclear arsenal [in
early 2002].

If the G8 summit in St. Petersburg fails to result in a just solution to the
Ukrainian gas issue, Ukraine should immediately start consultations with the
G8 governments (first of all, with the guarantors of its energy security) on
the following:

[1] urgent measures for preventing a crisis in gas supplies to Europe
in the 2006-2007 winter period;
[2] creation of Ukraine’s own closed nuclear cycle under full control
of the IAEA, which should involve intensive development of uranium
deposits in Ukraine and construction of enrichment facilities;
[3] the USA’s compliance with agreements on the supply and
certification of industrial nuclear equipment.

Ukraine’s right to such consultations is warranted by the Memorandum on
Security Guarantees, which was signed when Ukraine acceded to the
Nuclear Non-Proliferation Treaty.

In my previous article (December 30, 2005), the day before the
Ukrainian-Russian gas crisis broke out, I expressed a hope that it would
have “both negative and positive effects and that the two friendly nations
would find a way out through a strategic compromise rather than unilateral
steps or mutual accusations.”

Regrettably, Ukraine’s top leadership failed to hold its ground, turning a
deaf ear to the people and their representatives in parliament.

It is history now, but history has given Ukraine a second chance: to draw on
the potential of the Group of Eight nations to resolve the gas dispute with
Russia. Hopefully, Ukraine will not miss this chance. -30-
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LINK: http://www.mirror-weekly.com/ie/show/605/53900/
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[return to index] [Action Ukraine Report (AUR) Monitoring Service]
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3. THE GOVERNMENT ERRS, THE CONSUMER PAYS
Raising domestic gas rates by 85%

By Vitaliy Kniazhansky, The Day Weekly Digest
Kyiv, Ukraine, Tuesday, Date: July 11, 2006

In contravention of all laws, Naftohaz Ukrainy, Ukraine’s largest state-run
company, has been working without governmental supervision for more than
six months – since Nov. 15, when the government reversed the decision on
appointing members of the company’s supervisory board.

The fuel and energy minister introduced the company’s new top executives to
the Naftohaz staff only last Tuesday. They are Oleksiy Ivchenko, chairman of
the Supervisory Board (who just made his final choice between this post and
a seat in parliament) and Oleksandr Bolkisiev, chairman of the Board of
Directors.

What prompted the government to announce these appointments now that there
is a glimmer of hope that the coalition-forming marathon is drawing to a
close? It looks as though the current cabinet, a creature of Our Ukraine, is
very afraid that the BYuT, now pushing for power with its white-and-red
hearts flying (under the coalition agreement, Naftohaz is this bloc’s
preserve), will use its control over the gas monopolist to take Ukraine’s
financial strings into its hands.

Politically, this amounts to Yulia Tymoshenko’s victory in the next
presidential elections (nobody seriously considers her protestations that
she will not take part in them).

So, like several times before, the government had to be guided by
revolutionary expediency rather than obey the law. Naturally, the innately
honest Prime Minister Yuriy Yekhanurov, who was apparently forced to make
this decision in a clear breach of ethics with respect to his democratic
coalition partners, looked somewhat off-color when he was explaining to
journalists the reason why MP Ivchenko was being appointed chair of the oil
and gas supervisors.

Asked bluntly why no one but Ivchenko was appointed to this post, the head
of government emphasized that this decision was made because his candidature
was proposed by the Ministry for Fuel and Energy.

It’s ludicrous for this ministry to be dictating to the rest of the
government on how to staff offices that wield a great deal more real power,
not titular, than any other government posts. It is no accident that
Ivchenko, who has not yet formally and publicly given up his parliamentary
seat, came to be introduced to the company that knows him very well. The
impression is that the intrigue with the chief Naftohaz supervisor is going
to be a long one.

But Ivchenko should be given credit for his courage. All those who know
about his relationship with Tymoshenko-who is taking the final measurements
for her prime ministerial chair – cannot help worrying about his future. In
these circumstances, very few people will advise him to relinquish his
parliamentary mandate.

However, this piece of advice may have come from the president, who is
seriously concerned about Tymoshenko’s intention to revise the January 2006
Ukrainian-Russian gas deal that, one way or another, is still helping to
supply our country with gas, which is not so expensive by European
standards. What guarantees did Ivchenko receive from the guarantor of the
constitution?

Asked by The Day to comment on the appointment of Naftohaz’s top executives,
Valeriy Borovyk, chairman of the board of the New Energy of Ukraine
alliance, said, “All of our existing gas problems and the shady system of
relations in the gas sector are the result of the work of former top
Naftohaz executives.

It is very surprising that this appointment was made so hastily (on the
second attempt at that) before the new cabinet was formed. This decision
is incorrect, at the very least.”

Last Wednesday Borovyk also accused the government of unfairly and
monopolistically shifting responsibility for its clumsy policies in the gas
and housing/public utilities sectors, which have seen no reforms in 15 years
of independence and in the past 18 months, onto consumers.

“New Energy of Ukraine’s calculations show that payments for consumed energy
resources and services exceed the cost of supplied resources by more than
2.5 times. Payments for consumed resources and services in 2004 totaled UAH
79.03 billion, while supplies of primary and secondary resources and
services were worth UAH 30.97 billion – this is more than a twofold
difference,” Borovyk told journalists.

According to the head of the new energy alliance, it was “unfair” to raise
domestic gas rates by 85 percent, and the methods of assessing these rates
were “incorrect”…

There are two diametrically opposing poles in Ukraine: one, usually the
powers-that-be, says that we will eventually have to accept the tariff
increase, otherwise we will pull the plug on the housing and public
utilities sector, while the other suggests that tariff increases be
subsidized at state expense.

We are offering a third option: to establish a single state-run energy
resources monitoring system and set up a special state-owned enterprise,”
said Borovyk.

The government will probably not hear or will just ignore these accusations.
As for the proposed state-run primary and secondary energy resources
monitoring enterprise, it will most likely be nipped in the bud – who cares
about such control when, as someone famously said, in the conditions of
systemic disintegration there will always be people who know how to line
their pockets? -30-
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LINK: http://www.day.kiev.ua/165138/
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[ return to index] [Action Ukraine Report (AUR) Monitoring Service]
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4. TWENTY DAYS TO RULE
Recent Naftogas head Oleksiy Ivchenko appointed head of its supervisory board.
He is also a member of Parliament & both jobs at the same time is against the law.

ANALYSIS & COMMENTARY: By Alla Yeremenko
Zerkalo Nedili On The Web, Mirror-Weekly No 26 (605)
International Social Political Weekly
Kyiv, Ukraine, Saturday, 8 – 14 July 2006

Although the Ukrainian delegation’s negotiations with the head of Russian
Gazprom Aleksey Miller didn’t produce any results, Ukrainian acting fuel and
energy minister Ivan Plachkov has fulfilled his mission. He introduced the
new board chairman of Naftogas Ukraine, Oleksandr Bolkisev.

As for the rest of the agenda, Ukraine and Russia informed each other that
they didn’t find it necessary to review the prices stated in the contracts
for the supply of Turkmen gas that each of the parties signed, Plachkov said
in Moscow after the negotiations.

Gazprom suggested that Naftogas Ukraine sign a direct agreement with
Turkmenistan to settle operational problems related to gas supplies. “Russia
is ready to provide its transit services to transport Turkmen gas to
Ukraine, if Ashkhabad and Kyiv reach an agreement.”

The agreement to supply 40 billion cubic meters of Turkmen gas to Ukraine in
2006 was signed in December 2005, yet the gas has not been yet supplied.
During his recent visit to Turkmenistan, Plachkov was asked to buy Turkmen
gas not at 60 dollars, as is stated in the contract, but at 100 dollars per
1000 cubic meters. Plachkov refused. The day before, Russian Gazprom turned
down the conditions of Turkmenbashy [the Turkmen president].

Nevertheless, to support its gas balance, Ukraine needs about 12 billion
cubic meters of gas this year. The new leadership of Naftogas Ukraine will
have to tackle this problem.

NAFTOGAS OPERATIONAL MANAGEMENT
Aleksandr Bolkisev, who acted as board chairman of Naftogas of Ukraine since
May 12, was authorized at a meeting of the Cabinet of Ministers of Ukraine
on June 30. On July 6, he in his new capacity, together with the acting fuel
and energy minister Plachkov, went to Moscow to negotiate with Gazprom.

Prior to that, Bolkisev headed Naftogas subsidiary, Gas of Ukraine,
beginning April 22, 2005. After a joint venture, Ukrgaz-Energo, was set up
(where Naftogas and RosUkrEnergo each own by 50% of the stock), Bolkisev
became a member of its supervisory board on behalf of Ukraine (the
supervisory board of Ukrgas-Energo consists of four representatives from
each of the founders).

Being a member of the Ukrgaz-Energo supervisory board does not mean that
Bolkisev has a serious influence on the decision making, or that he has any
influence as a board member of Naftogas since late May 2006.

