Daily Archives: September 14, 2006

AUR#757 Sept 14 Euro-Pragmatist PM Heads To Brussels; WTO; Naftogaz Loses $368 M; Ukraine Risk Overview; Quest Roundtable VII, Oct 17-18, Wash DC

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               –——-  INDEX OF ARTICLES  ——–
              Clicking on the title of any article takes you directly to the article.               
    Return to the Index by clicking on Return to Index at the end of each article
By Roman Olearchyk and Stefan Wagstyl
Financial Times, London, UK, Thursday, September 14 2006

                                  FOR TALKS WITH EU, NATO
Natasha Lisova, The Associated Press,

Kiev, Ukraine, Wed, September 13, 2006


TV 5 Kanal, Kiev, in Ukrainian 0800 gmt 14 Sep 06
BBC Monitoring Service, United Kingdom, Thursday, Sep 14, 2006

                       NATO AHEAD OF VISIT TO BRUSSELS

              “Yanukovych refusing to have anything to do with NATO?”
ANALYSIS & COMMENTARY: By Alena Hetmanchuk
Glavred website, Kiev, in Russian 0946 gmt 12 Sep 06
BBC Monitoring Service, United Kingdom, Tuesday, September 12, 2006


Business Digest, Sofia, Bulgaria, Monday, September 11, 2006


Nine O’Clock, Bucharest, Romania, Wednesday, September 13, 2006

RIA Novosti, Moscow, Russia, Wed, September 13, 2006

Associated Press, Kiev, Ukraine, Tuesday, September 12, 2006

                           STRANGE POLITICAL BEDFELLOWS
ANALYSIS & COMMENTARY: Khadija Ismayilova
EURASIANET.ORG, New York, Wednesday, September 13, 2006


Business Digest, Sofia, Bulgaria, Monday, September 11, 2006

11.                          UKRAINE RISK – RISK OVERVIEW
EIU Riskwire – Overview, The Economist Intelligence Unit Limited
New York, New York, Monday, September 11, 2006

Roundtable VII: Ukraine and NATO Membership, Tue-Wed, Oct 17-18, 2006
Walter Zaryckyj, Program Coordinator
Ukraine’s Quest For Mature Nation Statehood Roundtable Series
Action Ukraine Report (AUR) #757, Article 12
Washington, D.C., Thursday, September 14, 2006


Ukrainian News Agency, Kyiv, Ukraine, Tuesday, September 12, 2006

14.                     ONLY THE U.S. TRIES AND CONVICTS
OP-ED: By Taras Kuzio, Kyiv Post, Kyiv, Ukraine, Thursday, Sep 07 2006

15.                                 “HE KNOWS TOO MUCH”
 Danger from non-diversification of Ukraine’s gas supply – security official
INTERVIEW: With SBU Deputy Chairman Ivan Herasymovych
BY: Roman Kulchynskyy and Vyacheslav Darpynyants
Kontrakty newspaper, Kiev, in Russian 28 Aug 06; pp 8 – 12
BBC Monitoring Service, United Kingdom, Tuesday, Aug 29, 2006


One Plus One TV, Kiev, in Ukrainian 1630 gmt 8 Sep 06
BBC Monitoring Service, United Kingdom, Friday, Sep 08, 2006

17.                       “THROUGH THE SMOKESCREEN”
   Wide inquiries planned in investigation of Ukrainian policeman’s killing
ANALYSIS & COMMENTARY: By Oleksandra Prymachenko
Zerkalo Nedeli, Kiev, Ukraine, in Russian 9 Sep 06; pp 1, 2
BBC Monitoring Service, United Kingdom, Monday, Sep 11, 2006

BBC Monitoring research in English 30 Aug 06
BBC Monitoring Service, United Kingdom, Sunday, Sep 10, 2006

                       Nataliya Gotsii, a model from Borispol, Ukraine
By Natasha Singer, The New York Times
New York, New York, Thursday, September 14, 2006

                              IS SIMMERED IN CULTURE
By Mat Schaffer, Boston Herald, Boston, MA, Wed, Sept 13, 2006

                      Poltava oblast hosts international folklore festival
By Ksenia Zalutska, Komsomolske, Poltava Oblast
The Day Weekly Digest In English, #27
Kyiv, Ukraine, Tuesday, September 12, 2006

By Roman Olearchyk and Stefan Wagstyl
Financial Times, London, UK, Thursday, September 14 2006

Viktor Yanukovich, Ukraine’s new prime minister, will today seek to dispel
doubts about his commitment to deepening ties with the west and show that

he can co-operate with President Viktor Yushchenko, his former enemy.

On his first official visit to Brussels, Mr Yanukovich will tell senior
European Union and Nato officials that he wants to base Ukraine’s foreign
relations on pragmatism.

Speaking in Kiev ahead of his departure, Mr Yanukovich called for “a
balance” in relations with the west and Russia. But in an apparent swipe at
Mr Yushchenko’s pro-west views and at the EU’s reluctance to treat Ukraine
as a potential future member, Mr Yanukovich also said it was time to replace
“Euro-romanticism” with “Euro-pragmatism”.

Mr Yanukovich this summer won Mr Yushchenko’s personal backing for a
coalition government in a deal that followed months of deadlock after
elections in March.

Most voters had expected Mr Yushchenko to form a government with Yulia
Tymoshenko, his former ally in the pro-democracy Orange Revolution, but Mr
Yushchenko turned instead to Mr Yanukovich, his rival in the disputed 2004
presidential elections.

A pact signed by the two men includes Mr Yushchenko’s plans for integration
with the west, including early membership of the World Trade Organisation
and possible future accession to Nato and the EU.

But Mr Yanukovich’s commitment to these aims has yet to be tested and doubts
persist about his government’s stability – not least because Mr Yushchenko’s
Our Ukraine party has yet to join the coalition, despite the president’s
personal backing.

Mr Yanukovich, who earlier pledged to revive strong ties with Russia, said
this week his government would adhere to the western integration plans. But
he provided few details on how fast it would proceed.

The visit to Brussels is expected to do little to solve Ukraine’s
fundamental dilemmas. While many people in western and central Ukraine want
integration with the west, much of eastern Ukraine, where support for Mr
Yanukovich is high, favours ties with Russia.

Ukraine relies heavily on Russia for low-cost oil and gas. Prices are now
rising but remain well below central and west European levels.

Vladimir Putin, Russian president, backed Mr Yanukovich in the 2004
presidential poll and was furious at Mr Yushchenko’s victory. He has
moderated his criticism since the Yushchenko-Yanukovich deal and last week
praised the president for his statesman-like qualities.

But Ukraine remains vulnerable to Russian pressure. Moscow is promoting a
loosely defined economic union, including a customs union, designed to boost
co-operation between Russia, Ukraine, Belarus and Kazakhstan.
Western-oriented Ukrainians worry this could bring Kiev closer into Moscow’s

While most Ukrainians support EU integration, about two-thirds oppose Nato
membership. But Mr Yushchenko wants to press ahead with Nato integration,
including securing a membership action plan (MAP) – a precursor to full
membership – later this year.

Mr Yushchenko wants entry into the WTO this year to score an early success
for his foreign policies. But Mr Yanukovich has questioned the proposed
entry terms.

As for EU integration, Kiev officials recognise that membership is a distant
prospect – and that Brussels will not even offer a vague promise of
accession in the light of public opposition in the EU to further

Kiev wants stronger trade relations, including better access to EU markets.
Brussels is ready to work on this but insists the onus is on Ukraine to
carry out necessary reforms, starting with completing preparations for

WTO membership.                                 -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
                                 FOR TALKS WITH EU, NATO

Natasha Lisova, The Associated Press,
Kiev, Ukraine, Wed, September 13, 2006

KIEV – Ukrainian Prime Minister Viktor Yanukovych heads to Brussels on
Wednesday for talks with European Union and NATO officials, a trip under
close scrutiny to determine how much the West should expect from a man

who was openly backed by the Kremlin.

What Brussels is likely to find during Yanukovych’s visit on Thursday is an
increasingly self-confident politician who appears determined not to be
taken for granted – either by the West or by Russia.

“The new Ukrainian government sees its task to stop playing the role of
beggar, which it has played in negotiations with the EU up until now, and
become a strong, self-confident and therefore interesting partner for
Brussels,” Yanukovych said in setting out his government’s agenda this
month. He did not mention NATO.

Yanukovych has publicly promised to uphold Ukraine’s pro-Western course,

and his interest in joining the European Union, with all the financial and
political rewards that promises, is not in doubt.

But Yanukovych’s ambivalence about NATO, despite his written pledge to make
membership a priority, is so pronounced that even Ukraine’s defense minister
seemed uncertain about how convincing a case Yanukovych could make for
Ukraine this week.

“Much will depend on how Prime Minister Viktor Yanukovych is received by
NATO, how convincing he is and whether he keeps his word,” Anatoliy
Hrytsenko, one of the strongest advocates for Ukraine’s NATO membership,
said in televised remarks.

Yanukovych’s office has said that he is expected to meet with NATO Secretary
General Jaap de Hoop Scheffer and the European Union’s top foreign policy
official, Javier Solana, and participate in separate Ukraine-NATO and
Ukraine-EU committee meetings.

It’s a getting-to-know-you visit, a chance for EU and NATO officials to get
reacquainted with the man whose fraud-marred grab for the Ukrainian
presidency sparked the 2004 Orange Revolution mass protests.

Yanukovych’s bid was strongly supported by Russian President Vladimir Putin,
and his ultimate defeat by the pro-Western Viktor Yushchenko was seen as not
only a crushing loss for Yanukovych but also as a humiliation for the

Yanukovych rebounded less than two years later to lead his center-right
party to victory in the 2006 parliamentary elections, and went on to form a
governing coalition that includes the Socialist Party and the Communists.

