AUR#742 Aug 1 GDP Growth Forecast Up To 5%; Furniture Industry Growth 17-22%; Expanding Credit; Letter to Yulia Tymoshenko; Round Table Made Of Glass

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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       

 
       IMF IMPROVES UKRAINE’S GDP GROWTH FORECAST
                                  FOR 2006 FROM 2.3% To 5%
                                                         
ACTION UKRAINE REPORT – AUR – NUMBER 742
Mr. E. Morgan Williams, Publisher and Editor  
PUBLISHED IN WASHINGTON, D.C., TUESDAY, AUGUST 1, 2006
 
                Help Build the Worldwide Action Ukraine Network
 Send the AUR to your colleagues and friends, urge them to sign up.

               –——-  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.   THE THREE MAGIC REASONS FOR PROSPERITY OF NATIONS:
                                DOES UKRAINE HAVE THEM?
ANALYSIS & COMMENTARY: By Valentin Zelenyuk
The Ukrainian Observer magazine, The Willard Group
Kyiv, Ukraine, August, 2006

2.         IMF IMPROVES UKRAINE’S GDP GROWTH FORECAST
                                 FOR 2006 FROM 2.3% To 5%

Ukrainian News on-line, Kyiv, Ukraine, Mon, July 31, 2006
3.    UKRAINE’S FURNITURE INDUSTRY ONE OF THE FASTEST
    GROWING ECONOMIC SECTORS, WILL GROW 17-22% IN 2006
ANALYSIS AND COMMENTARY: Roman Bryl, Ukraine Analyst
IntelliNews-Ukraine This Week, Kyiv, Ukraine, Monday, July 31, 2006

4.     KYIV MAYOR PROBABLY WON’T ALLOW IKEA TO BUILD 

New Europe, Athens, Greece, Monday, July 24, 2006

5.  AUSTRIA’S ERSTE BANK AGREES TO BUY MAJORITY STAKE
                              IN UKRAINE’S PRESTIGE BANK
By Roman Olearchyk in Kiev, Financial Times
London, United Kingdom, Monday, July 31 2006

6.   GERMANY’S HEIDELBERGCEMENT WANTS TO BUILD NEW

 DRY METHOD CEMENT PRODUCTION LINE IN UKRAINE BY 2010
Ukrainian News-on-line, Kyiv, Ukraine, Monday, July 31, 2006

7.        UKRAINE: EXPANDING CREDIT, UNTAPPED POTENTIAL
                         OF THE FINANCIAL SERVICES SECTOR
Oxford Business Group – Online Business Briefing Ukraine
London, United Kingdom, Thursday, July 20, 2006

8.     UKRAINE: AKHMETOV TO BUILD THREE 5-STAR HOTELS

OSTROV: Research Center of Donbass Social Perspectives
Donetsk, Ukraine, Monday, July 31, 2006
                         BENEFITS FROM POLITICAL TURMOIL
TV 5 Kanal, Kiev, in Ukrainian 1500 gmt 24 Jul 06
BBC Monitoring Service, United Kingdom, Monday, July 24, 2006
Business Digest, Sofia, Bulgaria, Friday, July 28, 2006

11.    FULL SPEED AHEAD “ANTI-CRISIS COALITION” INITIATES
       REVIVAL OF FREE ECONOMIC ZONES AND TECHNO-PARKS 
ANALYSIS AND COMMENTARY: By Nataliya Yatsenko.

Zerkalo Nedeli On The Web, Mirror-Weekly, No. 29 (608)
International Social Political Weekly
Kyiv, Ukraine, Saturday, 29 July – 4 August 2006 year

12. PRESIDENT SAYS UNITY DECLARATION CRUCIAL FOR UKRAINE
TV 5 Kanal, Kiev, in Ukrainian 1715 gmt 31 Jul 06
BBC Monitoring Service, United Kingdom, Monday, July 31, 2006

13.         UKRAINE’S PARTY OF REGIONS LEADER HOPES UNITY
                            PACT WILL BE SIGNED ON AUGUST 1 
TV 5 Kanal, Kiev, in Ukrainian 1400 gmt 31 Jul 06

BBC Monitoring Service, United Kingdom, Monday, Jul 31, 2006

14.                      “IT’S HOPELESS, BUT IT’S OUR WAY”
    This President, unfortunately, has proven to be too weak for the heavy
weight entrusted to him. Moreover, he often failed to carry even lighter loads.

             It is disastrous for a weak nation to have a weak president.
ANALYSIS AND COMMENTARY: By Serhii Rakhmanin
Zerkalo Nedili On The Web, Mirror-Weekly, No. 29 (608)
International Social Political Weekly
Kyiv, Ukraine, Saturday, 29 July – 4 August 2006

15.      FORMER U.S. AMBASSADOR TO UKRAINE STEVEN PIFER

                    SAYS WEST CAN WORK WITH YANUKOVYCH
              Too early to predict future course of Ukrainian foreign policy
INTERVIEW:
With Former U.S. Amb to Ukraine Steven Pifer
By Serhiy Kudelia, Radio Free Europe/Radio Liberty (RFE/RL)
Prague, Czech Republic, Monday, July 31, 2006

16.                     LETTER TO YULIA TYMOSHENKO

ANALYSIS & COMMENTARY: By William Zuzak, Ph.D., P.Eng.
Article sent to the AUR on Sunday, July 23, 2006
Published by the Action Ukraine Report (AUR) #742, Article 16
Washington, D.C., Tuesday, August 1, 2006
Zerkalo Nedili On The Web, Mirror-Weekly, No. 29 (608)
International Social Political Weekly
Kyiv, Ukraine, Saturday, 29 July – 4 August 2006

18.    LONG-TIME UKRAINIAN EDITOR APPEALS TO PRESIDENT

                        YUSHCHENKO OVER COURT DECISION
       Property of journalist seized to pay damages to Interregional Academy
              of Personnel Management, widely believed to be anti-Semitic.
      Believes his case an example of persecution of press freedom in Ukraine.
OPEN LETTER:
To Ukrainian President Viktor Yushchenko
FROM: Volodymyr Katsman, Editor-In Chief, Stolichnyye Novosti
Fakty i Kommentarii, Kiev, Ukraine, in Russian 28 Jul 06; p 6
BBC Monitoring Service, United Kingdom, Monday, July 31, 2006

19.     UKRAINE: 873 JOURNALISTS SIGN PETITION ADDRESSED
    TO PARTY OF REGIONS OVER ATTACKS ON TV JOURNALISTS
Ukrayinska Pravda website, Kiev, in Ukrainian 24 Jul 06
BBC Monitoring Service, United Kingdom, Monday, Jul 24, 2006

20. ORGANIZATION FOR THE DEFENSE OF FOUR FREEDOMS FOR
      UKRAINE (ODFFU) IS CELEBRATING ITS 60TH ANNIVERSARY
Marko Suprun, ODFFU, New York, NY, Monday, July 31, 2006
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1
THE THREE MAGIC REASONS FOR PROSPERITY OF NATIONS:
                              DOES UKRAINE HAVE THEM?

ANALYSIS & COMMENTARY: By Valentin Zelenyuk
The Ukrainian Observer magazine, The Willard Group
Kyiv, Ukraine, August, 2006

Back in the XVII century, Adam Smith clearly identified the key reasons
behind the wealth and poverty of various nations. The three major reasons
that this patriarch of modern economics mentioned were: (i) peace, (ii) easy
taxes, and (iii) tolerable administration of justice.

Ukraine was lucky to have the first one (unlike a number of other
transitional countries), but has done very badly on the other two.

Indeed, as we argue in this article, the biggest and the main fundamental
problem that prevented Ukraine from realizing its great economic potential
until now has been a poor business environment.

In particular, there were and unfortunately still are serious problems with
the most important issues for any business: property registration, the tax
system, protecting minority shareholders, dealing with licenses, opening and
closing companies, and hiring and firing people.

People who have tried doing business in Ukraine or have just lived there for
a while know these problems very well. But, how does Ukraine compare to the
rest of the world? Such relative standing of a country is fundamentally
important because it determines the flow and development of the two major
factors of economic growth-physical and human capital-among countries.

Unfortunately, but not surprisingly, the numbers are astonishingly bad for
Ukraine. For example, according to a very comprehensive recent World Bank
survey Doing Business-2006, Ukraine was ranked only 124 out of 155
countries! (See Table 1.) This standing is substantially worse than that of
most transitional and developing countries.

In fact, among transitional countries only Uzbekistan was ranked worse than
Ukraine, while such countries as Afghanistan, Belarus and Iraq ranked
higher!

To be specific, in terms of property rights registration, which is crucial
for any businessperson, Ukraine, a country with a relatively high level of
education, was ranked only 127, which is below many countries in Africa!

Another serious concern is the poor legal protection of investors (minority
shareholders from self-dealings by management, etc.), where Ukraine was
ranked 141 (out of 155)-worse than any other transitional and most
developing countries. This is an especially important issue since it
constitutes the main reason for the poor development of the key market
institution in Ukraine-the stock market.

Worst of all is the situation with the tax system, where Ukraine was ranked
151, only better than Belarus and three African countries! World Bank
estimates also suggest that the current level of taxation in Ukraine is very
similar to that in other European and Asian countries: firms have to pay
about 51 percent of their gross profit in taxes.

This is still unfavorable for the attraction of foreign investors and
keeping locals from off-shoring their businesses. The major problem,
however, is with the excessive tax bureaucracy: Ukrainian firms, on average,
must make 84 payments, spending about 2,185 hours to comply with tax
requirements.

Such bureaucracy substantially reduces the attractiveness of Ukraine for new
foreign investors, slows down existing businesses and pushes many of them
into the shadow economy, which by various estimates accounts for about 50
percent of Ukraine’s official GDP.

From the first look, the problem seems to be one of confusing and
contradictory laws. (For example, western experts generally regard the Civil
Code of Ukraine, given some improvements, as a pro-market law, but the
problem is that it contradicts the so-called Economic Code of Ukraine.)

The solution then seems to be simple: change the law! Nevertheless, despite
being criticized heavily by many experts and top officials for a long time,
the law has not yet been improved significantly.

Why? The problem is rooted in the high level of corruption along the entire
hierarchy of administrative and regulating agencies. This includes bribery
and direct involvement in (owned or shared) businesses by many civil
servants, from the bottom to the top.

The problem can be described through a vicious cycle: excessive and
contradictory laws give state bureaucrats the possibility to extract rent
from businesses and this, in turn, encourages state bureaucrats to stop
improvements in legislation that would reduce their rents.

Yet, on the other hand, such situations encourage many business people to
get involved directly or indirectly with politics on every level of the
political hierarchy-to protect their businesses and, while there, to also
get advantages and sometimes control and victory over their competitors.

Some positive signals can be also seen from the World Bank survey mentioned
above. For example, Ukraine’s rating was very good for issues such as
enforcing contracts (39), better than most transitional countries (including
Russia and China) and even some developed countries (Italy and Portugal).

Interestingly, it takes less time to resolve a dispute in Ukraine than in
Bulgaria, Czech Republic, or Hungary and with much less court and attorney
costs than in Russia, Slovenia or Kyrgyzstan.

Ukraine was also ranked relatively high on the issue of getting credit (75),
better than Greece, Poland and Russia. This positive sign is a reflection of
the relatively well-developed banking industry in Ukraine, as enormous
foreign investments in this sector also might suggest, and it should serve
as an example for other industries in Ukraine.

Ukraine was also ranked high for ease of trading across borders (78), which
is mainly related to some success recently achieved in the direction of
entering the WTO.

Moreover, comparisons in the World Bank surveys for the last several years
suggest that there has been an improvement in most areas, although it is
still very, very small.

Another country ranking, based on so-called ‘Economic Freedom Index’,
constructed by The Heritage Foundation (USA), confirms the poor standing
of Ukraine (ranked 99 out of 157!) relative to other, even poorly-developing
countries in the world. This rating assigned Ukraine to the worst group,
‘repressed economies,’ in 1995-1996.

Since 1997, Ukraine was assigned to the group of ‘mostly unfree’ economies,
which is an improvement, but only a very, very small one, leaving our
business environment at the same or at a lower level than Lesotho,
Nicaragua, Senegal, and other poorly developing countries.

Yet another country ranking, a 2004 study by Transparency International,
placed Ukraine at 122nd place (out of 144) in terms of the level of
corruption (the higher the rank, the higher the corruption).

This place was shared with such countries as Niger and Sudan but,
ironically, Ukraine scored worse than Honduras, Zimbabwe, Belarus and
many other poorly developing countries.

In their latest study, in 2005, Ukraine made some improvements: we caught-up
with Honduras, Zimbabwe and Belarus, now taking 107th place (out of 158).
But is this as it should be in a country with as relatively high an
educational level as Ukraine enjoys?

Summarizing our discussion above would actually help drafting the economic
and political strategy for the new Ukrainian government-if it wants to
achieve good and long-term economic growth for our nation.

[1] The very first thing the government should do is to reduce the tax
burden by simplifying procedures for tax payments and reducing their level
(mainly the profit tax, the value added tax, and the social security and
pension tax, together with pension reform).

[2] The second most important objective is to simplify business regulation
procedures (especially property registration and procedures for starting or
closing businesses) and reducing government intervention in the markets.
Another specific step should be to abolish the Economic Code, while
improving the Civil Code.

[3] The third most important objective that the new government should pursue
is to ensure that human rights and property rights (including that of
minority shareholders) are strengthened and respected, not violated as has
so often been the case. A particular step here would be ensuring no massive
re-privatization and also strong promotion of further privatization of state
enterprises.

[4] Finally, as any country, Ukraine needs peace for its prosperity. How
should it be ensured? Ukraine is not a gigantic country by global standards
and so needs to decide which military alliance to join. At this point in
history, clearly, the choice is between Russia and NATO.

