AUR#739 Jul 27 Pres Wants Any Coalition To Implement His Domestic & Foreign Policy; WTO; Poland; Romania; Finland; In The Public Interest;

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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 739

Mr. E. Morgan Williams, Publisher and Editor
PUBLISHED IN WASHINGTON, D.C., THURSDAY, JULY 27, 2006

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——- 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. PRES YUSHCHENKO SAYS CONDITION FOR ANY COALITION
GOVERNMENT IS TO IMPLEMENT HIS ELECTION MANIFESTO OF
2004 AND PURSUE HIS DOMESTIC AND FOREIGN POLICY
ICTV television, Kiev, in Ukrainian 1618 gmt 26 Jul 06
BBC Monitoring Service, United Kingdom, Wed, Jul 26, 2006

2. “TIMELESS APPROACH TO WTO”
Ukraine parliament dragging feet on WTO-related legislation
ANALYSIS AND COMMENTARY: By Olena Snezhko
Invest-Gazeta, Kiev, in Russian 25 Jul 06; p 5
BBC Monitoring Service. United Kingdom, Wed, Jul 26, 2006

3. THE ECONOMY UNDER A BROAD COALITION
OP-ED: By Valentin Zelenyuk
Kyiv Post, Kyiv, Ukraine, Thursday, Jul 27 2006

4 . POLAND SAID WORKING ON NEW POLICY TOWARDS UKRAINE
Gazeta Wyborcza website, Warsaw, in Polish 26 Jul 06
BBC Monitoring Service, United Kingdom, Wed, Jul 26, 2006

5. PRESENT AND PAST POLISH PRESIDENT LIKELY TO
JOIN EFFORTS ON RELATIONS WITH UKRAINE
PAP news agency, Warsaw, in English 1106 gmt 24 Jul 06
BBC Monitoring Service, United Kingdom, Monday, July 24, 2006

6. FOURTH LARGEST UKRAINIAN SUGAR PRODUCER TO DEBUT
ON WARSAW STOCK EXCHANGE (WSE) IN THREE WEEKS
Polish News Bulletin, Warsaw, Poland, Thursday, Jul 27, 2006

7. ROMANIAN PRESIDENT TO DISCUSS NATO ISSUES, STRATEGIC
PARTNERSHIP DURING VISIT TO THE UNITED STATES
Romania is interested in what was happening in Ukraine because it
wants a democratic state at its borders. Romanian economy undergoes
unfair competition by Ukraine’s chemical industry selling cheap fertilizer
because it gets methane at a below market cost.
Rompres news agency, Bucharest, in English 1308 gmt 25 Jul 06
BBC Monitoring Service, United Kingdom, Tuesday, Jul 25, 2006

8 . FINLAND’S KEMIRA’S TIKKURILA COMPANY TAKES FULL
OWNERSHIP OF UKRAINE’S KOLORIT PAINTS
AFX Europe (Focus), Helsinki, Finland, Tuesday, Jul 25, 2006

9. EBRD TURNS FOCUS ON EASTERN BLOC
The European Bank for Reconstruction and Development is switching its
attention away from central Europe to Russia and central Asia, generating
massive infrastructure projects and opportunities in its wake. Peter O’Neill
assesses the risks and prizes in the, Lloyds List

Peter O’Neill, Lloyds List, London, United Kingdom, Friday, Jul 21, 2006

10. GERMAN CO TO BUILD THIRD PLANT IN WESTERN UKRAINE
Building material manufacturer KNAUF builds in Borshev
Business Digest, Sofia, Bulgaria, Monday, July 24, 2006

11. FALL-OUT FROM UKRAINE GAS DISPUTE
By John Dizard, Financial Times, London, UK, Wed, July 26 2006

12. FAILURE OF THE ORANGE REVOLUTION IS

A HISTORIC OPPORTUNITY
COMMENTARY: By Anatol Lieven in the Financial Times
London, United Kingdom, Tuesday, July 25 2006

13. ORANGE REVOLUTION COMES FULL CIRCLE
By Natalia A. Feduschak in Kyiv, The Washington Times
Washington, D.C., Sunday, July 23, 2006

14. IN THE PUBLIC INTEREST
OP-ED: By Walter Parchomenko
Kyiv Post, Kyiv, Ukraine, Thursday, Jul 27 2006

15. UKRAINIAN PRESIDENT’S AIDE IVAN VASYUNYK SAYS
PARLIAMENT RESORTING TO “BLACKMAIL”
Interfax-Ukraine news agency, Kiev, in Russian 1559 gmt 26 Jul 06
BBC Monitoring Service, United Kingdom, Wed, Jul 26, 2006

16 . UKRAINIAN PRES HAS TILL 2 AUGUST TO DECIDE ON PM
TV 5 Kanal, Kiev, in Ukrainian 1600 gmt 25 Jul 06
BBC Monitoring Service, United Kingdom, Tue, Jul 25, 2006

17. MINISTER LUTSENKO REGARDS AS POLITICAL MOVE BY
DONETSK PROSECUTORS TO CLOSE CASE OF FALSIFICATION
OF DOCUMENTS ERASING CRIMINAL RECORD OF YANUKOVYCH
Ukrainian News Agency, Kyiv, Ukraine, Monday, July 24, 2006

18. “VOLODYMYR FESENKO: TYMOSHENKO WAS NOT FLEXIBLE
ENOUGH IN THE TALKS, AND SHE TRUSTED MOROZ TOO MUCH”
Dissolving Ukrainian parliament will only make things worse
INTERVIEW
: With analyst Volodymyr Fesenko
BY: Journalist Tetyana Pontik. Ukrayinska Pravda website,
Kiev, Ukraine, in Russian 20 Jul 06
BBC Monitoring Service, United Kingdom, Sunday, Jul 23, 2006

19. COMMENT ON JAMES SHERR COMMENTARY

Possibility the new Regions led coalition may reach a constitutional majority
Letter-To-The-Editor: by Tammy Lynch
Action Ukraine Report (AUR) #739, Article 19
Washington, D.C., Thursday, July 27, 2006

20. A DAY AT THE MAIDAN AND AN EVENING AT THE RADA
COMMENTARY: By Stephen Velychenko

Action Ukraine Report (AUR) #739, Article 20
Washington, D.C., Thursday, July 27, 2006


21. INTO THE VALLEY OF VINES…..CRIMEA
By Mark Smith, Guardian Saturday travel section
The Guardian, London, United Kingdom, Saturday July 22, 2006


22. THE SCIENCE-FICTION NOVEL THE SOVIETS FEARED
Passage that provides an eerie foreshadowing of Stalin’s politically
induced famine in Ukraine — millions died in 1932-33
By John J. Miller, The Wall Street Journal, New York, NY, Wed, July 26, 2006
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1
. PRES YUSHCHENKO SAYS CONDITION FOR ANY COALITION
GOVERNMENT IS TO IMPLEMENT HIS ELECTION MANIFESTO OF
2004 AND PURSUE HIS DOMESTIC AND FOREIGN POLICY

ICTV television, Kiev, in Ukrainian 1618 gmt 26 Jul 06
BBC Monitoring Service, United Kingdom, Wed, Jul 26, 2006

KIEV – Ukrainian President Viktor Yushchenko has not ruled out that he will
dissolve parliament in his interview to major TV channels today. He insisted
that he won’t play a technical role and demanded that all security and
law-enforcement ministries and agencies be appointed by him rather than the
parliamentary coalition led by the pro-Russian Party of Regions.

The main condition for the coalition government and the prime minister is to
implement the president’s election manifesto of 2004 and pursue his domestic
and foreign policy, Yushchenko said. Yushchenko also demanded that
parliament nominate its quote of constitutional court judges and swear in
judges appointed by the president and the assembly of judges.

The following is an excerpt from Yushchenko’s news conference broadcast
by Ukrainian ICTV television on 26 July; subheadings have been inserted
editorially:

[Presenter] And now the main news of the day, the interview of Ukrainian
President Viktor Yushchenko on his assessment of the current political
situation and plans of further actions. [Passage omitted: Yushchenko’s
introductory remarks]
TAKES TIME TO CONSIDER PREMIER’S CANDIDACY
[Yushchenko] I would like to make one general remark. It is very important
that we demonstrate patience and self-control in the process of forming a
government, security and law-enforcement ministries and agencies, that we do
not use pressure and – which is especially unpleasant – any ultimatums. Let
us respect the rights of the parties.

The president treated the processes happening in parliament for the last two
months with great patience. Moreover, I took part in some acts aimed at
normalizing the work of the Ukrainian parliament as soon as possible. I am
convinced that the 60 days that have passed have strengthened the philosophy
of Ukrainian parliamentarianism.

This is not only a minus, though of course the nation and the president have
been waiting for the answer and wanted that answer to be made much earlier
and in a more peaceful and compromise manner then it was reached. But I want
to emphasize that I respect parliament’s right to have special status and to
use its powers.

At the same time, I would like to stress that the president also has 15 days
envisaged by the constitution, during which he makes his decision. I would
like to emphasize once again that the president is not a mailbox that
automatically sends the answer on the same day to the same address. It is
evident that the authors of the constitution did not mean this by giving the
president the right to consider the candidate for prime minister for 15
days.

Obviously, the issue was about what course should be continued, what
relations between the president, the government and parliament should be,
what the procedure of appointing security and law-enforcement agencies is,
how a capable Constitutional Court is formed and many other things. It would
be very strange to give no answers to these obvious questions, although
there are legal issues that should be considered by lawyers at a certain
level, and there are many other things.

So, I proceed from the idea that the nation and parliament will get the
answer within the envisaged period. But I would ask the Ukrainian
parliament, especially certain political forces, not to create an illusion
of the possibility of pressure on the president regarding this decision.
NO USE OF FORCE
[Yushchenko] I would like to single out the topic which, in my view, should
not be raised either in parliament or outside it. These are various
scenarios involving use of force. I believe that one should not appeal to
the public and the mob now. One should not resort to disorder or find
comfort in the idea that they can do anything after the election. You can do
only one thing – observe the law.

When we talk about order or solving the current conflict, perhaps quite
naturally, we should emphasize and remember one thing – those who sow the
wind will yield a storm. I would not advise anyone to take the path of use
of force. I understand that this is a polemic, that this is an artificial
polemic, but I want to warn very seriously – it is not worth even discussing
this.

We should respect ourselves as politicians and look for answers that exist
rather than attempt to threaten that they won’t observe the constitution
again and please some sick minds.

[Olha Skotnykova, UT1 correspondent] First channel news, Olha Skotnykova.
Mr President, what is your assessment of the logic of events in parliament, in
particular statement by the speaker that parliament might not observe the
president’s decree on dissolution? What is your prediction as to what can
happen after that?

For instance if you issue the decree and parliament does not observe it and
continues sitting or appoints the prime minister on its own. What if this
scenario of legal nihilism come true? Thank you.
WARNS PARLIAMENT
[Yushchenko] Believe me, I would not like to pay too much attention to this
topic, but I stress that the decree will be fulfilled in accordance with the
constitution. And my decrees will be valid, legal and in line with the
letter and spirit of the Ukrainian constitution.

I have been and I am saying again that I will not allow anyone – starting
from myself – to break the Ukrainian constitution. It hurts that people who
were linked to writing the Ukrainian constitution today so easily begin to
comment on it in a dishonest way. To do this they should have formed the
Constitutional Court, which could assess the actions by the president and
parliament. This has not been done for smart reasons.

So, today we should look for understanding by sitting at the negotiation
table. It is better to come to an agreement than issue ultimatums. I will
not react to them. I am not interested in this because I, as the president,
have one goal – to ensure that the country’s political course, both domestic
and foreign, does not change.

Second, to protect the rights and freedoms with which not all of those who
now demand these actions from the president can be associated.

These are not empty words. I am convinced that today the Ukrainian nation
faces a test as never before. I understand that democracy does not take root
in a day. But I understand what price has been paid for freedom and
democracy in Ukraine to give it away so easily. I understand all the
difficulties of the Ukrainian parliament. I understand that it is split.

It is split naturally, when 8.3m people voted for one political force or
bloc and 8.6m people voted for another political force. I understand that 37
per cent of people support the coalition of the Party of Region, the
Communists and Socialists and 36.5 per cent do not support this coalition. I
understand even when 36 per cent support Our Ukraine’s integration into a
grand coalition and 36.5 per cent don’t.

So, one can feel that the nation has a stance. It is a complicated one.
Politicians cannot give a mathematical answer. Believe me, it is very
primitive to be guided by percentages. I am convinced that the challenge, a
test for Ukrainian politicians today, is how to show the nation the form of
understanding and consolidation which unfortunately did not happen during
the election. Those who will lead to a stand-off will lose.

Endless ultimatums are a weak response. Believe me, there is always a
counteraction to any action. The last thing I want is to appeal to voters or
Kiev residents, asking them to protect Ukraine’s democracy. I would not like
anyone in parliament to set the task of replacing the feeling of freedom,
independence and sovereignty with any other feelings. They won’t manage to
do this.

Ukraine is different. We have become more Ukrainian than two years ago. One
should not play with this. So, I would like very much that politicians don’t
redirect their responsibility to sit at the negotiation table and find a
compromise that would not have come to their minds two months ago. This is
the task for politicians.

I emphasize that to appeal to the public, to lead to a civil conflict and
look for an answer there, I think, is the ground for weak politicians.

CONDITIONS FOR PRIME MINISTER & COALITION GOVERNMENT
[Viktor Soroka, ICTV correspondent] Viktor Soroka, Fakty programme, ICTV.
Following this topic, both outside and inside parliament one people are
categorically calling on the president, as the head of state, to immediately
submit [to parliament] as candidate for prime minister Party of Regions
leader Viktor Yanukovych.

Others no less categorically, both in parliament and outside it, are calling
on you not to do this and immediately dissolve parliament. I understand that
there is possibly no definite answer, but what will the president’s position
be? And if he has to submit Yanukovych’s candidacy in accordance with the
constitution then on what condition, apart from guarantees of European
choice and adherence to human rights and freedoms? Thank you.

[Passage omitted: Yushchenko repeats he wants to take time to consider the
candidate for prime minister]

[Yushchenko] Point number two, which is no less fundamental for me, is what
policy the prime minister will carry out. I will not allow a situation when
a prime minister implements a policy of civil strife, a policy which leads
the Ukrainian nation in the direction opposite to sovereignty, a policy that
splits Ukraine’s lands and its territory, a policy that does not work for
consolidation.