He has reached out to Yushchenko, and the president’s center-left party is
now in talks about joining the coalition; it already has a handful of
members serving in Yanukovych’s Cabinet.

The European Union is likely to sound out Yanukovych about his interest in
joining a Russian-dominated economic union; they’ve warned that if Ukraine
signs up to a customs union with Russia, Kiev could hurt its chances of
setting up a free trade zone with the European Union. Yanukovych wants that
free trade zone, and he has said he will make that clear.

NATO will be seeking more clarity about Ukraine’s position ahead of a major
alliance meeting in Latvia in November. Originally, Ukraine was expected to
take the first step toward membership at that meeting. Yanukovych has said
that will not happen, but Yushchenko has said it is still on the agenda.

Analysts predict that Yanukovych, who has said he doesn’t want to get stuck
in an “either-or” choice between Moscow and the West, will try to keep his
options open, particularly on this first visit.

“He is well-versed at saying the right things,” said Ivan Lozowy, president
of the Kiev-based Institute of Statehood and Democracy. “But no matter how
pleasing he tries to be, he understands that his words and deeds will be
closely watched in Moscow.”                                 -30-

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
TV 5 Kanal, Kiev, in Ukrainian 0800 gmt 14 Sep 06
BBC Monitoring Service, United Kingdom, Thursday, Sep 14, 2006

KYIV – [Presenter] Ukraine has to join the WTO by the end of this year

and hopes to form a free trade zone with the European Union, Prime
Minister Viktor Yanukovych said in Brussels today after a luncheon
with the EU commissioner for external relations, Benita Ferrero-Waldner.
[Passage omitted: Ferrero-Waldner is shown commenting.]

[Yanukovych] All this is happening ahead of the preparation and signing
of a future broad agreement between Ukraine and the European Union.
We hope that this broad agreement will create basis for forming a free
trade zone between Ukraine and the European Union in the near future.             
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
                        NATO AHEAD OF VISIT TO BRUSSELS
            “Yanukovych refusing to have anything to do with NATO?”
ANALYSIS & COMMENTARY: By Alena Hetmanchuk
Glavred website, Kiev, in Russian 0946 gmt 12 Sep 06
 BBC Monitoring Service, United Kingdom, Tuesday, September 12, 2006

Prime Minister Viktor Yanukovych is said to be hesitating whether to sign a
letter supporting Ukraine’s joining the NATO Membership Action Plan

before his visit to Brussels, a website has said. Yanukovych is reportedly
resisting President Viktor Yushchenko’s pressure, saying that the letter
contradicts the position of his Party of Regions.

The following is the text of the article by Alena Hetmanchuk entitled
“Yanukovych refusing to have anything to do with NATO?” posted on the
Ukrainian website Glavred on 12 September:

The issue of Ukraine’s integration into NATO seems likely to become a
stumbling block in the formation of a grand coalition again.

At least, it will happen if [Prime Minister] Viktor Yanukovych fails to
fulfil his previous obligations and does not sign a certain letter in which
the Ukrainian government reportedly states its readiness to begin the
implementation of the NATO Membership Action Plan (MAP) by the coming
Thursday [14 September] when he is due to have a meeting with NATO
leadership in Brussels.

The first person to reveal the existence of this kind of message two weeks
ago was the head of the parliamentary committee for national security and
defence, Anatoliy Kinakh.

However, he then reproached Mr Yanukovych for his reluctance to sign the
letter that would confirm the invariable course of Ukraine’s foreign policy.

Then a representative of the Party of Regions [headed by Yanukovych],

Hanna Herman, sharply reacted to Mr Kinakh’s statement.

She said that Prime Minister Viktor Yanukovych and his government were
focused on tackling economic instability in Ukraine, but not on writing
letters to Brussels to confirm the invariable course of foreign policy:
“Penetrating into the prime minister’s position of foreign policy issues,
Kinakh ardently monitors the prime minister’s correspondence addressed to

In his opinion, prime minister’s epistolary activity in correspondence with
the European Union might serve as a proof of the new Cabinet of Ministers’
dedication to European values and its aspirations to transform Ukraine into
a full member of the European community.”

Anyway, according to available information, Ukrainian Foreign Ministry has
already prepared this message for the prime minister.

But having Anatoliy Orel as the prime minister’s adviser on foreign policy
issues, the Foreign Ministry seems likely to be driven into the same kind of
reservation in which it was contained when Mr Orel headed the general
department for foreign policy in [former] President Kuchma’s administration.

Glavred tried to clarify the situation, having contacted Anatoliy Orel
directly. Mr Orel was obviously in bad temper: he flatly refused to make any
comments, motivating it by saying that he “does not give interviews”.

However, could anything else be expected from the person who, according to
an episode narrated in diplomatic circles, having been asked: “What time is
it?” once answered: “What do you need it for?”

Viktor Yanukovych’s press secretary Denys Ivanesku behaved no less
cautiously. He just shyly noted that he was not ready to answer this
question and requested to contact him “after Brussels”.

By saying this, the press secretary actually confirmed our diplomatic
interlocutor’s opinion that the issue can drag on until the prime minister
lands on Belgian soil.

Meanwhile, speculations on Our Ukraine’s [propresidential party] likely
intention to link signing of this letter with its joining the grand
coalition began actively circulating on the Pechersk hills [central part of
Kiev where major government agencies are located]… [ellipsis as published]

Meanwhile, Glavred has got a confirmation from a reliable source from the
Party of Regions that this letter really exists and that Mr Yanukovych
refuses to sign it, indeed.

Moreover, we have also got a confirmation of the information that serious
pressure “at the highest level” is being exerted on Viktor Yanukovych, but
the prime minister is reportedly trying to explain to the president that his
signature under the message does not comply with his party’s position.

At the same time, another source from the Party of Regions has informed us
about the other likely option: Yanukovych will at last sign this letter on
behalf of the government, but he will make a special statement that the
Party of Regions’ position has remained unchanged.

A notable point is that nothing is known about this message in the
[presidential] secretariat itself. At least, the head of the foreign policy
department, Kostyantyn Tymoshenko, immediately redirected this question to
the Foreign Ministry, having presumed that “certain preparatory work for the
visit is likely to be under way”. As for the message that interested us, he
just noted: “I know that there was an idea of this kind.”

Most likely, Yanukovych’s acquaintance with NATO Secretary-General

Jaap de Hoop Scheffer promises to be interesting… [ellipsis as published]
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
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Business Digest, Sofia, Bulgaria, Monday, September 11, 2006
KYIV – Ukraine’s eastern Donetsk-based industrial conglomerate System
Capital Management (SCM), owned by local tycoon Rinat Akhmetov, is to buy
the half-constructed four-star Opera hotel in downtown Kiev, currently owned
by Ukrainian private company Intern, by the end of September 2006, it was
reported on September 6, 2006.

Further information will be released at the end of September, when the
purchase is to be finalised, SCM’s press secretary Evgenia Levchitskaya

According to Vyacheslav Yutkin from the Russia-based National Reserve
Corporation (NRC), SCM’s major competitor for the hotel purchase, the
Ukrainian conglomerate has already bought the attractive hotel property.

NRC offered a price of $49 mln (38.3 mln euro), but Akhmetov’s bid

exceeded it by a million U.S. dollars, and Intern hurried to accept it, Yutkin

The seven-story hotel, situated opposite the Taras Shevchenko National Opera
House, was to be completed in 2006. It is part of a larger project that
includes the construction of two more hotels for a total $14 mln (10.9 mln
euro). Yutkin believes the Opera hotel can bring an annual profit of over
$10 mln (7.8 mln euro).

NRC, controlled by Russia MP Aleksandr Lebedev, owns real estate properties
in the Crimea, Kiev and the Carpathians. At present, SCM runs hotel Donbass
Palace in Donetsk, as well as a number of health tourism complexes.

[Editor’s note: Akhmetov’s group owns a five-star hotel in the health resort
of Truskavets, Lviv region, western Ukraine. The hotel operates under the
Turkish brand Rixos. SCM plans to open another Rixos hotel in Kiev in 2006.]
(Alternative name: Kyiv, Lvov) www.zadonbass.org

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

Nine O’Clock, Bucharest, Romania, Wednesday, September 13, 2006

The Meinl European Land real estate company based in the United Kingdom
has entered into a co-operation agreement with the Acteeum Group company
for the purpose developing shopping centres in Ukraine and Turkey, as well
as in Romania and Bulgaria, the total estimate value of the project being
EUR 1 Bln.

The agreement foresees the development by Acteeum Group of shopping
centres and retail parks for Meinl European land, according to a press
statement by the realtor.

The total investment to be allocated for the development of real estate
projects within this partnership is going to reach EUR 1 Bln. The final
value of the investment is going to depend on the development of the
economies and retail markets in the four countries targeted.

Acteeum Group is a real estate developer that ahs developed retail projects
for Meinl European land in Central and Eastern Europe and in Turkey.

The group has offices in Amsterdam, Istanbul and Kiev, and is planning to
open representation offices in Bucharest, Sofia, Prague and Warsaw.

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

RIA Novosti, Moscow, Russia, Wed, September 13, 2006

KIEV – Ukraine’s national oil and gas company, Naftogaz, said Wednesday

its losses for 2005 stood at $368 million.

“Naftogaz Ukrainy finished 2005 with losses amounting to 1.842 billion
hryvnia,” the company said in a news release, citing audit results by the
Ernst &Young financial services company.

“As of December 31, 2005, the company’s current liabilities exceeded current
assets by 9.014 billion hryvnia ($1.8 billion), including tax arrears
totaling 5.168 billion hryvnia ($1 billion).”

Naftogaz said it had taken a total of about $1 billion in loans from foreign
banks to finance its activities and make investments, as well as to pay off
some of its short-term debt. The company said its long-term loans last year
nearly doubled, to 7.862 billion hryvnia ($1.37 billion).