It is interesting, however, that while talking to a ZN reporter and during
an interview with the British publication Gas Matters (according to
Ukrainskaya Pravda), Bolkisev said that he didn’t share the idea of the
Ukrgaz-Energo joint venture becoming a practical monopoly supplier of
imported gas to the Ukrainian market.

Moreover, he (as then-head of Gas of Ukraine) was not satisfied with the
unequal operating conditions of his company and Ukrgaz-Energo on the
Ukrainian market. Will Bolkisev change his opinion of Ukrgaz-Energo now?
After all, Naftogas is one of its co-founders.

Back in 1999, when Plachkov held the post of Fuel and Energy Minister,
Bolkisev was his first deputy. It is quite possible that they have
established a good trusting relationship since then. They trusted each other
to such an extent that Plachkov recommended Bolkisev for the post of board
chairman of Naftogas Ukraine.

After the dismissal of the Cabinet, Plachkov most likely would like to
return to Kyivenrgo, which he set up, so he needs a trustworthy person at
the head of Naftogas. Kyivenrgo needs gas as much as it needs favorable
treatment of its untimely payments, which can be guaranteed only by
Plachkov’s protege.

One way or another, formally or informally, Plachkov has facilitated
Bolkisev’s career in the gas industry.

Having accepted the appointment as Naftogas head, Bolkisev is sure to pursue
his own personal interests. But he will not be able to implement his plans,
if he has any, very soon.

NAFTOGAS STRATEGIC SUPERVISORY BOARD
The fact that recent Naftogas head Oleksiy Ivchenko was appointed head of
its supervisory board on July 4 will prevent Bolkisev from pursuing his own
policy for some time. According to the Naftogas statute, all strategic and
important financial decisions must be approved by the supervisory board.

However, when Ivchenko headed Naftogas, the role of the supervisory board
was reduced to a mere formality. Ivchenko and his deputies personally
managed all company activities, including the reorientation of its cash
flows and multibillion loans.

Obviously, Ivchenko will try to return the supervisory board to its leading
role. What for? And why did Ivchenko agree to take the post of the Naftogas
supervisory board chairman, if this contradicts the Constitution? Does he
really plan to leave parliament, as Yuriy Yekhanurov put it?

There could be several answers. However, it is very unlikely that Ivchenko
will risk giving up his appointment in parliament. Simply, he will have
twenty days to rule, before all the appointments are made in parliament and
in Cabinet.

Meanwhile, he may prevent the destruction of the January 4, 2006 trilateral
agreement between Naftogas, Gazprom and RosUkrEnergo, which also provided
for the establishment of Ukrgas-Energo. And second, he may try to obtain a
loan guarantee from Naftogas for a billion dollar loan from Ukrgas-Energo.

As we know, on July 5, acting finance minister Viktor Pinzenyk spoke against
providing a one billion dollar loan to Naftogas of Ukraine to pay off its
debt to RosUkrEnergo and pump gas into underground storages.

Pinzenyk emphasized that these expenses were not provided for in the 2006
budget. “We simply must follow the law, the Finance Ministry exclusively
funds those projects, which are provided for in the budget . the law does
not provide for these expenses,” Pinzenyk said.

Obviously, Ivchenko hopes that Pinzenyk will yield and the Finance Ministry
will issue an additional billiard dollars to Naftogas. During the time he
has left, he will also try to issue loan guarantees from Naftogas to
Ukrgaz-Energo, which will allegedly use this loan to purchase gas and to
make gas reserves in underground storages.

Since Naftogas is a co-founder of Ukrgaz-Energo, this move would seem quite
logical. Yet it may entitle this joint venture to a monopoly on supplies of
gas to Ukraine in the near future. Since Turkmenistan failed to supply gas
to Ukraine as provided in the contract, by this fall, RosUkrEnergo may start
dictating conditions for gas supplies and (most importantly) prices for gas
to Ukrainian consumers through Ukrgaz-Energo.

However, for this to happen, the January gas agreement should remain in
effect and Naftogas should have no alternative to Russian gas supplies.
Gazprom also should not give Naftogas any guarantees for a mandatory
provision of gas. Of course, any intergovernmental Russian-Ukrainian
protocol would be out of the question.

Then the previous scheme would remain in place and everything simply go on.
Ivchenko would be able to say that he changed his mind and will give up the
responsibilities of the supervisory board chairman of Naftogas and return to
parliament.

Remarkably, on the day when Bokisev was approved as board chairman of
Nafotgas, the Cabinet also discussed the appointment of Ivchenko to its
supervisory board. On June 30, even Yekhanurov did not support his
candidacy. But obviously, he underwent a serious change of heart because on
Tuesday, July 4 Yekhanurov said: “I have already signed my agreement;
Ivchenko’s introduction will be made today.”

Yekhanurov added that on Friday, the Cabinet reviewed the issue and on
Tuesday morning the Prime Minister approved all members of the supervisory
board headed by Ivchenko. We can only guess what or who made Yekhanurov
change his mind. But who can persuade Yekhanurov better than the President?

Why did Yekhanurov agree with Ivchenko’s candidacy? Because he is a
competent person. Just put it like this. The Prime Minister does not see any
problem with Ivchenko combining the work of parliament and the work of the
supervisory board of a business, which is forbidden by the Constitution.

This fact once gain testifies that Ivchenko will not stay on the board for a
long time. He may run for twenty days (or six months) and then return to
parliament. But during this time, he may perform several “feats”, about
which we may learn only post factum. -30-
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LINK: http://www.mirror-weekly.com/ie/show/605/53899/
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5. U.S. PLEDGES HELP IN GAS TALKS WITH RUSSIA
US Ambassador Taylor meets with American Chamber of Commerce in Kyiv

Maryan Poloviy, Kyiv Weekly, Kyiv, Ukraine, Wednesday, Jul 12, 2006

“The United States is ready to provide Ukraine with technical and expert
assistance in the process of gas talks with Russia and offer services of its
own companies to assist in the export of Russian gas to Europe,” said US
Ambassador to Ukraine William Taylor at a meeting hosted by the American
Chamber of Commerce in Ukraine.

He also added that Washington is ready to help Kyiv increase the efficiency
of coal mines and the extraction of methane gas from mines.

In the course of Ukrainian-Russian gas talks, the American diplomat called
to observe the principles of transparency. “Ukraine’s gas transport system
is difficult to understand as it is not transparent at all. The U.S.

believes that it must be a transparent system with meters, auditing and
verification. Ukraine must know who the real owner of a company that it
signs a contract with is. It is this kind of transparency that would
contribute to the successful execution of a contract and satisfy all parties
thereto,” said Taylor, adding that “the U.S. does not have the right to
interfere in the process of entering into a contract and negotiations; they
can only watch from the sidelines and assist.”

The US ambassador also mentioned that “during the U.S.-EU summit in Vienna
the principles of transparency in energy security were defined and such
principles will be used during the upcoming G8 summit in St. Petersburg.”

During the meeting the American diplomat also pointed to the strategic
importance of Ukraine’s Odesa-Brody pipeline for Europe and called not to
underestimate its value as compared to other energy corridors.

“We consider Odesa-Brody to be a useful pipeline for Ukraine. But it is not
an alternative to the Baku-Ceyhan pipeline. Great volumes of oil can be
supplied from Southeast Asia and the Caucasus. These pipelines will allow
for the shipment of energy resources to different parts of Europe and the
world. But their launching requires time,” Taylor stressed.

He added that besides assistance in energy matters, the U.S. is willing to
help Ukraine in the development of democracy and resolving socio-economic
problems.

Washington has already appropriated $45 mn to Kyiv for fighting corruption
over a period of two years and will be used for programs developed by the
Ukrainian government with the assistance of American experts from the
Department of Justice and USAID with the support of the US embassy in
Ukraine to fight corruption.

The American ambassador also informed that Washington is willing to invest
much more in fighting poverty programs in Ukraine.

“At the moment, Ukraine is competing with other countries over the right to
receive much greater funding provided for by the Million Challenge Account
for fighting corruption and building democracy. If it manages to win in this
competition, it will be able to receive much more substantial amounts of
money and use it not only for fighting corruption, but for fighting poverty
as well,” Taylor assured. -30-
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LINK: http://www.weekly.com.ua/?art=1152643958
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6. UKRAINE BUYS RUSSIAN NUCLEAR FUEL FOR SEVEN REACTORS

Interfax-Ukraine news agency, Kiev, in Russian 12 Jul 06
BBC Monitoring Service, United Kingdom, Wed, Jul 12, 2006

KIEV – Ukraine has bought fresh nuclear fuel from Russia for seven nuclear
energy generating units this year, Ukrainian Fuel and Energy Minister Ivan
Plachkov has said at a cabinet meeting.

He said that the Enerhoatom national nuclear power company is planning to
buy Russian fuel for all 15 Ukrainian nuclear reactors by the end of the
year. “Nuclear power plants are fully supplied with fuel,” he said. He added
that this year Ukraine has twice transported some of its spent nuclear fuel
to Russia. [Passage omitted: Enerhoatom’s profile] -30-
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7. FOUR UKRAINE GAS FIRMS CHANGE RUSSIAN HANDS

United Press International (UPI), Kiev, Ukraine, Wed, July 12, 2006

KIEV, Ukraine – Russian businessman Aleksandr Babakov sold off Monday
his share in four Ukraine gas companies to fellow Russian tycoon Iskandar
Makhmudov.