Two years ago I ran for president and honestly won with a programme of
consolidation and democratic development of this country.

This is what my voters believed in. They are the same Ukrainians. By the
way, there were about 14m of them. so, when a discussion is going on now
whether to ignore or not this or that part of the Ukrainian policy, either
domestic or foreign, I think this discussion has no future. I will not play
a technical role in this country.

I will implement the policy with which I came to big politics as the
president. This is my declaration and my programme that was approved
by the majority of Ukrainian society.

Point three is that there are three scenarios now. [1] The first option – 60
days are over, but Ukraine has neither prime minister nor cabinet. And the
day when the president can dissolve parliament has come.

I would like to stress that all political contradictions in society can be
resolved in parliament in two ways – through an accord, or in other words,
through a coalition, or through dissolution and a search for a new
composition of parliament, trying to find an answer through a [new]
coalition of consent. I am not rejecting this scenario.

I just want to say that it could add unnecessary confrontation to society
and political forces. But this option can be considered as a response to
those who failed to resolve the burning issues during consultations.

[2] The second way is to form a coalition which could deal with any
challenges that have to do with the basics of Ukraine’s political course,
democracy and freedoms. I will not go into details whether it should be a
grand or not-so-grand coalition. The talks are under way. I am not a
participant in the talks. I am not a member of either team that is defending
its position.

I am the president. I am aware of the talks. I know that there is some
progress. But not enough progress for us to say today that a possible
coalition will be built based on these principles, a cabinet will be formed
based on these principles and this is what we think about the constitutional
court crisis and so on. These are the questions to which I am demanding
clear answers. Without them, neither coalition will make any progress.

I would like to note that the composition of a coalition, be it the existing
one or a grand coalition, depends on whether this or that political force is
granted access to government. Making declarations about democratic values,
irreversibility of domestic and foreign policy, basic freedoms is one thing.

But having mechanisms to implement and defend them is a different thing.
Being a part of the government is the guarantee of sticking to this course.
Passage omitted: repetition]

Under any coalition, I will demand that the law-enforcement block is not a
subject for discussion. The interior minister, the country’s defence
minister, the foreign minister, the prosecutor-general and the head of the
Security Service of Ukraine [SBU] should be appointed only by the president.
[Passage omitted: repetition]

[Yushchenko] I want to say that for me the formation of the Constitutional
Court is an extremely important condition. This is something the president
is never going to drop.

I perfectly understand that there are too many conditions and that it seems
easier to say no than to admit that for eight months they have being
misleading the nation, lying that the Constitutional Court cannot be formed,
and to say that the time of honest politicians has come. There should be a
Constitutional Court in this country if we are talking about the rule of
law, rights and freedoms. [Passage omitted: repetition]

Parliament is going to come up with its five [constitutional] judges which
is going to be a good test of democracy for them.

[Passage omitted: Yushchenko says coalition MPs want to nominate their
candidates only.]

It is understood that they have chosen the way of usurping the
Constitutional Court as they are ignoring the idea of equal representation
of parliament’s political forces [in the Constitutional Court]. Only one
political force will have a chance to nominate the candidates and approve
them. This is not honest politics.

This kind of politics is hard to understand as it is one-sided. And this is
exactly why it is going to be a good test of democracy which will show us
whether it makes sense to continue the coalition talks or to stop them.
[Passage omitted: repetition]
WANTS NEW CONSTITUTION
[Yushchenko] I think that the last [constitutional] reform added many
illogical things to the constitution of Ukraine. What we are witnessing now
is that new powers have been redivided among parliament, the president and
the cabinet. But there are no new laws which explain their format and their
use in practice. Whole sections of laws which regulate the general state of
affairs are missing. [Passage omitted: repetition]

We keep referring to the constitution, knowing full well that the
constitution cannot produce any answer. No answer. And politicians have to
find the will to find answers within the constitution.

I think that many misunderstandings stemmed from the recent changes [to the
constitution]. They have thrown this country into chaos when one branch of
power feels that certain constitutional powers have been lost, while the
other branch has not got all the necessary rules and regulations. Many
issues are still waiting to be resolved by constitutional means.

I believe that a consolidated stance of Ukraine’s democratic forces is the
way to resolve this kind of contradiction. These two or three forces should
sit down at the negotiating table and say that, in line with the
constitution, they are prepared to hold a public discussion of changes and
amendments to the constitution or to create a new text. The nation should
know that it is involved in the process. [Passage omitted: repetition]

I believe that only this kind of mutual understanding will bring harmony to
the relations among the branches of power. [Passage omitted: repetition]
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[return to index] [Action Ukraine Report (AUR) Monitoring Service]
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2. “TIMELESS APPROACH TO WTO”
Ukraine parliament dragging feet on WTO-related legislation

ANALYSIS AND COMMENTARY: By Olena Snezhko
Invest-Gazeta, Kiev, in Russian 25 Jul 06; p 5
BBC Monitoring Service. United Kingdom, Wed, Jul 26, 2006

The Ukrainian parliament is dragging its feet on bringing legislation into
line with WTO requirements, Economics Minister Arseniy Yatsenyuk has
said. It is therefore pointless to speculate on when Ukraine will be admitted
to the organization.

It is irrelevant whether Russia joins the WTO before or after Ukraine, a
Ukrainian newspaper has said. Much will depend on the majority in the new
parliament and the cabinet that will be formed on its basis.

The following is the text of the article by Olena Snezhko entitled “Timeless
approach to WTO” published in the Ukrainian weekly business newspaper
Invest-Gazeta on 25 July; subheadings have been inserted editorially:

Ukraine and Russia are completely unable to complete entry to the World
Trade Organization. Whereas in the case of Russia the main obstacle is
negotiations with the USA, Ukraine’s chances may worsen over problems with
the passing of the necessary bills in parliament and the new composition of
the government that will include opponents of Ukrainian membership of that
organization.

For Ukraine the only remaining obstacle is Kyrgyzstan, which has raised a
demand to reduce import duties on agricultural goods. This caused
bewilderment in the Ukrainian government: Kyrgyzstan supplies its own
domestic market for these goods to only 40 per cent, and so liberalization
of conditions for exports to Ukraine is simply superfluous. All the more so,
in the framework of the free trade zone treaty there already exists a zero
rate for exports of goods from Kyrgyzstan.

In the words of Economics Minister Arseniy Yatsenyuk, if Ukraine makes
concessions and agrees to establish zero rates in the process of
negotiations on joining the WTO, it will have to take identical measures
with regard to other WTO members. This carries the threat of a review of
protocols already signed, including with the USA and the EU.

On the other hand, there has been progress in Kyrgyzstan’s consent to remove
from the negotiation framework the question of paying the Ukrainian debt of
27m dollars, whose existence is disputed by the Ukrainian side. However,
even despite the removal of this contentious issue, the situation regarding
negotiations between the two countries seems deadlocked.

In connection with this, the possibility has already been voiced of
insisting on the right of the majority in the working group for considering
Ukraine’s application.

“We are not rejecting the negotiating process with Kyrgyzstan,” Arseniy
Yatsenyuk says in a recent interview, “but it has to be exclusively
constructive. If it fails to have clear-cut signs of a constructive nature,
Ukraine will make use of its right to ask the majority in the WTO working
group to vote on the admission to the WTO without Kyrgyzstan.”

In that case, Ukraine can be accepted into the organization without signing
protocols with all the member countries.
NEED FOR COMPLIANT LEGISLATIVE CHANGES
Such an entry option requires the completion of bringing national
legislation into compliance with WTO standards. The prospects here are also
rather uncertain. The closer Ukraine gets to completing the negotiation part
of the integration process, the more obvious becomes the delaying by the
Supreme Council [parliament] of harmonization of legislation in accordance
with conditions of WTO agreements.

Although at the end of February this year, according to [outgoing Prime
Minister] Yuriy Yekhanurov, there were three or four laws remaining to be
passed for WTO entry, some of the bills are still “in the balance”. It is
precisely these bills that will be decisive for the time frame of
Ukraine’s accession to the WTO, if no way is found out of the existing
situation with Kyrgyzstan.

However, there is no question yet of time-frames for admission. This was
also said by Arseniy Yatsenyuk, who stressed that it was bad practice to
promise WTO entry from year to year. Everything depends on how quickly
the package of laws sent to the deputies back at the beginning of the year is
passed. And once again the uncertainty factor surfaces, at the basis of
which is the functioning of parliament.

The sooner a stable majority forms, in whose composition and with which all
the deputies of the current convocation agree to work, the quicker the
relevant bills will be considered. Then it will be the quality of the
parliamentary coalition that will influence the date of Ukraine’s accession
to the organization.

But it is not only the composition of the majority that will play a decisive
role. “I am concerned by two elements,” said Ihor Burakovskyy, the director
of the Economic Research and Political Consultations Institute. [1] “First,
the WTO is not mentioned in the new coalition agreement, either because the
priority of entry is self-evident, or for other reasons.

[2] Second, according to my estimates, parliament has been renewed by about
60 per cent. This shows that many things, including the WTO, will have to be
explained to many people virtually from scratch, which is very arduous
purely from the technical point of view.

On the other hand, the question arises as to how pro-WTO the new government
will be. However, Mykola Azarov, when he was Ukrainian deputy prime
minister, was directly involved in the question of Ukraine joining the WTO,
and it cannot be said that he put a brake on the process.

There were other problems at that time, connected not with Azarov’s
personality, but with the general organization of the system of power. Of
course, regardless of the priority nature of membership, there is a risk of
traditional foot-dragging.”
NO COMPETITION WITH RUSSIA FOR FIRST ENTRY
When it is no longer a matter of the pluses and minuses of membership, and
its economic advantages have become obvious, Ukraine cannot afford further
delays to joining the WTO. But the reason for this is not at all the noisy
competition with Russia over who is to be first to join.

Yatsenyuk said that the Ukrainian government will only welcome the entry of
Russia into the WTO, since it will regulate the norms and rules by which
commercial relations are conducted between the countries.

Russia today is on the same path to the WTO as Ukraine. The signing of the
protocol between Russia and the USA that was expected during the G8 summit
in St Petersburg was postponed for an indefinite period because of a dispute
over the audit of the quality of meat products being supplied by the
Americans to the Russian market.

The head of the American delegation, Susan Schwab, named September as a
likely date, the minister of economic development and trade of the Russian
Federation, German Gref, named October, while the leader of the Russian
delegation, Maksim Medvedkov, declined to forecast a date at all. The
position was exacerbated by Georgia, which on that night announced that it
was recalling its signature to the protocol.

This position of Georgia may have extremely unpleasant consequences for
Russia, since dissatisfaction has already also been expressed by the EU, for
which the recall of Georgia’s signature may be a good precedent. In such
conditions, Russian membership of the WTO is expected in 2007-08.

From the viewpoint of people who consider that the Ukrainian economy will be
a big loser from overtaking Russia in the negotiation process, it can be
said that Ukraine has been a winner from the problems of Russian integration
into the WTO.

But in actual fact, as Ihor Burakovskyy said, “this question is exclusively
political and imposed by politicians. It has no basis. It is virtually
impossible to coordinate the process of integration of Russia and Ukraine
into the WTO, because every country works out individual conditions for
joining the WTO. We can coordinate general approaches and discuss some
things, as was done in simple forms.

But since every country has its specific features, principles and different
levels of interest (there is one level of interest regarding Ukraine and
another, for understandable reasons, regarding Russia), we need to speak
less about politics and more about strategy, techniques, negotiation tactics
and the need to adopt a list of agreed draft laws. Without this, whether
Russia joins or not, Ukraine will not be accepted into the WTO.”
————————————————————————————————
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
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3. THE ECONOMY UNDER A BROAD COALITION

OP-ED: By Valentin Zelenyuk
Kyiv Post, Kyiv, Ukraine, Thursday, Jul 27 2006

A lot of people are now wondering what will happen to Ukraine if the new
coalition comes to power. Despite being a strong supporter of the Orange
Revolution, I would strongly argue for the benefit of a broad coalition
involving the Party of Regions and Our Ukraine. As an economist, I will
focus on economic issues, but first a bit about politics.

I think any panic about a return to an authoritarian regime, as in Russia or
Belarus, and away from the EU is not justified at all, especially under a
broad coalition. In fact, I think the current composition of political
forces in Ukraine is in some sense ideal.

[1] First of all, Ukraine will still continue further democratization and
movement toward the EU and NATO because this policy is the prerogative
of the President and he is expected to be in power till at least 2009.
Helping to form this coalition, rather than going into opposition, would only
increase the President’s real power.

On the other hand, Ukraine needs a good economic relationship with Russia,
and the Prime Minister from the broad coalition is more likely to do this.

[2] Second, the economy should grow even faster because it would be in the
interest of both the Party of Regions and Our Ukraine.

[3] Third, if Our Ukraine forms a broad coalition with the Party of Regions,
the communists and those radical socialists close to the socialists would
have very little power to prevent further market reforms so desperately
needed by Ukraine.

[4] Finally, and this is important, Ukraine will have a great opposition
leader, Yulia Tymoshenko, who will raise the alarm in the event of
wrongdoing. I believe that such a composition is the best product that
Ukrainian democracy has had to date. And now, the economy.

Without doubt, the Orange Revolution helped Ukraine progress on the path of
democracy. However, one should be honest and acknowledge that the Orange
coalition failed not only to agree on politics, but on how to run the
economy. This is the biggest disappointment many people in Ukraine have,
regardless of their political sympathies. Let’s look at the facts.

Despite the great expectations of many, the rapid growth of 12.1 percent in
2004 was replaced by modest growth of 2.6 percent in 2005. The main reason
for this underperformance was the ‘shakeout of property rights’: not even
re-privatization per se, but the real threat of having re-privatization on a
mass scale, fueled by disagreements within the Orange coalition.

Only when the property rights shakeout was finally pacified, in September
2005, was private investment revived dramatically and Ukraine became much
more attractive for foreign investors. However, a lot of time and
opportunities were lost.

The great thing about a broad coalition is that it would not allow another
property rights shakeout, as neither the Party of Regions nor Our Ukraine
wants it. Some re-privatization, limited to a few strategic assets where any
violations of legislation proved unambiguous in court, would be desirable
(as Kryvorizhstal clearly illustrated).