Can Russia help Ukraine have peace? Most Russian and Ukrainian people
have been friends and often relatives for centuries and this certainly
should continue on individual level, but shall this determine the quest for
the country’s security? Let us consider two important facts.

     [A] First, Russia indeed guaranteed Ukraine protection from invasions,
according to the treaty back in the XVII century, but it largely failed to
do so during the last two World wars. Moreover, in some sense, willingly
or unwillingly, Russia used Ukraine as a buffer to protect itself-as the
relative death count for both wars suggests.

     [B] Second, unfortunately, Russia is not a peaceful country itself-it
has continued wars outside and even within itself for centuries and there is
a big question if it is going to stop in the near future.

So, a pragmatic solution for ensuring peace for Ukraine is to follow the
example of successful Slavic countries by joining NATO as soon as possible
as well as integrating with the EU as deeply as feasible, while maintaining
pragmatically friendly relationships with the Russian people, as any country
with pragmatic leadership wants.

Reaching success in those three cornerstones of prosperity of a
nation-ensuring peace, imposing easy taxes, and guaranteeing tolerable
administration of justice-would help make Ukraine a prosperous, wealthy
nation. This is not just a theory. The past century has given us excellent
examples showing that this theory works well in practice.

The best example is Hong Kong that was among poor, developing nations in
the 1960s but joined the club of rich in the 1980s, having per capita income
higher than many European countries! The secret of success in Hong Kong
was based on the same three reasons: peace, easy taxes, and tolerable
administration of justice.

Indeed, Hong Kong is ranked as the ‘most free economy’, ranked first by
The Heritage Foundation and in the top 7 in the Doing Business survey by the
World Bank.

All countries that showed miraculous economic growth and performance-
Taiwan, South Korea, Singapore, Ireland, Luxembourg-understood the three
magic reasons and used them to their advantage, to make their nations
prosper.

The hope is that Ukraine will do it too!               -30-
———————————————————————————————–
NOTE: Valentin Zelenyuk is a Senior Economist at the Kyiv Economics
Institute (KEI), visiting professor of EERC at Kyiv-Mohyla Academy, and
Director of the Ukrainian Productivity and Efficiency Group (UPEG).
Currently, he is a visiting Research Scholar at the Kennan Institute of
Woodrow Wilson International Center for Scholars in Washington DC,

The author thanks Tom Coupe, Natalya Dushkevych, Kent Lewis and Pavlo
Prokopovych for valuable comments. The views expressed in this article are
those of the author and do not represent the views of above mentioned
organizations or people.
————————————————————————————————-
CONTACT: Valentin Zelenyuk e-mail vzelenyuk@kei.org.ua
————————————————————————————————-
LINK: http://www.ukraine-observer.com/articles/222/898

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2.   IMF IMPROVES UKRAINE’S GDP GROWTH FORECAST
                             FOR 2006 FROM 2.3% To 5%
 
Ukrainian News on-line, Kyiv, Ukraine, Mon, July 31, 2006
KYIV – The International Monetary Fund (IMF) has improved Ukraine’s
GDP growth forecast for 2006 from 2.3% to 5%. Ukrainian News learned
this from a statement by the International Monetary Fund, the wording of
which was made available to the agency.

The IMF says in its statement that the economic situation is improving in
Ukraine regardless of the political uncertainty and the economic growth has
replaced the GDP fall seen in 2005. Now, the IMF forecasts that Ukraine’s
GDP will grow by 5% in 2006.

However, the statement reads that the IMF sees risks in short-term
perspective, especially those related to the growth of energy tariffs, as
the growth in price of energy resources can push inflation, slow down the
economic growth, increase the national budget deficit, and affect the
foreign trade balance, which is negative already.

The IMF mission sees as possible further worsening of the environment on
foreign markets, which can strengthen macroeconomic splashes and affect the
access to foreign finance. Thus, the IMF mission recommends the government
and the National Bank of Ukraine to take appropriate steps to secure
stability and good economic results.

The IMF mission recommends to show the growth of cost of energy resources

in all tariffs to facilitate the effectiveness of the use of the energy
resources. It also recommends the authorities to take corrective measures
not to go beyond the plan of the national budget deficit of 2.5% for 2006.

The IMF mission also recommends to step up the process of structural
reforms. In the field of monetary and credit policy the IMF mission
recommends to secure low inflation and to continue strengthening of banking
supervision and regulation.

As Ukrainian News earlier reported, in April, the IMF worsened Ukraine’s GDP
growth forecast for 2006 from 5% to 2.3% and confirmed its forecast that the
inflation will be 13% in Ukraine this year.

In 2005, Ukraine’s GDP grew by 2.4% over 2004 to UAH 418,529 million.
According to the State Statistics Committee, Ukraine’s GDP grew in 2005 due
to the 8.1% growth in transport, 4.4% growth in extracting industry, and
3.0% growth on processing industry. In 2005, Ukraine saw inflation of 10.3%.
Inflation was 12.3% in 2004.                               -30-

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3.     UKRAINE’S FURNITURE INDUSTRY ONE OF THE FASTEST
    GROWING ECONOMIC SECTORS, WILL GROW 17-22% IN 2006

ANALYSIS AND COMMENTARY: Roman Bryl, Ukraine Analyst
IntelliNews-Ukraine This Week, Kyiv, Ukraine, Monday, July 31, 2006

KYIV – The furniture industry is currently one of the fastest growing
economic sectors. According to the consensus forecast of sector experts
based on data for furniture producers, the market will grow 17-22% this
year.

The market size will exceed USD 1.5bn against USD 1.15bn last year. Rapid
growth causes furniture produces to implement completely new sales schemes
and marketing methods to gain from overall market growth and speed it up
further.

Medium, small-sized companies dominate on local market —–
At present about 800 domestic and 200 foreign furniture producers operate
on the market. In most cases foreign companies work through local
intermediaries. The number of producers is rising now. Especially worth
noting is that the headcount is growing via medium and small-sized producers
that make rather high quality furniture.

There are only several big producers with sales volumes exceeding USD
200,000 per month. These furniture companies control up to 5% of the market.

Medium-sized companies with sales up to USD 40,000 per month have a
combined 60-65%. 30% of the market is controlled by small producers.

About 50% of furniture materials these companies use in production are
imported. It is mostly companies that operate in Western and Central regions
which prefer to rely on imported parts due to developed transport
infrastructure and proximity to foreign markets.

Furniture producers focus on domestic market and export a little —–
At the same time, exports of furniture amounted only to USD 30mn last year.
This figure showed several trends. First local plants focus on local buyers
because of excessive demand. That is why producers are oriented toward
making medium-priced or rather cheap furniture.

These segments account for 75% of all furniture produced. Medium priced
furniture (USD 1-2thsd per set) has 40%. Luxury furniture accounts for only
10%, and so-called expensive furniture – only 15%. Focusing on local
consumers, producers are not too interested in exports.

On the other hand, taking into consideration that small and medium producers
dominate on the market, they do not have enough funds to coordinate their
strategies to enter foreign markets. Local producers control the cheap
segment. The medium price segment is divided equally between local and
foreign companies. Foreign producers control the luxury and expensive
segments.

Another explanation for small export volumes is that local companies produce
mostly furniture for households (about 80% of total output). This furniture
is designed for local planning of buildings that is not similar to planning
abroad.

Plants start to upgrade marketing and advertising strategies —–
But there are signs that exports will rise in the future. First, local
producers have begun to focus on higher quality and more expensive
furniture. Demand for so-called mixed furniture made of metal, wood and
glass, of rare and exotic sorts of wood is rising. Also, plants have started
to use new marketing and advertising technologies.

We can witness renewal of companies’ images, re-branding, sub-branding and
etc. Producers now prefer to advertise not the product but its image. Brands
focused on individual needs are appearing. Some companies refuse to sell
furniture, choosing rather to sell design decisions for accommodations. At
the same time, plants spend less money on TV ads but prefer to use discount
and loyalty programs.

Very big trade centres required for furniture market —–
Now producers prefer to sell furniture through dealer chains (35% of sales)
and via own retail networks (35%). The most unpopular way to sell furniture
is the internet (about 2%). The own retail network is the most expensive way
and only big producers such as Merx, Liga-Nova, Ekmi, Enran, Irma, LVS,
LIVS can afford it.

But the benefit of an own network for a producer is that it allows closer
ties with a customer, meaning the seller can react more quickly and
efficiently to the buyer’s demands.

Significant changes are seen in the choice of trade places where furniture
is sold. Old styled small furniture shops are starting to disappear. They
are replaced by multi or single-branded supermarkets, special storages, and
direct sales on open marketplaces.

But producers believe the best way is through big furniture trade centers.
At present there is only one such center in Donetsk. Another one will be
opened soon in Kyiv.

The Donetsk center (Furniture Imperia) has 9,000 m² area. The center cost
USD 10mn of investments. Furniture from different producers is present
there. Such centers will influence the market structure significantly in the
forthcoming future: plants will focus mainly on making furniture and large
centers will focus on selling it.

Possible entry of furniture centers not to reshape market notably —–
One more thing worth mentioning regarding the appearance of large furniture
centers. Building centers in Donetsk and Kyiv is a form of securing from
entry of foreign majors like Swedish IKEA. The latter is trying to enter the
local market for several years, but still fails to overcome bureaucratic
barriers in its attempts to find land.

The arrival of a new major player could harm medium and small producers

and take away a decent market share from large local entities. But the present
situation shows that any big foreign player is bound to encounter some
issues. It takes more than one year to build an own center and it can be
built only in several big cities. It will be difficult for a large foreign
investor to enter the regions.

IKEA’s possible entry, for instance, did not reshape the market. It showed
the furniture market is prepared for such entries, which would only make its
growth more stable and profound.                       -30-

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LINK: http://www.securities.com/intellinews/about.html
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4.    KYIV MAYOR PROBABLY WON’T ALLOW IKEA TO BUILD
   COMMERCIAL COMPLEX ON LAND NEAR BORISPIL AIRPORT 
              
New Europe, Athens, Greece, Monday, July 24, 2006

KIEV – The top city official in Kiev last Wednesday said his government
“probably won’t” allow the Swedish retailing giant IKEA to build a store in
the Ukrainian capital, Interfax reported. “Under the present conditions they
(IKEA) are asking for, I can’t see it happening,” Kiev mayor Leonid
Chernovitsky told reporters. “I’m not going to cut down any trees.”

An IKEA proposal to construct an outlet on Kiev’s outskirts would force the
destruction of 36 hectares of woodland near the country’s biggest airport in
Borispil, Chernovitsky said. “And while I’m mayor, no tree is going to get
axed,” Chernovitsky said.

IKEA’s projected investment for the Kiev store in a 2005 offer was between
USD 350 and 400 million. Total land in the area requested by IKEA was 55 to
60 hectares.

 
An ambitious IKEA investment project envisions the construction of six
stores across Ukraine, of which the Kiev store was to be the first, and of
the creation of parks and amusement complexes nearby.

IKEA officials have promised a total investment to the country of USD 1.5
billion- a massive sum by Ukrainian standards. The Borispil region, in the
midst of a private construction boom of private homes purchased by middle
class Kiev residents, is among the capital’s most desirable suburban real
estate.

Borispil’s pine and hardwood forests are also heavily used by poorer Kiev
residents for summer picnics, and for mushroom and berry gathering. Kiev
city negotiators had offered IKEA representatives land plots of similar size
nearby, but the Swedish side was not budging from a preferred site near the
Kiev-Borispil airport highway, Chernovitsky said.

IKEA regional spokesmen were not available for comment. A secretary at the
company’s Kiev office said that “all the managers in the Kiev office allowed
to comment are on vacation.”

“We researched Kiev very thoroughly and came to the conclusion that this
land plot is the most suitable in terms of local infrastructure,
transportation and environmental concerns,” Natalia Altynova, IKEA’s human
resources manager for Russia and Ukraine, was quoted last month in the
English-language Kiev Post newspaper as saying. The Moscow-based Altynova
was also on vacation and unavailable for comment.

IKEA was one of the first Western companies to do business in independent
Ukraine, opening a saw mill and furniture plant in western Ukraine’s
Transcarpathia region more than a decade ago.

The Netherlands-headquartered corporate giant delayed serious plans to

enter Ukraine’s retail market until the country had undergone its Orange
Revolution ending in 2005, replacing a Soviet- style leadership with
pro-free market President Viktor Yushchenko.

Until Yushchenko came to office Ukraine had a poor record of attracting
foreign investment because of endemic corruption and undeveloped property
law. Traditionally, however, the Ukrainian government had been willing to
ignore environmental concerns, when offered major foreign investment.

The presence of an IKEA store is, in many East European countries,
considered an indicator that the country is serious about linking its
economy to Europe.

Before becoming Kiev mayor during the 1990s, Chernovitsky made a fortune

in banking as a specialist in financing private business. He is one of Ukraine’s
leading proponents of less government regulation, reduced corruption, and
the promotion of free enterprise.                      -30-
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5.  AUSTRIA’S ERSTE BANK AGREES TO BUY MAJORITY STAKE
                              IN UKRAINE’S PRESTIGE BANK

By Roman Olearchyk in Kiev, Financial Times
London, United Kingdom, Monday, July 31 2006

Austria’s Erste Bank has agreed to acquire a majority holding in Ukraine’s
Prestige Bank, marking the continued expansion of European banking groups
into the promising Ukrainian market.

Erste paid Euro 27.7m ($35m) for a 50.5 per cent stake and pledged to invest
Euro117m over the next four years to support the development of Prestige, a
small Ukrainian bank established in December 2005 by a group of businessmen
who sold their controlling stake in one of the country’s largest banks, Aval
Bank, to Austria’s Raiffeisen Banking Group for $1bn.