The Ukrainian newspaper Kontrakty reports Babakov sold his stakes in the
four companies as he continues his exit from Ukraine’s gas market.

Babakov owned between 60 and 80 percent of gas distribution companies
Dniprohaz, Kryborizhhaz, Kharkivhaz and Donetskmiskhaz.

Makhmudov’s Kuzbasrezervugol company purchased them for an undisclosed
amount. Oleksandr Parashchiy of investment company Concorde Capital
estimates the deal at between $50 and $60 million. Roman Zakharov, an
analyst from Foyil Securities, thinks Babakov will continue to sell
energy-related assets. -30-
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http://www.upi.com/Energy/view.php?StoryID=20060712-121901-6414r

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8. OIL AND GAS-RICH RUSSIA NOT FOR TURNING BY WEST
Nobody thinks that Russia can be stopped from veering
ever further from the path of democracy.

By: Chris Stephen in Moscow, Irish Times
Dublin, Ireland, Wednesday, Jul 12, 2006

RUSSIA: There is a cartoon in this week’s Moscow Times which says it all
about this weekend’s G8 summit of industrialised nations in Russia: the
seven guest leaders sit side-by-side at a banquet, heads bowed over their
food, while a huge Russian bear sitting on the end thumps the table and
breaks the crockery.

This is the image most Western leaders have resigned themselves to as they
trudge east to St Petersburg for a testy few days at the first major summit
hosted by Russia’s president, Vladimir Putin.

Nobody thinks that Russia can be stopped from veering ever further from the
path of democracy, but nobody wants to upset the bear. Especially on his
home soil. Russia has too many nuclear weapons, and too much oil and gas, to
be recklessly annoyed.

A senior Western diplomat told me this week: “It’s not a matter of coddling
Putin, it’s a matter of doing business with him.” It is indeed. Russia’s oil
and gas bonanza – it now produces as much of the black stuff as Saudi
Arabia – means a hungry market for everything from BMWs to mobile phones.

Massive lobbying by big business, and especially big oil interests, has
ensured that democracy, or the lack of it, will be a low priority at the
summit as Western leaders scramble for fresh contracts for their national
firms.

The US is leading the way, with Washington reportedly prepared to admit
Russia into the World Trade Organisation, ignoring a long list of
objections, if only the Kremlin will let US oil companies develop the giant
Stockman oil field.

It was in a similar spirit that the British attorney general Lord Goldsmith
used his time visiting Moscow last month to offer legal advice to Russia on
how better to prepare an extradition case against Chechen leader Akhmed
Zakayev, to whom London has given asylum, and whom Russia wants on
terrorism charges.

Just to be on the safe side, the final G8 communique has already been
written – four days before the first diplomatic foot steps on the first bit
of red carpet.

It is a safe assumption that this communique contains little beyond bland
pronouncements on the need to fight poverty, unemployment and HIV/Aids.

But get a few drinks inside a diplomat and he will admit to a gloomier
prognosis: Russia is entitled to roll back democracy and civil rights
because it is flush with cash and paying its debts.

The analysis of Putin’s Russia that most privately subscribe to was laid out
this week by chess champion Garry Kasparov, grooming himself as the
“great white hope” of Russia’s tattered opposition.

He sees Russia as being controlled by a tiny group, dominated by the
security services, who are making fortunes from oil and gas. “Stop
pretending that the Kremlin shares the free world’s interests,” he told me.
“It’s in Putin’s interest to keep the tension high. If oil prices are high
that keeps his regime going.”

Ironically, this is a picture Mr Putin might agree with: for the Kremlin,
furious at seeing so many former Eastern block allies slide into the
clutches of Nato and the EU, the priority is strength, not civic niceties.

And many Russians agree. Mr Putin has brought stability and opinion polls
show that is the priority for voters.

It is this reality that will see Western leaders shrug and smile for the
cameras – in the knowledge they can do little to influence the Kremlin on
issues including democracy, Chechnya and human rights. But while the
Western leaders will smile for the cameras, they will also frustrate Mr Putin’s
ambitions.

His chairmanship of the G8 was all about energy security, which, translated,
means allowing Russia’s state gas monopoly, Gazprom, to buy Western supply
companies. But Europe got scared last January when Gazprom abruptly cut
deliveries in Ukraine in mid-winter during a price dispute. US vice-
president Dick Cheney has since accused Mr Putin of using gas as a political
weapon.

And the European Commission, in an uncharacteristically bold move, told Mr
Putin that there must be a quid pro quo. If Russia wants a slice of Europe’s
pipelines, then it must let Western companies buy chunks of Gazprom.

The Kremlin has said no, and the result is stalemate. In fact, worse than
stalemate, because Russia is now anxiously watching EU governments
scrambling to reinvest in coal, nuclear power and just about anything else
that can provide an alternative to relying on Russian gas.

This is the one issue that Mr Putin wanted to resolve during this summit,
and his failure will be keenly felt. Despite the smiles and photo
opportunities in what remains one of Europe’s most stunning cities, this
weekend’s summit will only serve to underline how far apart Russia and the
West have now drifted. -30-

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9. NO ECONOMIC STRATEGY, NO COALITION

COMMENTARY
: By Pavlo Prokopovych
Kyiv Post, Kyiv, Ukraine, Thursday, Jul 13 2006

Last fall, a number of Ukrainian economists and politicians suddenly noticed
that Ukraine had never had a long-term strategy of economic development.
Recalling the end of 2005, when Yulia Tymoshenko was fired as premier by
President Viktor Yushchenko for “mishandling” the economy, one can easily
understand why this had become an issue at the time.

In preparation for the approaching parliamentary election, the government
still led by Tymoshenko had drastically increased social payments. It did
not matter much then that the only way out of the imminent budgetary crunch
was the re-privatization of Kryvorizhstal, Ukraine’s largest steel mill,
which had been sold a year earlier in a highly criticized state tender.

No Verkhovna Rada could stand in the way of the gamblers who were putting
the financial stability of the whole country at stake. And, as common in
games of chance, there was only one winner among them. Since the winner,
Tymoshenko, took a great deal of votes from her partners, the
pro-presidential Our Ukraine party, in the 2006 parliamentary elections, it
is not surprising that it took more than a couple of months for the Orange
parties to muster the courage necessary for a coalition agreement, which
fell apart anyway on July 6.

To many, the above story is easy to understand. First, the government of
Tymoshenko had no other options but to raise salaries in the budget-funded
sector because there was a shortage of resources in the Pension Fund caused
by Prime Minister Viktor Yanukovych’s 2004 increase in the minimum pension.

So Tymoshenko should have been thanked, at least in part, for her 2005 fight
against poverty in Ukraine. Second, the first privatization of Kryvorizhstal
could hardly be considered legitimate and, therefore, the best we can do is
to praise Yulia Tymoshenko for her good timing.

But it is not that simple. From the very first moment, the government
planned to spend the proceeds from the resale of Kryvorizhstal on
non-productive uses. The government reneged on its promise to lower the
tax burden on Ukrainian businesses without any pricks of conscience.

In other words, the current financial needs prevailed again, which was not
surprising, as the government did not have any strategy of economic
development then and, as a result, was too short-sighted. In an ideal world,
the money would have been used, at least in part, for introducing a unified
social tax of 20-25 percent.

Then two drafts of Ukraine’s strategic goals were developed last February,
one by current Prime Minister Yuriy Yekhanurov’s government and another by
its opponents from Yanukovych’s Party of Regions. The latter is not much of
interest since it is mainly about describing the main stages of economic
transition of Ukraine’s economy to a “new post-industrial economy.”

A number of measures to be taken at every stage are described, but what they
have in common with a strategic vision of Ukraine’s economic development
remains obscure for the reader, who can easily understand that the strategy
is not realistic. For instance, by the end of the second stage, Ukraine is
supposed to have a “late-industrial economy of common prosperity.”

Because the strategy is developed for 2006-20, we can expect to live in an
economy of common prosperity by no later than 2015-17. In monetary terms,
prosperity means an average monthly wage of at least $2,000. The authors of
the Party of Regions strategy of long-term economic development should have
just written that they expect the average wage in Ukraine to go up 10 times
in 10 years, which sounds no less like science fiction.

Yekhanurov’s strategy of economic development of Ukraine calls itself
apolitical and non-populist. Especially non-populist is its long-term goal
to double Ukrainian GDP by 2012, while putting inflation under control.
There is nothing mystical about this estimate.

The well-known “72 Rule” is a simple way to figure out how many years it
will take for a country to double GDP. To use it, divide 72 by the expected
average growth rate (12 percent in this case). The only problem is that
during the entire history of Ukraine’s independence, the economy grew 12
percent annually only once, in 2004.