Yet, time has been lost and the main forces in the new coalition are
unlikely to allow it. At least there would be no threat of another massive
revision of property rights, and this is the main reason for good economic
performance under the broad coalition.

Another advantage rooted in the fact that the interests of the Party of
Regions coincide with the interests of the majority of businesses, which is
very good at this stage in the economy’s revival. (GDP is currently just 65
percent of the 1990 level!).

Like it or not, the Party of Regions unites most business assets in Ukraine
now. Unlike a few years ago, some of their assets are now traded or will
soon be traded on local and international stock markets, and so their
leaders would want Ukraine to get better ratings, which would help their
stocks get higher valuations.

Better ratings are closely associated with economic and political
conditions. (In this respect, Ukraine is still doing poorly in terms of
business environment. In a recent World Bank survey called Doing
Business-2006, it was ranked 124 out of 155 countries. This is much worse
than most transitional and even developing countries, like Afghanistan,
which were higher in the rating!)

Therefore, the leaders of Party of Regions together with Our Ukraine,
behaving as rational economic agents, should be strongly inclined to carry
out the reforms necessary to improve economic and political conditions.

Could these reforms be made without a broad coalition? Ukrainians should
recall a lesson from the past – a package of pro-growth market reforms
failed to be adopted by parliament in 1996 and economic stagnation continued
till 1999!

Speaking realistically, the necessary economic reforms (land reform, tax and
pension reform, etc.) are practically feasible only under a broad
coalition – not when a few votes can sabotage a parliamentary decision on
critical issues.

Such sabotaging of the continuation of pro-market reforms would be very
likely under any narrow coalition, as the communists and the radical
socialists are likely to oppose such reforms, as past experience shows.

Finally, the improvement of economic conditions in Ukraine should determine
another benefit from a broad coalition – it will make Ukraine even more
attractive for foreign direct investments (FDI).

Before 2005 Ukraine had one of the lowest inflows of FDI per capita of all
transitional economies. Moreover, a major portion of all FDI inflows were
not from the West, but from the offshore zones (often with Ukrainian
origin). They were mostly from Cyprus and Russia, and so did not have the
same spillover effects as would have been the case with Western FDI brought
to successful transitional economies.

To sum up, with the broad coalition of Our Ukraine and Party of Regions,
Ukraine should be performing much better economically and politically than
under any shaky Orange or anti-crisis coalition. The hope is that the leader
of Our Ukraine will step over ambitions and emotions and form a broad
coalition with Party of Regions for the sake of prosperity for the whole of
Ukraine. -30-
—————————————————————————————————-
Valentin Zelenyuk is a Visiting Research Scholar at Kennan Institute at
Woodrow Wilson International Center for Scholars in Washington DC,
USA, Senior Economist at Kyiv Economics Institute, visiting professor
of EERC at Kyiv-Mohyla Academy and Director of Ukrainian Productivity
and Efficiency Group (UPEG).
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[ return to index] [Action Ukraine Report (AUR) Monitoring Service]
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4. POLAND SAID WORKING ON NEW POLICY TOWARDS UKRAINE

Gazeta Wyborcza website, Warsaw, in Polish 26 Jul 06
BBC Monitoring Service, United Kingdom, Wed, Jul 26, 2006

WARSAW – Will Poland change its strategy regarding Ukraine in the face of
the collapse of the orange camp? “We are prepared to help and act as an
intermediary, but we are not planning any new initiative within the next few
days,” Andrzej Krawczyk, President Lech Kaczynski’s foreign policy advisor,
tells Gazeta Wyborcza reporters.

No one knows whether President Viktor Yushchenko will dissolve parliament as
Yuliya Tymoshenko would like him to, or whether he will share power with the
pro-Russian blue camp that won the elections last March. “We are waiting for
the situation to stabilize,” Krawczyk adds.

What the presidential aide calls caution is deemed as helplessness and a
waste of time by the opposition. Politicians of the Civic Platform [PO] and
the Democratic Left Alliance [SLD] say that Poland fell silent on Ukraine at
a time everyone expected us to be active. People who shaped Polish foreign
policy until recently tell us that Washington wanted to see Warsaw involved
in saving the orange camp.

“The Americans expected someone from Poland would intervene and call Kiev.
No call was made because the current president does not have the kind of
contacts that his predecessor had in Ukraine,” says an associate of former
prime minister Kazimierz Marcinkiewicz.

President Kaczynski’s people explain that under the new circumstances it was
impossible to apply the scenario of [former president] Kwasniewski’s
mediations and the Ukrainian round table. “Stronger involvement on Poland’s
part could be seen as meddling with internal affairs. After all, the last
elections were not rigged,” says MEP Konrad Szymanski of Law and Justice
[PiS].

Observers of the Ukrainian political scene also do not see how Warsaw could
have got more involved in the conflict after Yushchenko dismissed Prime
Minister Yulia Tymoshenko last September. The situation in Ukraine continues
to fluctuate. Old alliances fall apart and new ones are forged.

It is even difficult to say who is a greater enemy for Yushchenko:
Tymoshenko, the princess of the orange revolution, or his main revolutionary
rival Viktor Yanukovych. One thing is certain: for nearly one year now no
one – not even Warsaw – could have succeeded in bringing members of the
warring orange camp to sit at one table.

Sources close to the president and the Ministry of Foreign Affairs indicate
that Poland will shortly change its strategy in the face of the political
changes taking place in Kiev. There will be few contacts at the government
level. Efforts will focus on the development of a civic society and
democratic institutions.

Contacts between NGOs and youth organizations will intensify. “We will start
with sending prominent advisors,” a source close to the president tells us.
What kind of advice does Poland have to offer? “On the introduction of
public procurement procedures, and the establishment of a civil service and
other modern state structures,” we hear.

Not all experts associated with the current administration agree with such a
strategy. One source who had huge influence on Polish foreign policy until
recently tells Gazeta Wyborcza reporters that “we should do everything we
can to persuade the blue camp to follow the path of the orange camp.” This
cannot be achieved by maintaining limited contacts, says our interlocutor.

It has to be said, however, that Poland will not be seen as a welcome
partner in Ukraine at present. Leonid Kozhara, former diplomat and deputy of
the Party of Regions who will now have a huge influence on Ukrainian foreign
policy, tells Gazeta Wyborcza reporters that the consent to have Poland act
as an intermediary in Kiev’s contacts with Washington and Brussels was a
mistake that the Ukrainians must not repeat.

Experts in Kiev claim that attempts at persuading the blue camp to change
colour are unrealistic. For Yanukovych’s people the very word “orange” is
synonymous with danger and hostile plotting. This does not mean we do not
have any chances, however.

When Yanukovych was prime minister under former president Leonid Kuchma,
he showed a very high interest in Poland. He sought to develop economic ties
with us. Warsaw will remain an interesting partner for Yanukovych if it
presents Kiev with attractive economic projects. A specific and financially
backed plan for taking joint advantage of the Odessa-Brody pipeline could be
one of them. -30-
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5. PRESENT AND PAST POLISH PRESIDENT LIKELY TO

JOIN EFFORTS ON RELATIONS WITH UKRAINE
PAP news agency, Warsaw, in English 1106 gmt 24 Jul 06
BBC Monitoring Service, United Kingdom, Monday, July 24, 2006
WARSAW – President Lech Kaczynski and former President Aleksander
Kwasniewski are to jointly deal with Poland’s foreign policy, Dziennik
disclosed on Monday [24 July]. This unexpected cooperation will cover
Polish-Ukrainian relations.

The former president has just been appointed chairman of the International
Centre for Prospective Studies in Kiev, while the incumbent president has
clearly suggested he would be willing to use Kwasniewski’s experience.

Andrzej Krawczyk, minister at the Presidential Chancellery assured Dziennik
that if President Kwasniewski addresses President Kaczynski with a
cooperation proposal on Polish-Ukrainian matters it will be considered “very
seriously and with good-will”. Also politicians of the Left were positive on

the initiative.

The cooperation proposal will probably be forwarded soon because

Kwasniewski is very keen on Poland playing an important mediation role in
Kiev in relations with the EU. He also wants to make the Kiev-based centre
a world renowned scientific institute, Dziennik wrote. -30-
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6. FOURTH LARGEST UKRAINIAN SUGAR PRODUCER TO DEBUT
ON WARSAW STOCK EXCHANCE (WSE) IN THREE WEEKS

Polish News Bulletin, Warsaw, Poland, Thursday, Jul 27, 2006

WARSAW – The fourth-biggest Ukrainian sugar producer, Astarta is preparing
to strengthen its position on the domestic market. In order to gather the
necessary financial means, it will conduct a share issue on the WSE. The IPO
will be carried out by ING Securities.

The company is to go public on 11 August and investors can already subscribe
for its shares. According to ING Securities director Andrzej Olszewsk, the
maximum number of new shares issued may reach 6.7m, with up to 7.6m shares
offered in total. The share price will range from ZL19 to ZL27, which means
that Astarta could earn from ZL127m to ZL180m on the operation.

“Our aim is to consolidate the fragmented Ukrainian sugar market. At
present, five leading sugar producers control only 30 percent of the
market,” says the Ukrainian enterprise’s CEO Wiktor Iwanczyk. By 2010,
Astarta plans to increase its market share from 3.2 percent to 10 percent.
————————————————————————————————
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7. ROMANIAN PRESIDENT TO DISCUSS NATO ISSUES, STRATEGIC
PARTNERSHIP DURING VISIT TO THE UNITED STATES

Romania is interested in what was happening in Ukraine because it
wants a democratic state at its borders. Romanian economy undergoes
unfair competition by Ukraine’s chemical industry selling cheap fertilizer
because it gets methane at a below market cost

Rompres news agency, Bucharest, in English 1308 gmt 25 Jul 06
BBC Monitoring Service, United Kingdom, Tuesday, Jul 25, 2006

BUCHAREST – Romania’s President Traian Basescu said that his visit due
to the United States soon “becomes an annual visit and it will be repeated
within the Romanian-US partnership and it is not a spectacular one”.

Romania’s president said in an interview with daily Evenimentul Zilei, on
Tuesday 25 July, that his official visit to Washington would implicitly have
a working nature through the key-topics on its agenda including the
cooperation within NATO, issues related to the modernization and increase
in the technical and intervention capacity of the Romanian troops in the
operations theatres and the development of the strategic partnership.

Likewise, on this occasion they will hold talks on the economic cooperation
and trade exchanges, the US investments in Romania being given pride of
place.

“We would like to see US investments also in industries such as automotive
industry and aeronautics no matter if in IAR Ghimbav [central Romania], in
Romaero or the airplanes works in Craiova [southern Romania],” President
Basescu stressed.

President Basescu pointed out in context that his visit to Washington was
the second he had paid there since he had been in office and he would visit
Berlin in autumn for the second time. The recent visit to Paris as well was
the second this year, Basescu added.

Referring to his meeting with President Bush, President Basescu emphasized
the fact that the Black Sea issue had been integrated into the discussions
on Europe’s energy security. “It looks like Romania’s interests overlap
those of the US, which is not true. Romania’s interests only limitedly
coincide with those of the US,” President Basescu explained.

He also showed that Romania was interested in what was happening in Ukraine
because it wanted a democratic state at its borders or in what was going on
in Georgia, Moldova or the Caspian area. “We’d like the Caspian crude to be
able to get out of the area by different ways from those on the existing
routes supervised by one single state,” Romania’s president said.

In his opinion, the Romanian economy undergoes an unfair competition by
Ukraine’s chemical industry that, benefiting from much cheaper methane,
sells fertilizers on the international markets much cheaper than Romania,
which buys methane at the market price.

President Basescu will pay an official visit to the United States, on 26-28
July, at the invitation of his US counterpart George W Bush. The visit is
part of the political dialogue between Romania and the United States.

The visit’s agenda schedules the meeting with President George W Bush
followed by a news conference in the Oval Office and the dinner the US
President offers in honour of President Basescu, the members of the
Romanian official delegation attending.

The visit’s agenda also schedules an appointment with Defence Secretary
Donald Rumsfeld at the Pentagon and several appointments with the US House
of Representative’s Speaker Dennis Hastert and US Congressmen at the
Capitolium and a meeting with the heads of parliament friendship groups with
Romania and a working dinner with the US Senate’s leaders, and some
officials of several NGOs interested in the regional strategy.

The visit’s targets also include the discussion of aspects of the
consolidation of the bilateral strategic relation between the US and Romania
as NATO allies in the struggle against terrorism as well as in the common
interest in the promotion of international and regional security and
stability. -30-

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8. FINLAND’S KEMIRA’S TIKKURILA COMPANY TAKES FULL
OWNERSHIP OF UKRAINE’S KOLORIT PAINTS

AFX Europe (Focus), Helsinki, Finland, Tuesday, Jul 25, 2006

HELSINKI (AFX) – Kemira OY said its paints and coatings unit Tikkurila has
increased its stake in Ukrainian-based company Kolorit Paints to 100 pct.

The Finnish paints company acquired the remaining 49 pct that it did not own
from Ukraine’s LGU for an undisclosed sum.

Tikkurila bought a 51 pct stake in the company in Aug 2004. Kolorit’s name
will be changed to TOB Tikkurila. -30-
———————————————————————————————–
fiplan1.afxnews.com ~ azer.sawiris@afxnews.com afs/wj
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9. EBRD TURNS FOCUS ON EASTERN BLOC
The European Bank for Reconstruction and Development is switching its
attention away from central Europe to Russia and central Asia, generating
massive infrastructure projects and opportunities in its wake. Peter O’Neill
aasesses the risks and prizes in the, Lloyds List


Peter O’Neill, Lloyds List, London, United Kingdom, Friday, Jul 21, 2006

THE European Bank for Reconstruction and Development is currently known
as the Bank which likes to say DA particularly when it comes to infrastructure.

Contracts for new projects are free-flowing across the old Eastern bloc and
the EBRD plans to be the catalyst for even more. Old and new ports and
airports, rail and pipeline networks, hydro and nuclear power stations and
their transmission links, city district heating, gold mines and minerals,
raw materials and consumer goods’ transport by new roads, sea, rail and
air… the list is extensive and costly, which is where the bank comes in.