The acquisition agreement gives Erste the option of buying out the rest of
Prestige, which plans to open more than 25 branch offices throughout Ukraine
this year. Erste hopes Prestige will capture a solid share of Ukraine’s
banking market, which has grown strongly in recent years.

Total sector assets increased by 19 per cent in the first half of this year,
driven by private household demand for credit. Total credit volume during
this period surged by 47 per cent, Erste said in statement.

Ukraine’s banking industry remains largely controlled by local business
groups, but the presence of European banks has surged in the past year as
the country has come onto investors’ radar screens after adopting a western
integration strategy following the Orange Revolution of 2004.

Raiffeisen’s purchase of Aval, which operates a countrywide network of more
than 1,400 outlets, preceded a series of acquisitions in Ukraine by
European banking groups that took their market share from below 10 per cent
to more than a quarter.

In February, Italy’s Banca Intesa inked an agreement to purchase a
controlling stake in Ukrsotsbank, one of Ukraine’s largest banks with $1.3bn
in total assets, for $1.16bn.

Two months earlier, France’s BNP Paribas acquired a 51 per cent stake in
another large Ukrainian bank, Ukrssibank, for about half a billion dollars.

Earlier this year, Hungary’s OTP Bank jumped into the Ukrainian market,
agreeing to pay $650m for a bank Raiffeisen operated in Ukraine previous to
its acquisition of Aval.

Sources said OTP is seeking to increase its presence in Ukraine, a country
with a population of more than 47m, and has held negotiations on the
acquisition of another Ukrainian bank.

In March, France’s Crédit Agricole agreed to pay $254m for a 98 per cent
stake in Index Bank, ranked 21st by net assets out of more than 150
Ukrainian banks.

On July 18, Eurobank, the second largest Greek bank, announced its
acquisition of a 99.34 per cent stake in Universal Bank, Ukraine’s
72nd-largest bank by assets.                      -30-
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6.  GERMANY’S HEIDELBERGCEMENT WANTS TO BUILD NEW
 DRY METHOD CEMENT PRODUCTION LINE IN UKRAINE BY 2010

Ukrainian News-on-line, Kyiv, Ukraine, Monday, July 31, 2006

KYIV – Heidelbergcement AG of Germany wants to build by the year

2010 a new line in Ukraine producing cement by dry method.
Andrii Panchenko, the manager in charge of cement production at
Heidelbergcement in Ukraine, made this statement at a press conference.

‘We are considering the possibility of building a new cement line for a dry
method. The production is more likely to be based where there is a
sufficient raw material base. Possibly, at Donetsksement,’ he said.

Panchenko noted that construction of a new production line is connected with
the projection that Ukraine may experience a cement shortage by the year
2010 and its cement enterprises will not be able to cover it.

As Ukrainian News earlier reported, Heidelbergcement owned 79.6% of the
shares in Kryvyi Rih Cement (Dnipropetrovsk region) and 99.97% of the shares
in Dontsement (Dniprodzerzhynsk, Dnipropetrovsk region), according to the
December 2005 report of the Agency for the Development of the Stock Market’s
Infrastructure.

Heidelbergcement acquired Dontsement (Amvrosiivka, Donetsk region) through
its Danish affiliate office CBR Portland BV in December 2005. Heidelbergcement

has representative offices in 51 countries worldwide, including 12 in Eastern
European countries.                                  -30-
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7.        UKRAINE: EXPANDING CREDIT, UNTAPPED POTENTIAL
                       OF THE FINANCIAL SERVICES SECTOR

Oxford Business Group – Online Business Briefing Ukraine
London, United Kingdom, Thursday, July 20, 2006

As loan activity increases in Ukraine, market insiders continue to point to
the vast untapped potential of the financial services sector.

While loan activity increased by roughly 20% in 2005, according to Standard
& Poor’s, and the Ukrainian government has actively created laws designed to
improve access to credit, lending remains at a fraction of the market’s true
potential.

Although high interest rates and collateral requirements are a deterrent to
would-be borrowers, another challenge to mass credit and lending is the lack
of a credit reporting agency. At present, no single database exists on which
banks and other lenders can call upon to obtain accurate and timely
information on a loan applicant.

As Ukrsotbank’s Vadym Beresovyk put it, Today, every bank has its own
clients’ credit history database, which is not shared with other banks, and
it is impossible to protect yourself from bad borrowers, who often switch
banks.

The risk to the lender is higher, and further, consumers who are qualified
for large loans may get a fraction of the amount they would otherwise be
eligible to obtain. Processing time is also long and costly, as
investigations into a borrower’s personal history may be required.

Only 20-25% of qualified costumers are able to make use of credit, due to
the strict requirements banks place on borrowers, according to Andriy Kiyak,
head of the International Bureau of Credit History (IBCH). It can also take
a week or longer to issue a normal business loan, pending approval by the
lending bank’s security service, which dampens business development.

However, plans are in the pipeline to make financial services more
accessible for customers by establishing credit bureaus with the legal
mandate to monitor borrowers.

The Ministry of Justice is working on licensing regulations for credit
agencies, according to the Kyiv Post.

One of the key issues will be implementing a well-enforced law guarding

the privacy of individuals’ credit histories. It is a new practice in the
country to ask permission to create a credit history for a client. However,
now the practice is becoming more common, according to Kiyak.

The necessary legislation and regulatory framework has yet to be approved

by the parliament. Without it, one cannot be sure of the security of the
personal information that credit bureaus will hold.

In order for a company to get a licence to open a credit bureau, it must
have been registered for at least three years prior to the application, have
no tax or other debts, and the bureau itself must have a statutory fund of
not less than $996,000 and a sophisticated software system.

At present, IBCH, partly owned by TAS Financial Group, the Ukrainian Bureau
of Credit Histories, associated with top local bank Privat, and the First
All-Ukrainian Bureau of Credit History (FAUBACH), created by the Association
of Ukrainian banks, are all waiting for approval by the Ministry of Justice.

Once all the conditions are met and the draft law passed, the new credit
bureaus can begin accumulating the accepted minimum of 500,000 individual
credit histories needed to begin formal operations.

The draft law was developed under the supervision of the US Agency for
International Development (USAID), through its Commercial Law Centre in
Ukraine, in consultation with local banking institutions.

USAID is also helping the Ministry of Justice to develop regulations for
monitoring the credit agencies once they become operational. The flow of
information not only to lenders but also to other credit agencies must be
ensured and protected against unwanted third parties to provide transparency
and trust in the system and prevent a monopoly on credit information.

Once the law is passed, market watchers say loan activity will quickly
expand. The IBCH has predicted that consumer loans will grow between 80

and 90%, mortgage loans between 50 and 70% and automobile loans between
70 and 80% over the next three years.

However, there are other obstacles that the sector must overcome to achieve
these high levels of growth, according to the Commercial Law Centre.

These include the development and implementation of a national education
programme on credit and its uses, the establishment of a sound ownership
structure, and the need for the availability of the significant capital
outlay that must be made prior to any revenue being generated through the
sale of credit reporting agency products. The centre reported that these
obstacles are surmountable in the short to medium term.

Analysts see the opening of authorised credit bureaus as necessary for the
creation of a more favourable business environment. At present, the country
has a cash economy, where consumers must wait and save to make large
purchases, such as a house or a major appliance, which slows demand and
growth. The availability of credit creates immediate demand, leading to
increased employment opportunities.

Demand for housing is already rising, fuelling robust construction and real
estate markets. Widely available loans would further increase demand.

Banks are increasing their focus on retail lending to meet demand, and will
welcome credit reporting agencies as a means to speed processing and lower
costs, thus freeing up more time and capital to serve clients.     -30-

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LINK:  http://www.oxfordbusinessgroup.com
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8.     UKRAINE: AKHMETOV TO BUILD THREE 5-STAR HOTELS
 
OSTROV: Research Center of Donbass Social Perspectives
Donetsk, Ukraine, Monday, July 31, 2006
The richest businessman of the country, Rinat Akhmetov, will build three new
5-star hotels in Ukraine, according to ‘Delo’ newspaper. The Turkish hotel
network Rixos belonging to the businessman started negotiation on
construction of hotels in Kiev, Kharkov and Odessa.

The information of Akhmetov’s plans has been confirmed. ‘So far the
negotiations are over concerning the capitals’ project,’ said Andrey
Semenov, head of marketing department of Rixos Hotel Prikarpatye

Now Rixos is considering three hotel projects in cities-millionaires
proposed by Ukrainian investors. ‘The company’s plans include construction
in other cities as well, ‘ Mr. Semenov said. Per his words, the cost of the
project for one hotel for 250-280 rooms will be about $40-50 million.

 
He did not tell the date of project realization referring to commercial secret.
‘Opening of hotels will take place not earlier than in three years,’ he
said.

Reference: Rixos was founded in 2000 in Antalia (Turkey), it owns 8 hotels.
One of the last Rixos projects was the hotel Sungate Port Roayl, the seven
stars (higher than lux-premium), it takes 25 hectares. It costs $250
million. (Ostro@skif.net)                      -30-
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9.    UKRAINIAN ECONOMICS MINISTER SEES ECONOMIC
                      BENEFITS FROM POLITICAL TURMOIL
 
TV 5 Kanal, Kiev, in Ukrainian 1500 gmt 24 Jul 06
BBC Monitoring Service, United Kingdom, Monday, July 24, 2006
KIEV – [Presenter] Ukrainian have stopped looking up to politicians and
are now counting on themselves alone, Economics Minister Arseniy
Yatsenyuk has said in a comment on the parliamentary crisis.

In his opinion, this has had a positive impact on GDP growth and the

economy as a whole. However, political instability can negatively affect
the investment climate in Ukraine, Arsenyuk warned.

[Yatsenyuk] Ukrainians are so tired of politics and of the political turmoil
that the latest macroeconomic indicators point to the following: Ukrainians
do not get their bearings from politics or politicians. Ukrainians have
started to get their bearings from themselves alone.

This is a good thing, because in social terms there has been a lot of
change. We have given up paternalism and the idea that the state owes
everything to everybody. No. The public has realized that nobody will help
them unless they help themselves.                           -30-
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10. CZECH GROUP ACQUIRES TWO UKRAINIAN LENDERS

 
Business Digest, Sofia, Bulgaria, Friday, July 28, 2006

Liga Biznesinform Czech PPF Group agreed to acquire two Ukrainina lenders,
Agrobank and financial company PrivatKredit, it was reported on July 28,
2006 but no financial detail on the agreement was disclosed.

 
The deal is to be approved by the Commission on Financial Markets of the
Czech Republic, the National Bank of Ukraine and the antitrust authorities
of the two countries.

Agrobank was established in December 2002 in Dnipropetrovsk and on July 1,
2006 the bank had net assets worth 644.7 mln hryvnias ($ 127.7 mln/100.6 mln
euro). The bank’s credit investment portfolio totalled 543.3 mln hryvnias
($107.6 mln/84.7 mln euro) and its capital stood at 67 mln hryvnias ($13.3
mln/10.5 mln euro). The bank’s net profit for the first half of 2006 was 1.5
mln hryvnias ($297,000/234,000 euro).

PrivatKredit, which specializes in consumer loans, is an affiliate of the
Privat Bank group. PPF group, owned by Dutch PPFGroup N.V., is an
international financial holding, managing assets worth 200 bln Czech crowns
($8.9 bln/7.0 bln euro) at the end of 2004 and comprising PenzijnifondCP,
eBanka and companies specialized in asset management.

The group operates in the Czech Republic, Slovakia, Russia and Kazakstan

and has shown interest in the eastern European and Asian markets. (Alternative
name: Ahrobank, Dnepropetrovsk) http://liga.net/
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LINK: http://www.aiidatapro.com
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11.   FULL SPEED AHEAD “ANTI-CRISIS COALITION” INITIATES
      REVIVAL OF FREE ECONOMIC ZONES AND TECHNO-PARKS 

ANALYSIS AND COMMENTARY: By Nataliya Yatsenko.
Zerkalo Nedeli On The Web, Mirror-Weekly, No. 29 (608)
International Social Political Weekly
Kyiv, Ukraine, Saturday, 29 July – 4 August 2006 year

The recently formed parliamentary majority keeps amazing experts with its
economic reform plans. A couple of days ago an outstanding figure in the
Party of Regions insisted on the need to revise the NBU policy, up to
replacing its Governor.

No doubt, statements of this kind are de mauvais ton and totally
unacceptable for a respectful political force. Therefore, on the following
day, the PR leader Viktor Yanukovych had to disavow them.

Furthermore, last Monday Mykola Azarov, newly appointed Budget Committee
Chair, presented draft Supreme Rada proposals for the 2007 Budgetary
Resolution.

Whereas the first paragraph of the document (reading “The draft state budget
for 2007 should be built on a stable taxation base with a gradual reduction
of fiscal burden on the national economy”) perplexes the reader as to what
is planned after all – stability or reduction – the fifth paragraph dashes
the reader’s hopes.

I quote: “Given the adverse impact of restrictions imposed on the operation
of special (free) economic zones and innovative technology parks, the draft
2007 State Budget of Ukraine should provide for the resumption of effective
investment and innovation projects with the tax regime applicable prior to 1
April 2005; it should also provide for strict regulation and tight state
control of their implementation.”

Every other word in this paragraph can be called into question.

What “adverse impact of restrictions” is meant here? It could be adverse for
certain groups of interests, but it was positive for the state budget.

Finance Minister Viktor Pynzenyk argues that in 2005 budget revenues grew by
3.4 times (UAH 32.6 billion) as compared to 2004, primarily thanks to the
eradication of “shadow schemes and practices,” including the cancellation of
tax benefits for free economic zones and techno-parks.

“According to Ministry of Finance data, the restoration of tax benefits will
entail budget losses of UAH 12.5 billion and render it impossible not only
to raise minimum salaries in 2007, but also to pay the minimum salaries of
UAH 400 due in December 2006,” – says the Minister.