Ex-President Oleksiy Ivchenko said in late April the losses of the company,
which accounts for 10% of the state budget’s revenues, hit $500 million in
the first quarter of 2006 alone, whereas the Fuel and Energy Ministry said
losses stood at $600 million.

Ivchenko clashed with the Finance Ministry, which rejected Naftogaz’s
proposal to raise gas prices for households by 60% starting in July. The
ministry demanded instead that Naftogaz scale back spending on a number of
foreign projects and cut investment in production in Ukraine.

Fitch Ratings said in late April the company expected losses could be as
high as $1.5 billion in fiscal year 2006.

It also cited press reports that Naftogaz has accumulated debts of around
$700 million for natural gas supplied by Rosukrenergo in February and March,
after Naftogaz was forced to sell gas on the domestic market at prices lower
than its acquisition price.

Rosukrenergo is a gas transportation company 50% owned by a subsidiary of
Russian energy giant Gazprom, with the other 50% being held by Austria’s
Raiffeisen Bank.  Naftogaz placed the blame for any potential disruptions to
gas imports on the government.                            -30-

LINK: http://en.rian.ru/world/20060913/53847203.html
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
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Associated Press, Kiev, Ukraine, Tuesday, September 12, 2006

KIEV – Ukraine plans to spend $4.5 billion to modernize and reconstruct its
Soviet-era network of natural gas pipelines that supply Europe with much of
its gas, Ukraine’s state-owned gas company Naftogaz said Tuesday.

The four-year reconstruction project will help increase gas volumes and the
reliability of gas transit services, the company said. “We, as reliable
partners, will provide stability of gas transit to European countries,” said
Volodymyr Sheludchenko, head of Naftogaz’s board of directors.

The modernization project was expected to be funded through loans and
investments, including from abroad, Natogaz’s press office said, refusing to
provide any other details. Some 80% of Russian gas exports to Europe go
through Ukraine.

Ukraine’s Energy Minister, Yuriy Boyko, has said that Ukraine would ensure
that western European gas consumers don’t suffer supply disruptions as they
did in January during a price dispute between Ukraine and Russia, when
Russia briefly turned off the gas taps. Russia then accused Ukraine of
siphoning off gas meant for Europe.

Currently, Ukraine’s government is anticipating a gas price increase from
the current $95 per 1,000 cubic meters to $135 next year – a 42% hike – even
as Moscow and Kiev hold talks aiming at averting another pricing dispute and
supply disruptions.

Ukraine had hoped to retain the $95 price – already a two-fold increase over
last year – for five years, but that looked less likely after Prime Minister
Viktor Yanukovych, perceived as more pro-Russian than the Westward-leaning
officials who ran the previous government, called recent price talks with
Moscow “rather difficult.”                               -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]


Khadija Ismayilova
EURASIANET.ORG, New York, Wednesday, September 13, 2006

Yushchenko made his first official visit September 7-8 to Azerbaijan.
The trip produced seven bilateral cooperation agreements, including
a commitment to expand energy cooperation.

Yushchenko said his administration’s top priority was to forge deals
concerning “the extraction, refining and sale of oil,” the Trend news
agency reported.

In talks with Aliyev, he touted Ukraine’s Odessa-Brody pipeline as a
potentially new energy conduit linking Azerbaijan, and possibly Kazakhstan,
to Western European markets. The Yushchenko-proposed route would
bypass Russia, as does the already existing Baku-Tbilisi-Ceyhan pipeline.

Following his discussions with Azerbaijani leaders, the Ukrainian president
acknowledged that Kyiv and Baku were not a natural fit as partners. “Our
talks were easy-going, but there are problems in our relations that we are
ready to resolve,” he said.

For much of the past two years, Ukraine and Azerbaijan have been at
political odds. Yushchenko, who led the Orange Revolution in Kyiv in late
2004, became the embodiment of the democratization movement in the
former Soviet Union.

Aliyev, meanwhile, drew international criticism in connection with the
Azerbaijani government’s manipulation of the 2003 presidential and 2005
parliamentary election. In short, the two seemed to be polar opposites in
terms of political practices.

After Yushchenko’s triumph in Ukraine, Azerbaijan was among the
authoritarian-minded former Soviet states that took action to prevent the
spread of what became known as the Orange Revolution phenomenon.

In September 2005, for example, authorities at Baku airport barred an
activist of the Ukrainian youth organization Pora, which served as a
catalyst for the Orange Revolution, from entering Azerbaijan, prompting a
protest from Kyiv.

The “cold war” between Kyiv and Baku reached a peak in October of last
year in a dispute over the fate of Rasul Guliyev, an Azerbaijani opposition
leader who is wanted in Baku on embezzlement charges.

Guliyev, who denies the allegations against him, was attempting to return to
Azerbaijan to take part in the country’s parliamentary elections.

Azerbaijani authorities barred his plane from landing in Baku and he was
diverted to a Ukrainian airfield. With an international warrant against him,
he was briefly detained in Ukraine, but then released.

The decision against keeping Guliyev in custody caused displeasure in Baku,
and Aliyev reportedly personally called Yushchenko to complain.

Geopolitical circumstances in the Caspian Basin seem to have forced the
Azerbaijani and Ukrainian leaders to set aside their philosophical
differences. From Azerbaijan’s perspective, Ukrainian political support can
reinforce Baku’s stance toward a Nagorno-Karabakh settlement.

In a September 7 statement, Aliyev expressed thanks for “Ukrainian
understanding of Azerbaijan’s [Karabakh] position.”

Addressing students of Baku Slavic University on September 8, Yushchenko
placed Ukraine firmly on Azerbaijan’s side, saying that “recognition of
Azerbaijan’s territorial integrity is a necessary condition for settlement
of the [Karabakh] conflict.”

Yushchenko’s Karabakh statement appears linked to Ukraine’s desire for
Azerbaijani support in the energy sphere.

Kyiv’s efforts to reduce its energy dependence suffered a considerable blow
in early September, when Russia cut a deal with Turkmenistan on gas
supplies, thereby denying Ukraine significant access to Ashgabat’s abundant
energy reserves.

The Russian-Turkmen deal will likely require that Ukraine pay a
significantly higher price for gas imports.

Russia also wields considerable influence over Ukraine’s oil supplies. The
Odessa-Brody pipeline was supposed to reduce that dependence, but the oil
route, which is capable of transporting 40 million tons of oil per year,
remains underutilized.

Yushchenko sought an Azerbaijani commitment to ship a relatively modest
amount – about 4.5 million tons – via Odessa-Brody bound for Western
markets. Aliyev’s did not give a clear response, although he indicated that
diversification of Azerbaijan’s energy export routes is a basic element of
the country’s oil strategy.

“We have already established three pipelines to export our oil to world
markets. However, as oil exploration in Azerbaijan increases we consider
new facilities for export,” Aliyev said.               -30-
Editor’s Note: Khadija Ismayilova is an analyst based in Washington.
Rovshan Ismayilov is a freelance journalist based in Baku.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

Business Digest, Sofia, Bulgaria, Monday, September 11, 2006

Swiss-based gas trader RosUkrEnergo (RUE) plans to buy stakes in seven
Ukrainian regional gas companies and approved the $73.5 mln (58 mln euro)
asset appraisal made by Ukrainian Aval bank, part of Austrian Raiffeisen
International Bank-Holding, it was reported on September 11, 2006.

RUE plans to acquire stakes belonging to Ukrainian businessman Igor
Eremeev’s Continium group and to create a gas distributing network in
Ukraine. According to preliminary figures, RUE will pay $15.1 mln (11.9 mln
euro) for a 42.6 pct stake in Lvivgas, $16.6 mln (13.1 mln euro) for 40.75
pct in Ivano-Frankovskgaz and 52.4 pct in Chernigovgaz.

A 55.58 pct stake in Volyngaz and a 56.72 pct in Chernovtsygaz are evaluated
at $6.5 mln (5.1 mln euro) each. The 60.03 pct stake in Zakarpatgaz costs
$10.3 mln (8.1 mln), and 21.41 pct in Rovnogaz are estimated at $1.9 mln
(1.5 mln euro).

RUE plans to delegate the management of these stakes to joint
Ukrainian-Russian company UkrGazEnergo, equally owned by RUE and

Naftogaz Ukrainy.

[Editor’s note: RosUkrEnergo is a joint gas trading company in which Russian
gas monopoly Gazprom owns 50 pct and the remainder is held by two

Ukrainian businessmen.] (Alternative names: Lvovgas, Naftohaz Ukrainy,
Naftogaz Ukrayiny, Naftohaz Ukrayiny, Ivano-Frankivskgaz)
LINK: http://proua.com/,http://www.aiidatapro.com
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
11.                     UKRAINE RISK – RISK OVERVIEW

EIU Riskwire – Overview, The Economist Intelligence Unit Limited
New York, New York, Monday, September 11, 2006

                                  OVERALL ASSESSMENT
Operating risk in Ukraine is fairly high. The presidential administration
that took power early in 2005 is more committed than the previous one to
attempting to increase political transparency and uphold the rule of law.

However, the old elites connected to the previous administration have
regained control of parliament and the government.

They are unlikely to push for greater political transparency or prioritise
rule-of-law considerations, and are closely tied to vested interests that
continue to distort the commercial and administrative system.

Red tape similarly remains pervasive, although some progress is being
achieved in easing the regulatory burden and simplify procedures.

Discrimination against foreign businesses was common in the past; the
situation is improving, but concrete results will only be noticed gradually.
The tax system is unclear and unpredictable. Infrastructure is inadequate.
                                          SECURITY RISK
Security risk in Ukraine is low. Armed conflict is not a concern. Although
ethnic tensions over Crimea persist, these are not expected to lead to
violent confrontations.