Uneasy political and commercial truces are in place across much of the
region, but these can untangle very fast, particularly where a country is
run with overdependence on one man at the top. This is not just about
insurance and export credit risk, but potentially major financial disasters
which could hammer a foreign operator’s global budget strategy.

The presence of the EBRD is effectively a stabilising force amid a turbulent
political and financial climate. Ports and regional and hub airports in
particular are set to directly benefit from the five-year strategy, approved
at the recent EBRD annual general meeting in London.

There will be around 4bn of EBRD money per annum for all sectors in these
regions. EBRD leverage normally produces another 60% of further money from
government and private sector finance. Over five years, that should produce
a total of around 64bn.

The bank also says better own profits mean it will ‘accept higher country or
financial risk as well as taking on more participating in equity’.

The European Investment Bank, other multilateral lending bodies and
parastatal money from the likes of the Kuwait Investment Office, could all
add to the pile.

EBRD president Jean Lemierre told Lloyd’s List that its operational
countries who are now in the EU were ready to ‘graduate’ and most would be
out of EBRD lending by 2010.

Up to 40% of EBRD investment is envisaged for Russia, where there is stiff
local competition for emerging projects. The Russians are using their recent
oil and gas profits to strike up deals with old comrades in central Asia and
Ukraine on steel, power and oil and gas. The central Asians are talking to
China, Japan and Turkey, not simply multinationals in the EU and US.

Many have questioned why the Russians need help, with so much Kremlin
petrogas money around. Had bankers forgotten how much western money
and effort went down a big black hole as the Russians went into financial
freefall?

Mr Lemierre’s answer is that Russia’s regions still need major assistance.
The EBRD encourages countries to pursue public private partnerships (PPP),
adding ‘we are having a good discussion on this with Russia. There is
potential to finance ports, airports and bridges’.

He says Russia needs ‘to tap the market [so it] can use the money and the
skills of the private sector. This is absolutely crucial, otherwise there
will be bottlenecks in Russian growth and that would cause a serious
problem.’

Russia, however, is not the only controversy on the banks agenda. At the
recent AGM, Romanian interests made it clear that they were unhappy about
the high cost of PPP for governments compared with high profits made by
investors. They are aware that similar projects in the UK are under
criticism. Mr Lemierre freely admits that the region had a lot to learn
about managing PPP.

Foreign investors and big, foreign, operational companies complain of long
legal delays over disputed tenders, disinterested and blocking bureaucrats,
delays in clearances and corruption pressures. Accusations about state
agencies backtracking on agreed rates of return which were changed after
operators and investors had been hooked, have also been levelled at the
bank.

But for all these complaints the bank’s presence in the region does appear
to have had a positive impact. On offer is the promise of infrastructure on
a massive scale.

In Bulgaria, the airport privatisation process is well under way for the
Black Sea coastal airports of Varna and Burgas. The port strategy links show
that nodes developed with foreign partners are definitely in.

Burgas, with one of the Balkans’ biggest air cargo centres, is a major
transit hub for sea, rail and road (route E87). They boast there is cheaper
fuel from the Balkan’s largest refinery nearby (10km). The concession winner
for both airports will have to put up a total of 130m and the EBRD will put
in around 50m. Other Bulgarian airports in the government’s concession
strategy are Plovdiv, Rousse, Gorna Oryahovitsa and Targovishte.

In Georgia, progress at Batumi port has been impressive, but in addition,
tenders are to be called to effectively privatise K’ut’aisi airport in
north-central Georgia. ‘Ultra-modern’ upgrades of the airports of Batumi
airport and the capital Tbilisi should be finished by the year end. There
are negotiations with the US and other countries for Tbilisi to be used as a
transit point.

Azerbaijan has a major national transport development plan in place courtesy
of the EBRD and the Asian Development Bank (ADB) which may now be another
source for collaborative funding. Last year the ADB said the state-owned
Caspian Shipping ‘monopolises sea transport and operates independently’.

The government is planning a major expansion of the port’s operations,
including the addition of large oil tankers. The Baku International Port is
an autonomous entity responsible for the operation, maintenance, and
development of four major terminals.The ministry of transport, the ADB
added, says that ‘the port needs communications, navigational, and
search-and-rescue facilities’.

In Kyrgyzstan, where they are working closely with China to modernise the
railway system, the EBRD is also working hard. Gold mining deposits and all
mineral mining is being ‘developed on basis of open tenders’. The bank is
hoping mining will be the engine that pulls the republic forward in reforms.

In turn, EBRD officials said the bank was ready to support gas pipeline or
energy projects under a concession structure. Kyrgyzstan has five million
people.

Everyone, including the Kyrgyzi, are still looking over their shoulders at
Russia. Speaking at the AGM, the Kyrgyzi representatives said: ‘We have
discussed our debts with Russia in the energy sector and we hope by autumn
the government will have implemented measures to make our energy sector more
attractive to investors and we are talking with companies about finance and
concessions.

‘We would also like to attract big investors from our neighbours,’ they
added, in a clear signal to the Chinese representatives.

In Tajikistan, meanwhile, the government is also keen to play the transit
role and delegates told Lloyd’s List there would there be more air passenger
and cargo traffic for Dushanbe before the end of the year. They hope
Dushanbe airport, with its Ganci military base, will become a transit point
between Asia and Europe.

India is two hours away, China one hour and London four hours. By next year
they plan to reduce air cargo rates, which are about four times road rates,
they said. The 13,800ft runway can handle the world’s heaviest freighters.

In Turkmenistan, the government plan for 2005-2020 envisages investing up to
$63bn in all sectors, of which $25bn will be foreign direct investment.

Better logistics are needed to cope with strong production and planned
increases in cotton, ready-made textiles and grain exports.
This country of only five million will also need to tap into all modes of
international shipping to cope with production from a range of new
fertilizer and chemical plants (150,000 tonnes per annum increase).

They are developing a new industry to produce 45,000 tonnes of paper per
annum. All this will be helped by new road and rail, such as the
Ashgabat-Karakums highway (650km) and the 550km Ashgabat-Turkmenbasy
port highway. There will be 1100km of new railway, including to Kazakhstan
along the shore of the Caspian. All this is aimed at uniting the oil and gas
fields into a single network.

While the clearly impressive array of projects under way point towards a
successful strategy on the part of the bank and its government partners, the
$64bn question is whether in the long term such investments will prove to be
a stabilising force.

Addressing the bank’s AGM, Nobel Prize Laureate Joseph E. Stiglitz, offered
some cautionary thoughts on the matter.

He said most of the privatisations had been more or less inflicted on the
transition countries in a botched experiment. They had done little good for
the general population except let them watch asset-stripping unfold,
acquired, he added, in quasi-legal or clearly criminal ways.

‘If you got $1bn-$2bn in assets through illegal privatisation, you’d fear
the next government in power would take it back so the best thing to do is
not to reinvest in the country but to take it out as fast as you can.’

By moving assets to western countries, he said, oligarchs enjoyed the best
of two worlds: ‘They had property rights protected abroad and weak rule of
law at home.’ -30-
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10. GERMAN CO TO BUILD THIRD PLANT IN WESTERN UKRAINE
Building material manufacturer KNAUF builds in Borshev

Business Digest, Sofia, Bulgaria, Monday, July 24, 2006

Delo German building materials manufacturer KNAUF will set up its third
Ukrainian plant in Borshev, western Ternopil region, the company CEO for
Ukraine, Oleksandr Gavrish, said. The availability of raw materials in the
town of Borshev was the main reason to choose it as the location for the new
plant, Gavrish added.

He said that the practice of importing gypsum from Moldova is no longer
feasible and the company would pursue a policy of setting up plants where
raw materials are available. KNAUF poured a total of 70 mln euro ($88.4 mln)
in ore mining in western Ukraine this year, the CEO said. The company’s two
other plants in Ukraine are located in the capital Kyiv and in the town of
Soledar, eastern Donetsk region.

According to Pyotr Aizman, the president of a local construction materials
association, KNAUF followed the current trend among construction materials
manufacturers to relocate their units from the capital to other regions, and
especially, to those in western Ukraine. The German manufacturer also owns
a sand quarry in Borshev.

Setting up such a plant costs 2.5 mln euro ($3.2 mln) to 3.0 mln euro ($3.8
mln), while return on the investment is registered in about five years,
local analytical company Pro-consulting, says. Yet, the capacity of the new
plant will increase KNAUF’s market share to 30 pct from 20 pct, forecasts
Valentin Simonov, director of a recently established construction materials
company.

KNAUF ( www.knauf.com) specialises in the production of preformed parts,
do-it-yourself (DIY) materials, facades, insulated and other building
materials. The company also has divisions for mechanical engineering,
logistics and interior construction. (Alternative name: Kiev, Ternopol)
http://www.delo.ua . -30-
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11. FALL-OUT FROM UKRAINE GAS DISPUTE

By John Dizard, Financial Times, London, UK, Wed, July 26 2006

The political crisis in Ukraine that broke up the pro-European and American
Orange Coalition is having profound knock-on effects in energy and,
ultimately, the securities markets.

The most immediate effect is that Europe now has few attractive alternatives
to ensure secure access to natural gas. On the present course, this is
leading to an undeclared bidding war between European importers and their
US rivals for relatively scarce supplies of liquefied natural gas.

Already, the lead times for LNG liquefaction plants in supplier countries
have lengthened from 36 months to more than four years. The impact on gas
prices of the scramble for supplies could be felt this winter, the season of
heavy demand in the northern hemisphere.

Among the prospective casualties are the US firms that are building LNG
import facilities on the East and Gulf Coasts, as well as gas-fired
utilities and industries that are counting on their supplies.

The US facilities are in a weaker position than competing facilities in
Europe and Asia. Customers, of US facilities, electric and gas utilities,
must pass price increases to end users through frequently recalcitrant state
regulatory agencies, whereas the Europeans and Asians do not.

That means that European LNG project financings will find it easier to
attract capital. It also means that the gas pipeline business is becoming
less attractive than the LNG industry. These days, ease in switching
suppliers is worth a premium.

However, Europe will become more dependent on gas from less stable regions,
such as the Gulf or Nigeria. That will lead to more price volatility – good
news for growing LNG trading operations, but not for industrial users or
households.

Under the Western model for building and operating gas pipelines, you are
paid a good, but not excessive, regulated return for acting as a common
carrier. Russia explicitly rejects that model; it sees pipelines as an
instrument of its political power.

Russia and its allies in Ukraine resolved January’s crisis over the cutbacks
of gas at the Ukraine border by in effect giving the state-controlled
Gazprom control over the Ukrainian pipelines and a huge storage system near
the border with Europe.

The Russian company’s control over Ukrainian pipelines also cuts off one of
the alternative routes for new pipelines between the giant Central Asian gas
reserves and Europe. January’s dispute was less over the price of Russian
gas imports, since these are largely paid for by transit fees, than over
Ukraine’s access to Russian pipelines to import Turkmen gas.

Under the European model, this access could not have been denied. Ukraine
has signed the European protocol on energy transit, and the Orange prime
ministerial candidate, Yulia Timoshenko, had said her government would
follow its requirements. Ukraine’s willingness to implement the transit
protocol under a non-Orange government is questionable.

Furthermore, by leaving control over Ukraine’s internal oil and gas
production with the local oligarchic structure, the country’s ability to
reduce its dependence on Russian, and Russia-transited, gas imports, is
negligible. That increases the risk to European supplies.

Western oil and gas people who have operated in Ukraine believe the
dependence could be reduced under a different legal regime. As one says:
“Ukraine has very significant reserves of gas. Timoshenko told us two months
ago she would open up production sharing agreements and joint venture access
to these fields. That would have brought in the western oil companies.”

Central European countries that might have joined European ventures to build
pipelines on southern, non-Russian routes are now doing deals directly with
Russia. “If they won’t defend their own interests, we certainly can’t count
on them to defend ours,” says one senior official.

An LNG project director of a European energy company says: “There is now
significant activity to secure new supplies of LNG. Europeans did not think
that this was an imminent issue, but now they realise that it is.”

The US authorities have been busy licensing new LNG import facilities. Few
of those facilities have tied up long-term supplies. Furthermore, the
long-term contracts that are in place have penalty prices for non-delivery
that can easily be outbid by European and Asian importers, particularly in
high-demand seasons.

With European national companies on the way to over-procuring their own LNG
requirements as a hedge, the rush for LNG could create a new division among
the allies.

Among the companies whose prospects could be most directly affected is
Cheniere Energy (LNG) whose primary business is the construction of three
offshore LNG terminals on the Gulf Coast. But given the growing dependence
of the US on LNG imports, the nation’s energy companies, utilities, and
industrial consumers of natural gas are at greater risk due to the events in
Ukraine. -30-
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12. FAILURE OF THE ORANGE REVOLUTION IS

A HISTORIC OPPORTUNITY

COMMENTARY: By Anatol Lieven in the Financial Times
London, United Kingdom, Tuesday, July 25 2006

When, in 2004, the Orange “revolution” in Ukraine against a rigged
presidential election seemed to put that country on the path to join the
west, it was top news in the US media and the stuff of countless emotional
commentaries. Many of them focused on the iniquity of Russia, which had
backed the existing Ukrainian regime.

Since then, the events of 2004 have proved to be no revolution at all, in
the sense of a fundamental change in the Ukrainian state. The Orange
coalition split, economic growth declined drastically, reform stagnated and,
in free and fair parliamentary elections in March this year, the pro-Russian
grouping led by the ousted candidate of 2004, Viktor Yanukovych, emerged
as the largest party.

After months of political chaos, including hooliganism by both sides in the
Ukrainian parliament, Mr Yanukovych will now probably lead a coalition
government under the presidency of his rival, Viktor Yushchenko.

These developments, however, have been barely reported by most of the US
media, let alone commented on. This silence marks a response to ideological
and geopolitical embarrassment of which the old Soviet media might have been
proud. It also misses an opportunity to conduct a searching public debate on
US and western strategy in the former Soviet Union.

For developments in and concerning Ukraine have contradicted an important
assumption on which US and, to a lesser extent, European strategies have
been based. They have demonstrated that the processes which the west has
encouraged in central Europe and the Baltic states cannot be extended
seamlessly to the former Soviet Union.

Societies, economies and national identities and affinities are very
different; links to Russia are closer; and both the US and the EU are weaker
than appeared to be the case a few years ago.