Perhaps Mr Azarov is in possession of alternative data testifying to the
damaging effect of the FEZ liquidation but cannot make them public for

some reasons.

However, it is more likely that no thorough feasibility study of free
economic zones has ever been conducted on the national scale either in the
wake of the “orange” revolution when all FEZ were abolished, or now that

the “anti-crisis” coalition wants them restored.

Paragraph five cites efficiency as a criterion for FEZ revival. It looks
goon on paper, but in practice it is going to be substituted by tried and
tested “manual control” and arbitrariness.

It does not matter which of the options proposed by Azarov is eventually
chosen: whether the Cabinet makes decisions on a case-by-case basis or
whether Parliament is charged with this responsible mission (potentially
lucrative for MPs).

Serhiy Matviyenkov, Chair of the Supreme Rada Committee for Industrial and
Regulatory Policy, urged his colleagues to create new free economic zones
instead of restoring the dubious old ones, with which Mykola Azarov agreed
in principle. Of course, a special procedure will be elaborated, with all
the necessary formalities and criteria.

Yet has anyone ever thought of the crux of the problem, namely: whether the
privileged tax regime is justifiable? Should there be a flexible system of
tax incentives for high-performance free economic zones and techno-parks?
Should tax benefits be substituted with direct budget subsidies?

The “anti-crisis” coalition plans to make a U-turn not only on free economic
zones. Mykola Azarov has dropped a hint that his Committee could initiate a
“careful analysis of the impact that several laws had on the national
economy and domestic market by weakening customs protection of the

Ukrainian market.”

As one of the TV news programs suggested, an idea could be reanimated to
allocate state budget money for the setting up of a non-state pension fund
for the employees of budget-financed institutions, the assets of which would
be managed by a “specially selected” company.

This is the sort of “consistent economic policy” that awaits our country. It
implies stability, tax treatment and regulatory norms a la the previous
Yanukovych Cabinet.

“Having turned down, with good reason, the government’s report of the 2005
State Budget execution, we, in fact, disapproved not only of the Cabinet’s
activities at large, but also the budget policy it pursued in 2005-2006.

In whole truth, it was a disastrous policy that would bring the country to
the abyss,” – said the Budget Committee Chair after 241 MPs voted to
criticize the Yekhanurov government for 2005 Budget execution.

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12. PRESIDENT SAYS UNITY DECLARATION CRUCIAL FOR UKRAINE

TV 5 Kanal, Kiev, in Ukrainian 1715 gmt 31 Jul 06
BBC Monitoring Service, United Kingdom, Monday, July 31, 2006

KYIV – Ukrainian President Viktor Yushchenko has insisted that his
continuing crisis talks with parliamentary faction leaders must result in
the signing of a national unity declaration. Speaking at a news conference,
he said agreement must be reached on such key issues as language and
security policy.

He urged politicians to give up what he termed as speculation on these
issues which was used in the run-up to the recent parliamentary elections.

Yushchenko said that the possibility of dissolving parliament was discussed
during his meeting with pro-Russian Party of Regions leader Viktor
Yanukovych on 31 July. Another round of talks between Yushchenko and

leading politicians is expected to take place on 1 August.

The following is an excerpt from Yushchenko’s news conference, broadcast by
Ukrainian television TV 5 Kanal on 31 July; subheadings have been inserted
editorially:

Good afternoon. Esteemed journalists, I’d like to say a few words about and
give a little comment on what happened on Friday [28 July, when Yushchenko’s
crisis with parliamentary faction leaders broke off] and on what today’s
talks ended with. I have always proceeded from the assumption that the
nation needs a basic, fundamental and uniting document as a breath of air.

It would show that key political players in this country care about the most
important national priorities, that from now on language policy, security
policy or the policy of forming a united national space are not a problem in
Ukraine.

These and several other key points have been used in speculation in the
run-up to the elections and not only at that time, they have long been a
wound dividing society and making Ukraine and its political views of key
priorities look divided and no longer united in the international arena.

                    UNITY DECLARATION MUST BE SIGNED 
I remain convinced that the nation’s political elite must give such an
answer. It must bury the sword and declare a joint position on key tasks
that are most topical in terms of national prospects. I am sure that a lot
of things that seemed to oppose each other were seen in a somewhat

different way during the first part of the nationwide round table.

The difference was that they could now be discussed and positions could be
made closer to each other. In the early hours of Saturday, at 0130 [2230 gmt
on 29 July], I was sure that we are ready to sign 99 per cent of the
memorandum. At 0330 in the morning, something different happened.

The other party felt it necessary – due to various political procedures – to
discuss this decision. In essence, this was the reason why a formal meeting
focusing on signing this document was postponed.

I’d like to reiterate that I remain firmly convinced that the declaration
must be signed. This is why my meeting with [Party of Regions leader] Viktor
Yanukovych today was dedicated to this part of political objectives. We
discussed various problems that arise regarding this document in terms of
both substance and procedure.

I believe that we have reached another understanding that today and today’s
meeting of the working group must result in a common denominator on key
issues that we failed to discuss in the early hours of Saturday. I am
optimistic about this.

   POSSIBILITY OF DISSOLVING PARLIAMENT DISCUSSED 
At the same time, I said that today’s talks have been held in the context of
consultations with political leaders regarding the political situation in
Ukraine and the possibility of dissolving the Ukrainian parliament. I am
convinced that the preferred path lies in searching for a compromise today
and at this stage, and that the nation must be given an honest answer to the
questions that were asked of us.

We should not hide behind minor answers. I am convinced that this path would
be more constructive and lead towards an understanding both between the
political parties in parliament and in general, in relations between the
president-parliament-government triangle. [Passage omitted: answers
questions from journalists]
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13. UKRAINE’S PARTY OF REGIONS LEADER HOPES UNITY 
                       PACT WILL BE SIGNED ON AUGUST 1 

 

TV 5 Kanal, Kiev, in Ukrainian 1400 gmt 31 Jul 06
BBC Monitoring Service, United Kingdom, Monday, Jul 31, 2006

KIEV – [Presenter] Party of Regions leader Viktor Yanukovych hopes that

the declaration of national unity will be signed tomorrow. Speaking after a
two-hour meeting with President Viktor Yushchenko, Yanukovych also
said that a working group will begin ironing out contentious issues today.

[Yanukovych] I hope that this will be done tomorrow. The declaration of
national unity should be part of a coalition accord. Any differences that
there are in the declaration will probably be taken into account in the
coalition accord.

[Presenter] Viktor Yanukovych also said that he had not discussed the issue
of his premiership during the meeting with Yushchenko. Let us recall that
before the meeting, Yanukovych said he was not going to withdraw his
candidacy, which had been nominated for prime minister by the
[parliamentary] coalition.                                -30-
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14.     “IT’S HOPELESS, BUT IT’S OUR WAY”
      This President, unfortunately, has proven to be too weak for the heavy
  weight entrusted to him. Moreover, he often failed to carry even lighter loads.

              It is disastrous for a weak nation to have a weak president.
 

ANALYSIS AND COMMENTARY: By Serhii Rakhmanin
Zerkalo Nedili On The Web, Mirror-Weekly, No. 29 (608)
International Social Political Weekly
Kyiv, Ukraine, Saturday, 29 July – 4 August 2006

This is all like watching a recorded match, already knowing the score. You
know from evening news that your favorite team lost and didn’t even have a
chance.

But in the morning you turn on your TV, hoping to see that the newscaster
was wrong! And even seeing three goals conceded in the first minutes,
you keep watching every move, every pass, and every kick.

You just hate to believe that your idols care so much about their legs and
don’t care about their reputation. You still hope that these players, who
are lazily strolling the field, will hear your calls and prayers, will feel
your earnest wish for their victory, and will break their backs to win.

And after the final whistle, having exhausted your vocabulary of four-letter
words, you swear not to watch football ever again. But a few days later you
hope again that your team can and will play better – with a little bit of
luck and a new coach.

                                       CATENACCIO
The analogy with catenaccio [Ital. “chain-like”, “drag” – slow and dull
foot-dragging play in the middle of the field with too many crosses and few
scoring opportunities to secure a desired score – A.B] is prompted by the
current political peripatetic in Ukraine. Now it is obvious that nothing at
all has been happening in this country for the last several weeks, except
for sheer imitation of play.

The final score was predetermined like in a “fixed” match with one side
getting its unfair victory and the other – its undeserved reward.

They have just been pulling wool over our eyes, keeping us on tenterhooks,
and we have been anxious whether the President would dissolve the parliament
or not, okay the candidature of Viktor Yanukovych for premiership or not,
take part in the roundtable meeting or not, etc. Many of us, taking all
those fake disputes in all good faith, became accessories in a big hoax.

Eloquence appears to be the only skill acquired by our politicians in
fifteen years since independence. They have learned very well how to cover
up self-seeking, money-grubbing, and treachery with lofty phrases about
“national unity,” “historical mission,” and “political responsibility.”

All those political discussions, heated debates, and even fistfights in the
session hall are nothing but shows staged to disguise a banal collusion.

What is going to happen now? – In all reasonable probability, Yanukovych
will be appointed Prime Minister and Our Ukraine will “legalize” cooperation
with its ideological opponents.

It doesn’t matter much how exactly this deal is formalized – whether by
joining the coalition [of the Regions Party, the Socialists, and the
Communists – A.B.], signing an ambiguous official agreement, or concluding
an unambiguous secret pact.

The deal may be frustrated in theory, but it is as good as done in practice,
just because the stakes are too high.

“SPECTATORS OF THE SHOW ALWAYS STAYING LOW”
Many voters, who supported the “orange,” are not ready to reconcile with
such an alliance. But the orange leaders must have prepared the ground
before. Right after the parliamentary election returns were announced, they
began to talk about the need “to unite the western and eastern parts of the
country.”

They swore that posts in the government were the last thing they were after:
“Our mission is to unite Ukraine! We are aware of our responsibility before
the nation! We must uphold the democratic reforms! But we have to have
levers of influence to fulfill our mission. That’s why we have to stay in
the government. Yes, we know that it’s a compromise, but it’s not betrayal.
Yes, it’s a heavy cross, but we are ready to carry it.”

What a commendable self-sacrifice! But there is one nuance: no reforms or
achievements to list in this leadership’s record.

Their explanations would be logical if they had a moral right

to state the following:

[1] “We have finally made everyone equal before the law. Corrupt
officials have been duly punished and we must stay at the helm to
prevent a comeback of the rotten regime.

[2] We have accomplished the long-awaited administrative reform
and delivered local self-governments from the central government’s
dictate.

[3] We have deprived local “princelings” of the least chance to ignore
national interests. Our sacred duty is to follow through, drive the last
nail in the coffin of separatism, and do away with poverty in the
remotest provinces.

[4] We have made everyone abide by the Constitution and if we left
now, there would be no one to protect it from infringements.

[5] We have rooted out corruption as a phenomenon. We have no right
to let the yet unpunished bribe-takers get off lightly.

[6] We have set new democratic standards for mass media and buried
the myth about authorities interested in a “tame” mass media.

[7] We are the first political leadership in Ukraine’s history that
understands freedom of expression as authorities’ duty to heed public
opinion rather than everybody’s right to say whatever they please.”

    LIST OF PROMISES NEVER KEPT IS FAR LONGER
The list of promises that were never kept is far longer. The colossal credit
of popular trust in the orange leaders was a foundation on which they
promised to build a new state.

Where are the blocks and bricks that never became walls?

[1] Has this leadership adopted a modern concept of national security?
[2] Has it carried out consistent transformations in the education and
         healthcare systems?
[3] Has it introduced a new model of territorial-administrative
         management?
[4] Has it diversified energy supply sources or instituted energy-saving
         as a legal norm?
[5] Has it modernized the mechanisms of public utility services?
[6] Has it created favorable environments for investors?
[7] Has it done away with contraband?
[8] Has it put an end to unwarranted eavesdropping?
[9] Has it offered any incentives for domestic producers to make
         them competitive on the global market?
[10] Has it created any prerequisites for a truly independent judiciary?
[11] Has it passed the bills on the President, on the Cabinet of
         Ministers, on central bodies of executive government, on
         referendums, or on the opposition?
[12] Has it founded the Public Television?
[13] Has it launched an effective national program of support for
          Ukrainian culture?
[14] Has it moved a finger to help Ukrainian publishers?

This is all about the “blocks” and there are plenty of smaller “bricks.”

One may argue that the orange leadership has achieved a significant
breakthrough on the international arena. But what exactly has it achieved?

Ukraine has been declaring its readiness to integrate with the European
community for a decade, producing heaps of normative acts, memorandums,
and official statements.

   UKRAINE IS STILL FAR FROM WELCOME IN EUROPE
But Ukraine is still far from welcome in Europe. A stable democratic
government, an effective market economy, and a developed civil society still
remain in the list of priority plans – on paper only.

There is a paradoxical but undeniable fact: under the relatively
anti-Western presidency of Leonid Kuchma and the pronounced anti-Western
premiership of Viktor Yanukovych, Ukraine declared membership in NATO
as its strategic goal.

Under the pronounced pro-Western presidency of Viktor Yushchenko,
Ukraine did not even manage to legalize the temporary presence of foreign
troops on its territory.

The level of pro-NATO sentiments has dropped below zero, with
whole cities and administrative regions declaring themselves “NATO-free
zones.”

This fact graphically demonstrates the orange leadership’s inability to
achieve set goals despite titanic efforts exerted by several ministers.

At the macro-level, its foreign political impotence was expressed in the
fact that the word “Ukraine” was never even mentioned during the G8
summit [in St. Petersburg in July – A.B.].

At the micro-level it is evident from tougher visa issuance procedures
introduced by most EU countries.

President Yushchenko invited leaders and business captains of democratic
nations to a pompous conference in Kyiv – a sort of “mini-Davos,” but the
“guest stars” did not come. And those who did were not convinced by his
promises that “in a year world business would not recognize the Ukrainian
economy”.