Another point to be taken into account here is that in 2004-2005 the rate of
inflation in Ukraine was above 10 percent. Therefore, the fast growth of the
Ukrainian economy was be accompanied by a fight against inflation. Such
plans cast doubts on the whole long-term strategy developed by the
government. Though some of its ideas will be implemented irrespective of
whether they were mentioned in the strategy.

For instance, infrastructure development really matters, as the dilapidated
urban and transport infrastructure of Ukraine hinders its economic
development. However, mentioning intensive urbanization as a way to cut
down expenses in this context is a little ambiguous, since one of the major
problems of Ukraine today is its excessive centralization.

So, against the background of reduced industrial output in most Ukrainian
regions, Kyiv stands out as an island of prosperity with an almost twofold
increase in the index of industrial production since 1990, which is not,
however, an indication of the successful transformation of the Ukrainian
economy.

The cornerstone of any viable strategy of long-term economic development of
Ukraine is the implementation of administrative, tax and land reforms. The
fact that they have not been carried out yet is because no comprehensive
shock therapy program was implemented in Ukraine during the 1990s. Who
could expect more from Communist Party functionaries and red directors?

Nowadays only inveterate optimists believe in the capacity of the Ukrainian
economy to grow at 12 percent a year over several years. Though I personally
prefer having economic dreamers in power to being abused by left-wing
administrators on a regular basis.

Unfortunately, the time of dreamers is up. As Yekhanurov has mentioned more
than once, the government led by Tymoshenko was always too left-wing for
him. Another member of the Orange coalition, the Socialist Party of Ukraine,
never had anything to do with pro-market reforms at all.

Is there any reason for mourning the death of the Orange coalition? From an
economic point of view, not much. Were they able to find a consensus on any
important issue? They fought shoulder-to-shoulder against the falsifiers of
the 2004 presidential election. But a good political fighter does not
necessarily make a good economic planner. -30-
————————————————————————————————-
Pavlo Prokopovych is a Senior Economist at the Kyiv Economics Institute
and an Assistant Professor at the Economics Education and Research
Consortium at Kyiv-Mohyla Academy.
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LINK: http://www.kyivpost.com/opinion/oped/24793/
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10. EU SAYS UKRAINE IN “SORRY STATE” AND UKRAINIANS
DESERVE A BETTER GOVERNMENT THAN THEY ARE GETTING

Reuters, Brussels, Belgium, Wed, July 12, 2006

BRUSSELS – The European Union on Wednesday bemoaned a political
crisis in Ukraine, saying the country was “in a sorry state” and deserved
better government.

Erkki Tuomioja, the foreign minister of Finland, which holds the six-monthly
EU presidency, told the European Parliament Ukraine was making it more
difficult for the European Union to engage with the country. “But we will
certainly do so; it is strategically important,” he said. “It is important
for the Ukrainians.”

“Ukraine is in a sorry state … I believe the Ukrainians deserve a better
government than they seem to be getting at the moment,” Tuomioja said.

Ukraine has been in crisis since inconclusive elections three and a half
months ago left it without a fully fledged government and parliament little
more than a year after the “Orange Revolution”, whose leaders became
darlings of the West.

That euphoria was short-lived and efforts to form a coalition by groups
behind the revolution that propelled President Viktor Yushchenko to power
collapsed this month.

An alternative was hastily assembled, led by the Regions Party of Viktor
Yanukovich, the president’s rival in the 2004 election in the revolution’s
aftermath.

While facing the prospect of a government of his adversaries, Yushchenko
has vowed to accept no big changes to his programme of moving into the
European mainstream.

Yushchenko set his sights on early EU membership after the pro-Moscow
government was ousted in 2004 but Ukraine currently falls under the European
Union’s Neighbourhood Policy, which holds out the prospect of closer
economic ties, not membership.

EU leaders have in the past year become more downbeat about the pace of
future enlargement after numerous polls showed concern among EU citizens
about its impact on their jobs. -30-
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LINK: http://www.alertnet.org/thenews/newsdesk/L12761585.htm
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11. WHAT WILL HAPPEN IF THE PARTY OF REGIONS
COMES TO POWER?

COMMENTARY: By Stephen Velychenko
Kyiv Post, Kyiv, Ukraine, Thursday, July 13, 2006

Although the Party of Regions is commonly called an “opposition” party, this
is a misnomer that carries with it erroneous implications and assumptions
that will lead to erroneous assessments and judgements.

The Regions Party is rather a “restorationist” party that could destroy
Ukrainian democracy and threaten European security if its leaders come to
power again and turn Ukraine into another Belarus.

Ukrainians re-emerged on Europe’s political map in 1991 after more than 200
years of direct foreign political rule imposed by military might. Between
1709 and 1711, then between 1918 and 1921, and again between 1944 and
1950, Russia invaded Ukraine three times in a series of bloody wars that
tied Ukraine to the tsarist and then Soviet empires.

Under Russian rule, Ukrainians got Russian-style serfdom, Siberian exile,
governmental prohibition of publishing and teaching in the native language,
terror and famine-genocide.

When in 1991 Ukraine emerged as an independent state there was no
“liberation war.” Consequently, the imperial or “old regime” elites were not
exiled or executed.

They remained in power until 2004 and since then have retained positions of
influence to such a degree that they can keep their own out of jail.

Their constituency, meanwhile, is the product of Soviet migration policies
that directed Russians into and Ukrainians out of Ukraine.

This immigration and “ethnic dilution”, combined with deportations and
millions of unnatural Ukrainian deaths between 1917 and 1947, created large
Russian-speaking urban enclaves in the country’s four easternmost provinces.

In addition, educational and media policies channeled upwardly mobile
non-Russian rural migrants into Russian-speaking culture, and allowed urban
Russians to live, work and satisfy their cultural and spiritual needs
without having to use or learn Ukrainian.

Since 1991, an increasing percentage of Russians and Russian-speakers see
Ukraine as their native country.

However, in 2005, whereas only 6 percent of Ukrainians still saw themselves
as “Soviet citizens,” the percentage for Russians was 18 percent.

And while 2 percent of Ukrainians in Ukraine still did not regard Ukraine as
their native country, 9 percent of Russians in Ukraine did not.

This means that a percentage of the population in Ukraine today, of whom
most are Russian, support foreign rule over the territory in which they
live – much as did once the French in Algeria, the Germans in Bohemia and
Poland, the Portuguese in Angola, and the English in Ireland.

This anomie and nostalgia for empire of some Russian speakers would be
harmless if not for Ukraine’s neo- Soviet political leaders who exploit it
to maintain their bygone imperial-era power in a post-colonial state.

Both would be manageable if leaders in Russia, the former imperial power,
were able to resign themselves to the loss of their empire, and like the
British, help the new national government rather than its imperial era
collaborators.

Putin is no DeGaulle – who realized in the end that French settlers had to
leave Algeria.

Ukraine’s neo-Soviet leaders are organized into four major groups, with
varying degrees of support, covert and overt, from Russia and its
government, whose ambassador to Kyiv, Viktor Chernomyrdin, is not
known ever to have made a speech in Ukrainian.

Ukraine’s Communists (1) and the Natalia Vitrenko Bloc (2) openly advocate
the abrogation of Ukraine’s independence and its reincorporation into a
revamped imperial Russian-dominated USSR.

The Russian Orthodox Church (3), which claims an estimated 50 percent of
Ukraine’s Orthodox believers, is not only led by a Patriarch in Moscow,
which sits in Putin’s government, but is dominated by its chauvinist,
anti-Semitic fringe.

This church does not recognize Ukrainians as a distinct nationality. It
publicly supports Ukraine’s Communists, and has fielded priests to run in
elections.

In June 2003, the Russian Patriarch gave the leader of Ukraine’s Communist
Party, Petro Symonenko, its “Order of Prince Vladimir,” although no more
than 8 percent of Ukraine’s voters back these old Communist Party leaders.

The more serious threat to Ukraine is posed by its fourth major neo-Soviet
group – the Donetsk-based Party of Regions.

Although the 2004 presidential and 2006 parliamentary election results
suggest approximately one-third of all voters in 2006 supported the Party of
Regions, these returns are dubious.

[1] First, they are a product of documented coercion, intimidation and
covert operations – albeit smaller in scope and scale than was the case
in 2004.

[2] Second, they are based on ‘machine politics’ in Ukraine’s eastern
provinces where, in control of the local administration and manufacturing,
the party can offer people fearing poverty and insecurity short-term material
incentives in return for votes.

[3] Third, they are based on a lingering Soviet-style cradle-to-grave
enterprise-paternalism, still stronger in eastern than western Ukraine,
which allows managers and owners to politically blackmail their employees,
much as “company-town” owners did in nineteenth-century Western Europe
and America.

How strong the party would be in Ukraine’s east without the dirty-tricks,
machine-politics and neo-feudal enterprise-paternalist-based intimidation is
difficult to determine. But it likely would have been less than one-third of
the seats in the country’s parliament.

The Regions party ostensibly supports Ukrainian independence in as much
as its leaders regard Ukraine as a territory that they should control as a
“blackmail state,” just as they controlled it up to 2004.