The failure of the Orange “revolution” is, in many ways, a great pity for
Ukraine. Irrespective of whether Ukraine can join western institutions,
westernising reform is a good thing in itself and should be pursued. But the
latest developments have also saved Ukraine, Europe and, indeed, the US
from a great danger.

That danger was the prospect of early Nato enlargement to Ukraine, which
until a few weeks ago was being pushed by powerful forces in Washington.
This strategy is dead for the foreseeable future and we urgently need to
develop an alternative one.

The danger from Nato expansion was threefold: the certainty of Russian
retaliation; the opposition of a large majority of Ukrainians, especially in
the Russian-speaking east and south; and the fact that Nato membership was
not going to be backed up by membership of the European Union, thereby
anchoring that country in the west.

At a conference on Ukraine in Rome in June, the majority of EU officials and
west European diplomats declared EU membership for Ukraine to be an
impossibility. Several expressed profound scepticism that even enhanced
partnership would amount to anything serious.

The reason was Ukraine’s lack of development, but equally important was
the revolt of west European electorates against further EU enlargement and
its costs to the west European taxpayer.

This in turn reflects the faltering west European economic growth of recent
years. The engine of EU enlargement, which did most of the heavy lifting
when it came to bringing the former communist states into the west, is close
to the limits of its strength.

We may regret these new circumstances, but we should also treat them as an
opportunity for new thought. We have tended to treat as truly legitimate and
democratic only those Ukrainian politicians who lead their country away from
Russia – whether their electorate wants it or not.

The divided affinities of Ukrainians are not a problem for us to solve, but
a deeply rooted historical and democratic reality. The west and Russia
should agree to avoid inflaming one or other Ukrainian grouping so far that
it will risk violent clashes and regional destabilisation.

For Russia, this means not intervening in Ukraine’s democratic process. For
the west, it means not trying to draw Ukraine into an anti-Russian alliance.
Neither side should try to claim exclusive economic influence.

If we are sensible, the result will be a Ukraine that is free, independent,
neutral, open to international investment and economically tied to both
Russia and the west. By all the standards of Ukrainian history, that would
be a wonderful fate. -30-
————————————————————————————————
The writer is a senior research fellow at the New America Foundation. His
next book, Ethical Realism: A Vision for America’s Role in the World,
co-authored with John Hulsman, is to be published by Pantheon in September
————————————————————————————————
http://www.ft.com/cms/s/6c5fa0a8-1b7a-11db-b164-0000779e2340.html
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13. ORANGE REVOLUTION COMES FULL CIRCLE

By Natalia A. Feduschak in Kyiv, The Washington Times
Washington, D.C., Sunday, July 23, 2006

KIEV — In a stunning turn of events, the political forces that were ousted
from power in Ukraine’s 2004 Orange Revolution are poised to make a vengeful
comeback. And at their helm will be Viktor Yanukovych, a man who suffered a
humiliating defeat, and who may be days away from returning to his former
job as prime minister.

“The situation is so complex that you won’t make sense without a half liter”
of vodka, former Polish President Alexander Kwasniewski said during a recent
conference in Yalta in summing up the situation in Ukraine today.

Just three weeks ago, the country appeared to be headed toward a period of
political stability, following hotly contested parliamentary elections in
March.

The three parties that backed the Orange Revolution and collectively won the
most seats in parliament finally signed a coalition agreement after months
of negotiations. The new government was expected to give President Viktor
Yushchenko a chance to move forward with reforms, particularly in
integrating Ukraine into the European Union and NATO.

More importantly, the public was expected to have a three-year respite from
a string of national and local elections, which had overly politicized the
country.

Then, in a shocking development, just days after signing the agreement,
Oleksandr Moroz, the Socialist Party leader, defected from the coalition on
July 6. Instead, he formed a new coalition with Mr. Yanukovych’s pro-Russian
Regions Party and the Communists.

The new grouping voted in Mr. Moroz as parliament speaker, a powerful post
following recent constitutional changes. They also chose Mr. Yanukovych as
their candidate for prime minister.

Mr. Moroz’s defection has not only changed parliament’s balance of power,
but has put Ukraine’s Western orientation in doubt and pushed the country
into its worst political crisis since 2004.

“The people are tired,” Mr. Yushchenko said in his regular radio address
last week, commenting on developments. “Society is unhappy with such a
development in parliament. Responsible for the social apathy today are all
national deputies and in particular, political leaders.”

Under new constitutional changes, Mr. Yushchenko is now left with two
unsavory choices: dissolve parliament and call new elections, or forward the
nomination of Mr. Yanukovych to the legislature and allow the man who is his
political opponent to form a government.

The president has until Tuesday to decide. On Friday, he canceled a trip to
Moscow for a meeting of ex-Soviet states, citing “political situation” back
home.

If he decides not to disband parliament, under the complex new
constitutional changes, Mr. Yushchenko has until Aug. 5 to decide whether to
forward Mr. Yanukovych’s nomination to lawmakers.

As Mr. Yushchenko mulls over his choices, observers point out that leaders
of the Orange coalition and the president himself are not without blame in
the current situation.

For nearly three months, the Orange coalition haggled over government
posts, critics say. Many of the arguments centered on whether Yulia
Tymoshenko, the firebrand politician who has had a turbulent relationship
with the president, would again become prime minister.

Mr. Yushchenko had fired her from the job last year because of infighting
with his own political allies, who were also jockeying for high-powered
positions. What job would go to Mr. Moroz, who previously had been
parliament speaker, did not appear to be a priority.

During this period, parliament’s work ground to a standstill. That prompted
negative reaction from the public, which had high hopes for the new
legislature. Instead of promised reforms, the public saw rising costs for
energy and consumer goods.

Mr. Yushchenko’s initial hands-off approach during the political
negotiations also cost him public support. In hoping to appear above the
fray, Mr. Yushchenko increasingly looked like a weak leader.

“At the macro level, he has been a visionary rather than a strategist,”
James Sherr of the Conflict Studies Research Center of Britain’s Defense
Academy wrote recently. “At the micro level, he has been an arbitrator
rather than an arbiter and a conciliator rather than a tactician. Since his
inauguration in January 2005, he has frequently lost sight of the enemy and
the country.”

Mr. Yanukovych and his party, on the other hand, have orchestrated an
impressive comeback. An American public relations firm has been hired to
boost their images. Until recently, Mr. Yanukovych has remained in the
background, letting other party members do the talking.

The party has also tapped into the public’s discontent and blamed
parliament’s standstill on the leaders of the Orange Revolution. They have
aggressively questioned Ukraine’s readiness to join the EU and NATO — both
priorities for Mr. Yushchenko.

Mr. Yanukovych’s party also has played the Russia card. Party leaders argue
that relations between the two countries need to be strengthened and Russian
must become an official language along with Ukrainian, because of the
country’s large ethnic Russian minority.

The strategy seems to be paying off. A recent opinion poll conducted by
Kiev’s prestigious Razumkov Center showed that if presidential elections
were held today, Mr. Yanukovych would win 31.3 percent of the vote, while
Mrs. Tymoshenko would earn 19.6 percent. Only 8.4 percent of those polled
said they would vote for Mr. Yushchenko.

Mr. Yushchenko, a former central bank chief, served as prime minister under
pro-Russian President Leonid Kuchma until he led protests against the
authoritarian president in 2001. He contested the 2004 presidential election
as the opposition candidate against Mr. Yanukovych, who was backed by Mr.
Kuchma and Russia. In the vote seen by observers as riddled with fraud, Mr.
Yanukovych was declared winner. The resulting Orange Revolution protests led
to a runoff win by Mr. Yushchenko.

The political capital earned in the revolution was soon lost in political
wrangling between Mr. Yushchenko and Mrs. Tymoshenko and corruption charges.
The two leaders parted ways last year until they were forced to come back
together to stop the ascent of the pro-Russian party.

In the March elections, Mr. Yanukovych’s Regions Party became the largest
bloc in the 450-seat parliament, winning 186 seats, or 32 percent, but not
enough to establish a stable government. The party was followed by the
Tymoshenko bloc in the second place with 129 seats (22 percent) and Mr.
Yushchenko’s Our Ukraine party in the third with 81 seats (14 percent). The
Socialists and Communists came in the fourth and fifth places with 33 and 21
seats, respectively.

Initially Our Ukraine and the Tymoshenko bloc formed a coalition with
support from the Socialists and with Mrs. Tymoshenko as the prime minister.
That plan was upset by Mr. Moroz’s defection.

In a sign of the times, Our Ukraine last week announced it was going into
the opposition, following similar statements by Mrs. Tymoshenko. Mrs.
Tymoshenko, however, is demanding the president dissolve the legislature and
call new elections to keep the pro-Russian majority from gaining power.

Mrs. Tymoshenko vowed Thursday that she and her deputies would stay away
from parliament until Tuesday in an effort to pressure the president to
dissolve parliament.

Mr. Yanukovych, for his part, met with Mr. Yushchenko Thursday, ostensibly
to discuss the political situation and to promote his candidacy. He said
there was no talk of dissolution and that he and the president shared many
similar positions.

The Ukrainians, meanwhile, apparently are in no mood for another cycle of
elections and political horse trading. A July 10-14 poll by the
International Institute of Sociology and the Center for Political Research
in Kiev found 54 percent of Ukrainians are opposed to a dissolution of
parliament, Agence France-Presse reported. -30-
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14. IN THE PUBLIC INTEREST

OP-ED: By Walter Parchomenko
Kyiv Post, Kyiv, Ukraine, Thursday, Jul 27 2006

They say miracles can happen. They also say old habits dies hard.

Today in Ukraine, it seems like it will take no less than a miracle for the
splintered democratic forces ever to unite and form another Orange
coalition in the parliament, following the coalition’s collapse on July 6,
after existing just two days.

The personal ambitions of Orange leaders, and their disillusionment over
compromises made and opportunities lost, continue to pull them apart, and
with them the hopes and dreams of millions of Ukrainians who stood bravely
behind them during the perilous days of the Orange Revolution.

Have these democratic forces reached a dead end with no chance whatsoever of
reuniting and realizing the democratic ideals of the Orange Revolution? Not
necessarily so.

Today, Viktor Yushchenko still has a very rare, third opportunity to revive
the Orange Revolution. The first opportunity was on the Maidan (Independence
Square), when countless citizens rose up to protest blatant falsification of
the presidential election and call for an end to the corrupt and repressive
practices of former President Leonid Kuchma.

The second chance was the recent formation of an Orange coalition in
parliament, which was considered a sure thing, but quickly collapsed due to
strong opposition within the democratic coalition to the president’s nominee
for parliamentary speaker, the very confrontational Petro Poroshenko.

The essential scenario for a rare, third opportunity to unite Ukraine’s
democratic forces and possibly form a majority in the parliament is not one
that the president’s advisors are likely to bring to his attention, given
their decided lack of any strategic orientation in domestic politics. It
includes a critical assumption and several key steps.

The scenario presumes that Yushchenko acts boldly and decides to disband
parliament on or after July 25, in accord with the Constitution and calls
for a new election as prescribed by law. The president’s Our Ukraine bloc,
together with Yulia Tymoshenko’s bloc provide compelling reasons to justify
the decision.

Moreover, in disbanding parliament, the president rejects the argument,
prevailing among Ukraine’s political pundits, that his political bloc and
the democratic forces, in general, can only lose public support in a rerun
of the parliamentary election as specious.

The scenario then develops in the following manner:

Step 1: Yushchenko breaks away from the dead-end group thinking of his

very ambitious tiny circle of “best and brightest advisors” who have little to
show in domestic politics during the past 18 months other than the awkward
defeat of the president’s Our Ukraine bloc in last March’s parliamentary
election and the steadily eroding public support for the president and his
bloc ever since then.

The president also demonstrates uncommon boldness, decisiveness, and
initiative and takes the first step toward a genuine, heartfelt
reconciliation with Yulia Tymoshenko, her bloc and other democratic forces.
Of course, Tymoshenko is ready, willing and able to reconcile and support
the president’s initiative.

Both leaders are drawn together by the disturbing defeat of the new
democratic coalition in parliament and the resulting great political
uncertainty facing the country.

Step 2: In a lengthy, emotional televised conference, Yushchenko and
Tymoshenko join forces on the eve of the election campaign. In separate
statements, each opens their heart to the nation and in a repenting,
confessional manner admits past mistakes, sharp personal differences, and
vows to work shoulder to shoulder for the public good and victory of the
democratic forces in the election, in particular.

The televised conference is a historic moment and a shot of adrenalin for a
nation with frayed nerves and suffering from political exhaustion. The
international community, disappointed by the recent collapse of the Orange
coalition, watches the event mesmerized and approvingly. Knowledge of this
fact arouses Ukrainian pride in this historic event to an even greater
extent.

Step 3: Yushchenko and Tymoshenko do not drop the ball. They continue to
show the public they are a genuine, democratic team that will continue to
work in tandem well beyond the election.

They take full advantage of the media to get their message across to the
nation: the fate of democracy in Ukraine is in great peril today and there
is a very real danger that Viktor Yanukovych and his Party of Regions will
encourage widespread corruption in politics and business as they did under
President Kuchma, now that they are back in power.

Yushchenko takes the lead in informing, cultivating and harnessing public
opinion in support of this message. During the past 18 months, he failed to
do this in any systematic fashion. This grave error contributed, in no small
measure, to the public’s eroding faith in his presidency and the democratic
coalition, in general.

A dramatic, genuine reunion of the president and Tymoshenko could
dramatically change the calculus of Ukrainian politics. It is conceivable
that it could even give the democratic forces enough votes to topple
political kingpin Viktor Yanukovych and his party.

Yushchenko has nothing to lose and everything to gain in implementing this
scenario. Public confidence in the president has been eroding steadily for
months and is at an all-time low, according to recent Ukrainian polls.

If the proposed reunion with Tymoshenko is genuine and not lukewarm or
theatrical in any sense, he can reverse this very negative trend line, while
advancing the cause of democratic forces in the country.

After all, Ukrainians are a very forgiving, tolerant and sentimental people
who find little comfort in the death of the Orange Revolution, a seminal
event in their country’s rich history and a source of great pride.

Is the above scenario, given Ukraine’s current political realities,
unrealistic? Indeed, but it is not impossible. Nor would it take a miracle
to accomplish. However, it would take something nearly as rare; namely,
political courage.