After a good deal of lip service to “a comprehensible and predictable
foreign policy” this leadership showed its real worth in the January talks
with Moscow [on new terms of supplies of Russian natural gas – A.B.].

The best it achieved was an utterly disadvantageous contract.

Its contents and effects sharply contrasted with the promises to rid Ukraine
of its critical dependence on Russian fuel supplies, defend national
interests, and eradicate corruption in the higher echelons.

Now it is hard to gather what exactly this leadership means by a “steady
foreign political course.”

                                WHO’S THE BOSS HERE?
Knowing about Yushchenko’s outspoken devotion to the Ukrainian language,
many believed that after the Orange Revolution (which gave this nation a
powerful charge of patriotism) there would be no confrontation between
Ukrainian and Russian in this country. Many hoped that under Yushchenko’s
presidency Ukrainian would become competitive and prestigious.

But the widely advertised “pro-Ukrainian” campaign never went further than a
few successful projects on two TV channels (only thanks to their managers’
and journalists’ initiative).

All that the new government managed to produce was the ambiguous slogan
“Think Ukrainian!” and the unambiguous sanctions against Russian-language
publications. The national publishing industry never got the support it
counted on so much.

Yushchenko is not the only one to blame for what is happening. But he is
undoubtedly to blame for letting it happen. And he is to blame for the
unprecedented aggravation of conflicts among the religious confessions.

PRESIDENT TOO WEAK FOR HEAVY WEIGHT ENTRUSTED TO HIM

This President, unfortunately, has proven to be too weak for the heavy
weight entrusted to him. Moreover, he often failed to carry even lighter
loads.

At the dawn of his presidency he dressed down municipal officials for
the absence of wheelchair ramps at the entrances to administrative
buildings.

He called upon them to “turn to face the people” and ordered them to
immediately build such ramps.

In fact, a good president is not the one who gives such orders but the one
whose subordinates do that kind of job for him. The ramps were never built.

Did Yushchenko build an efficacious system of government? Did local
authorities turn to face the people? – The answer is clear as day.

One day Yushchenko decreed to liquidate the State Road Inspection. At first
many drivers hailed the move, saying it was high time to remove “those big
road robbers” and hoping that in a few weeks some more efficient body would
replace them. Three months passed, but nobody came to put things on
Ukrainian roads in order.

Meanwhile, two weeks after the innovation almost all drivers began to
complain about “complete chaos” on motor roads and were ready to forgive
everything only if the road police came back. Finally, the SRI was restored.

So was order on the roads (only unrecorded fines became larger). And road
police officers complained in TV interviews that “those drivers went hog
wild” and forgot the traffic rules.

That was the price of one inconsiderate initiative: the militia was
humiliated, the drivers were depraved, and the leadership’s reputation was
stained once again.

The President had “peaceful initiatives” as well. One of them was a project
for construction of the Artistic Arsenal in Kyiv. Many ridiculed it but said
sympathetically, “After all, the idea is not bad. Maybe Yushchenko will
succeed at least with this project.”

He didn’t. The project remains suspended and God knows if it will ever be
completed. The only hope is for the Regions Party – it is disciplined and
rich enough. Those guys know what they want and how to achieve goals.

The Artistic Arsenal project was nothing compared to the scandal around the
multistory apartment block that was constructed unlawfully in Mariinsky
Park. Experts unanimously warned that it could cause a landslide on the
Dnipro slope. For weeks it was the talk of the town.

The President was indignant. He promised to intervene. But were the
offenders punished? Was the building demolished? Was the slope
reinforced?

These and lots of other examples mirror the weakness of the incumbent
political leadership. Inability to follow through is a weakness. But it is
disastrous for a weak nation to have a weak president.

Some committed patriots, who still earnestly trust in Yushchenko in spite
of all his weaknesses, are calling upon him to dissolve the parliament,
abrogate the amendments to the Constitution, and restitute the strong
presidential vertical of power. What for? – Liquidating the road police
again? Building another museum?

  PRESIDENT HAD COLOSSAL LEVERS OF INFLUENCE
              BUT THREW THEM TO THE FOUR WINDS
Yushchenko had colossal levers of influence but threw them to the four
winds.

All law enforcement bodies were directly subordinated to him and he
promised to “jail bandits.” Did he?

He promised to root out corruption in governmental offices. Did he?

Was it not under his presidency that the Prosecutor General Office shelved
hundreds of criminal cases instituted by the Interior Ministry and the
Security Service?

Didn’t he hear that the PGO was openly called a commercial venture whose
profit grew after each new case was buried?

Yushchenko was supposed to – and expected to – signal and accomplish a
transition from authoritarianism to democracy. He did not because he was
unwilling and unable to.

The day that Our Ukraine becomes a political trophy of the Regions Party (in
a body or in limbs) will be the last day of the Yushchenko policy, even if
he serves the full five-year term of his presidency, and even if he is
re-elected for a second term. Both his former friends and foes will lose
interest in him.

The bulk of the “orange electorate” will hardly be happy about Yushchenko’s
last political steps. Many will remain personally loyal to him – like fans
who don’t turn their backs on their team despite defeats.

But true fans want their team to play and win or at least try to fight,
instead of selling themselves to others.

                                      IN CAHOOTS
There is nothing bad about the idea of signing a memorandum on the
“consolidation of efforts for preserving the country’s unity.” But it hardly
looks feasible – like the Yushchenko-Yanukovych pact that was signed a

few months ago but was soon denounced. A more recent example is the
agreement on forming the “Orange Coalition.”

The documents contained good declarations and were inked by authoritative
and responsible political leaders. Where are those documents now?

Who can guarantee that the National Unity Universal [initiated by
Yushchenko] will not share their fate?

It may sound a bit cynical, but in legal terms the value of this document
equals the price of the paper on which it is written.

Imagine a small provincial town. Jobs are scanty and salaries are meager, if
paid at all. All adults (who have not fled to bigger cities yet) either go
to work in the police or join criminal gangs. The sides are at war,
suffering heavy losses. So one day the police general and the gang leader
decide to start what they call “a constructive dialog.”

As a result, they “join forces” – exclusively for the sake of peace in the
town, which is home to both. The law enforcers get enlisted in criminal
rings as rank-and-file men and ringleaders reinforce the higher police
ranks.

The analogy may seem lame or even coarse and cynical, but it was drawn by an
acquaintance of mine and there are too many people who share his view. The
man lives in Kharkiv and is engaged in journalism, business, and politics.
He voted for Yushchenko in 2004 and for Our Ukraine in 2006.

He can’t understand how the leaders and policy-makers of Our Ukraine and the
Regions Party could unite the country if they “even breathe differently,” as
he puts it. And the differences between them lie much deeper than those
between ordinary residents of West-Ukrainian and East-Ukrainian towns.

There is only one thing they have in common: the majority of leaders on both
sides are equally aware of the magic power of money and the real price of
power. And that’s what explains their perverted alliance.

The key to money and power is in the new slogan “Two Viktors – One
Ukraine!” (or in the earlier one – “East and West Together!”)

Collusion under such a slogan is not a sin. It is passed off as a noble act,
and the voters should be grateful to the political swindlers for cheating
them once again. Yes, it was a cheat.

Didn’t one Viktor promise his voters to rid the country of the “orange
plague?”

Didn’t the other Viktor pledge to safeguard the young democracy against the
“revanchists?”

Now these calls for unity and consolidation come in quite handy when both
Viktors have to explain to the confused voters in both parts of Ukraine why
the “orange rats” and the “bandits” should row the same boat.

Today the orange need the blue-and-white because it is the only way for them
to hold on to the power which cost them so much effort, which they have
gotten used to, and which is slipping away from them.

The white-and-blue can’t do without the orange because they need to get
complete control of the parliament and neutralize the President.

Ukraine was not split yesterday. It’s not Yushchenko who did it and it’s not
Yanukovych who aggravated this problem. Their predecessors had for years
shredded and mangled this country. It survived, but the wounds were still
bleeding.

If the orange had cared about it, they would have tried to treat and heal
these wounds. If the white-and-blue had cared, they wouldn’t have rubbed
salt in them. But the orange didn’t care because they had already come to
power, and the white-and-blue didn’t care because they hoped to regain it.

Neither moved a finger to make the declarations of unity and consolidation a
reality. They ignored the disease yesterday.

[1] Why should we trust their slogans today?
[2] Why didn’t Yushchenko and Yanukovych meet at a round table
      in January of 2005?
[3] Why didn’t they sign a national unity pact in March of 2006?
[4] Why did they learn to “breathe” as one only in this dire need to
      share the power in the state?

The problem is not the personal or professional qualities of the orange
leaders who might get some positions in the new government. The problem is
that the idols have not been debunked and the enemies have not been
acquitted. And both are going to strike a political deal.

But if they could only look at themselves through their voters’ eyes, how
would they feel about it?

             “BUDDA WALKING AROUND THE CALVARY
                       AND SHOUTING ‘ALLAH AKBAR!'”
I sincerely wish success to the participants of the political project
entitled Universal, but I personally consider it hopeless. If those who got
together in the presidential palace were thinking of the future of Ukraine,
they did not have such a conversation. “We must respect the opinion of the
voters.” Do, please. Who prevented you from doing so up until now?

“I would like to draw your attention to the need to comply with the
Constitution and the laws.” Does one need a round table to realize that?!
Several dozen wise politicians proclaimed common truths with important
looks.

When I was looking at the participants of this performance, I was
involuntarily thinking to myself that now those who were committing
despotism and those who failed to punish those guilty of despotism, have
shamelessly put on the togas of arbitrators.

                     “WE WERE WAITING FOR SO LONG.
           THERE IS NOTHING SILLIER THAN WAITING!”
Was there a chance to mend Ukraine, which is torn apart, and is there such a
chance now? The answer to this question is unknown.

We can’t blame the government for not doing anything. The success of certain
politicians and of certain ministries did not go unheeded.

Yet it did not create an impression of systemic changes. When the population
is speaking of reforms, it means success. When the reform initiators are
speaking of them, it means imitation.

From the last eighteen months much has been justly said about the lack of a
real leader, united team and uniting ideology. Yet the shift of the
priorities turned out to be a major sin.

The establishment of the unity of the state should have become the number
one priority. Where does this unity start? From respect of the state. What
does one need for that? Respect of the state to its citizens. Long and
tiring talks about the concern of people will never substitute the concern
itself.

A real everyday concern of people would have freed the residence of Western
Ukraine from the need to pay their love to the government in advance as well
as would have rid the residents of the West from their instinctive hate of
the government.

The problem does not lie in the president alone. Too many high officials
from the Maidan sincerely believed in what they were saying from the rostrum
at Ukraine’s major square. Yet in practice they failed the test for power
and money. That is why they have lost.

Why didn’t they try to do the obvious things? If their sense of
responsibility failed, then why didn’t their instinct of self-preservation
work? After all, the government is doomed in an unfavorable country. Lack
of intuition has become the testimony of their weakness as politicians.

  “TO RAISE, TO FALL AND RAISE AGAIN LIKE A STAR?”
The Orange are offered a second chance and they will certainly use it. This
is a rather widespread argument, but I personally do not share it.

The Orange have already had their second chance; it was after the dismissal
of the Tymoshenko Cabinet. However they lost it. They even had their third
chance after the parliamentary elections, but the whole Ukraine have heard
and seen how and why the so-called democratic majority collapsed.

That is why only those who have already forgotten the long and shameless
fight for portfolios are now able to believe in the talks about the
responsibility for the future of Ukraine.

There are also those who believe that, in early elections, a single bloc of
BYuT and Our Ukraine with proper corrections is the chance not only for
the Orange but also for the state. The supporters of this idea still believe
in the ability of the President to dismiss the current parliament.

When I was writing this article, the Universal operation was still in
process. I do not rule out that my readers already know its outcome. But
for now we can only predict it and it seems to us that it will end with the
union of Our Ukraine and the Party of Regions and with the premiership of
Yanukovych.

It is hard to believe in the ability of Yushchenko to dismiss parliament.

Why? Because up until now, the president’s most decisive move was . the
dismissal of the government, which he created himself.

Even if we assume that the president will dare to take this measure, it will
hardly become a new chance for the Orange. Most likely it will result into a
new quarrel, and new attempts to substitute the deeds with the words and a
new “anti-crisis coalition.”

Early elections look hopeless because currently there is no political force
in Ukraine that is able of becoming the vehicle of the values of the Maidan.

From my strictly subjective point of view, we can only speak of separate
people, scattered through different parties or being outside any of the
parties. However it is difficult to imagine that they all will get together
under one common banner.

That is why, Our Ukraine going into opposition will become the chance
for both the Orange and Ukraine, because:

[1] this will be just in historic and political terms;
[2] this will enable Yushchenko’s supporters to save their face;
[3] this will enable them to preserve Yushchenko as a politician (if
     only he is interesting for them in this position);
[4] this will become an actual, rather then mythic, demonstration of
     responsibility.

Being in the opposition (but not in the government where they are doomed
for a short political life and even shorter leash), the sons and the
daughters of Maidan will gain the moral right to sign under the plans for
the unification of the state and will be obliged to fulfill them.

Only being in opposition to the regime will the former government be able
to collect its strengths and gain new leaders.

Thus it will earn the right for a new life. There, on the other side of the
barricades, it will be able to help to defend the few gains of the Orange
revolution.

Let’s hope that I will be mistaken in my forecast, but the coming of the
Regions of Ukraine and their allies to power can become a serious trial for
democracy.

There are all the reasons to believe that they will pose a threat to the
slowly growing civil society in Ukraine, for the middle class that has
been born and exists in defiance of everything.

The freedom of speech and the freedom of entrepreneurship did not become
the gains of the Orange revolution. These are the obvious gains of the
society.