Yet, Region’s anti-constitutional advocacy of Russian as a “second language”
shows it wants to keep Ukraine within the Russian-language communications
sphere and out of the English-language communications sphere.

While the Canadian and Polish ambassadors to Ukraine can learn Ukrainian
before their appointments well enough to use it publicly, some Party of
Regions leaders have the unmitigated gall to speak Russian in parliament.

Some, like former Deputy Prime Minister Mykola Azarov, have not yet managed
to learn Ukrainian after 15 years of independence.

But then again, how many French in Algeria learned Arabic? How many English
in Ireland learned Gaelic? How many whites in Africa knew Swahili or Bantu?
How many Japanese learned Chinese or Korean? How many Germans in Breslau
learned Polish?

Regions leaders, additionally, engage in symbolic colonial-homage type acts
that pander to imperial Russian nostalgia and compromise Ukraine’s status as
an independent country.

In November 2005 in Russia’s Krasnoyarsk, for example, Regions leader Viktor
Yanukovych publicly gave the speaker of the Russian State Duma a bulava –
the symbol of Ukrainian statehood.

While the party formally supports Euro-integration, just like Russian
President Vladimir Putin supports the Eurointegration of Russia, it has not
explicitly stated that it is for “EU membership for Ukraine.”

Given this omission, there is every reason to believe that if Regions gets
control of the country they will first incorporate Ukraine into the
Moscow-sponsored Single Economic Space, and only then, via Russia,
“integrate into Europe,” just like Belarus.

Party leaders learned their politics under Soviet-era Ukrainian leader
Vladimir Shcherbitsky, ran Kuchma’s “blackmail state,” and employed criminal
Bolshevik-style electioneering and campaign practices.

They publicly belittle Ukrainian independence, are in constant contact with
Russian extremists like Deputy Duma Speaker Vladimir Zhirinovsky, Konstantin
Zatulin, and Moscow Mayor Yury Luzhkov, and they included the Communist
Party in the new coalition announced on July 7.

All of which shows that for all their chatter about laws, representation
and committees, Ukraine’s neo-Soviet Party of Regions is no mere opposition
party. It is more a restorationist party whose purpose is to destabilize the
country.

If the Party of Regions’s tactics succeed, they will strengthen those
opposed to Ukraine’s entry into the EU and who think that the country should
remain in Russia’s sphere of influence.

Foreign observers must ask themselves how a renewed Party of Regions-led
Kuchma-like “blackmail state” is supposed to fit into the EU?

How is Russia, a resource-based autocracy, supposed to be “stable” when
resource-based autocracies everywhere else in the world are notoriously
unstable?

Ukrainians can be sure that Party of Regions leaders will not trouble Bill
Gates about a Ukrainian version of Windows, or Hollywood studios about
Ukrainian dubbing and subtitles, or fashion magazine chains like Burda about
Ukrainian translations. -30-
————————————————————————————————
Stephen Velychenko is a Resident Fellow, CERES Research Fellow, Chair
of Ukrainian Studies Munk Center at the University of Toronto, Canada.
He is currently a visiting lecturer at Kyiv-Mohyla Academy
————————————————————————————————
LINK: http://www.kyivpost.com/opinion/oped/24792/
————————————————————————————————-

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12. COALITION: RELOADED
From anti-crisis to a new crisis

By Yuriy Dokukin, Kyiv Weekly, Kyiv, Ukraine, Wed, July 12, 2006

The orange parliamentary coalition of the government of Ukraine could be
described as “stillborn”. In its place a new, “anti-crisis” coalition
consisting of the Party of Regions, the Communist Party (CPU) and the up
until recently orange Socialist Party, was born.

The new coalition officially announced on July 11 consists of 238 deputies.
It was actually formed on July 6, when it demonstrated consolidated actions
in the struggle for power. On that day, Socialist leader Oleksandr Moroz was
elected the parliament’s speaker from the new majority.

In addition, two members of the parliament from Nasha Ukraina (Our Ukraine)
voted for him. The agreed candidate for the position of premier from the
anti-crisis coalition was announced – Party of Regions leader Viktor
Yanukovych.

The faction of the Yulia Tymoshenko Bloc announced it would move into the
opposition. Our Ukraine decided not to join the anti-crisis coalition and is
preparing for extraordinary elections.

Roman Zvarych, a deputy of Our Ukraine stated that his party colleagues and
BYT deputies intend to demand that the court deem the formation of the new
coalition illegal. He called it “an anti-democratic coalition by its
essence”.

A BYT deputy Andriy Shevchenko told KW that “the coalition in its new format
consists of adherents of a different course than the one Ukraine needs and
they will not ensure Ukrainians a better life. The parliament is unable to
function; it is defective. The defect is irreparable. Therefore, the
parliament must be replaced.”

Shevchenko said that BYT and Our Ukraine lawyers see five possible ways for
extraordinary elections being held. The legal grounds for it are the
violations during the election of Moroz as the speaker and the formation of
the coalition. The political grounds lie in the fact that this kind of
parliament will not be able to work for the benefit of Ukraine.

Director of the National Strategy Institute Kost Bondarenko believes:

“The orange forces overdid it: they were so self-assured and distanced from
the real situation and felt like victors that they underestimated the
possibility of one more scenario and as a result overslept the scenario as a
result of which Moroz became the speaker.”

Chairman of the Penta Center of Applied Political Studies Volodymyr Fesenko,
“Moroz is not a marionette and the Party of Regions must keep that in mind.
He will act according to his own logic, not the logic of the Regions. That
is why a lot of unexpected things await us ahead.”

THE WORD OF THE PRESIDENT
President Viktor Yushchenko has made several statements, in which he
formulated his requirements to the new coalition. He demanded that the
program on which he won the presidential election be fulfilled and that
Ukraine stick to the domestic and foreign policy courses it has chosen.

“Regardless of the coalition format, I categorically insist on a political
majority complying with the principles of the country’s unity and
fulfillment of the reform program, which received wide support of the
Ukrainian people in the presidential election 2004 in Ukraine,” he said.

“Today, my position remains unchanged: there will not be the revenge of
Kuchmism. The country will move towards the European Union,” Yushchenko
reaffirmed. The president emphasized that he would submit to the parliament
the candidature for premier only after the deputies elect the judges of the
Constitutional Court. “Only the Constitutional Court is capable to assess
whether the actions of all branches of power comply with the Constitution.
This is down payment for the legitimacy of all future decisions and
measures,” the president noted.

Background
The parliamentary elections were held in Ukraine on March 26, 2006. Their
results were officially announced on April 27. The first sitting of the new
Verkhovna Rada was on May 25. Then, numerous recesses were announced for
the formation of a coalition. On June 22, Our Ukraine, BYT and SPU formed a
coalition. According to amendments to the Constitution, which took force on
January 1, 2006, a parliamentary coalition must form the government.

Since June 27, the Party of Regions faction had been blockading the work of
the VR. On July 6, the blockade was lifted, but the SPU faction basically
split the coalition, creating a new one with the Party of Regions and the
CPU. To date, the Party of Regions faction includes 186 deputies, SPU – 33
and CPU – 21. The BYT faction has 129 deputies and Our Ukraine – 80.

Commentary
[1] Leonid Grach, MP, CPU:
“The new coalition, I hope, will show consistency and durability. Within one
week we will finish the process of formation of the parliament’s leadership
and the Cabinet of Ministers. As for our faction, there are agreements as to
the position of the vice speaker and the chairs of four committees.
Consultations are being held regarding our participation in the government
and local self-government bodies.

After the new government is formed, pragmatism and professionalism in the
management of all economic and social processes will appear. Second,
Ukraine’s foreign policy will stabilize. Members of the anti-crisis coalition have a
common approach to such policy. This includes joining the Common Economic
Space with Russia, Belarus and Kazakhstan, granting Russian the status of an
official language and refusal to join NATO.”

[2] Yevhen Kushnaryov, MP, Party of Regions:
“Soon, the country will have a new premier in the candidate from the
anti-crisis coalition Viktor Yanukovych. The president will agree to this
candidature; I simply see no legal possibility for him not to do so. I also
don’t believe there will be any serious conflict.

In the second half of the 1990s, Poland had the Socialist Kwasniewski for
its president. And though the right-wing Solidarnosc had a parliamentary
majority and the premier’s position, there was no civil war in Poland.”

[3] Dmytro Vydrin, MP, BYT:
“It is now clear that not only the first, but also the second coalition is
unsuccessful. It will not be able to work normally and it will also have an
‘enemy within’. There are 20 governors who belong to other parties and they
will sabotage its decisions. The operation of the parliament will be
continuously blocked. Neither the executive nor legislative branches will
function properly.

There are two possible solutions: either premature parliamentary or
premature presidential elections. For this reason, there will likely be a
single consensus between BYT and the Party of Regions to holding premature
elections. As for Our Ukraine, it should try to join BYT and run in the
future parliamentary elections on a single list.”