The political crisis that followed the flawed presidential election in 2004
fuelled inter-regional differences, but a resort to violence remains
extremely unlikely, and there is no indigenous armed activity of any kind.

There is some hostility to foreign capital, but little opposition to foreign
business people as such, and they face no special risks. Violent crime is a
concern for all businesses, as is the influence of organised crime in
Ukrainian politics and the economy.

Foreigners have not been targets of kidnapping but there have been attempts
at extortion. A rise in the number of physical attacks against foreigners
was reported in 2005, although these were still isolated incidents.
                                POLITICAL STABILITY RISK
The approval of a new government in August 2006 means that a pre-term
election or cabinet reshuffle are no longer sizeable short-term risks.

The risk of further political instability is nevertheless still high, given
that the president now shares power uncomfortably with a heterogeneous
coalition drawn primarily from groups that until recently opposed him.

The “Declaration of National Unity”, which both the president and the former
opposition signed in early April, improves only somewhat the prospects of
some degree of political stability.

Similarly, the fact that many pro-presidential politicians are backing the
coalition–despite it being led by their former opponents–is also helpful,
but does not eliminate the possibility of serious friction.

Moreover, constitutional changes have shifted powers from the presidency to
parliament, which adds to the risk of inter-institutional struggle and
periodic political paralysis.
                           GOVERNMENT EFFECTIVENESS RISK
Government effectiveness risk is high. The leadership and the bureaucracy
have traditionally performed poorly and erratically. Corruption is
widespread and red tape is pervasive.

The March 2006 parliamentary election has returned many seasoned political
leaders to government, which should help to increase the level of

However, the new government is unlikely to move quickly on administrative
reforms, increase transparency, or tackle the power of vested interests
still prominent in the public sector. The introduction of constitutional
changes at the start of 2006 has strengthened parliament and the cabinet.

Although it could eventually help lead to a more effective political system,
political manoeuvring surrounding the shift to a new distribution of power
is still likely to reduce government effectiveness over the short term at
                                LEGAL & REGULATORY RISK
The legal process is not independent and the judiciary is easily cowed by
vested interests. Contracts are difficult to enforce and regulation is
neither impartial nor clear.

Although it is possible for foreign firms to win court cases, particularly
at the higher levels, the judicial process remains slow and inefficient.

Ukraine is dominated by powerful local players who have successfully
excluded foreign capital. The risk that foreign investors’ assets will be de
facto expropriated is low, but recent examples of this exist.

The outgoing government’s record on promoting competition and restraining
unfair competitive practices was poor.

Although the presidential administration is more committed to a level
playing field than the ones in place before 2005, reforming the old system
will take a while. Private property rights are still not well protected.
Local accounting standards are well below accepted levels in the EU and the
                                  MACROECONOMIC RISK
Ukraine’s economic growth decelerated rapidly in 2005 and remained sluggish
in the first months of 2006, but has picked up recently and is expected to
reach 6% or more annually in 2006-07. Inflation has risen but remains
moderate, and the currency is stable.

Although relatively strong growth is expected over the forecast period, the
economy is still over-dependent on a few low value-added sectors. This
increases the economy’s susceptibility to price and demand swings, and its
vulnerability to protectionist measures abroad. Moreover, low levels of
investment raise further doubts over the sustainability of the economic

Fiscal policy has loosened since mid-2004, which is partly to blame for
higher inflation since then. Further inflationary pressures are to be
expected, as the government boosted incomes prior to the 2006 parliamentary
election and as gas and electricity prices are rising sharply.
                      FOREIGN TRADE & PAYMENTS RISK
In the event of a financial crisis, foreign-exchange availability would
rapidly diminish–as was apparent during the election-related turmoil in
late 2004.

Discriminatory tariffs are a low risk but might be imposed in the event of a
grave economic crisis. There is a moderate risk of excessive trade
protection, and some capital controls are expected to remain in place.

The central bank has loosened currency controls in recent years. Not least,
it abolished the requirement that 50% of export earnings be converted into
the domestic currency.

The central bank has long been under pressure from exporters eager to see
swifter currency depreciation, but it has thus far resisted these demands.
                                         TAX POLICY RISK
The tax system poses some risks for business, since the tax regime lacks
predictability and transparency. Parliament made some progress in 2003 in
amending tax laws, including passage of a flat 13% income tax rate, which
entered into effect at the start of 2004.

Parliament attempted on occasion to reduce the VAT rate (from 20% to 17%)
under the previous president, but was blocked by presidential veto. The
level of corporate taxation is moderate, having been lowered as of 2004 as
part of a campaign to encourage tax compliance.

However, at 25% it is still higher than in many central European economies.
There is a persistent risk that taxes will be enforced in a manner
unfavourable to foreign firms even if, in theory, they are
non-discriminatory. An additional risk comes from sudden changes in the tax
environment that leave businesses little time to adjust.
                                   LABOUR MARKET RISK
Labour market risk is moderate. Strikes are only common in the state sector
and scarcely affect foreign firms. Labour laws are tilted towards the
employee and against the employer.

There is a shortage of managers and employees with exposure to doing
business in a market economy. Wage compensation is slowly moving towards a
system under which pay is related to productivity rather than age. Freedom
of association in Ukraine is respected.
                                         FINANCIAL RISK
Financial risk remains relatively high in Ukraine. The financial sector is
still underdeveloped, and there is little long-term finance available
domestically for the private sector. Few foreign firms would want to access
the small local financial markets.

There is an inadequate local bond market, while the illiquid stockmarket
plays little role in providing equity finance.

The international Financial Action Task Force (FATF) removed Ukraine from
its blacklist of countries deemed not to be sufficiently vigilant in
confronting money laundering in 2004, and in February 2006 ended its close
monitoring of the implementation of Ukraine’s money-laundering provisions.
                                   INFRASTRUCTURE RISK
Infrastructure risk is high. Port facilities are extensive and have improved
over the past three years, but are in need of further upgrading. Air
transport provision has deteriorated, requires investment and is expensive
compared with other locations in the region.

The distribution network is erratic and below standard. The
telecommunications system requires massive investment. The road network is
large but in poor repair, with the railways suffering from similar problems.

Power generation capacity is sufficient, but power cuts are possible at any
time and non-payment for energy is a concern. Information technology
infrastructure is inadequate for a country with Ukraine’s level of
education.                                            -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

 If you are receiving more than one copy of the AUR please contact us.
Roundtable VII: Ukraine and NATO Membership, Tue-Wed, Oct 17- 18, 2006

Walter Zaryckyj, Program Coordinator
Ukraine’s Quest For Mature Nation Statehood Roundtable Series
Action Ukraine Report (AUR) #757, Article 12
Washington, D.C., Thursday, September 14, 2006

WASHINGTON – The Ukraine’s Quest for Mature Nation Statehood
Roundtable Series began when a number of Ukrainian and American
organizations convened in April of 2000, to consider ways to encourage
a more engaged level of dialogue between the U.S. and Ukraine.

These deliberations gave rise to a commitment: to convene an annual
conference that would bring together prominent representatives from
academia, the private sector and the governments of Ukraine, the United
States and Europe, to monitor Ukraine’s progress towards fuller integration
into the Euro-Atlantic community and stronger bilateral relations with the
United States.

Six such events have been held:
Roundtable I:    Ukraine’s Quest for Mature Nation Statehood
Roundtable II:   Taking Measure of a U.S. – Ukraine Strategic Partnership
Roundtable III:  Ukraine and the Euro-Atlantic Community
Roundtable IV:  Ukraine’s Transition to a Developed Market Economy
Roundtable V:   Ukraine’s Transition to a Stable Democratic Polity
Roundtable VI:  Ukraine’s Transition to an Established National Identity

The conferences have resulted in improved cooperation between the
governments of Ukraine and the United States on matters of mutual benefit.

Further, the forums have proven to be a valuable venue for
business-to-business contacts resulting in increased trade and investments
between Ukraine and the country’s largest foreign investor, the United

Finally, the series has provided an annual forum for think tanks and policy
advisors from both countries to discuss ‘topics of the moment’ that may be
of bilateral interest.

Continuing the tradition, Roundtable VII: Ukraine and NATO Membership,
will take place on Tuesday-Wednesday, Oct 17 and 18, 2006 in Washington,

This year’s conference will bring together bring together government and key
non-government representatives of Ukraine, the United States and Ukraine’s
several neighbors as well as experts from the world of academia to examine
and evaluate Ukraine’s readiness to assume a place in the Euro-Atlantic
world in one of its two critical dimensions, or more precisely, to accede to
the historically singular security alliance known as NATO.

A veritable Who’s Who from the American, Ukrainian and European
governmental, NGO and private sectors, including the six individuals who
have served the post of United States Ambassador to Ukraine, are being
invited to provide their insights regarding the sine qua non of Ukraine’s
“Euro-Atlantic ambitions”.

The gathering will feature eight panels, run during the course of four
regular sessions, six highlight focus sessions, two working lunches and
two Conference receptions.

The following is a brief overview of the conferences:
[1] Roundtable I: ‘Ukraine’s Quest for Mature Nation Statehood’ was held in
Washington, DC on September 19-20, 2000 at the Library of Congress and
the Council on Foreign Relations.  The event took on the task of assessing
Ukraine’s progress in consolidating its national independence.

[2] Roundtable II: ‘Taking Measure of a U.S.-Ukraine Strategic Partnership’
was held in Washington, DC on October 31 and November 1, 2001, at the
Wyndham Crown.  The forum focused on assessing the capacity of the two
countries to make the requisite political, economic diplomatic and military
commitments to the realization of mutual strategic objectives.