There are reasons to believe that the Orange simply feared to renew the
system of “temniks” (secret instructions to the media) and failed to
establish the mechanism of the militia and tax “cleaning ups.” Although they
tried in the very beginning.

The Regions will not fear and they will succeed if nobody prevents them from
this. The experience and the possibilities of the Orange could be of use for
everyone who is ready to stand up for their rights.

The historic mission of the Orange is to be strict controllers of the new
government rather then its silent accomplices.

It is hard to believe in Our Ukraine voluntarily going into the opposition,
after all that has been said and done. Yet many would like to believe in
this in order not to become finally disillusioned about politics.

The Maidan has destroyed the wall and we face a precipice. This precipice
divides the government and our notion of it.

We don’t want our last hopes to be shattered on the bottom of this
precipice.                                      
  -30-
———————————————————————————————
LINK: http://www.mirror-weekly.com/ie/show/608/54110/

———————————————————————————————-
NOTE:  Some of the sub-headings and the formatting of the article
were added editorially by the Action Ukraine Report (AUR).
———————————————————————————————–
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
========================================================
15. FORMER U.S. AMBASSADOR TO UKRAINE STEVEN PIFER
                SAYS WEST CAN WORK WITH YANUKOVYCH
             Too early to predict future course of Ukrainian foreign policy

INTERVIEW: With Former U.S. Amb to Ukraine Steven Pifer
By Serhiy Kudelia, Radio Free Europe/Radio Liberty (RFE/RL)
Prague, Czech Republic, Monday, July 31, 2006

WASHINGTON – Former U.S. Ambassador to Ukraine Steven Pifer, in
an exclusive interview with RFE/RL’s Ukraine Service, discusses what the
shifting political landscape might mean for Ukraine’s future.

Pifer, currently a senior adviser at the U.S.-based Center for Strategic and
International Studies [CSIS], tells correspondent Serhiy Kudelia that it is
too early to predict the future course of Ukrainian foreign policy.

But he says that in the event that Party of Regions head Viktor Yanukovych
becomes prime minister, he believes the U.S. government does not have an
“instinctive bias” against working with him.

RFE/RL: Ukrainian Ambassador to the United States Oleh Shamshur greeted
everyone in June 2006 with the announcement of an ‘Orange coalition’ that
was to form a new government. Today, the Orange coalition is nonexistent and
there is no government. Does Washington have any trust left in Ukrainian
politicians?

Steven Pifer: I can’t speak for the U.S. government on this, but I don’t
think it really undermines the confidence in that sense. I mean, politics
are very complex. Certainly a month when Shamshur spoke I think it was the
expectation of everyone, based on the information at the time,  that there
would, in fact, be an ‘Orange coalition’  in the [Verkhovna] Rada.

As far as I can tell, pretty much everybody — both in Ukraine and the
United States — was surprised by Mr. [Socialist Party leader Oleksandr]
Moroz’s decision to defect [from the Orange coalition] and join with the
Regions Party and the Communists.

RFE/RL: But many analysts claim that the main responsibility for the
splintering of the Orange coalition lies with President Victor Yushchenko.

Pifer: Clearly now, if you look at the choices that President Yushchenko and
Our Ukraine had after the March 26 elections — where at that point I think
it really was in the president’s hands to decide whether he would have an
‘Orange coalition’ or whether he would join with Regions Party — certainly,
the wavering by Our Ukraine and its inability to move quickly in March,
April, and May has led to a situation now where they face a different, and a
much less attractive set of choices.

RFE/RL: In a recent article, Carnegie Endowment for International Peace
analyst Anatole Lieven characterized the collapse of the Orange Revolution
as a geopolitical defeat for the Unites States. Do you agree with such an
assessment?

Pifer: I think that geopolitical view is not the way that Washington looks
at Ukraine. That’s almost suggesting that Ukraine is an object of
competition between the West and Russia. And certainly when I was in the
U.S. government, people were not looking at Ukraine in those terms.

What people saw the Orange Revolution about was the Ukrainian people really
making a decisive break with the past — where they actually took control of
their own political destiny. And that’s why it was such a moving thing that
got so much attention in the West.

Now, certainly there’s been frustrations and disappointments in what has
happened since the Orange Revolution. But I’m not sure at this point, if you
are saying there has been now a huge geopolitical switch — I think it is
premature to come to that conclusion.

Certainly, I think that the millions of Ukrainians who went out and
protested against the effort to steal the elections in 2004. They still are
politically empowered in a way that was not the case prior to 2004. That is
a powerful force, and  I don’t think the political maneuverings are ever
going to change that.

RFE/RL: But two participants of the so-called anti-crisis coalition — the
Communists and the Party of Regions — conducted their election campaign
on an anti-American and anti-NATO platform. If they do in fact form a
government, are they likely to maintain Ukraine’s current foreign-policy
course?

Pifer: Now, the question that comes now — yes, you are going to have
presumably with the ‘anti-crisis’ coalition, if it is affecting the choice
of the prime minister and the cabinet, you may have a different policy
course, but I think people are going to wait and see, you know, how
different is that policy?

First of all, you’ve seen from President Yushchenko and Foreign Minister
[Borys] Tarasyuk their view that Ukraine should continue to pursue a
Euro-Atlantic course. Second, it’s not totally clear yet what policies
that — if Mr. Yanukovych becomes prime minister — what policies he would
pursue.

For example, when he was prime minister in 2002, 2003, 2004 — at that point
he supported  the Ukrainian policy of trying to join NATO and trying to join
Europe. I think there are elements in the Regions Party, who, while they may
not be enthusiastic about joining  NATO, would like to see Ukraine draw
closer to the European Union.

So, I think it’s a bit simplistic to conclude that, as a result of the
political developments, Ukraine is going to veer off in a totally different
direction.

RFE/RL: So you don’t expect any deterioration in U.S.-Ukrainian relations if
Yanukovych becomes prime minister and the Party of Regions becomes the
basis of a new government?

Pifer: The point will be, and this I think is going to be something
important, is that if Mr. Yanukovych becomes prime minister it will have
been the result of an essentially democratic process, and the U.S.
government looks at presidents and prime ministers who come to position as
the result of a democratic process in a very different way than those who
don’t.

And, I think, U.S. officials have said they would be prepared to work with
whatever government comes out of this process. So, I don’t think you have an
instinctive U.S. government bias against working with Mr. Yanukovych. -30-
—————————————————————————————————
http://www.rferl.org/featuresarticle/2006/07/6139CD86-890D-4F4F-BFD4-11478CFAF5A8.html

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[return to index] [Action Ukraine Report (AUR) Monitoring Service]
========================================================
16.         LETTER TO YULIA TYMOSHENKO
 
ANALYSIS & COMMENTARY: By William Zuzak, Ph.D., P.Eng.
Article sent to the AUR on Sunday, July 23, 2006
Published by the Action Ukraine Report (AUR) #742, Article 16
Washington, D.C., Tuesday, August 1, 2006
As a Canadian of Ukrainian heritage, I have maintained an interest in
Ukrainian affairs throughout my life. I must confess that I do not
understand Ukrainian politics and attribute the bizarre action of Ukrainian
politicians to “kompromat” and excessive desire for power.
 
Nevertheless, at the risk of being accused of interfering in Ukraine’s
internal affairs, allow me to present an external perspective on the present
parliamentary-constitutional crisis in Ukraine.

You have adamantly refused to enter into a coalition with the Party of
Regions and appear to be doing everything possible to trigger new
parliamentary elections this fall.

On the one hand, I agree that a government headed by Viktor Yanukovich

would be disastrous for Ukraine. External to Ukraine, one could expect
boycotts of Mr. Yanukovich and his officials, and a decrease in foreign
investment (except, perhaps, by organized crime).
 
Internally, one could expect further polarization of Ukrainian society and
a creeping return of Stalinist terror, which was making a resurgence under
the Kuchma regime.

On the other hand, there are several pressing issues that should be handled
immediately and before the next parliamentary elections.

Five crucial issues come to mind:

(1) Accession to the WTO
(2) Abolishment of immunity from prosecution
(3) Appointments to Constitutional Court
(4) Pricing of crude oil, natural gas and transit fees
(5) Constitutional review

In my opinion, the optimum solution would be to create an interim all-party
coalition comprised of the five political parties for a period of one year.

Although I am not qualified to suggest who should be the prime minister,
speaker, etc. in the Verkhovna Rada, I would suggest that these people be
from lower down on the party lists. Certainly, these could not include
Tymoshenko, Yanukovich, Poroshenko or Kivalov (the former CEC chairman,
presumably responsible for falsification of the 2004 Presidential vote).

I would urge you to consider this scenario and to formulate your position as
to what conditions you would be willing to enter into such an interim
all-party coalition.

Before concluding, allow me to expand on the five points listed above.

(1) Accession to the World Trade Organization: I would have expected Ukraine
to have passed all required legislation in this area over one year ago. It
is crucial that Ukraine do so as soon as possible. Furthermore, Ukraine
should encourage and facilitate (if possible) the accession of the Russian
Federation to the WTO.

(2) Abolishment of immunity from prosecution of Verkhovna Rada deputies: In
my Reports I and II (see link below) on the 26 March 2006 parliamentary
elections, I expressly stated that, although the election procedures were
fair and legitimate, the “party lists” for which the people were obliged to
vote were not.

Even conceptually, it is impossible to fight corruption, if the corrupters
themselves are elected to the Verkhovna Rada. There is worldwide consensus
(including Ukraine) that this immunity should be abolished as soon as
possible. Otherwise, the deputies in the Verkhovna Rada will be rightfully
viewed as criminals by the peoples of the world and will be treated as such.

(3) Appointments to Constitutional Court: The argumentation is that
parliamentary immunity can only be abolished by a constitutional amendment,
but that the Verkhovna Rada refuses to nominate its share of judges to the
Constitutional Court. This indicates that the so-called “2005” constitution
is not working and is, thus, invalid. I would argue that it should be the
prerogative of the President of Ukraine to make such appointments unless and
until they are superceded by nominations from the Verkhovna Rada.

(4) Pricing of crude oil, natural gas and transit fees: My response (see
link below) to your excellent article in the July 13, 2006 issue of the Wall
Street Journal Europe — reproduced in the July 13 issue of the Action
Ukraine Report (AUR#731) and in your BYUT Newsletter #6 of July 17 — has
been published in AUR#735 of July 19, 2006.

It is, indeed, crucial that all recipient countries of gas transited through
Ukraine, as well as all supplying countries in Eurasia, be involved in the
negotiations. However, interim flexible agreements may be necessary to span
a period of instability that currently besets the world.

(5) Constitutional review: I submit that the “2005” constitution, which
replaced the “1996” constitution of Ukraine, is invalid for three reasons:

(a) It was negotiated by politicians under duress during the Orange
Revolution crisis.
(b) The present impasse in the Verkhovna Rada indicates that this
constitution is inoperable and probably never will be operable.
(c) It was drafted by politicians without consulting the people of Ukraine
and without their ratification via a referendum.

Whereas Abraham Lincoln in his Gettysburg Address envisioned government

“of the people, by the people, for the people”; Ukrainians are saddled with
government “of politicians, by politicians, for politicians”.

Article 5 of the 1996 Constitution of Ukraine expressly states that it is
the Ukrainian people, and not the President, the Verkhovna Rada or the
Courts, who are the final arbiters in the Ukrainian state. Similarly,
articles 69, 72, 106, 155 and 156 specifically refer to referendums. (See
Appendix A.)

Referendums as instruments of consensus-building and decision-making are
utilized successfully in Switzerland and many countries of the world. In a
series of letters on “The Canadian Constitution” (see link below), I argue
forcefully that politicians should not be in charge of drafting or amending
a constitution.

This must be done by specifically created Constituent Assemblies under the
auspices of the Constitutional Court. For it is the people, and not the
politicians, who must define how they wish to be ruled by their government
and its institutions. Any constitutional amendment must be ratified by the
people via a referendum. All three entities — President, Verkhovna Rada,
citizens of Ukraine — should have the ability to initiate a referendum on
any question.

In my opinion, the proposed 2005 constitutional changes go too far in
emasculating the powers of the President. As head of state, the President is
responsible for the efficient day-to-day operation of the government and its
institutions. Should the occasion arise, the President should have the power
to “rule by decree”, with the proviso that his decision can be overruled by
appropriate legislation in the Verkhovna Rada.

On the other hand, the office of the Presidency must not be seen as a
sinecure for political allies and old cronies. Once elected, the President
must cut any direct connection to any of the political parties that either
supported him or opposed him during the elections.

He should not be involved in the political intrigues within the Verkhovna
Rada. In this context, President Yushchenko should not act, nor be viewed

as acting, on behalf of Nasha Ukraina.