But is political courage even possible in politics? In 1955, a then junior
Senator from the state of Massachusetts named John F. Kennedy wrote

about it in his Pulitzer Prize-winning classic “Profiles in Courage.”

In it, the freshman Senator illustrated how eight of his historical
Senatorial colleagues, men such as John Quincy Adams, instead of focusing
on their careers, stood alone against tremendous political and social
pressure and demonstrated astounding integrity – a quality that the great
American novelist, Ernest Hemingway, called “grace under fire.”

The crucial question is: can Yushchenko find the political courage to form a
genuine union with Yulia Tymoshenko, his former Orange ally and current
political rival, who has made his blood boil on so many occasions? To do so,
some old habits will have to die.

He will have to become a president with a firm hand, one who does not sit
passively on the political sidelines debating incessantly whether or not to
intervene in a crisis while Rome is burning. One who accepts responsibility
for policy failures instead of playing blame-game politics.

One who does not speak in platitudes or hide behind smooth-talking, arrogant
advisors but, rather, is able to look the people in the eye and address them
on television during a national crisis. One who in the heat of a crisis can
set aside personal political ambitions and partisan politics and do what is
best for the public interest.

But if President Yushchenko can find the political courage, then one thing
is certain. Ukraine will have a very rare, third chance to salvage the
October Revolution, to unite democratic forces and possibly return them to
parliament as a majority; and Ukrainians will for generations to come, no
doubt, thank him for putting the country, once again, on sure footing in its
march toward democracy and Europe. -30-
————————————————————————————————-
Walter Parchomenko, Ph.D., is a Senior Fellow with the Atlantic Council of
the United States currently based in Ukraine. The views expressed in this
article are purely his own.
————————————————————————————————-
LINK: http://www.kyivpost.com/opinion/oped/24860/
———————————————————————————————–
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15. UKRAINIAN PRESIDENT’S AIDE IVAN VASYUNYK SAYS
PARLIAMENT RESORTING TO “BLACKMAIL”

Interfax-Ukraine news agency, Kiev, in Russian 1559 gmt 26 Jul 06
BBC Monitoring Service, United Kingdom, Wed, Jul 26, 2006

KIEV – The presidential secretariat views the position of the parliamentary
coalition regarding the president nominating a candidate for prime minister
as blackmail, first deputy head of the secretariat Ivan Vasyunyk has said.

He told a news conference today that in countries with a developed
democracy, before presenting a candidate for premier to the president for
confirmation, the coalition would “hold preliminary consultations with the
president on the acceptability of and room for compromise in the cabinet’s
programme and so on”.

“Unfortunately, the newly formed anti-crisis coalition has decided to talk
to the president using faits acomplis, and this is the same as blackmail.
[They say] we’ve taken a decision, let the institution of the president
decide. This is a deadend, it’s a road to nowhere,” Vasyunyk said.

He also said that the president was worried that the situation in parliament
“is creating a threat to Ukraine’s young democracy, as well as to
parliamentarianism”. “Unfortunately, in this situation of a parliamentary
crisis, the president can’t be guaranteed and, consequently, can’t give
these guarantees to the Ukrainian people, that the coalition will carry out
and implement the state’s domestic and foreign policy course,” Vasyunyk
said.

“When a parliamentary crisis arises in civilized countries, it’s the
president’s duty to dissolve parliament. But our opponents claim that
they’ll refuse, that the president doesn’t have the right,” he said.

Vasyunyk said that the secretariat calls on parliament to be balanced and
calm. “There’s no need to get agitated and there’s no need to resort to
blackmail. The president is sure that all procedural issues and all
political issues will find their resolution as a result of dialogue,” he
said. -30-

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16. UKRAINIAN PRES HAS TILL 2 AUGUST TO DECIDE ON PM

TV 5 Kanal, Kiev, in Ukrainian 1600 gmt 25 Jul 06
BBC Monitoring Service, United Kingdom, Tue, Jul 25, 2006

KIEV – The president [Viktor Yushchenko] has still not decided whether to
dissolve parliament and is hoping for a compromise with MPs, Yushchenko’s
legal adviser, Mykola Poludyonny, has said. He said that if Viktor
Yushchenko decides to hold an early election, he will hold consultations
with representatives of factions in parliament.

As for the candidate for prime minister, the president’s lawyers say he
still has until 2 August to consider it. The advisers describe the possible
appointment of the head of government by parliament without the president’s
nomination as illegitimate, and say it may even fall under an article of the
Criminal Code.

[Ihor Koliushko, captioned as presidential legal adviser] If the president
adopts a decision in line with Article 90 [of the constitution] on the early
dissolution of the Supreme Council [parliament], it will immediately lose
its authority to make any decision.

[Poludyonnyy] He hopes that the tense situation will move towards a
constructive one. If this does not happen, it is probably worth expecting
that the president will make use of the right we are talking about [to
dissolve parliament].

[The 60-day deadline from the opening of parliament for forming a new
government, after which Article 90 appears to give the president the right
to dissolve parliament, elapsed at midnight on 24 July. First deputy
parliament speaker Adam Martynyuk said that parliament will appoint the
prime minister on its own unless the president resubmits the majority’s
nominee, Party of Regions leader Viktor Yanukovych – see Interfax-Ukraine
news agency, Kiev, in Russian 1131 gmt 24 Jul 06.] -30-
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17. MINISTER LUTSENKO REGARDS AS POLITICAL MOVE BY
DONETSK PROSECUTORS TO CLOSE CASE OF FALSIFICATION
OF DOCUMENTS ERASING CRIMINAL RECORD OF YANUKOVYCH

Ukrainian News Agency, Kyiv, Ukraine, Monday, July 24, 2006

KIEV – Acting Interior Minister Yurii Lutsenko describes as a political move
by Donetsk prosecutors the closure of a case on falsification of court
verdicts erasing the criminal record of Party of Regions leader Viktor
Yanukovych. Yurii Lutsenko presented his estimation of the closure of the
case live on the Fifth TV channel.

“I regard it as a wrong decision…This was an obvious political
demonstration of loyalty to the man who wants to become the prime minister,”
Lutsenko said. He said there existed at least five facts indicating that the
case on erasing the criminal record of Yanukovych was falsified
.
In particular, he referred to findings of criminal experts that confirmed
that the case was falsified. “[This is] obvious work so that he (Yanukovych)
could submit to Yuschenko his biography without several years of his hard
early years,” Lutsenko said.

Lutsenko admitted however that he could not change anything as an official
in the development of the events, as the prosecution is the last instance.

As Ukrainian News earlier reported, the Donetsk regional prosecutor’s office
has closed a case on the falsification of documents on erasing the criminal
record of Yanukovych.

In February, the Donetsk regional prosecutor’s office resumed a case on
possible falsifications in erasing the criminal record of Party of Regions
leader Viktor Yanukovych. -30-
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18. “VOLODYMYR FESENKO: TYMOSHENKO WAS NOT FLEXIBLE
ENOUGH IN THE TALKS, AND SHE TRUSTED MOROZ TOO MUCH”
Dissolving Ukrainian parliament will only make things worse

INTERVIEW: With analyst Volodymyr Fesenko
BY: Journalist Tetyana Pontik. Ukrayinska Pravda website,
Kiev, Ukraine, in Russian 20 Jul 06
BBC Monitoring Service, United Kingdom, Sunday, Jul 23, 2006

Dissolving the Ukrainian parliament will not benefit either President Viktor
Yushchenko or the country as a whole, analyst Volodymyr Fesenko has said.
In an interview with a web site, he said this will only worsen the ongoing
political crisis and take Ukraine to the brink of disintegration.

As a possible way out of the situation, Fesenko proposed nominating a prime
minister who is not affiliated with the new majority in parliament (led by
the Party of Regions) or the failed Orange coalition.

Although the Party of Regions is widely seen as a pro-Russian force, many of
its key members are interested in developing trade with the West and in a
review of earlier gas accords with Russia, Fesenko said.

The following is an excerpt from Fesenko’s interview with journalist Tetyana
Montik entitled “Volodymyr Fesenko: ‘Tymoshenko was not flexible enough in
the talks, and she trusted Moroz too much'”, published on the Ukrayinska
Pravda website on 20 July; subheadings have been inserted editorially:

[Montik] Recently they have been calling Socialist Party leader Oleksandr
Moroz more and more often the Ukrainian Judas. Do you think there is a grain
of truth in this comparison?

[Fesenko] I would use a milder term in this case – “the ghost of the Kaniv
Four [an alliance in the 1990s, which involved Moroz, but whose decisions he
refused to honour] come back to life”. The idea of an alliance between the
Socialist Party and the Party of Regions [led by defeated 2004 presidential
election candidate Viktor Yanukovych] arose long before 6 July.

At first a section of the Socialist Party faction was in favour of a
coalition with the Regions, immediately after the elections, although at the
time Moroz and especially [then first secretary of the Socialist Party’s
political council Yosyp] Vinskyy were categorically opposed to such an
alliance.

Moroz’s denial of any claims to the speaker’s job within the framework of a
democratic coalition [consisting of key parties behind the Orange
Revolution: the Yuliya Tymoshenko Bloc, propresidential Our Ukraine and the
Socialists] created the preconditions for the Socialist Party’s enticement
towards the Party of Regions.

The Socialists’ public opposition to electing [key Our Ukraine figure Petro]
Poroshenko as speaker was basically an ideological screen and a pretext for
a split with the “Orange team” and for aligning with the Party of Regions.

[Montik] What led Moroz to enter into an alliance with the “anti-crisis
coalition” [consisting of the Party of Regions, the Socialists and the
Communists]?
[Fesenko] The main reason for what happened was, in my view, very simple:
Moroz was very keen on becoming parliament speaker as this was his last
chance to make a real name for himself. This was his political swan song and
everything else took second place. [Passage omitted: Moroz described as a
master of political intrigue, accused of provoking current crisis]
PARLIAMENT’S DISSOLUTION WILL NOT END CRISIS
[Montik] What is the danger behind parliament’s dissolution and new
elections to the Supreme Council [parliament]? And to what extent is it
really to the “Orange team’s” benefit?

[Fesenko] First of all, these elections will not solve the main problem
today and parliament will remain split. The two antagonists – the Party of
Regions and the Yuliya Tymoshenko Bloc – will still dominate. I have even
made out my own gloomy little formula: “The Party of Regions plus the Yuliya
Tymoshenko Bloc equals war.” What is more, this will be a war in society and
a war in parliament. Second, moderate politicians may be removed from
parliament, only to be replaced by radicals.

For example, instead of Moroz, with all his moral and ethical problems, we
could have [radical Progressive Socialist Party leader Nataliya] Vitrenko,
which would make the situation in parliament even more tense.

The political split will deepen, both during and after the elections. And
arguably the most serious problem is that any attempt to dissolve parliament
and declare early elections could lead to a political crisis, because the
leaders of parliament and the new coalition may not accept such a decision.

On the other hand, the election campaign itself and the results of the
elections may again aggravate a political split. And this may no longer be
just a question of a lack of trust in a potential prime minister, but in the
incumbent president, too.

Statements are being heard in the corridors of the Regional camp that if
[President Viktor] Yushchenko does not nominate [Viktor] Yanukovych for
prime minister and provokes the dissolution of the Supreme Council, then the
president may face a vote of no confidence in local councils, and there
would be a real danger of a split in the country.

If the Supreme Council is dissolved, the Party of Regions is threatening to
demand a snap presidential election simultaneously with early parliamentary
elections. There are no legal grounds for this, but there are historical
precedents. In 1993-94 [former Ukrainian President Leonid] Kravchuk, under
pressure from the Supreme Council, was forced to hold early presidential
elections. In other words, a parliamentary crisis in the event of the
dissolution of the Supreme Council threatens to develop into a general
political crisis.

[Montik] How likely is the Supreme Council to be dissolved?
[Fesenko] It is possible, in both theory and practice. However, when we
speak about a coalition process, we should take into account the
differences, a solution to which is not prescribed in the constitution or in
parliament’s regulations.

For example, there is no precedent for a situation where a coalition has
already been created, but has not been able to form a government, and there
it ceased to exist, but a second coalition starts to form its own government
after its predecessor has exhausted the one-month limit.

What do you do about time limits? Recalculate another month to form a new
coalition? Officially, yes, but then what about the 60 days set aside to
form a government?

Here you get a conflict of legalities, and the coalition is playing on them.
And it is quite possible that the president, in making his decision, will
refer to these. Only each side will allude to those norms of the
constitution and standing orders which suit it.

The legal grounds for dissolving the Supreme Council will come into play
after 24 July, when the 60 days allocated for the forming of a government
will have expired. And then the problem will be not so much a legal one as a
political one: will the president decide to hold early elections or not?
EARLY ELECTIONS WON’T HELP YUSHCHENKO
[Montik] What do you think Yushchenko will do?
[Fesenko] Bearing in mind the arguments we have already mentioned,
dissolving parliament will not be to the president’s advantage. Yushchenko
is aware of the risks of such a decision and so he will try to find a way
out of the crisis without having to call early elections. Basically, he has
a choice of several evils.

But there is only one solution, and that is a compromise with the Party of
Regions. It is just a question of the price and the conditions of such a
compromise. Of course, Yushchenko may use his old habit of dragging out a
solution to the problem, taking advantage of the fact that the constitution
allows the president up to 15 days to present a prime minister-designate to
parliament.

It is possible that the head of state will try to appeal to the
Constitutional Court regarding the many legal conflicts connected with the
coalition process and thus prod the Supreme Council into unblocking the work
of the Constitutional Court.

However, the tactic of prolonging a decision will lead to an even bigger
strategic defeat for the president. Sooner or later he will either have to
come to an agreement with the Regions or provoke extraordinary parliamentary
elections. But the later this is done, the weaker the president’s positions
will be.

[Montik] During all the long coalition talks, has Yushchenko shown himself
to be a weak politician?
[Fesenko] Let’s say he has demonstrated a lack of a firm and consistent
position. He hasn’t revealed an awareness of his own interests: what does he
actually want? [Passage omitted: repetition]

[Montik] Does Yushchenko have good advisers?
[Fesenko] Yushchenko’s problem is not that he doesn’t have enough advisers.
The problem is he has plenty, but no mechanism for working out a single
position. He is inclined to delegate powers, which is what he did when he
was prime minister. Then most cabinet decisions were taken in government
committees headed by the deputy prime ministers.