[3] Roundtable III: ‘Ukraine and the Euro-Atlantic Community’ was held in
Washington, DC on October 8-9, 2002 at the JW Marriott on Pennsylvania
Avenue and The Ronald Reagan Building.

The gathering’s aim was to: a) objectively assess Ukraine’s internal and
external credentials for seeing a place in the Euro-Atlantic world and b)
extensively explore the Euro-Atlantic community’s attitude towards embracing
Ukraine as one of its own.

[4] Roundtable IV: ‘Ukraine’s Transition to a Developed Market Economy’ was
held in Washington, DC on October 7 and 8, 2003.  The gathering focused on
evaluating Ukraine’s market readiness, from both a macro and micro economic
perspective, to advantageously compete in the global economic arena and
attempted to address a key question: “Will the United States Support
Ukraine’s WTO Accession Process?”

[5] Roundtable V: Ukraine’s Transition to a Stable Democratic Polity, took
place on September 13 and 14, 2004 in Washington, D.C. The forum focused
on evaluating Ukraine’s movement, from both a domestic and an international
perspective, toward implementing the political reforms necessary to achieve
the country’s ultimate stated goal: membership in NATO and the EU.

The event was held at a crucial time for Ukraine: one month before the
beginning of the ‘now legendary’ UA presidential elections cycle of 2004.

[6] Roundtable VI: Ukraine’s Transition to an Established National Identity,
took place on September 27 and 28, 2005 in Washington, D.C. The conference
focused on evaluating Ukraine’s ability to develop a “firm center of gravity
as a nation/state” and to define a “distinct sense of place in world
 affairs”, particularly in the aftermath of its historically significant
performance during the “Orange Revolution”.
                       PARTIAL LIST OF PAST SPONSORS
The following is a partial list of institutions that have served as sponsors
of the Ukraine’s Quest for Mature Nation Statehood Roundtable Series:

Congressional Ukrainian Caucus; Ukrainian Congress Committee of
America; Embassy of Ukraine to the United States;
Ukrainian American Freedom Foundation; Embassy of the United States to
Ukraine; Organization for the Defense of Four Freedoms for Ukraine; The
Library of Congress; Ukrainian National Information Service; American
Foreign Policy Council; Ukrainian American Youth Association; Freedom
House; US-Ukraine Foundation; International Republican Institute; Center
for US Ukrainian Relations; National Democratic Institute; International
Renaissance Foundation; FYI/SAIS/Johns Hopkins University; Romyr
Consultants Corporation; BSSP/Harvard University; World Congress of
Ukrainians; LAP/New York University; Ukrainian Central Information Service;
ISE/Columbia University; Regional Initiatives UA; Ukraine-US Business
Council; Orange Circle.
The following is a partial list of individuals that have served as Steering
Committee Members of the Ukraine’s Quest for Mature Nation Statehood
Roundtable Series.

William Miller, Bob Schaffer, Stephen Nix, Nelson Ledsky, John Van
Oudenaren, Richard Murphy, Herman Pirchner, Adrian Karatnycky,
John Micgiel, Tom Keaney, John Costello, Kyle Parker, Katie Fox
Nadia Diuk, Ilan Berman, Morgan Williams, George Nesterczuk
Julian Kulas, Olena Koslova-Pates, Barbara Broomell, Oleksandr
Poteikhin, Serhiy Konoplyov, Vitaly Shelest, Stephan Bandera,
Vera Andrushkiv, Nadia Komarnycky McConnell, Bohdan Fedorak,
Borys Potapenko, Mykhailo Sawkiw Jr., Tamara Gallo Olexy,
Mykola Hryckowian, Walter Zaryckyj.
The Heritage Foundation of First Security Federal Savings Bank,
Self Reliance (New York) Federal Credit Union
Phillip  Morris Companies Inc., Ukrainian International Airlines,

Selfreliance (NJ) Federal Credit Union, SUMA Yonkers Federal Credit
Union; Polish-American-Ukrainian Cooperative Initiative (PAUCI);
Selfreliance Ukrainian American Federal Credit Union, Chicago, Illinois;
Coca-Cola Ukraine; Ukrainian National Credit Union; Ukrainian Future
Credit Union; International Renaissance Foundation; Providence
Association; Raytheon Corporation; Ternopilbud; DynCorp; Shell
International Gas; Khmil Ukraina; SigmaBleyzer; Ukreximnefteproduct;
Bechtel Corporation; Ukrtransnafta; Kyiv Atlantic Ukraine/Atlantic Farms;
Cleveland Selfreliance FCU; The PBN Corporation; Kraft Foods Ukraine;
Western NIS Enterprise Fund; Obolon; Motorola; Naftohazbud; Digital
Alliance; Cargill; FAKRO Enterprises; Desomark; AES Kyiv Oblenergo;
The Boeing Company; Geneza Press; Kvazar Micro; Aerosvit;
Romyr Consultants Corporation.
CONTACT: Walter Zaryckyj, Executive Director/Center for US-Ukrainian
Relations, Adj. Associate Professor of Social Sciences/New York
University, UA Quest RT Series Program Coordinator, 1 917 476 1221,

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
             Send in a letter-to-the-editor today. Let us hear from you.

Ukrainian News Agency, Kyiv, Ukraine, Tuesday, September 12, 2006

KYIV – Ukrainian Sobor Republican Party protests against appointment of
Communist Party member Olha Hinzburh as State Archive Committee

chairwoman to replace Hennadii Boriak. The party has disclosed this in a
statement, text of which Ukrainian News has.

The party says that despite old material and technical base, the former
leadership of the committee held great work to open the access to the
selections referring to fight for Ukrainian independence, which fixed crimes
of the communist regime.

The authors of the application say that appointment of the person having no
relevant education (engineer mechanic) and representing political force,
which considers itself the successor of those, who committed the crimes, as
the head of the State Archive committee threatens the continuation of the

‘Ukrainian archives can turn into closed semisecret establishments, like it
was in the USSR,’ the party reported. According to the party, the archive

business has to be headed by a specialist and impersonal scientist with great
As Ukrainian News earlier reported, on September 7, the Cabinet of Ministers
dismissed Boriak as State Archive chairman and appointed Hinzburh. Hinzburh
was the deputy of the Verkhovna Rada of the fourth convocation and
representative of the Communist Party of Ukraine.                -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
14.                ONLY THE U.S. TRIES AND CONVICTS

OP-ED: By Taras Kuzio, Kyiv Post, Kyiv, Ukraine, Thursday, Sep 07 2006

The sentencing two weeks ago of former Prime Minister Pavlo Lazarenko
to nine years imprisonment and a $10 million fine brings to an end an
investigation and trial that followed Lazarenko’s arrival in the U.S. seven
years ago seeking ‘political asylum’ from Ukraine.

The major irony of the sentencing of Lazarenko by a U.S. court is that it
would have never happened in Ukraine, where senior officials have always
remained above the law, and still do.

If Lazarenko had stayed in Ukraine, or had been extradited to Ukraine by the
U.S., he would have never been sentenced by the prosecutor’s office or tried
in a Ukrainian court. A transcript made illicitly by Major Mykola
Melnychenko in President Leonid Kuchma’s office has the latter to Prosecutor
Mykhaylo Potebenko in 2000 about Lazarenko.

Kuchma suggests asking the U.S. to extradite Lazarenko to Ukraine. Potebenko
replies that this would not be a good idea as Lazarenko’s testimony in court
would implicate Kuchma and other senior officials. During Lazarenko’s Prime
Ministership in 1996-1997, he was awarded two state medals by Kuchma.

No senior Kuchma era officials have been sentenced for abuse of office,
election fraud or violence against journalists and political opponents. Such
sentences are now highly unlikely as these same officials now have
parliamentary immunity or are in government.

Senior Kuchma era officials were not to know that Yushchenko, once in
power, would be so forgiving and tolerant of their misdemeanors.

Different proposals for constitutional reforms were introduced by President
Kuchma in his last two years in office to transform Ukraine into a
parliamentary republic out of fear of an elected President Yushchenko with
extensive executive powers stemming from the 1996 constitution.

With the failed parliamentary vote for constitutional reforms in April 2004,
the dirtiest election campaign in Ukrainian history was unleashed to block
Yushchenko’s election.

This culminated in an attempted poisoning of Yushchenko in September 2004,
followed by a failed bomb attempt two months later on Yushchenko’s election

Exaggerated fear of the threat following Yushchenko’s victory led some
senior officials, such as Transport Minister Heorhiy Kirpa, to commit

A large number of Kuchma era officials were not prevented from fleeing to
Russia where they have been protected by the Russian authorities as
political allies. Senior Kuchma era officials who fled to authoritarian
Russia as well as those who remained in democratic Ukraine avoided criminal

Last year, Donetsk oligarch and Party of Regions MP Rinat Akhmetov hid in
Monaco out of fear of criminal charges being launched against him after
murder  accusations were levelled against him. Last month Akhmetov was
included by the presidential secretariat in the list of Ukrainian VIP’s who
received a state medal.

Former Sumy Governor Volodymyr Shcherban was the only senior official
who sought ‘political asylum’ in the U.S., rather than Russia. Following
Lazarenko’s conviction, only Shcherban can therefore, among Kuchma era
officials allegedly guilty of abuse of office, be charged and tried.

On Ukrainian Independence Day President Yushchenko said that society is
seeking equality of all Ukrainian citizens before the law. Yet, Yushchenko
admitted that ‘We have not achieved this’.

The Ukrainian authorities have an uphill struggle on transforming Ukraine
into a state based on the rule of law. In 2004, the last year of Kuchma’s
rule, 76 percent of Ukrainians believed there was no equality before the
law, according to a Democratic Initiatives poll. Two years into the
Yushchenko administration and this figure has only declined to 75.