Respectfully yours
William Zuzak, Ph.D., P.Eng.
Edmonton, Alberta, Canada
Email: mozuz@telusplanet.net
———————————————————————–
NOTE: The articles mentioned above are available at
http://www.telusplanet.net/public/mozuz/ by clicking on the appropriate

links under Will Zuzak Letters. Six letters concerning the Canadian
Constitution, archived at
http://members.fortunecity.com/zuzak/constitution/con_indx.html
outline my views on the appropriate procedures to amend a constitution.
—————————————————————————————
                    Appendix A: Constitution of Ukraine 1996
                    http://www.rada.gov.ua/const/conengl.htm
Article 5
Ukraine is a republic.
The people are the bearers of sovereignty and the only source of power in
Ukraine. The people exercise power directly and through bodies of state
power and bodies of local self-government.
The right to determine and change the constitutional order in Ukraine
belongs exclusively to the people and shall not be usurped by the State, its
bodies or officials.
No one shall usurp state power.
Article 69
The expression of the will of the people is exercised through elections,
referendum and other forms of direct democracy.
Article 72
An All-Ukrainian referendum is designated by the Verkhovna Rada of Ukraine
or by the President of Ukraine, in accordance with their authority
established by this Constitution.
An All-Ukrainian referendum is called on popular initiative on the request
of no less than three million citizens of Ukraine who have the right to
vote, on the condition that the signatures in favour of designating the
referendum have been collected in no less than two-thirds of the oblasts,
with no less than 100 000 signatures in each oblast.
Article 106
The President of Ukraine:
6) designates an All-Ukrainian referendum regarding amendments to the
Constitution of Ukraine in accordance with Article 156 of this Constitution,
proclaims an All-Ukrainian referendum on popular initiative;
Article 155
A draft law on introducing amendments to the Constitution of Ukraine, with
the exception of Chapter I — “General Principles,” Chapter III — “Elections.
Referendum,” and Chapter XIII — “Introducing Amendments to the Constitution
of Ukraine,” previously adopted by the majority of the constitutional
composition of the Verkhovna Rada of Ukraine, is deemed to be adopted, if at
the next regular session of the Verkhovna Rada of Ukraine, no less than
two-thirds of the constitutional composition of the Verkhovna Rada of
Ukraine have voted in favour thereof.
Article 156
A draft law on introducing amendments to Chapter I — “General Principles,”
Chapter III — “Elections. Referendum,” and Chapter XIII — “Introducing
Amendments to the Constitution of Ukraine,” is submitted to the Verkhovna
Rada of Ukraine by the President of Ukraine, or by no less than two-thirds
of the constitutional composition of the Verkhovna Rada of Ukraine, and on
the condition that it is adopted by no less than two-thirds of the
constitutional composition of the Verkhovna Rada of Ukraine, and is approved
by an All-Ukrainian referendum designated by the President of Ukraine.

The repeat submission of a draft law on introducing amendments to Chapters
I, III and XIII of this Constitution on one and the same issue is possible
only to the Verkhovna Rada of Ukraine of the next convocation.

———————————————————————————————–
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
========================================================
17.           ROUND TABLE MADE OF GLASS

ANALYSIS AND COMMENTARY: By Yulia Mostovaya
Zerkalo Nedili On The Web, Mirror-Weekly, No. 29 (608)
International Social Political Weekly
Kyiv, Ukraine, Saturday, 29 July – 4 August 2006

Those who have ever sat at a glass table will know it is an ordeal. People
are accustomed to hiding certain movements or gestures under tables: they
can scratch themselves, touch their neighbour’s foot, make a vulgar gesture,
secretly change cards, stretch their legs and wait for the talks to end.

A transparent table is a trap for human weaknesses and emotions. It is a
magnifying lens for hidden agendas and insincere attitudes.

Last Thursday Ukrainian TV viewers had a chance to observe both obvious and
obscure movements of the top politicians who assembled at a round table in
the Presidential Secretariat.

Most people in the audience saw that, irrespective of their political
allegiance, few of the invited leaders displayed an ability to generate
ideas, sincere concern about the situation in the country or a readiness to
assume responsibility for it.

They also saw that the document designed to unite various political forces
was legally inoperative. So what was the point of showing the gathering to
the nation?

What was the purpose of the gathering, in the first place? In fact, it could
have several objectives.

OBJECTIVE 1 could be to demonstrate to the Ukrainian political elite,
general public and international community who is ‘the king of the castle.”
On the face of it, this objective was fully attained.

Of course, if one wished to carp at Viktor Yushchenko, one could find minor
slips:

[1] the President should not have got engaged in a long discussion with

such a skillful talker as Petro Symonenko;
[2] he should have avoided the non-PC epithets he used a couple of times;
[3] he should not have drawn analogies between Ukraine and Poland when it
came to the language and national self-identification issues, which could be
interpreted as his lack of understanding of Ukraine’s specifics;
[4] he should have paid equal attention to all provisions of the document,
etc.

And yet Viktor Yushchenko looked and behaved as the President. It was a man
who knew what he wanted and (non-typically) could formulate his ideas in
plain language understandable for millions of TV viewers. The President’s
position dominated throughout the discussion of the issues that he put on
the agenda and was prepared to consider in detail.

It pertained, in particular, to defense matters and NATO membership. Of
course, he should have started making out his pro-NATO case when his support
rating was 55%, rather than 8%. He should have started coordinating the
country’s development strategy and monitoring its implementation as far back
as early 2005, but this is another story.

At this juncture, we should reiterate that the round table revealed the
President’s strengths. How did Viktor Yushchenko achieve it?

[1] First, by concentrating his personal effort on the saving of his own
political face in this quandary.

[2] Second, by seeking advice from experts capable of identifying national
interests and of talking to the UN Security Council from the Parliamentary
Assembly of the Council of Europe.

[3] Third, by ensuring there would be no. opponents to the President at the
round table (apart from Petro Symonenko who has nothing to lose). Those

who could challenge the President’s stance or vie with him for the viewers’
empathy had their hands tied and preferred to keep a low profile.

Tymoshenko concurred with everything he said hoping the round table would
result in the decision to dissolve the Rada. Yanukovych attended the
assembly with only the aim to get the President to nominate him for prime
minister, without which he has no way of legitimately presiding over the
Cabinet.

So, for the most part, the PR leader kept silent or supported the President
with emphatic respect. Moroz trusted his fellow Socialist Tsushko to speak
for the party, and the latter appeared open to compromises on a broad range
of issues.

It is hard to say whether Moroz’s reserve could be put down to his still
feeling uncomfortable for what he did or to his anxiety about the coalition’s
and Parliament’s future.

Tymoshenko declared she was prepared to sign the document in its original
version, while Azarov said the Party of Regions would sign it within half an
hour, both having their own agendas in mind.

Therefore if one expected the round table to bring together parties and
groups with varying ideological positions but striving to reach a consensus
vis-a-vis the country’s political course, they would be disappointed.

It was not the case because, for one thing, practically none of the
represented political forces has any ideology whatsoever and, for another,
none of them is interested in any political course. What they are after is
power and access to resources.

OBJECTIVE 2 was to develop and agree upon the country’s strategic

course. At least, this was the announced aim of the round table and of the final
document, kind of a declaration of the national harmony. Did the President
seriously intend to define the strategic course? We doubt it.

[1] First, strategic courses are not developed within a few hours of
discussion. [2] Second, the round table expected to shape the nation’s
future should have been more representative of Ukrainian society. As matters
stood, the participants were clearly divided into two antagonistic camps:
“pro-Soviet” and “anti-Soviet.” They were unable to bridge the societal rift
stemming from this very antagonism.

There was not a single person raised in the post-Soviet era, not a single
politician or expert educated in the West, not a single leader speaking a
European language, not a single elected or appointed official trained in
modern management and good governance.

There was no one capable of infusing a fresh spirit into the discussion, let
alone generating innovative, breakthrough ideas for the society,
administration and national economy.

It is not that Ukraine lacks such people: there is still no demand for them
from the powers that be and the opposition. So instead of being the center
point of the initiatives of the Ukrainian elite, the round table turned into
a mix of positional struggle, cynical opportunism and pricks of conscience.

The selection of the civil society representatives was strange, to say the
least. There were many esteemed persons among them, but the only thing they
have in common is their experience of cooperating with Ivan Vasiunyk.

I would not compare Popovych and Kravchuk or Pliushch and Sverstiuk, but

the civil society sector of the round table did not (and, perhaps, could not)
come up with original, convincing proposals.

Students from Kyiv Mohyla Academy and Polytechnic Institute or experts from
the country’s leading think tanks could have been in a better position to do
so. Nor did the civil society sector cope with its role of representing the
“public conscience,” since none of its representatives asked the document
authors: “Where is a provision on Ukraine’s security of power supplies?

Why doesn’t it address the issue of corruption in the gas sector undermining
this security? What will the nation’s stance be over the possible loss of
its independence because of the faulty policy in the gas sector?”

Tymoshenko said nothing about it. Yanukovych, immersed in his thoughts, made
no comment. But why did the civil society representatives hold their
tongues? Why didn’t they ask the politicians who will sign the
anti-corruption provisions in the document?

Will it be Yushchenko? Moroz? Yekhanurov? Kravchuk? Will it be their
satellites: Ivchenko, Rudkovsky, Montrezor, Boiko or Voronin?

The people assembled at the round table have a decade-long history of
confrontation and no trust of one another. How could they possibly work
together toward developing the country’s strategic course? Some would say
the organizers invited those who were available. But that would not be true.

The organizers invited those whom they could admit to the exclusive club;
those with a solid footing but past their political prime. Given this
approach, it is still unclear why Kravchuk and Pliushch were in while Kuchma
and Lytvyn were out.

If the President had been truly interested in designing a breakthrough
strategy, he should have convened owners of large businesses who finance
political parties, rather than party leaders. Why deal with intermediaries?
Why lose time on conventionalities in this “extreme situation?”

Instead of meeting with Akhmetov, Kolomoysky and Firtash tete-a-tete, he
could have brought them all together at a round table, but without TV
cameras, civil society and tied hands this time.

They could have had a fruitful conversation and made a series of
macro-decisions conducive to universally acceptable and stable ground rules
concerning ownership protection, efficient judiciary, land market and the
like. Yet the President opted for a different route. Why? Perhaps, in view
of the third objective.

OBJECTIVE 3: Window Dressing. Didn’t it strike you as strange that

in their assessment of the latest developments, the participating politicians never
criticized Viktor Yanukovych as a candidate for premiership? (Tymoshenko
does not count as her goal is early elections).

Nor did invited experts do so. Didn’t it surprise you that the President,
aspiring to define the strategic course, did not engage in an active
discussion with those who opposed this course during the parliamentary
elections but kept silent at the meeting?

The President could, indeed, want a coordinated course, but that was,
obviously, not his primary concern. Numerous politicians and political
observers believe Yushchenko needed, first and foremost, a polished

document in vindication of giving a green light to the coalition with the
Party of Regions, Socialists and, maybe, even Communists.

He needed a plausible explanation for his electorate of this alliance with
the forces that, supposedly, committed to sharing his values by signing the
document.

Some MPs (in the Yuliya Tymoshenko Bloc and “our Ukraine”) are of the
opinion that the President arranged the round table to expose the
incompatibility of the politicians responsible for the Supreme Rada’s
effective functioning: “Thus Yushchenko will have the moral, as well as
legal right to dissolve Parliament.

This round table will also make evident that Yushchenko cannot possibly
second Yanukovych’s nomination for the prime minister.” Those who regard
early elections as the only chance to break the deadlock would not give up.
In particular, they attach great importance to the President’s steadfast
position over the language of the document concerning NATO.

This paragraph is critical as NATO accession could become an impetus for
drastic reforms that Ukrainian authorities have been postponing for years.
Reportedly, Yushchenko also insists on the original wording of provisions
concerning the Ukrainian language and indivisible church.

It is hard to say what it is more important: the President’s personal
beliefs or his desire to make “anti-crisis coalition” members abandon their
election slogans. Is it about the President’s principles or traps for the
opponents? Some politicians in the YTB and OU think it is a bit of both.

Proponents of an early election might know something special, which we have
no way of knowing. We can only make guesses and ask questions. For example:
if Yushchenko wanted to reveal irreconcilable differences between the
parties, why did he try to smooth things over?

 
Why did “Our Ukraine” cease demanding that the coalition nominate another
candidate for premiership?

Why did negotiations between the coalition and “Our Ukraine” go as far as
discussing the future of the Constitutional Court and its possible decision
to reverse constitutional reform, making a future National Bureau of
Investigation accountable to the President, and curtailing the powers of the
Interior Ministry, Prosecutor General and SBU?

According to some PR members, the OU negotiators have dropped their
requirements to remove the Communists from the coalition. Why did the
President, winding up the round table on Thursday, commission the working
group to prepare a document suitable for all, instead of opening it for the
signing by those forces only that see eye to eye with the President on the
most crucial items of the document?

         NOT LEGALLY BINDING, NO MORAL COMMITMENT
No matter what kind of document the round table participants eventually
sign, it will not be legally binding. Nor will they have any moral
commitment (as if they knew what this is) to respect it.

Petro Symonenko made a relevant statement right on the porch of the
Presidential Secretariat: “The document as an act of subordinate legislation
is one thing, and a legitimate coalition of which the CPU is a member is
another thing.” The Communist leader is not alone in thinking so.

We still do not know who will sign the document. Will Yuliya Tymoshenko

do it, just to avoid being tagged as “the instigator of splitting the country”
and “opponent to the presidential course”? However, if she sees the
President’s reluctance to dissolve the Rada, she could refuse to sign. [???
AGAIN, AT THE ROUNDTABLE, SHE SAID, “I CANNOT SIGN
THIS DOCUMENT.”]

Symonenko is likely to withhold his signature on ideological grounds. Moroz
and Yanukovych will send their lawyers to check and re-check every phrase,
contemplating in the meantime what matters more to them – posts or election
promises. “Our Ukraine” will follow the President’s instructions as usual.

In theory, the document might be endorsed with only three signatures – those
of OU, PR and Socialist leaders, which will be yet another pretext for the
President to argue for re-formatting the coalition.

In any case, the round table initiated by the President was either a gesture
of romantic despair on the part of the head of state or an act of
window-dressing aimed to make the “orange” forces’ capitulation look more
elegant in the public eye.

To tell the truth, Viktor Yushchenko is in a tough situation. He must make
one of the most vital decisions in his entire political career. Not only
will this decision affect the future of his friends and foes, but also seal
his own fate.

          YUSHCHENKO IS CHOOSING A PARTNER FOR HIMSELF
While resolving the dilemma – coalition or dissolution – Yushchenko is
choosing a partner for himself. Should it be Yanukovych or Tymoshenko?

 
It is a difficult choice. In making the decision Yushchenko should remember
that early an election will not change the quality of Parliament, its cynicism
and lack of ideology.