[4] Tom Warner, Concorde Capital:
“Many Our Ukraine deputies suspect Yushchenko negotiated behind their back
with Yanukovych and Moroz – that is, they suspect Yushchenko was part of a
plot to bring down the ‘orange coalition’.

Yushchenko’s authority within the party has plummeted and other Our Ukraine
leaders led by Poroshenko are struggling to keep the party together.
Meanwhile, by meeting with Tymoshenko, Yushchenko has annoyed the Regions,
which reacted by stepping up its treat to officially nominate Yanukovych.

Yushchenko is attempting to drive a hard bargain by playing Yanukovych and
Tymoshenko against one another but he is in danger of losing control of the
situation. The danger is that orange supporters, who have so far been more
depressed than angry, could take to the streets, with no one to maintain law
and order. However, it’s not clear that the Regions will go ahead with
Yanukovych’s nomination.” -30-
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LINK: http://www.weekly.com.ua/?art=1152643136
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[return to index] [Action Ukraine Report (AUR) Monitoring Service]
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========================================================
13. COWARDICE OR CONSPIRACY
Whether the president’s reluctance to act is due to cowardice, conspiracy,
or a martyr complex, Ukraine is badly in need of a leader. If Yushchenko
can’t even save himself, what can the nation expect from him?

EDITORIAL: Kyiv Post, Kyiv, Ukraine, Thursday, Jul 13 2006

As early as last summer, one could find supporters of Ukrainian President
Viktor Yushchenko referring to the internationally renowned hero of the
Orange Revolution as the country’s “messiah.” Now, just a year later,
Yushchenko has been crucified by his enemies and betrayed by one of his
former allies, whom some recent protesters have dubbed “Judas.”

How could a leader so revered undergo such a drop in popularity in such a
short period of time – even in a country as unstable as Ukraine?

For starters, he alienated one of his key allies in his fight for the
presidency: firebrand femme fatale Yulia Tymoshenko, who was fired by
Yushchenko last fall. A slyer political leader would have kept her close and
de-clawed.

Instead Yushchenko chose the company of spent politicians like Roman
Zvarych, who left the center stage of Ukrainian politics last year as well,
after having been caught lying about his education.

Zvarych was again side by side with Yushchenko as the Orange coalition, the
parliament, and any respect that might have remained for the values of the
Maidan, lapsed into disgrace.

The “messiah” should have taken the hint when the people didn’t vote to
spare him during the parliamentary elections, giving their support to a
party of what many Ukrainians call “criminals” – the modern-day Barabas.

Thereafter, only a short walk remained between the president and the cross,
a path he seemed to choose himself.

Why didn’t Yushchenko act like a king of kings (or at least of Ukrainians)
when his political opponents challenged the sovereignty of the state by
challenging the state language and the right of Kyiv to host military
exercises.

The challengers were small – regional officials and a handful of radicals –
but the stakes were high, testing the messiah’s faith like the devil
himself.

From there it was easy for the Regions Party, so demonized by Yushchenko
and his allies during the Orange Revolution, to raise the bet even further.

They literally took control of the parliament and made their demands known,
while the “messiah” tried to distance himself from the entire struggle, as
if he were above such earthly matters.

Nevertheless, Yushchenko ended up yielding to Regions’ demand that he take
part in coalition talks, gave up the coalition agreement to vote for the
speaker and premier simultaneously, and allowed the secret parliamentary
vote that made Socialist leader Oleksandr Moroz, the so-called Judas,
parliamentary speaker.

Time and again his allies and followers tried to convince Yushchenko to
revive the Orange Coalition with Tymoshenko (more Joan of Arc than Mary
Magdelane) and Moroz.

But Yushchenko seemed to be either incapable of mustering the resolve, or
blinded by his fear of the more charismatic and courageous Tymoshenko.

On July 6, that fateful Thursday evening, when the secret vote took place,
there may not have been a last supper, but the messiah’s fate had been
fixed. His faithful apostle Peter (Poroshenko) couldn’t save him.

But this is where the biblical analogy ends. Yushchenko is supposed to be a
president, not a prophet, but the country hasn’t had a Constitutional Court
or functional parliament for months.

Due to cowardice or conspiracy, Yushchenko has been crucified politically.

On the day the Post went to print, Moroz and Regions leader Viktor
Yanukovych were telling journalists how the president’s Our Ukraine party
was sure to join them, following their meeting with Yushchenko.

In the meantime, Tymoshenko announced on national television that she would
never join the coalition of her long-standing enemies, whom her party
referred to in a press release as “criminal-communists.”

She didn’t mince her words, but urged people to fight for the values of the
Maidan, challenging Moroz’s appointment in court and setting up a tent camp
in Kyiv.

Yushchenko was less stalwart, telling journalists that his chances of
joining Regions & Co. were “hardly optimistic,” and citing violations in
parliamentary rules – less inspirational than one would expect from a
messiah.

Even some deputies from his party have helped block the parliament along
with Tymoshenko’s BYuT. Others, including a few Socialists, quit their party
in protest against Moroz’s defection.

Whether the president’s reluctance to act is due to cowardice, conspiracy,
or a martyr complex, Ukraine is badly in need of a leader. If Yushchenko
can’t even save himself, what can the nation expect from him? -30-
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LINK: http://www.kyivpost.com/opinion/editorial/24794/
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[ return to index] [Action Ukraine Report (AUR) Monitoring Service]
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14. UKRAINE: STOP THE CARNIVAL
But Yushchenko has nobody but himself to blame. He had two years
to create a new system of political relations, make peace with his
opponents, and find a common language with the opposition.

Vitaly Portnikov, Radio Liberty commentator, for RIA Novosti
RIA Novosti, Moscow, Russia, Wed, July 12, 2006

MOSCOW – Ukrainian politics has returned to the carnival days of the
controversial 2004 presidential elections. Deputies are fighting in
parliament, blowing horns, and tearing each other’s expensive shirts and
jackets. The Ukrainian parliament has again become one big protest site.
For how long?

Having failed to obtain the power that was almost within reach,
pro-presidential Our Ukraine and the Yulia Tymoshenko Bloc are using such
unacceptable political tools as fighting in parliament and staging public
demonstrations in front of the parliament building.

During the last period of President Leonid Kuchma’s rule, when power was
there for the taking but the majority of people looked down on it, such
carnivals of anarchy could and did bring results, notably during the 2004
elections.

But now the Orange have to stand up against political forces that are
supported in the southeastern parts of the country, where the Orange have
no weight whatsoever. In addition, the Party of Regions, led by 2004
presidential candidate Viktor Yanukovych, has learned quite a few tricks
from its opponents since the 2004 elections, including how to stage protests
in parliament and outside it.

If the Orange try to rally the people again, their opponents will do the
same. And if they try to obstruct work in parliament, pressing for their
victory, their own work might be obstructed after their “triumph.” We have
seen this happen more than once in Ukraine, both when the Orange coalition
was in the making and during its disintegration.

Holding an early parliamentary election looks like a way out of this
situation, in which the Orange coalition has been forced into opposition. No
one will protest among the opposition forces or the current authorities. But
what will happen if the Party of Regions wins the election? What if Our
Ukraine sacrifices everything it has to support Yulia Tymoshenko?

In other words, what would President Viktor Yushchenko do with a parliament
without Our Ukraine, and the Party of Regions capable of forming a ruling
majority? Should he keep dissolving parliaments until his supporters win an
election? But who are his current supporters, especially in view of
high-voltage tensions between Yushchenko and Tymoshenko?

There are no winning moves for the president now. The dissolution of
parliament would destabilize the situation and have unpredictable
consequences. Letting the parliament go ahead, however, would amount to
surrendering to the mercy of the Party of Regions, and bargaining for seats
for his supporters in an assembly where others are in power.

But Yushchenko has nobody but himself to blame. He had two years to create
a new system of political relations, make peace with his opponents, and find
a common language with the opposition.

Elected by the western and central regions of Ukraine, Yushchenko should
have worked day and night to also become president of the southeastern
regions, but he did not.

As a result, the Ukrainian authorities used old political tools for the
parliamentary election campaign, shouting about “bandits,” pledging to
prevent the revival of “Kuchma’s rule,” and using other mud-slinging
tactics.

Meanwhile, clever students from Donetsk pledged to put an end to the
“orange plague” and expose the new authorities.

And this is all the teams of Viktor Yushchenko, Yulia Tymoshenko and
Viktor Yanukovych can offer the electorate. Therefore, the carnival goes
on. -30-
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LINK: http://en.rian.ru/analysis/20060712/51231544.html
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[ return to index] [Action Ukraine Report (AUR) Monitoring Service]
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15. UKRAINE PRES SAYS PARTY UNLIKELY TO JOIN COALITION

Associated Press (AP), Kiev, Ukraine, Wed, July 12, 2006

KIEV, Ukraine – Ukrainian President Viktor Yushchenko said Wednesday his
party was not likely to join the pro-Russian parliamentary coalition headed
by his former Orange Revolution rival, noting that it would be too difficult
to explain such a union to his supporters.