Around 73 and 75 percent of Ukrainians, respectively, believe that if an
individual has money or they belong to the authorities they can then escape
justice. In other words, the current administration’s own inaction against
senior Kuchma era officials has made people continue to believe there is no
rule of law.

As the Ukrainian anecdote says, if you steal a cabbage you can go to jail.
But, if you steal billions you run for parliament and have a criminal record
better still, you are invited by the President to sign a Universal document
and form the government.

Ukraine’s progress towards a state based on rule of law is being de-railed
by five inherited legacies and contradictions within the Yushchenko

[1] First, the ‘new’ ruling elites did not arrive from abroad in 2004.
President Yushchenko faithfully served President Kuchma from 1994-2001 and
they both signed a denunciation of anti-Kuchma protestors in February 2001.

As events since the Orange Revolution have shown, Ukraine’s ruling elites
protect each other from criminal charges.

When President Yushchenko ordered the Prosecutor’s office to investigate
charges of corruption made by presidential secretariat head Oleksandr
Zinchenko against Yushchenko’s business allies, Yushchenko said he knew in
advance that no evidence would be found. Such a comment is a signal to the
Prosecutor’s office not to find any evidence.

In September 2005, President Yushchenko and opposition leader Viktor
Yanukovych signed a Memorandum that permitted the Party of Regions to
vote in favor of Yuriy Yekhanurov’s candidacy for Prime Minister.

In the Memorandum, President Yushchenko agreed to give an amnesty for
election fraud and reintroduced immunity for local deputies.

Lazarenko is the only Ukrainian politician to ever have his immunity
stripped by the Ukrainian parliament. Parliament refused to consider
Kuchma’s demand to strip Tymoshenko of immunity.

[2] Second, there is no political will to prosecute senior officials inside
Ukraine. Only the U.S. has ever prosecuted a senior Ukrainian official.

The 1996-2005 Ukrainian constitution permitted President Yushchenko to
remove the Prosecutor. Following 2006 constitutional reforms this can only
be undertaken with parliament’s approval.

Yushchenko did not replace Prosecutor Svyatoslav Piskun, whom he inherited
from the Kuchma era, till nine months into his presidency. Piskun protected
senior Kuchma era officials and eventually became an MP with the Party of

Serhiy Kivalov, head of the Central Electoral Commission in 2004 when
election fraud occurred, is also a Party of Regions deputy. He was never
charged and continued to be Dean of Ukraine’s most prestigious Law Academy
in Odessa. He is also the current head of a parliamentary committee.

[3] Third, the Yushchenko administration has always been divided in its
attitudes towards the past. Yulia Tymoshenko believes she was upholding the
Orange Revolution by supporting the launching of criminal proceedings for
Kuchma era crimes, including calling for opening investigations into past

President Yushchenko and Our Ukraine disagreed with Tymoshenko’s approach
to the past. In his address to parliament on the day Viktor Yanukovych was
elected premier,  Yushchenko said, ‘We should not be looking for problems in
the past. This is the only way out’.

The head of the presidential secretariat, Oleh Rybachuk, described mutual
accusations between Yushchenko and Yanukovych in the 2004 elections as
merely ‘asymmetrical’, ‘impetuous’ and ‘nasty things’.

Ukraine certainly needed reconciliation between warring political groups and
inflamed regional tensions after the election. But one wonders whether
reconciliation should be at the cost of the fundamental principal of a rule
of a law-based state that everyone is equal before the law.

[4] Fourth, last month Yushchenko unveiled a monument to former Rukh leader
Vyacheslav Chornovil. An investigation has been re-opened into his death in
what many have always believed was a suspicious car accident in March 1999.

If the new investigation finds that Chornovil’s death was not due to an
‘accident’, will the Yushchenko administration seek to find the high level

This is highly doubtful on the basis of their record in office when dealing
with the organizers of the murder of journalist Heorhiy Gongadze in 2000.

Only three lower ranking police officers have been put on trial. The
organizers of Gongadze’s murder have never been charged, have been allowed
to stay in politics, even though retired and out of office, to flee Ukraine
or may have even been murdered.

[5] Fifth, the Yushchenko administration, which has pledged to uphold the
constitution and rule of law, is itself often not in compliance with the
law. Presidential decrees in early 2005 to increase the power of the
National Security and Defence Council, in order that it become a
counter-weight to the Tymoshenko government, were unconstitutional.

A law adopted on Aug. 4, and signed into law that day by President
Yushchenko, which prevents the Constitutional Court from reviewing
constitutional reforms is illegal, according to U.S. Judge Bohdan Futey, a
long time adviser to the International Republican Institute on legal reform
in Ukraine. President Yushchenko cannot usurp the rights of the
Constitutional Court.

Members of Our Ukraine in 2005 and 2006 refused to relinquish their
parliamentary seats after entering government. Legislation requires this no
later than 20 days following joining the government.

Roman Zvarych, the current Minister of Justice and Our Ukraine member,
has ignored the Aug. 24 deadline to relinquish his parliamentary seat. He
should set an example by upholding the law.

Following the return of Yanukovych to government, which is dominated
by Kuchma era officials, Ukraine’s Orange Revolution is at a crossroads.
Ukraine can either continue to slowly move forward democratically or
stagnate towards the policies of the Kuchma era.

A state based on the rule of law is a central feature of a democracy and,
therefore, if Ukraine is to continue to muddle ahead then this area needs
radical institutional and cultural overhaul.      -30-
Dr. Taras Kuzio is a Senior Fellow at the German Marshal Fund of the USA.
The views expressed in this article are those of the author and should not
be attributed to the German Marshal Fund of the USA. Taras Kuzio is also
an Adjunct Professor, Institute for European, Russian and Eurasian Studies,
George Washington University.
LINK: http://www.kyivpost.com/opinion/oped/25038/
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
15.                             “HE KNOWS TOO MUCH”
 Danger from non-diversification of Ukraine’s gas supply – security official

INTERVIEW: With SBU Deputy Chairman Ivan Herasymovych
BY: Roman Kulchynskyy and Vyacheslav Darpynyants
Kontrakty newspaper, Kiev, in Russian 28 Aug 06; pp 8 – 12
BBC Monitoring Service, United Kingdom, Tuesday, Aug 29, 2006

KIEV – Ukrainian Security Service (SBU) deputy chairman Ivan Herasymovych,
who supervises economic counterintelligence, has said that insufficient
diversification of gas supplies is the main threat to national security.

He said that somebody in the SBU in 2005 destroyed important documents
relating to the activities of controversial Russian businessman Semen
Mogilevich, who is involved in gas dealings. There is no evidence of foreign
special service involvement in the case of murdered journalist Heorhiy
Gongadze, he also said.

The following is the text of the interview that Herasymovych gave to Roman
Kulchynskyy and Vyacheslav Darpynyants, entitled “He knows too much”
published in the Ukrainian business weekly Kontrakty on 28 August;
subheadings have been inserted editorially:

The deputy chairman of the Security Service of Ukraine [SBU], Ivan
Herasymovych, has established a connection between the destruction of the
“Mogilevich affair” and the course of gas negotiations with the Russian

[Correspondent] You are in charge of the SBU economic counterintelligence
department. What threats to national security now exist in the energy
sphere, in particular gas?

[Herasymovych] First and foremost there are insufficient rates of
diversification of gas supply sources. The fact that [Russian gas company]
Gazprom, contracted virtually for all the Turkmen gas from January 2007, is
turning into a monopoly gas supplier to Ukraine, undoubtedly is a threat to
the country’s economic security. The problem of ensuring the trilateral gas
balance this year with our partners – the EU and Russia – is also topical.

[Correspondent] Tell us about these threats in more detail.
[Herasymovych] The latest round of negotiations to regulate the gas problem
is starting now. The SBU has already presented the government with its
proposals on this matter. I cannot comment in more detail on the current
situation, since it might damage the negotiation process.

[Correspondent] What can you say about the financial stability of Naftohaz
[Ukrayiny – Ukrainian state oil and gas company]?
[Herasymovych] The question of the economic and financial stability of
Naftohaz Ukrayiny as a state company also falls within the field of vision
of the SBU.

[Correspondent] How much time does the new government have to improve
Naftohaz’s financial health?
[Herasymovych] Let’s put it like this: the basic time for the game has
already run out and we need to win in extra time. Here you should note that
there are real professionals playing against Ukraine.

Let us recall, for example, the information campaign that accompanied the
inclusion in the Russo-Ukrainian gas schemes of RosUkrEnergo [RUE, monopoly
supplier of gas from Russia and Central Asia to Ukraine].

Certain forces tried to throw a shadow on the first persons in the Ukrainian
state. The calculation was simple – to create the impression that allegedly
the new authorities at the highest level were reincarnating corrupt schemes.
The aim was to influence the attitude of the EU regarding the
Russo-Ukrainian gas negotiations.

[Correspondent] Who designed that campaign – specialists from RUE, Gazprom,
the FSB [Russian Federal Security Service] or all together?
[Herasymovych] We came up against a developed technique for information
protection of the economic interests of certain structures and persons. You
can hire highest level consultants for the money you make from the gas
business. Almost all the transnational companies do that.

[Correspondent] How much money do businessmen make at the level of RUE
minority shareholders from gas schemes?
[Herasymovych] You’d better ask them.

[Correspondent] Does the economic counterintelligence department really not
have that information?
[Herasymovych] I’ll answer like this: big money is connected with large
expenditure and big obligations to other participants and with considerable

I would advise anyone wanting to discuss the alleged corrupt nature of the
scheme being used by RUE to consider that for Ukraine it is important to
guarantee receiving gas on the eastern border at a price of 95 dollars per
1,000 cu.m.
[Correspondent] What do you know about Semen Mogilevich?
[Herasymovych] A lot. Mogilevich has been in the SBU’s field of vision since
1993. The relevant case consisted of about 3,000 pages, including reports
from foreign special services. I personally had indirect dealings with him,
but I consider this case to be unique.