As a comparison, Tymoshenko [who was also a prime minister] abolished the
institution of government committees and categorically refused to
re-establish it because she is inclined towards a centralized model of
administration. Yushchenko, on the other hand, is drawn towards
decentralization and is not looking to take immediate control over the work
of his apparatus. That was how he operated during the election campaign.

It looks like that is the model of management he is sticking to now. But
during a crisis the political process is so complex that the president must
keep it permanently under control and he must have his own point of view.
Yushchenko’s nature is such that he often waits for a problem to sort itself
out, and if it doesn’t then he makes radical decisions at the last moment.

However, the situation now is so acute that he shouldn’t delay and he should
be making quick decisions. We can see from the current parliamentary crisis
that there are various legal interpretations and various positions in Our
Ukraine and, by all accounts, in the presidential secretariat.

And Yushchenko frequently wavers between different positions without
choosing a clear platform for himself. That is precisely why he is losing
tactically.
UKRAINE NEEDS A STRONGER LEADER
[Montik] Why has confidence in Yushchenko taken a tumble? Why is he
considered a weak president?
[Fesenko] That is a fairly widely held point of view, although in actual
fact Yushchenko is a rather mellow president, a president of compromise. But
society demands a strong leader, and therefore there is a demand for a
strong and a tough authoritarian-type prime minister – a Yuliya Tymoshenko
or a Yanukovych.

However, the problem is that neither one nor the other is acceptable to the
whole country. In Yushchenko’s words, neither will bring the country
together. And this serious problem – the candidate for prime minister – is
not helping to get us out of the parliamentary crisis in a constructive way.

In my view, the best way out of this situation would be to put forward a
nonaligned candidate for the post of prime minister. This may not conform to
the logic of constitutional reform and party elections, but it may help to
find a way out of the crisis without pain. But this option, by all accounts,
does not suit the Party of Regions.

[Montik] If you compare the two potential coalitions, which of them do you
think is the stronger – the anti-crisis coalition or the Orange one?
[Fesenko] Either type of coalition would be unstable and potentially risky.
Mainly because they have no experience of coalition and there is a very high
level of mistrust of one another. They are all afraid of the same thing: who
will be first to double-cross the other?

There have been differences in both coalitions, and they were most vividly
expressed between Our Ukraine and the Socialists – over NATO, language,
economic policy, land reform and privatization, for example.
NEW PARLIAMENT COALITION STABLE, FLEXIBLE
There are also potential differences among the anti-crisis coalition. [Key
Party of Regions figure Yevhen] Kushnaryov, for example, said back in April
that for the Party of Regions the least acceptable coalition option was an
alliance with the left, because it would be difficult to conduct an
effective economic policy with them.

A coalition with the Communists and the Socialists is good for the Party of
Regions as a way of coming to power. But to implement this power they need
Our Ukraine, because they have no serious differences with them over the
economy. It will be easier to reach agreement with them because both have
business representatives and people experienced in running the state.

The anti-crisis coalition looks more stable because it has a clearly
dominant leader which has cemented this alliance, and that is the Party of
Regions. This coalition also has a solid material base and a, figuratively
speaking, strong Donetsk management, i.e. with a democratic wrapping – a
tough, authoritarian style of management and a strong centralized base in
the Party of Regions which strengthens this coalition.

The Socialists and the Communists are the younger allies of the Regions, and
they are well aware of this. And what is very important – the Regions behave
in a very flexible and effective way. Whereas in the democratic coalition
people argued over every trifle, among the anti-crisis team there is not
even a hint of that: you want Moroz as speaker, fine, we’ll give the
Communists the post of first deputy speaker.

Although the Party of Regions is the strongest faction, it is prepared to
share posts even in government. But the key positions in the cabinet are
still, of course, with the Party of Regions. They are behaving very flexibly
and strictly in line with the letter of the constitution and [parliamentary]
procedure, which cannot, unfortunately, be said of the representatives of
the Orange coalition. We remember the discussion about the rights of a
parliamentary opposition.

[Passage omitted: Party of Regions had more effective coalition policy]

[Montik] Who is currently dictating the conditions in talks between the
Party of Regions and Our Ukraine?
[Fesenko] The position of the Party of Regions is stronger. When there were
talks between the Regions and Our Ukraine in June, the Regions even agreed
to [Our Ukraine’s Yuriy] Yekhanurov being prime minister.

They got the majority of the chief posts in the economy, above all control
over the fuel and energy sector, but they were prepared to give the
premiership to Yekhanurov.

Now the situation is different. They are insisting on Yanukovych for prime
minister and are prepared to share some posts with Our Ukraine, but this is
more like compensation to ease the bitter taste of Our Ukraine’s defeat.
Party of Regions’ strategy

[Montik] Why is the Party of Regions aiming for an alliance with Our
Ukraine?
[Fesenko] The point is, it is very important for them to come to an
agreement with the president and with Our Ukraine.

[1] First, because of its relations with Europe, the Party of Regions needs
Our Ukraine to “whiten” its image before Europe. And the Party of Regions
wants to get into Europe and to appear to be more “civilized”.

[2] Second, Yushchenko is still head of state who controls the
power-wielding structures, and the Regions are well aware of this. Then they
need Our Ukraine as a counterweight in relations with the left. Therefore the
Party of Regions is being quite flexible.

But for the president and Our Ukraine, the situation is complex. By coming
to an agreement with the Party of Regions they want to avoid a political
crisis, to prevent this country from splitting, to maintain the foreign
policy course and, finally, ensure certain strategic compromises in the
economy.

But even a tactical compromise with the Party of Regions is fraught with
serious risks for the president and Our Ukraine, particularly for their
political reputation. Most of the “Orange electorate” will not understand or
accept such a compromise.
GAS CONFLICT WITH RUSSIA
[Montik] If you take the gas question, is Yanukovych as Ukraine’s prime
minister really a panacea against a gas conflict with Russia?
[Fesenko] In this case you should look at two things. First, the Party of
Regions and Yanukovych himself have both criticized the gas agreements of 4
January.

And later, when Russia voiced its surprise at Tymoshenko’s requests to
review these agreements, Yanukovych said that we would not review them, in
other words he did a U-turn. But, on the other hand, preliminary agreements
with Gazprom were in place by now that the price of gas would not be
increased for the second half-year.

And the Party of Regions is clearly hoping that it will be able to keep the
prices at the current level or avoid a sharp gas price increase. But I think
they realize that an increase in the gas price cannot be avoided in the long
term.

The Party of Regions has its own economic interest in the gas problem,
because big business in the Regions is linked with the steel and chemical
industries, and these are industries which are suffering most of all from
the increase in the gas price. Therefore for them this question is crucial
and vital, and they will be giving it prime importance.

The problem is how they will resolve it – by making geopolitical concessions
to Russia or concessions over the control over the gas transport system.

[Montik] So, if the Party of Regions comes to power, the idea of a
gas-transport consortium between Russia and Ukraine may be revived?
[Fesenko] That’s quite possible. In the soft option, running the pipeline
could be a joint venture – preserving Ukraine’s rights of ownership, and in
the tougher option -privatizing the gas transport system and selling half
the shares to [Russia’s] Gazprom.
MOSCOW’S ROLE IN UKRAINIAN CRISIS
[Montik] Quite a lot has been said recently about Moscow having played by
no means the last part in this parliamentary crisis. Is there a grain of truth
in this, do you think?
[Fesenko] Undoubtedly. First, Russia could have played its part in the
collapse of the Orange coalition. The Socialist Party has long had good
contacts with Moscow, including with the Kremlin, through a number of
faction members. They say that Moroz himself has had meetings with [Russian
President Vladimir] Putin.

Rumours are going around the political corridors about a call to Moroz from
the Kremlin the day before these well-known events. Therefore, Moscow’s
influence could have been one of the reasons why the Socialists suddenly
reviewed their coalition sympathies.

Second, there are influential Russian politicians who have been cooperating
with the Party of Regions for ages. They could have lobbied through the
leadership of the Regions this centre-left coalition format.

It is no secret that Russia has been saying for a long time that a coalition
between the Regions and the leftist parties is the most acceptable option
from the point of view of Russia’s interests. They even thought of a name
for it in Moscow – “the coalition of the colours of the Russian flag
[white-blue-red]”.

[Montik] What was the main mistake of the “Orange team” in the coalition
talks? Was it the position of Tymoshenko who firmly insisted on her prime
minister’s portfolio?
[Fesenko] They all made mistakes. All the participants in the coalition
process in the Orange format made mistakes – the president, Tymoshenko,
Moroz and Our Ukraine. The absence of a clear position hampered Our Ukraine
and the president. They spent a long time deciding with whom it would be
better to come to an arrangement with, the Party of Regions or the Yuliya
Tymoshenko Bloc. And it was the idiosyncratic attitude towards Tymoshenko
which hampered them.

But Tymoshenko had another problem. She didn’t just want to be prime
minister, she wanted to weaken the position of the president and Our Ukraine
as much as possible, sometimes even to the extent of public humiliation.

[Passage omitted: Poroshenko wanted to restore his political reputation by
allying with Tymoshenko, Our Ukraine erred in dragging out coalition
process]
TENSION MAY LEAD TO DISINTEGRATION
[Montik] Tymoshenko is threatening a second revolution. Does Ukraine have
the stomach for another revolution?
[Fesenko] There is no revolution situation at the moment and so one can only
speak about a new Maydan [Independence Square in Kiev, the focal point of
the Orange Revolution] in terms of political theory.

In 2004 we saw the Maydan as a massive civilian protest, but now all we see
are multicoloured “party mini-Maydans”. People can be assembled, but better
to pay them.

Some people will come as a call of the heart, but in the main the people who
come to rally and “demonstrate in the tents” will be party activists who
will be brought in from the regions, and often for some kind of material
reward. And both Yuliya [Tymoshenko] and the Party of Regions will use this
technique. But it is hardly likely to work.

The social atmosphere has changed. The “revolution of raised expectations”
has turned into “counter-revolutionary disillusionment”.
Instead of a revolution, there may be the heightening of a confrontation and
an escalation of political and emotional tension with fatal consequences for
the country. Unlike 2004, a split in the country will no longer be a risk,
but a real threat.

[Montik] Russia has long been saying that one should prepare for such a
split.
[Fesenko] Yes, yes. And, unfortunately, in the Regions there are supporters
of such radical approaches. They do not dominate in the party and their
business wing is against the implementation of such a scenario, but there
are radicals there, and they are being sustained by certain political
circles in Russia.

Therefore, such a scenario could become a reality. Besides, sad though it
may seem, Yuliya Tymoshenko may help this scenario to come true by her
own radical actions. For her the main thing is victory, at any price.
But there can be no absolute victory in the present conditions, that is also
a fact.

Therefore the realization of an all-out confrontation scenario may again
split Ukraine and revive the kind of split that happened in 2004, but
already in new conditions where the opposing forces will have an
organizational-political base in the form of the local self-administration
bodies they control, which could become the institutional basis of this
split.
YANUKOVYCH AND NATO, EU ACCESSION
[Montik] If Yanukovych becomes prime minister, do you think Ukraine will
need to forget about its plans to join NATO and the EU?
[Fesenko] I would not dramatize the Yanukovych factor. Moreover, if the
situation had been calmer, and not so tense as it is now, then one could
have predicted that if he was appointed premier, Yanukovych would make a
number of pro-Western moves and statements just for show.

By the way, this was precisely the strategy that had been planned in the
event of Yanukovych’s victory at the presidential elections. Something
similar could happen this time. Besides, the business wing of the Party of
Regions is in favour of European integration, because they need it
economically and they will support this process.

For Yanukovych and his party the NATO issue is not the main one or the basic
one. Economic questions are the priority ones. That is why the main risks
may be connected with the revival of the Single Economic Space project [an
economic union of Ukraine, Belarus, Russia and Kazakhstan, which is strongly
favoured by Moscow].

In terms of European integration, this is a more sensitive subject, since it
is scarcely possible to combine participation in the Single Economic Space
customs union with European integration.

As far as NATO is concerned, a soft option of “neutralizing the problem” is
likely: a public rejection of the rapid-entry strategy whilst maintaining
contacts and cooperation with the alliance.

The course towards Euro-Atlantic integration is being maintained, but in
restricted and moderate forms. The question of joining NATO is being
postponed and will be examined only through a nationwide referendum and at
some indeterminate future date, i.e. it is not a problem of today or
tomorrow.

This is what could happen in relation to NATO and the EU if Yanukovych gets
in. Nor should one forget that the management of foreign policy is within
the president’s remit. Whoever becomes foreign minister could be of crucial
importance for Ukraine’s foreign policy.

[Montik] Why then is Yanukovych now a stumbling block? What is his problem
right now?
[Fesenko] The appointment of Yanukovych as prime minister is symbolic
revenge. That is precisely how Yushchenko’s supporters, especially in
western Ukraine, interpret it. And for them a Yanukovych premiership is a
political and a moral insult.

Yushchenko realizes this very well. In western Ukraine they are already
calling for people not to recognize Yanukovych as prime minister. Yushchenko
also fears a possible political conflict on this and negative consequences
for his own political reputation. That is why he is trying all he can to
persuade the Party of Regions to withdraw the nomination of Yanukovych for
prime minister. -30-

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[ return to index] [Action Ukraine Report (AUR) Monitoring Service]
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19. COMMENT ON JAMES SHERR COMMENTARY

Possibility the new Regions led coalition may reach a constitutional majority
Letter-To-The-Editor: by Tammy Lynch
Action Ukraine Report (AUR) #739, Article 19
Washington, D.C., Thursday, July 27, 2006

RE: James Sherr commentary, “The School of Defeat”

Action Ukraine Report (AUR), #738, Article 1
Washington, D.C., Sunday, July 23, 2006

Thank you, once again, to James Sherr for his impressive analysis on the
struggle for Ukraine’s government. As usual, it made me consider a few
things I hadn’t earlier.

One thing did occur to me while reading, however. I seems to me that the
debate over whether to have a new election must include the possibility
that, if things remain as they are, the Party of Regions-led coalition may
reach a constitutional majority.