Yushchenko spoke after holding crisis talks with Viktor Yanukovych, whom
he defeated in 2004 for the presidency, amid continuing political turmoil
following the inconclusive March parliamentary election that reinforced deep
fault lines between the country’s largely-Russian speaking east and the
nationalist, Ukrainian-speaking west.

“In the format of the coalition that we have today, there is little optimism
of coming closer,” Yushchenko said after the three-hour talks. “This step
would be very difficult to explain to voters. Too many arguments.”

The pro-Russian coalition combines Yanukovych’s pro-Russian party, which
won the most votes in March elections, with the Communists and the Socialists.

It was formally formed this week, after Socialist Party leader Oleksandr
Moroz abandoned his former Orange Revolution allies, saying their constant
bickering would have spelled doom for a new government led by them.

The new coalition, which would control at least 236 seats in the 450-member
parliament, immediately proposed Yanukovych to become premier.

Its attempts to start work in parliament Tuesday, however, led to brawls and
noisy disruptions by the pro-Western reformers who helped Yushchenko lead
the protests against Yanukovych’s initial, fraud-marred presidential victory
in 2004. Those protests, known as the Orange Revolution, led to a
court-ordered revote that brought Yushchenko to power.

On Wednesday, rival tent camps sprouted around the capital as the divided
political forces called out supporters – in an echo of the Orange
Revolution.

“As a politician, I am sure that the project in which the political forces
that represent the west and the east, a project in which these political
forces were able to unite, it would be one of the great political projects,”
Yushchenko told reporters.

Yanukovych concurred. “Today, we understand that uniting Ukraine is
the desire of our voters,” Yanukovych said in a separate news conference.
“But in what format we will have our cooperation, we cannot say now.”
He said talks would continue.

Asked if he would support Yanukovych’s nomination for the premiership,
Yushchenko said he wanted a candidate who would consolidate the nation.
When pressed to give a yes or no reply, Yushchenko refused to answer.

A government led by Yanukovych would likely draw Ukraine back under Moscow’s
influence and obstruct Yushchenko’s goal of drawing this former Soviet
nation of 47 million closer to Europe and seeking NATO and E.U. membership.
Yushchenko insisted the country’s pro-European choice would not change.

On Wednesday, about 30 tents – including three, large military-style tents –
were put up on Independence Square under the bright yellow flags of Pora,
the youth group that helped galvanize Yushchenko’s supporters less than two
years ago.

Evhen Zolotaryov, deputy head of Pora, said they hoped to attract tens of
thousands of protesters by the weekend to demand that Moroz be removed from
the parliamentary speaker’s post. Supporters of Yulia Tymoshenko, who would
have returned to the prime minister’s job under the Orange Revolution
coalition, set up their own tent camps. Tymoshenko did not participate in
Wednesday’s talks.

In a park near parliament, about 1,000 Yanukovych supporters set up tents
and pledged to remain until the pro-Russian coalition was firmly in place.

“I can’t be indifferent to our country’s fate – we voted for Yanukovych and
we’ll continue to insist that our votes are heard,” said Lena Mesheryakova,
20, from Donetsk. -30-
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[return to index ] [Action Ukraine Report (AUR) Monitoring Service]
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16. UKRAINE’S PRO-DEMOCRACY REFORMS IN DOUBT
The pro-Russian leader ousted in ’04 is poised to regain
control as the Orange revolutionaries split

By Fred Weir, Correspondent of The Christian Science Monitor
Boston, Massachusetts, Wednesday, Jul 12, 2006

MOSCOW – Orange is out, at least for the moment, as Ukraine’s political
roller coaster seems set to reject at least some results of 2004’s
pro-democracy revolt and vault Moscow-leaning politician Viktor
Yanukovich back into the country’s driver’s seat.

After a week of wild surprises in the 450-seat Supreme Rada, Mr.
Yanukovich’s Party of Regions announced Tuesday that it had formed a
new “anticrisis coalition,” holding a slender 12-seat majority, with the
Communists and the formerly Orange-allied Socialists.

Oleksandr Moroz, the Socialist leader, announced that he had forwarded
Yanukovich’s name to President Viktor Yushchenko as the new coalition’s
choice for prime minister. Mr. Moroz defected last week from a tentative
Orange Coalition and was subsequently elected parliamentary speaker with
Regions Party support.

Witnesses said the bitterly divided Rada dissolved into “pandemonium” at the
news, with fisticuffs, angry shouting matches, and at least one attempt to
storm the podium.

“This is really the least expected outcome,” of Ukraine’s three-month-old
political crisis, says Oleksandr Shushko, an expert with the independent
Institute for Euro-Atlantic Integration in Kiev. “It means that Yanukovich’s
forces have proved to be very well-organized and disciplined, unlike the
democrats, and they have prevailed in the complicated game of
coalition-building.”

For Mr. Yushchenko, the choices are tough. He now has 15 days to accept a
Yanukovich-led government, or employ his constitutional power to dissolve
parliament and declare fresh elections. In televised remarks Monday, a
weary-looking Yushchenko said he would never agree to a government that
tried to reverse Ukraine’s strategic course toward

NATO membership and economic integration with the European Union. “I
firmly declare and will proceed from the position that the current domestic
and foreign policy course will be unchanged,” he said. “I expect that this
demand will be reflected in the activity of the future coalition.”

Yanukovich, whose power base is in heavily Russified eastern Ukraine,
opposes joining NATO and favors deeper economic integration with Russia.
Improving relations with Moscow will be a top priority of his government, he
told the official Russian RIA-Novosti press agency Monday. “We have no
doubt that the tone of our relations should be changed, and we can correct
everything before we reach the point of no return,” Yanukovich said.

Hard-fought elections last March produced a split parliament. The Regions
Party gained the largest group with 186 seats. The two main Orange parties
fared well, but fell short of a combined majority. The Yulia Tymoshenko bloc
holds 129 seats and Yushchenko’s Our Ukraine has 81. That left the centrist
Socialists, who won 33 seats, and the Communists, who secured 21 seats,
holding the balance of power.

After nearly three months of wrangling, Orange parties announced their own
coalition two weeks ago, which would have seen Ms. Tymoshenko restored to
the job of prime minister. She was fired by Yushchenko last September amid
mutual accusations of corruption.

Close Yushchenko ally, Pyotr Poroshenko, would have been elected to the
powerful post of parliamentary speaker. That deal went down in flames last
week when Moroz took his Socialists over to Yanukovich’s side, scooping up
the speaker’s position for himself.

“Moroz’s ambition doomed the Orange coalition,” says Alexander Chekmyshev,
deputy director of the Institute of Journalism in Kiev. “But many people,
including in Yushchenko’s camp, never wanted to see Tymoshenko become
prime minister again. Things could now go many different ways.”

Many Ukrainians blame Yushchenko for the failure to build a supportive
governing coalition. “Yushchenko has shown a lack of practical leadership,
and has lost his reputation as a successful manager,” says Mr. Shushko. “He
had a lot of time and opportunities, but it all fell apart. Now he’s in a
no-win situation.

“If he calls for new elections,” he continues, “his party will probably lose
much more ground to Tymoshenko. But if he supports Yanukovich’s Red-Blue
coalition, it will be bad for Ukraine’s international reputation and for our
reform prospects.”

A furious Tymoshenko denounced the Socialists as “traitors” for abandoning
the Orange camp and called the new coalition a “coup d’état.” A fiery
populist who stood beside Yushchenko throughout the Orange Revolution,
she is urging new elections.

“The Supreme Rada, because it has betrayed its promises to the people, is
illegitimate,” Tymoshenko said in televised remarks Monday. “We will either
become the coalition ourselves, or, if the law allows it, we will definitely
be in favor of holding an early election.”

The sudden appearance of a pro- Russian coalition is welcome news in Moscow,
where President Vladimir Putin is preparing to greet leaders of the Group of
Eight’s rich democracies at this weekend’s summit in St. Petersburg.

“This news will give Putin a big boost, just before the G-8 summit,” says
Alexei Mukhin, the director of the independent Center for Political
Information in Moscow.

“Putin has always chafed at the support Western leaders gave to the Orange
Revolution, and now he can say to them ‘see how you misunderstood things
in Ukraine?’ ” he says. -30-
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LINK: http://www.csmonitor.com/2006/0712/p04s01-woeu.html
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[return to index] [Action Ukraine Report (AUR) Monitoring Service]
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17. UKRAINE’S YUSHCHENKO WITHIN RIGHTS TO DISSOLVE
PARLIAMENT ANALYST SAYS

RIA Novosti, Moscow, Russia, Tue, July 11, 2006

KIEV – Ukraine’s president can dissolve parliament without violating the
constitution, a political expert said Tuesday as political events in the
country seemed to be reaching the climax.

The dissolution of the Supreme Rada is becoming an increasing possibility
after the collapse of a three-party coalition that drove the 2004 “orange
revolution”.

Despite the formation of a new alliance led by the pro-Russia Party of
Regions and the nomination of leader Viktor Yanukovych for the prime
minister’s job Tuesday, President Viktor Yushchenko can dissolve the
Supreme Rada as the deadline for the formation of a new government
expires July 24.