Mogilevich is not simply a person, but a system of contacts, by tracing
which it is possible to get a fair amount of
interesting information about this or that event both in Ukraine and beyond
its borders. What specifically are you interested in?

[Correspondent] Under what circumstances, why and which of the SBU officers
destroyed the Mogilevich file?
[Herasymovych] The Semen Mogilevich file was destroyed during the change of
SBU leadership in September 2005, despite the instructions of the new
chairman, Ihor Drizhchanyy, forbidding the scrapping of any documents.

I would very much like to find out who gave the order to destroy this file
and why. The Prosecutor-General’s Office [PGO] is now looking into it in the
framework of a criminal case.

[Correspondent] Who benefited from the destruction of the file, apart from
Mogilevich himself?
[Herasymovych] The investigation will provide the answer to that question as
well. But in any case, the destruction of the so-called Mogilevich file
damaged the interests of Ukraine. Back in August 2005 SBU staff engaged in
the case warned that in November-December serious problems connected with
the supply of gas awaited Ukraine.

The officers proposed to the then SBU leadership an algorithm of actions
that would have allowed the government more effectively to protect the
interests of the state in the process of the gas negotiations.

Instead of that, some very strange decisions were taken – to stop the work
of the group dealing with Mogilevich and destroy the relevant file.

[Correspondent] Are you hinting that Mogilevich’s structures are behind the
Swiss RUE company?
[Herasymovych] Whereas previously Mogilevich had been one of the most
influential businessmen in Russia, now, taking account of the latest
political trends in Russia, I would not exaggerate his influence.

[Correspondent] Did Mogilevich really control the Eural Trans Gas company
[fore-runner of RUE]?
[Herasymovych] There are certain facts that can be interpreted as evidence
of that company’s links with the structures of Mogilevich.

[Correspondent] What do you know about Mogilevich’s structures in Hungary,
and what is their role in schemes for capital outflow from Ukraine?
[Herasymovych] Mogilevich did indeed found a number of structures in
Hungary, but nobody has managed to obtain documentary confirmation of his
involvement in money laundering.
                              THE JOURNALIST MURDER CASE
[Correspondent] Were you part of the investigation team on the case of
[murdered journalist Heorhiy] Gongadze?
[Herasymovych] Yes.

[Correspondent] Explain how it was that Maj Mykola Melnychenko [former
bodyguard to ex-President Leonid Kuchma, who made recordings in Kuchma’s
office apparently implicating him and other senior officials in serious
crimes] managed to go abroad before the start of the tape scandal?
[Herasymovych] The “iron curtain” of KGB times is already in the past.
Mykola Melnychenko received an external passport in breach of established
procedures, was given a Czech visa, travelled by car as far as Lviv, got
into a bus and crossed the Polish border, where he was met and transferred
into the Czech Republic.

Incidentally, the presidential guard service even before the scandal should
have paid attention to Melnychenko, who told the leadership of his wish to
go abroad, and after being refused permission, insisted on having his own

[Correspondent] What is the cost of the apparatus that Melnychenko used to
record conversations in the office of the head of state?
[Herasymovych] Not expensive. He was using normal Dictaphones.

[Correspondent] Does it not seem to you that the disappearance of Gongadze,
the tape scandal and the Ukraine Without Kuchma movement were all links in a
single operation planned by foreign special services?
[Herasymovych] In the investigation process our team concluded that at the
initial stage the tape scandal was not controlled. In particular, there are
no grounds for saying that [Socialist Party leader] Oleksandr Moroz, who
made public the Melnychenko tapes, was being openly or secretly used by any
special services.

No signs of special service work in preparing the tape scandal were
discovered. Although an appropriate theory was developed almost immediately.

[Correspondent] Are all the Melnychenko tapes authentic?
[Herasymovych] No.

[Correspondent] Who, if not Western special services, organized the tape
[Herasymovych] First of all, I’m not a court of law able to proclaim the
guilty party. And secondly, a frank comment on this might damage
investigation of the Gongadze case.

[Correspondent] How much did the tape scandal cost Ukraine?
[Herasymovych] It’s extremely complex to draw up the balance sheet. On the
one hand, the scandal proved to be a catalyst for democratic transformations
in the country. On the other hand, Ukraine was accused, not without the
recordings, of supplying Kolchugas [radar devices] to Iraq.

Apart from that, it is obvious that in the country’s premier office they
talked not so much about journalists and someone’s personal life as about
questions directly connected with the security of the state.

It is not by chance that Mykola is unwilling to give evidence to the
Prosecutor-General’s Office. He understands that if he starts speaking, he
will have to tell everything – from “A” to “Z”.

[Correspondent] How realistic is the chance of finding those who ordered the
murder of Gongadze after the death of former Interior Minister Yuriy
Kravchenko [found shot shortly before he was due to be questioned about the
[Herasymovych] The gradation of the perpetrators and those who ordered it is
fairly notional in this case. For example, Melnychenko is trying to convince
us that it was not Kuchma who placed the order, and is accusing another

It is possible that President Kuchma was displeased with articles by Heorhiy
Gongadze. But displeasure is not grounds for murder. If he said “sort it
out”, then it is quite likely that at some stage the situation could have
got out of control, i.e. the theory of an “excess by the perpetrators” may
well have the right to exist.

The accused who are now giving evidence in court still allege that they had
not received an order to kill Gongadze. Why [fugitive police Gen Oleksiy]
Pukach strangled Gongadze with his own hands, as they are saying, only Gen
Pukach himself can say.

[Correspondent] It’s difficult to believe somehow that an experienced police
general lost his self-control and strangled a well-known journalist.
[Herasymovych] It’s no less strange that a police general himself engaged in
surveillance, isn’t it? [Pukach had allegedly kept Gongadze under
surveillance prior to his disappearance.]

[Correspondent] Who ordered the murder of Gongadze?
[Herasymovych] The PGO [Prosecutor-General’s Office] has to determine that.
I hope that Pukach will be found and that those who ordered the killing will
be put on trial.

[Correspondent] Do you believe that President Kuchma was simply set up, by
having spoken sharply against Gongadze?
[Herasymovych] I can’t say that it is precisely this theory that is the most

[Correspondent] Gongadze’s relatives constantly stress that the authorities
were putting a brake on the investigation of Heorhiy’s murder. Who did this,
if Kuchma gave a direct instruction to pursue the case to the end?
[Herasymovych] You shouldn’t believe in the omnipotence of Kuchma. The
investigation was stalled by people in the know ho were able to make use of
connections in the law-enforcement agencies.

Pressure was put on the investigation team by illegal, hidden methods and it
is fairly hard to prove that a specific person was the initiator.

 But we know the part played by everyone in this story and we remember who
was really working to solve the crime and who was earning political

I can only say that I am surprised when they try to present [Deputy
Prosecutor-General Viktor] Shokin as the person who created the conditions
for Pukach’s flight.

To put a police general in prison in 2003 (this was under the old regime!)
took a good deal of effort on the part of the deputy chief of the PGO’s
directorate for investigating especially important cases, Roman Shubin, and
Deputy Prosecutor-General Viktor Shokin. When Pukach was released, they
carried on working and finally proved that he was one of the key figures in
the case.

[Correspondent] Who, according to your information, helped Pukach to flee to
[Herasymovych] According to my information, nobody has proved that Pukach
was hiding in Israel.
                        ATTEMPTS TO SUBORN SBU OFFICERS
[Correspondent] In what way do foreign special services recruit Ukrainian
high-ranking officials?

[Herasymovych] Methods of recruitment do not have national specific
features – they are universal and multiple. Foreign special services trace
bank accounts, collect compromising information during foreign visits and so
on. Then they propose collaboration.

It’s good when a politician or official comes home and tells us that they
wanted to recruit him. In such cases a complicated intellectual game starts.

[Correspondent] Did they try to recruit you?
[Herasymovych] Several times, but I’m not prepared to talk about it. A far
more acute problem for the SBU was the recruitment of service staff by
domestic business. Usually it was proposed to SBU officers to work as
advisers on some issues, in most cases the “advisers” provided cover for
some breaches of the law or other, frankly speaking – a “roof” [protection].

[Correspondent] What amounts are offered to SBU deputy chairmen for
[Herasymovych] Once I was offered 300,000 dollars via middlemen to give an
order not to provide a guard during the transporting of a group of illegal
migrants to the airport to be deported. I refused, since that order would
have brought to nothing several years of work by a whole team of our staff.

If an official takes money, if only once, as a consequence it is highly
likely that he will be blackmailed and drawn in to other crimes.

[Correspondent] Offering bribes is a criminal offence. Why did you not
initiate the detention of the persons who offered you 300,000 dollars?
[Herasymovych] It’s not that easy to prove juridically the fact of the offer
of a bribe.

[Correspondent] Why is it that in the years of independence the SBU’s
Labyrinth information system was de-catalogued, and can you from one request
receive a full list of reports, say, about a businessman politician?
[Herasymovych] The SBU information system is not called Labyrinth. On
condition of observing a certain procedure, it is possibly rapidly to get
any operational information, but the unit of primary information may not be
complete. For example, an SBU officer or informant overheard some
conversation in a bar… [ellipsis as published]

[Correspondent] Or, for example, while monitoring the air waves.
[Herasymovych] We have definitively abandoned monitoring the air waves,
since in 50 per cent of cases that monitoring was unauthorized bugging of
conversations. So, to return to your previous question, operational reports
are filed into the relevant data bases.

As a result, a complete unit is built up of disparate fragments that form
the basis for further analysis. I can’t disclose the principles of
cataloguing SBU information units.