On the other hand, he should also bear in mind that no memorandum, pact or
any other document can deceive the people, whose values will never be shared
by Yanukovych and who will never accept Yanukovych’s methods.

           BEST POSSIBLE SOLUTION IS FOR “OUR UKRAINE”

                                TO JOIN THE OPPOSITION
The best possible solution under the circumstances would be for “Our
 Ukraine” to join the opposition. It would boost the party’s image with the
voters. It would strengthen the opposition.

It would prove that Ukrainian political elite can be consistent in promoting
its principles and true to itself. It would allow Yanukovych, Moroz and
Symonenko to enjoy doing business together. Yet this scenario does not seem
to go well with either the President or the OU majority.

[Ukrainian poet and public figure] Borys Oliynyk made an insightful comment
at the round table: “The President has found himself between the rock of
political expediency and the hard place of ethics.”

The President – initiator of the unifying pact – chooses the former. A
national leader chooses the latter. God bless Viktor Yushchenko and give

him the wisdom to understand who he is.               -30-
————————————————————————————————
———————————————————————————————–
NOTE:  Some of the sub-headings and the formatting of the article
were added editorially by the Action Ukraine Report (AUR).
———————————————————————————————–
[return to index] Action Ukraine Report (AUR) Monitoring Service]
========================================================
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========================================================
18. LONG-TIME UKRAINIAN EDITOR APPEALS TO PRESIDENT
                     YUSHCHENKO OVER COURT DECISION
      Property of journalist seized to pay damages to Interregional Academy
            of Personnel Management, widely believed to be anti-Semitic.
     Believes his case an example of persecution of press freedom in Ukraine.

OPEN LETTER: To Ukrainian President Viktor Yushchenko
FROM: Volodymyr Katsman, Editor-In Chief, Stolichnyye Novosti
Fakty i Kommentarii, Kiev, in Russian 28 Jul 06; p 6
BBC Monitoring Service, United Kingdom, Monday, July 31, 2006

Volodymyr Katsman, the editor-in-chief of the Stolichnyye Novosti newspaper,
has written an open letter to President Viktor Yushchenko. He complained
that a court in Kiev has ruled to seize his property to pay compensation for
moral damage to the Interregional Academy of Personnel Management, widely
believed to be anti-Semitic.

He believes the academy is racist and xenophobic and says that his case is
an example of persecution of press freedom in Ukraine.

The following is the text of the article providing generous excerpts of the
open letter from Volodymyr Katsman published in the Ukrainian daily
Kommentarii i Fakty on 28 July; subheadings have been inserted editorially:

Bailiffs from the state bailiff service of Pecherskyy district department of
justice in Kiev have seized the property of a journalist, promising “to sell
it to pay for moral and material damages to the Interregional Academy of
Personnel Management”.

In connection with this, the chief editor of the publishing house SN –
Stolichnyye Novosti, Volodymyr Katsman, sent an open letter to Ukrainian
President Viktor Yushchenko, people’s deputies, heads of law-enforcement
agencies, political parties, electronic and print media and journalist
colleagues calling on them to defend freedom of speech and democracy in
the country.

We quote with brief cuts the text of Mr Katsman’s appeal.

“Extraordinary circumstances make me appeal to you. At the demand of the
IAPM (Interregional Academy of Personnel Management), by now sadly known
throughout the world, whose leadership has turned the country’s biggest
non-state higher educational establishment into a breeding ground for
xenophobia and racism, bailiffs of Kiev’s Pecherskyy state bailiff service
have seized all my property, promising ‘to sell it to pay for moral and
material damage to the IAPM’.

Such unprecedented actions provoked by the Pecherskyy court and the IAPM
were undertaken as a showcase example of how gangsters and xenophobes are
putting in their place journalists who have been brave enough constantly to
criticize them for whipping up interethnic discord in Ukrainian society and
for truthful investigations of gangsterism, corruption and bribery.

“I will not get into an analysis of the damage done to the Ukrainian state
by the IAPM.

Suffice it to say that it was precisely the activity of the IAPM that for a
long time put a brake on the abolition of the [US] Jackson-Vanik amendment
[relating to trade with Ukraine, cancelled in 2005]; the IAPM ‘merited’
being put on a list in the US State Department of the most dangerous
organizations, having virtually convinced world public opinion that it is
possible for a higher educational establishment in Ukraine to exist
unpunished and propagate itself via the media, on the basis of whose
activity lie xenophobia and racism, where lectures are given to students by
the leader of the world ‘ku-klux-klan’ (!) and which openly conducts
anti-US, anti-British and anti-Israeli propaganda, insults domestic
politicians and the president of Ukraine, calls Hizbollah terrorists ‘the
peace party’ and so forth… [ellipsis as published]

Our publications always wrote and will continue to write the truth that the
IAPM under the current leadership of that establishment is a most dangerous
hotbed of inflaming interethnic discord in the tolerant Ukrainian society.

  NO PROGRESS IN CASE OF KATSMAN’S BEATING UP
On 8 April this year at the entrance to my own home I was beaten senseless
by gangsters. From blows to the head by wooden bats I received serious
cranial cerebral damage, concussion and multiple wounds to the head and
arms. I spent a month and a half in hospital and, according to the doctors,
escaped death by a miracle.

The criminal case that was started then, which is being conducted by
investigators of the city directorate of the Interior Ministry, has made no
progress at all in three and a half months, even though the law-enforcement
agencies have eye-witness evidence at their disposal and the results of a
journalistic investigation carried out by the SN – Stolichnyye Novosti
publishing house, which clearly point to those who ordered and perpetrated
the crime.

Without giving away any special ‘investigation secrets’, I will say
unambiguously that the tracks lead to the IAPM, from where, literally
several weeks after the crime was committed, new threats of reprisals came
against the SN – Stolichnyye Novosti publishing house and also against me
personally and against our journalist Serhiy Kovtunenko, and this is also
known to the law-enforcement agencies.

I remind you that this case was taken under the personal control of
Ukrainian President Viktor Yushchenko, Prosecutor-General Oleksandr
Medvedko, Interior Minister Yuriy Lutsenko and both – the former and
present – secretaries of the NSDC [National Security and Defence Council,
Anatoliy Kinakh and Volodymyr Horbulin].

Nevertheless, the police are standing idle and I have not been informed for
over month now about the course of the investigation.

What is happening in our society? Where are the practical gains of freedom
of speech and democracy? Are they in the decisions of the Pecherskyy court
and the Pecherskyy bailiff service of Kiev that are ‘putting journalists
that have overstepped the mark in their place’?

Are they in taking away a journalist’s property and transferring it to the
‘suffering’ IAPM so that it can continue inflaming interethnic hatred,
xenophobia and racism and shaming Ukraine in the eyes of the whole world?

People who know me understand perfectly that I am not speaking out of fear
for my personal property – and what property can a journalist have in
comparison with the IAPM, which according to official data alone, by
transforming its educational establishment into a conveyor for selling
diplomas, received profit from ‘selling services’ to the tune of 167.9m
hryvnyas (a 31.5 per cent increase over last year) and a net profit of 27.2m
hryvnyas (an increase of 11.5 per cent).

    OUTRAGE AT ATTACK ON FREEDOM OF SPEECH
I am outraged at the actions of the judicial-juridical services of Kiev’s
Pecherskyy district, which more spiritedly than usual took on the execution
of an order from the IAPM!

I am outraged at the fact that the ‘case of Katsman’s beating up’, taken
under the control of all the highest leaders in the country, not only is not
being cleared up with due speed and zeal, but has simply had the brakes
applied!

I am outraged that the powers that be and their opponents from other
political forces, simply politicians and leaders of law-enforcement
agencies, to the noise of ‘the great fight’ for portfolios and jobs, and to
the chattering about freedom of speech and democracy, could not care less
about the fate of a specific journalist, who in the 33 years of his
journalistic activity has never (!) given cause for doubt to be cast on his
professional or human decency!

I am outraged at the fact that all sorts of professional journalistic unions
and associations that did not react in the slightest to my savage beating up
by gangsters are silent even today, when my property is being frozen, and
will possibly also be silent tomorrow, when by decision of the Pecherskyy
court and the Pecherskyy bailiff service, it is not ruled out, I will be
arrested and placed in custody, since I will continue in future, together
with my journalist colleagues from the SN – Stolichnyye Novosti publishing
house, to wage the struggle against xenophobes, racists, fascists and
ku-klux-klan people – be they in the IAPM or in any other place!

I am outraged at the fact that in the country of the victorious Maydan [Kiev’s

Independence Square, heart of the pro-democracy Orange Revolution of
December 2004] freedom of speech and democracy are being so cynically and
brazenly violated! I call on everyone who shares my outrage over this to
join my open letter!

I call on people who are not indifferent to the fate of freedom of speech
and democracy in Ukraine to do something to defend them!

I also call on the president of Ukraine, people’s deputies of Ukraine, heads
of law-enforcement agencies, heads of political parties of Ukraine, heads of
Ukraine’s electronic and print media and my journalist colleagues to react
to this letter!”                                   -30-
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[return to index] [Action Ukraine Report (AUR) Monitoring Service]
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19.   UKRAINE: 873 JOURNALISTS SIGN PETITION ADDRESSED
  TO PARTY OF REGIONS OVER ATTACKS ON TV JOURNALISTS

Ukrayinska Pravda website, Kiev, in Ukrainian 24 Jul 06
BBC Monitoring Service, United Kingdom, Monday, Jul 24, 2006

KIEV – A total of 873 Ukrainian journalists have so far signed an open
letter to the party of an MP who attacked two TV journalists. The letter has
been posted on influential news and comment website Ukrayinska Pravda.

STB journalists were filming the Party of Regions tent camp in a Kiev park
when they say MP Oleh Kalashnykov and a group of party supporters

attacked them, confiscating a tape from their camera, the letter says.

The letter says this is not the first time Party of Regions members or
supporters have attacked journalists, carried out surveillance of them or
tried to prevent their legal media activities.

“After this incident there are grounds to talk even about a systemic failure
by certain members of the Party of Regions to understand the basic
principles of democracy and freedom of speech, which, for some reason,

is spreading on a wide scale,” the text on the website says.

The letter says it welcomed the apology by some party members immediately
after the incident. However, it said that the party had not denounced a
statement by another of its MPs that the journalists had beaten themselves
up. It also says the party has not acknowledged the “illegal seizure” of the
video cassette, which the Interior Ministry has confirmed.

The letter sets out a list of demands on the Party of Regions:
[1] to return STB’s confiscated cassette immediately;
[2] to stop the slandering of the two journalists by certain MPs and
publicly apologize to them personally;
[3] for Party of Regions faction members who condemn Kalashnykov’s

actions to allow him to face criminal charges (he has parliamentary immunity);
[4] for Party of Regions leader Viktor Yanukovych to announce the results
of his party’s investigation of the event from the speaker’s dais in
parliament, to apologize to Ukrainian journalists over this and other
incidents and clearly state that there will be no more such incidents;
[5] to guarantee that Party of Regions members will uphold Ukraine’s laws
and constitution with regard to freedom of speech.

If the demands are not met, “we will be forced to carry out commensurate,
but, we emphasize, legal resistance to attacks on freedom of speech by
members of the Party of Regions”, the letter says.

“We reserve the right to turn to the Interior Ministry, Prosecutor-General’s
Office and international institutions”, it says.

 
The letter was posted on 14 July 2006. At time of monitoring on 24 July, the
website had appended a list of 873 signatures by journalists from many
different TV, press and other media outlets.                -30-
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[return to index] [Action Ukraine Report (AUR) Monitoring Service]
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20. ORGANIZATION FOR THE DEFENSE OF FOUR FREEDOMS FOR
       UKRAINE (ODFFU) IS CELEBRATING ITS 60TH ANNIVERSARY

Marko Suprun, ODFFU, New York, NY, Monday, July 31, 2006

PASSAIC, New Jersey – On Saturday, July 29, 2006 the Board of Directors of
the Organization for the Defense of Four Freedoms for Ukraine (ODFFU) held
its quarterly meeting at the Ukrainian Center in Passaic, NJ, one of the
oldest Ukrainian community centers in the United States.

ODFFU is celebrating its 60th anniversary this year and will mark the event
with a commemorative banquet on Saturday, October 28, 2006.  The
organization was founded in 1946 by a conference of Ukrainian American
organizations in New York to support the struggle for a free and independent
Ukraine.

The political stalemate in Ukraine was a topic of discussion among members
of the board.  “As members of the Ukrainian Diaspora, we reiterate our
solidarity with the people of Ukraine who stood their ground in defense of
their liberties on the Maidan in 2004.

Despite the outcome of the current crisis, be it a new round of elections or
a national unity government, Ukraine’s Euro-Atlantic aspirations have to be
safeguarded,” said Michael Koziupa, president of the ODFFU.

Professor Walter Zaryckyj, ODFFU’s external affairs director announced this
year’s annual roundtable conference will be held October 17-18, 2006 at the
Ronald Reagan Building and International Trade Center in Washington, DC.
This year’s roundtable theme will be: Ukraine and NATO Membership
.

Today, the ODFFU aims to raise public awareness about Ukraine and

sponsors programs that safeguard the rights and liberties of Ukrainians
around the world.  Earlier in the year, ODFFU advanced a letter campaign
to representatives of the Russian Federation in the west to stop the energy
blackmail.  Over 800 letters were downloaded from the ODFFU website,
www.fourfreedoms.net.                             -30-
=====================================================
CONTACT: Marko Suprun, marko@silvercow.net
———————————————————————————————–
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
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                        PUBLISHER AND EDITOR – AUR
Mr. E. Morgan Williams, Director, Government Affairs
Washington Office, SigmaBleyzer

Emerging Markets Private Equity Investment Group
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Mobile in Kyiv: 8 050 689 2874
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