“Although there are no formal grounds for dissolution, they can be found if
necessary,” said Mikhail Pogrebinsky, director of the Kiev-based Center for
Political and Conflict Studies.

The president has 15 days to consider a prime minister’s candidacy before
submitting him for the Rada’s approval. “The 15-day countdown starts today,
so the president can just wait until July 24 to dissolve the Rada without
violating the constitution,” Pogrebinsky said.

Ugly scenes broke out in the 450-seat Rada Tuesday after the new coalition
was announced officially. Deputies from Western-leaning “orange” factions
blocked legislative work – mirroring a move made by the Party of Regions at
the end of June – after Socialist Party leader and new Rada Speaker
Oleksandr Moroz declared a new parliamentary coalition comprising the Party
of Regions, the Communist Party and the Socialists. Political opponents even
started two fights in parliament.

“New elections are quite a possibility, as what is going on in parliament is
unacceptable,” the analyst said adding that a new vote could produce a “more
stable configuration.” He said only a union between former premier Yulia
Tymoshenko’s bloc and the pro-presidential Our Ukraine bloc could preserve
the driving force surviving from the 2004 “orange revolution” after the
election. -30-
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LINK: http://en.rian.ru/world/20060711/51205048.html
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18. UKRAINE: KYIV’S PRO-WESTERN POLICY IN DOUBT

By Valentinas Mite, Radio Free Europe/Radio Liberty (RFE/RL)
Prague, Czech Republic, Wednesday, July 12, 2006

PRAGUE – The scenes of chaos in the Ukrainian parliament on July 11 appear
to have heralded a remarkable shift in the balance of power — and questions
as to the future course of Ukrainian foreign policy.

Ukraine’s rudderless Orange Revolution is floundering in a crisis largely of
its own making. Its once dispirited political opponents are on the brink of
a return to power.

Viktor Yanukovych, the main rival of President Yushchenko and seemingly
banished to the political wilderness by the Orange Revolution in December
2004, looks poised to become prime minister.

His pro-Russian Party of Regions has forged an alliance with the Communists
and the Socialist Party, whose leader Oleksandr Moroz abandoned his former
Orange coalition allies in return for a promise to be made speaker.

DECISION TIME
President Viktor Yushchenko has 15 days to consider Yanukovych’s nomination
and send it back to parliament for approval. Fifteen days to consider just
what Yanukovych might do to his plans for political and economic reform.

Not least in foreign policy. Oleksandr Sushko, the head of the Center for
Peace, Conversion, and Foreign Policy, a Kyiv-based think tank, says the
whole idea of Ukrainian NATO membership could now be up for review.

“They suggest having a referendum but it is not so important, what is
important is the fact that the Party of Regions is opposed to NATO
membership,” Sushko said.

It’s a measure of just how much President Yushchenko has lost the political
initiative that it is Yanukovych who now appears more closely in tune with
public opinion. Recent polls suggest that Yanukovych’s opposition to NATO
closely reflects the views of most Ukrainians.

THE EU QUESTION
If the Yanukovych coalition comes to power, Yushchenko can also expect a
shift in the government’s attitude toward the idea of EU integration.

“In this field, they are proposing some kind of vague policy, which would
endorse the Ukrainian objective of integration into the EU in a general sort
of way without undertaking any serious obligations,” Sushko said. “It would
mean some kind of protracted, vague attitude toward European integration. In
a sense, it could be reminiscent of the approach of [Leonid] Kuchma and his
government, which was in power until 2004.”

Sushko says that the Party of the Regions is more in favor of close
relations with Russia and CIS countries but has no concrete program for
dealing with Russia on the energy question and other important practical
issues.

Oleksiy Kolomiyets, the head of the Kyiv-based Center for European and
Trans-Atlantic Studies, agrees but adds that while the Party of Regions is
pro-Russian, it is unlikely to establish such close relations with Moscow as
Uzbekistan or Belarus.

Any new coalition, he says, will have to take into account the strong
opposition of western Ukraine and many of the central regions to closer
union with Russia. And even if the Party of Regions does dominate the new
cabinet, it will be constrained by political reality.

“According to the new Ukrainian Constitution, the president has complete
responsibility for foreign policy,” Kolomiyets said. “In addition, the
foreign minister and defense minister report to him. He also has complete
control over the Ukrainian Council of National Security and Defense.”

PRESIDENTIAL OBSTACLE
Kolomiyets says it is very likely that any initiatives to change the
pro-Western policy of Ukraine will be effectively blocked by the president,
making the new cabinet ineffective. Sushko agrees and says the likely
stalemate might lead to new elections as early as the fall.

Echoing that, former Prime Minister Yuliya Tymoshenko on July 11 called for
new elections, saying that that was the only way out of the crisis. For
once, she and Yanukovych were in agreement. He said he too would support

the dissolution of parliament.

“We don’t fear the dissolution of parliament and if it happens I think we
will win a definite victory [in new elections] and will finally end this
nightmare,” Yanukovych said.

President Yushchenko, though, remains silent on the issue of a new vote.
Perhaps because it is not clear that it would serve any purpose.

There is no guarantee that a fresh election would not reconfirm the divide
between the Russian-speaking eastern Ukraine, which favors closer ties with
Russia, and western Ukraine, which is urging integration with the European
Union. -30-

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http://www.rferl.org/featuresarticle/2006/7/a29ac932-4f29-4a8d-affb-ed8ca08d5d89.html

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[ return to index] [Action Ukraine Report (AUR) Monitoring Service]
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19. NEW ANTI-GOVERNMENT RALLIES SET IN UKRAINE

United Press International (UPI), Kiev, Ukraine, Wed, July 12, 2006

KIEV – Ukraine is bracing for more demonstrations after supporters of a
candidate for prime minister called Wednesday for the start of nationwide
protests.

Several thousand demonstrators protested outside the Ukrainian parliament
Wednesday, many calling on President Viktor Yushchenko to dissolve
Parliament and hold a new election, the Russian Information Agency Novosti
reported.

A leading supporter of former Prime Minister Yulia Tymoshenko said
demonstrations — which included blasting music from parked cars on
Wednesday — would be held throughout Ukraine until President Viktor
Yushchenko dissolves Parliament. “We declare the start of a campaign against
the anti-crisis coalition that will have no deadline,” Oleksandr Turchinov
said.

Also, Wednesday, the president of the European Union, Finnish Foreign
Minister Erkki Tuomioja, described Ukraine as in a “sorry state” due to its
political crisis. He said the European Union was finding it increasingly
difficult to deal with the country.

Ukraine has been in crisis since inconclusive elections 3 1/2 months ago
left it without a workable government, the news agency said. -30-
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[ return to index] [Action Ukraine Report (AUR) Monitoring Service]
========================================================
20. COUNCIL OF EUROPE OFFICIAL NOTES LACK OF PROGRESS IN
SOLVING KILLING OF UKRAINIAN JOURNALIST HEORIY GONGADZE

AP Worldstream, Kiev, Ukraine, Wed, Jul 12, 2006

KIEV – An official from Europe’s main human rights body expressed concern
Wednesday over the continuing failure of authorities in Ukraine to determine
who ordered the killing of an investigative journalist nearly six years ago.

Heorhiy Gongadze’s beheaded body was found in a forest outside Kiev in 2000.
The killing triggered months of protests against then President Leonid
Kuchma after a key witness released tape recordings in which voices
resembling those of Kuchma and other top officials were heard conspiring
against the journalist. The Ukrainian journalist wrote about high-level
corruption.

Three former policemen went on trial for the killing earlier this year, but
the investigation to find the mastermind remains stalled. Kuchma has denied
any involvement, and questioned the authenticity of the recordings.

“I am a little disappointed at the lack of progress in the investigation
concerning the instigators and organizers,” Sabine
Leutheusser-Schnarrenberger, who is preparing a report for the Council of
Europe’s Parliamentary Assembly on the Gongadze case, said during a visit
to Kiev. “It is good that three officers are on trial … this is necessary,
but not sufficient.”

She called on the government to demonstrate the political will “to allow
prosecutors to complete their job,” but said that she was worried this might
not happen.

Ukrainian President Viktor Yushchenko pledged to bring Gongadze’s killers
to justice, calling it a matter of honor for him. He accused his predecessor,
Kuchma, of sheltering Gongadze’s killers by refusing to pursue the case.

Gongadze’s family have complained that authorities are still not doing
enough to find the mastermind. Leutheusser-Schnarrenberger said that the
newly elected Parliament Speaker Oleksandr Moroz reassured her that solving
the case remained a top priority.

“He rightly said that this case is the prism through which the Council of
Europe observes the progress of the rule of law in Ukraine,” she said.
During her visit, Leutheusser-Schnarrenberger met with the top prosecutor,
investigators working on the case, Gongadze’s widow and lawyers representing
the journalist’s family. -30-
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[ return to index] [Action Ukraine Report (AUR) Monitoring Service]
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