If, as the leaders of Our Ukraine and BYUT fear, large numbers of their
members defect — you could see Regions 186 + Socialists 29 + OU 40 +

BYUT 40 = 295. Then, you have 21 Communists to spare, for a possible
(if not definite) constitutional majority. How will these Our Ukraine coalition
members vote? This well could remove President Yushchenko’s control by
eliminating the possibility of veto on key laws.

If Our Ukraine officially joins the coalition, a split in the party becomes
likely, making the “defectors” those who remain in opposition. In this
case, the coalition still may hold a constitutional majority, thanks to BYUT
defectors.

The question is what effect Our Ukraine’s ministers and deputies would have
on key votes that could eliminate a veto possibility. Given the shifting power
center in the country, will they continue to tow Yushchenko’s line?

Of course, any coalition with Regions, OU and the Communists would have
significant cleavages, making it unstable, but as we’ve seen, power and
money are incredible motivators.

A new election may increase the plurality of Regions (although we should
never discount Tymoshenko’s campaigning ability). But, if Our Ukraine
chooses to remain in opposition, the strength of the coalition may actually
be less after the Our Ukraine and BYUT “defectors” are removed in an
election, thus preventing them from artificially swelling the coalition’s
ranks. If Our Ukraine joins a coalition, again, an election could be used
to try to remove those with questionable loyalties.

This doesn’t take into account the questions about whether an election is
legitimate under these circumstances, of course, and how the Regions

members would react to, and during, a new election. I merely wonder if
the potential composition of a “new” Rada may be more advantageous to
the current opposition than it seems at first glance.

Tammy Lynch, Institute for the Study of Conflict, Ideology & Policy
Boston University, USA, ( tammylynch@hotmail.com)
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20. A DAY AT THE MAIDAN AND AN EVENING AT THE RADA

COMMENTARY: By Stephen Velychenko

Action Ukraine Report (AUR) #739, Article 20
Washington, D.C., Thursday, July 27, 2006

Regular readers of MAIDAN will know that for the last months it has reported
how Party of Regions activists have engaged in the same kind of “rent a
crowd” practices as they practiced in 2004 and again during the
parliamentary elections. They might also wonder why this side of Region’s
activities does not get publicized and analyzed in the world media.

Their tactics include offering fifty hryvnia daily to whoever they find on
the streets in the poorer sections of Kyiv and busing- in young men from
Donbass. This short article will not offer an English summary of these
reports.

It rather records two personal observations made on July 23 and July 24 on
the Maidan and then in front of the Verkhovna rada which seem to confirm
the veracity of the MAIDAN.ORG reports.

[1] First, is the striking difference in the kind of supporters that turn
out from each side. On the Tymoshenko/PORA side there is a cross-section of
society. Young and old, both genders all walks of life. They seem terribly
unorganized in their formal public expressions of support. Their literature
does find its way into trash-bins, but I saw no discarded piles behind
buildings and in dark corners.

While Party of Regions also have some people from all walks of life, among
them one notices a predominance of adolescent males who seem to be more
concerned with waiving flags and making noises in unison than discussing
among themselves and with passers-by – as do Tymoshenko/Pora people.

Regions activists that I talked to and who tried to explain to me why the
Americans are evil and the Russians are “our brothers,” terminated the
exchange of ideas and told their associates to do likewise when I asked them
to tell me how many million Ukrainians did the American government murder.

When I asked a flag-waiver whether he was paid to come. He, of course, said
no. However his companions looked at him and at me in a rather unfriendly
manner – at which point I decided to leave. Looking into corners and
sidestreets, meanwhile, one can find piles of discarded Regions newspapers
and leaflets.

[2] The second noticeable difference between the two groups is the presence
of a visceral gut anger among Tymoshenko/PORA supporters, who in front of
cameras will break down in tears as they plead with Iushchenko not to
“surrender Ukraine to criminals and communists.”

Others, in quarrels with opponents or discussions among themselves,
literally shake with anger and contempt when they try express their
abomination and disgust with Regions and Communist politicians.

I witnessed them spitting in the face of a communist delegate (identifiable
by a lapel-pin) as he was running the gauntlet from the Rada to the council
of ministers across the street. An old lady with an egg was waiting for
Ianukovych by the exit from the Rada car-park — but I cannot say how that
ended.

When the Bolsheviks took power in 1917 few people cared and life went on
normally for the next few weeks. Similarly, today in Ukraine, the Party of
Regions successfully staged a restorationist coup-d’etat this July, and life
has gone on normally.

However, there is still the chance that Tymoshenko will not repeat the
mistakes of Hrushevsky and the non-Bolshevik left in 1917 and put Ukraine
back on the democratic-European path. -30-
————————————————————————————————
Stephen Velychenko, is Resident Fellow,CERES, Research Fellow,Chair

of Ukrainian Studies, Munk Center University of Toronto, Devonshire
Place, Toronto M53 3K7, velychen@chass.utoronto.ca.
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21. INTO THE VALLEY OF VINES…..CRIMEA

By Mark Smith, Guardian Saturday travel section
The Guardian, London, United Kingdom, Saturday July 22, 2006

Inspired by Tennyson’s stirring words, I set out by Eurostar one drizzly
pre-heatwave day to fulfil a childhood ambition and find the valley of the
charge of the Light Brigade.

The Crimea turned out to be a gem. Ukraine’s Soviet-era visa requirements
have been abolished, the budget airline crowds have yet to move in, and it’s
easily reached by train.

Twice a week, the “Kashtan” from Berlin to Kiev has a direct sleeping car
which carries on to Simferopol. Painted in the blue and yellow of the
Ukrainian flag, the sleeping car is elderly but comfortable, a home away
from home for an epic two-night journey across Europe, with patterned
carpet, frilly curtains and a corridor thoughtfully decorated with plastic
plants.

Simferopol is Crimea’s transport hub. The world’s longest trolleybus ride
takes a scenic but backside-numbing 2½ hours over the mountains to Yalta,
where a statue of Lenin glowers across the road at McDonald’s. Yalta’s
Livadia Palace was the Tsar’s summer residence and inspired location for the
1945 Yalta Conference, where Churchill, Roosevelt and Stalin were famously
photographed side-by-side.

I took a local train to Bakhchysaray to see the palace of the Tartar khans
who ruled the Crimea until 1783, and on to Sebastopol, the naval base
besieged by the British and French in 1854. Seven miles away, the little
port of Balaclava was the British supply base for the siege, where I climbed
the hill to the ruined fortress overlooking the harbour and the Black Sea.

The battlefield is utterly unsigned. I trudged inland for miles through the
drizzle, trying to find it with the 1854 map in my history book.
Disheartened, I eventually came to a roundabout, petrol station and the
Ukrainian equivalent of a Little Chef.

I asked for directions. Ignorant of the Ukrainian for “battle”, I
improvised, but my one-man impersonation of the battle of Balaclava proved
too much for the girl on the checkout.

She summoned the Heavy Brigade, a buxom woman from the kitchen who
gesticulated wildly and repeated “Yalta”. I took the Yalta road, and as if
by magic the landscape assumed the features of the 1854 map. The shallow
valley, the raised road with the hillocks used as redoubts, a row of poplar
trees marking the line of Russian guns. I’d found it.

Today, charging on horseback would be difficult, as Tennyson’s valley of
Death has become a valley of vines for Ukraine’s wineries. I can’t think of
a better use for it.

· London-Berlin starts at £79 one-way with couchette, Berlin-Simferopol £96
one-way with sleeper. See www.seat61.com/Ukraine.htm or call 0870 2435363.
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http://travel.guardian.co.uk/countries/story/0,,1826033,00.html?gusrc=rss
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22. THE SCIENCE-FICTION NOVEL THE SOVIETS FEARED
If nothing else, the One State is exceptionally good at killing people. In a
passage that provides an eerie foreshadowing of Stalin’s politically induced
famine in Ukraine — millions died in 1932-33 — Zamyatin describes how a
new method of food production solved the problem of hunger, mostly by
eliminating the number of mouths

By John J. Miller, The Wall Street Journal, New York, NY, Wed, July 26, 2006

Authors sometimes gripe about the long wait between the completion of a book
and its publication. Perhaps the sad case of the Russian writer Yevgeny
Zamyatin will help them put things in perspective: He finished his novel
“We” in 1921, but it didn’t appear in print in his native land until 1988.

The problem wasn’t that Zamyatin and his manuscript were obscure or unknown.
Rather, it was that they offended communist censors, who correctly
understood “We” to be a savage critique of the totalitarianism that was
starting to take shape in the years following the Russian Revolution.

They managed to suppress “We” inside the Soviet Union, but they weren’t able
to keep it from making a deep impression elsewhere: Two of the most iconic
novels in the English language — “Brave New World” by Aldous Huxley and
“1984” by George Orwell — owe an enormous debt to Zamyatin.

That’s because “We” is the ur-text of science-fiction dystopias: It
described an Orwellian society almost three decades before Orwell invented
his own version. Although the book has never been especially hard to find in
the U.S. — editions have been in print since 1924 — it will now become
even more readily available, thanks to Natasha Randall’s new translation,
published this month by the Modern Library.

Orwell actually had a tough time tracking down the novel for himself.
“Several years after hearing of its existence, I have at last got my hands
on a copy,” he wrote in a 1946 review of “We.” He immediately noticed its
similarity to Huxley’s work: “Brave New World,” he wrote, “must be partly
derived from it.” Despite this, Orwell regarded “We” as “not a book of the
first order.”

In certain respects, that’s true: The plot isn’t exactly gripping, and the
narrator has an annoying habit of letting his thoughts trail off into
ellipses…

Yet “We” is also the product of a powerful imagination. It describes a
futuristic world dominated by the One State, which is devoted to
“mathematically infallible happiness.” Because freedom is supposedly the
enemy of happiness, the One State strives to eradicate all marks of
individuality. “To be original means to somehow stand out from others,” says
one character. “Consequently, being original is to violate equality.”

The characters in “We” have numbers instead of names — the book’s
protagonist is D-503. In Randall’s translation, they are called “ciphers”
(in other versions, they are “numbers”). They wear matching uniforms and
shave their heads. “The Table of Hours” dictates their lives: It tells them
when to wake, when to work and when to sleep. “One sees oneself as part of
an enormous, powerful unit,” says D-503. “Such precise beauty: not one
extraneous gesture, twist or turn.”

Here, Zamyatin takes aim at obsessions with industrial efficiency. He refers
several times to Frederick Winslow Taylor, an American advocate of
scientific management whose ideas were popular in the young Soviet Union. If
Zamyatin had merely satirized Taylor, his censors might have let him get
away with it — Zamyatin was, after all, a Bolshevik who had supported the
Communist Revolution.

But Zamyatin went further, painting an ominous portrait of the Soviet
Union’s coming tyranny. In “We,” Taylor-style regimentation isn’t maintained
by factory-floor managers who are worried about the bottom line, but rather
by a corps of NKVD-like political police known as the Guardians. They
enforce order by terror, and nobody is supposed to talk about it. Following
the arrest of three ciphers, for instance, D-503 comments that
“Conversations, for the most part, concerned the rapid fall of the barometer
and the change of weather.”

The Guardians uphold the rule of the Benefactor, who is the product of a
sham election, conducted annually on the Day of the One Vote: “The history
of the One State does not know a single instance in which, on this day of
rejoicing, even one voice dared to disturb the magnificent unison.” The
influence on Orwell’s “1984” is apparent: Big Brother is more like a kid
brother.

The most memorable phrase in “1984” is probably “Big Brother is watching
you.” In “We,” the Guardians do the watching — a task made easier by the
fact that everyone lives in glass houses, literally. Curtains may be lowered
only at scheduled times for sex, which, because there’s no marriage, is
rationed through a system of pink slips. Promiscuity is more or less
encouraged because it prevents ciphers from creating personal bonds that
would conflict with their duties to the One State.

Zamyatin was trained as a naval engineer; he spent time in England
overseeing the construction of Russian icebreakers. Likewise, D-503 is the
designer of a spacecraft. His sexual seduction by I-330 leads him into an
underworld of rebels who plot against the Benefactor. (The male ciphers are
all odd-numbered, prefixed by consonants; the females are even-numbered,
with vowels.) This resistance movement refers to itself as MEPHI, as in
“Mephistopheles,” the devil who revolted against heaven.

Because D-503 is an otherwise loyal servant of the One State, he is haunted
by his attraction to I-330. When she gets him to play hooky from his job, he
feels both guilt and fear: “I had stolen my work from the One State, I am a
thief, I would soon be under the Machine of the Benefactor.” The Machine is
an execution device that vaporizes dissidents in public rituals.

If nothing else, the One State is exceptionally good at killing people. In a
passage that provides an eerie foreshadowing of Stalin’s politically induced
famine in Ukraine — millions died in 1932-33 — Zamyatin describes how a
new method of food production solved the problem of hunger, mostly by
eliminating the number of mouths: “True, only 0.2 percent of the population
of the earthly sphere survived. But in exchange for all that — the
cleansing of thousand-year-old filth — how glistening the face of the earth
has become! In exchange for all that, this zero-point-two percent has tasted

bliss in the ramparts of the One State.”

A key event in “We” involves the One State’s method for solving another
problem: Imagination. “It is the last barricade on the path to happiness,”
claims an announcement, which orders ciphers to undergo a kind of brain
surgery known as “the Great Operation.”

In the 1920s, copies of “We” were smuggled into the Soviet Union from
abroad — most of the communist literati knew what Zamyatin had written, and
they berated him for it. The harassment eventually became too much.

In 1931, Zamyatin penned a desperate letter to Stalin, begging for
permission to leave the country: “The critics have made me the devil of
Soviet literature,” he wrote, likening his inability to publish as a “death
sentence.” (Later this year, Yale University Press will print the full text
of this letter, as well as many other political and literary documents, in
“Soviet Power and Culture.”)

Amazingly, Stalin agreed to let Zamyatin go, perhaps because Maxim Gorky,
an impresario of Soviet literature, encouraged it. Zamyatin moved to Paris,
where he died in 1937. More than half a century later, “We” finally was
published inside the Soviet Union.

Its appearance provided a clear indication that glasnost was real — and
that the One State of our own world was heading toward collapse. -30-
————————————————————————————————
Mr. Miller writes for National Review and is the author of “A Gift of
Freedom.”
————————————————————————————————
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