[Correspondent] Did one of the former SBU deputy chairmen, Volodymyr Satsyuk
[once suspected of poisoning President Viktor Yushchenko], really copy those
units for his own use?
[Herasymovych] I don’t know anything about that. The SBU databases are
protected in the proper way.

[Correspondent] The newspaper Ukrayina Moloda, whose editor is a
presidential adviser, published an article in which you are named as
godfather to a child of [former presidential chief of staff under Kuchma]
Viktor Medvedchuk. Have you demanded a retraction of that information?
[Herasymovych] The information is an out and out lie. When Medvedchuk’s
first daughter was born, I was in the seventh form at school, and when the
second one was born my job was too low-level to be socializing with such
high-ranking officials of the time as Mr Medvedchuk.

The PGO has checked out all the allegations set out in the article, and they
were not confirmed. After that, the SBU and its staff took the paper to
court. As for the material itself, according to my information, it was
organized by real (or potential) figures in criminal cases connected with
corruption within the SBU.

[Correspondent] Can you name specific names?
[Herasymovych] Only one – Col Valentyn Kryzhanovskyy, who turned out to

be a citizen of the Russian Federation. He was set up in the SBU by extremely
respected gentlemen, including even a people’s deputy.

In essence, they managed to mislead the paper’s chief editor, Mykhaylo
Doroshenko, and convince him of the reliability of the information presented
for publication.

A group of specialists on the “advantageous” sale of the condemned material
tried to play out a combination attracting the press aimed at provoking
changes in the leadership of the service.

[Correspondent] How did you come to join the SBU?
[Herasymovych] I served in the Far East in a military unit of the first
airborne army. In 1993 I returned to Ukraine and moved to Transcarpathia,
where I worked in the regional directorate of the SBU.

[Correspondent] What were you doing in Transcarpathia?
[Herasymovych] I was investigating cases connected with false advice notes
(with whose help Chechens, and not only they, “stung” banks for considerable
amounts), smuggling of radioactive materials and so on.

[Correspondent] Who suggested your move to Kiev?
[Herasymovych] They started inviting me to the capital after I’d been
already working for three years, but I didn’t want to move my place of
residence once again. In 1998, when the department of counterintelligence
protection of the economy of the state was set up, I was made an offer that
I accepted.

[Correspondent] What is the reason for your rapid career growth?
[Herasymovych] I never avoided high-profile cases. To be sure, on the one
hand you can gain prestige, experience and knowledge from them, but on the
other – you can make yourself a pile of problems.

[Correspondent] How substantial is the political influence on the formation
of the composition of teams dealing with high-profile cases?
[Herasymovych] There is no political influence now. The composition of teams
is formed in accordance with the functional activity and professional
abilities of staff and the specific features of the crime that needs to be
solved.                                                     -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]


One Plus One TV, Kiev, in Ukrainian 1630 gmt 8 Sep 06
BBC Monitoring Service, United Kingdom, Friday, Sep 08, 2006

KIEV – Ukrainian Interior Minister Yuriy Lutsenko has accused the
Prosecutor-General’s Office of delaying important investigations.
Interviewed live on private One Plus One TV on 8 September, Lutsenko said
prosecutors were either biased or incompetent.

Lutsenko was responding to criticism voiced by Prosecutor-General Oleksandr
Medvedko earlier on the day. He had called “unprofessional” Lutsenko’s
recent statement that nationalist leader Vyacheslav Chornovil’s death in
1999 was a murder, not an accident.

Lutsenko said the Prosecutor-General’s Office “took away” the Chornovil case
from his aide, who, the minister said, had been making good progress in the
investigation. Lutsenko also called for the results of forensic tests in the
case to be made public.

Asked by the presenter to respond to charges that he often makes rushed
accusations which do not lead to anyone being put on trial, Lutsenko said:
“How can they be put on trial if we hand cases to prosecutors?”

“The Interior Ministry has good reason to suspect this or that person of
involvement in this or that crime. The law says, unfortunately, that I
cannot investigate this case. I have to refer it to the Prosecutor-General’s

“If it updated the public on the progress of investigations more often,
there would obviously be no people avoiding punishment for years,” Lutsenko
said. Instead, “it spends years investigating cases which interest society”,
he added.

Lutsenko did admit, however, that he often lacked legal knowledge in his
job: “I am perfectly aware that, not being a specialist, I make mistakes of
a purely legal character.” “But this does not mean it is possible to shut me
up so that I don’t make people do their jobs,” Lutsenko said.

He insisted he had grounds to suspect an MP of involvement in the murder of
senior police officer Roman Yerokhin. He accused the Prosecutor-General’s
Office of being slow to question witnesses in the case, which were detained
by the police, questioning policemen instead. “Investigators are either
biased or incompetent,” Lutsenko said.                      -30-

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
17.                    “THROUGH THE SMOKESCREEN”
       Wide inquiries planned in investigation of Ukrainian policeman’s killing

ANALYSIS & COMMENTARY: By Oleksandra Prymachenko
Zerkalo Nedeli, Kiev, Ukraine, in Russian 9 Sep 06; pp 1, 2
BBC Monitoring Service, United Kingdom, Monday, Sep 11, 2006

A serious analytical weekly has published a plan of investigation into the
murder of Col Roman Yerokhin. Prosecutors believe that finding out who
Yerokhin was, what he did and whom he knew is important for the
investigation. The plan envisages several checks into Yerokhin’s past

The conclusion of the investigation will depend on the positions of
political forces rather than evidence of the witnesses and suspects, the
weekly suspects.

The following is the text of the article by Oleksandra Prymachenko entitled
“Through the smokescreen” published in the Ukrainian weekly Zerkalo Nedeli
on 9 September; subheadings have been inserted editorially:

Interior Minister Yuriy Lutsenko doubts the involvement of a deputy from the
Party of Regions in the killing of police Col Roman Yerokhin. He said this
when commenting on the information disclosed last week that, apart from a
YTB [Yuliya Tymoshenko Bloc] deputy, a deputy from the Party of Regions
might be responsible for ordering the killing.

“On the Internet there are many emotions, theories, sometimes dirt and
distracting smoke… [ellipsis as published] A lot of information appears on
the Internet, but there are now operational investigative actions in
progress that will certainly lead to the killer.”

Lutsenko said that his main purpose as a minister was to discover the person
who ordered the crime: “All the other theories – about who he (Yerokhin)
was, how he worked, with whom he was acquainted – are secondary.”
(Ukrayinska Pravda website)

Of course, the person who ordered it (the instigator) is the main thing. But
who Yerokhin was, how he worked and who he was friendly with are not simply
secondary aspects.

These are not idle theories but questions that, if unanswered, will make it
impossible to solve the crime and establish what the instigator’s motive
was. That means answering the main question that is worrying far from just
the interior minister.

Zerkalo Nedeli was told by Lutsenko, whose interview was published in the
previous issue, that from the very first days of the disappearance of Col
Yerokhin, the Interior Ministry together with the prosecutor’s office and
the SBU [Security Service of Ukraine] undertook the investigation of the

Zerkalo Nedeli has at its disposal a plan and draft outlines executed
undoubtedly by an authoritative hand. Our assumption is that the hand is
that of a prosecutor.

This plan testifies that the questions of “who Yerokhin was, how he worked
and with whom he was acquainted” are not only not secondary for the inquiry,
but completely equal to the first point – disclosure of the person who
ordered the crime. And one cannot disagree with that.
The plan contains about a dozen points. We will quote some of them,
stressing that the document does not contain references to any political
force or specific politicians.

Thus, at the time of sketching out the note, it was planned to request
material of the in-house check by the internal security directorate of the
Ukrainian Interior Ministry in 2005 in the internal affairs directorate of
Donetsk Region on Yerokhin and Chornyy (Chornyy is deputy chief of the
Donetsk DCOC [Directorate for Combating Organized Crime], who worked

with Yerokhin and also moved to Kiev – Ed.)

It was also intended to request a document from the SBU Donetsk Region
directorate about the existence of operational information about corrupt
activity by Yerokhin during his time as deputy chief of the DCOC of the
Donetsk Region internal affairs directorate, which was presented in August
2006 at the request of Interior Minister Lutsenko.

The investigation was also interested in a request from Supreme Council
[parliament] deputy [Yuriy] Karmazin to the Interior Ministry, the SBU and
the Prosecutor-General’s Office [PGO] in January 2006 about corrupt activity
by Yerokhin and Chornyy and relevant material of how the departments
concerned reacted to it.

We do not know what the SBU document is about. And we realize that even if
it contains impartial information about Yerokhin it cannot serve as
unequivocal confirmation of his involvement in dirty deeds.

(Alas, one cannot discard the possibility that the information was handed
over not with the aim of cleansing the police ranks, but with the aim of
“re-roofing” [provision of new protection for] financial structures that
provide abundant revenues, considering the story of the law-enforcement
agencies and special services of our state.)

As far as the deputy’s request is concerned, amplification is required here.
In actual fact, there was no deputy’s request. There was a deputy’s appeal
“Regarding abuse of office by staff of the DCOC of the Interior Ministry
directorate in Donetsk Region, Yerokhin, Reznykov and Chornyy”.

The date of registration of the appeal to the PGO was 24 November 2005. All
the material is now in the archive. But there is also a document dated 13
December 2005, signed by Deputy Prosecutor-General [Viktor] Shokin, “On
consideration of the appeal regarding abuses…” [ellipsis as published],
true, without mentioning the three above-mentioned names.

We realize that an officer in the law-enforcement agencies engaged in
“unmasking” conversion [money laundering] centres will inevitably become a
target for the most crafty provocations and combinations of enemies. And the
whole arsenal of pressure and disparagement may be put into action against
him, in which “defamatory” information of a rival agency and even a deputy’s
request are not the strongest and far from the last means.

Apart from that, we understand that over every operative carrying out his
duty in today’s Ukrainian reality there is always hanging, like a sword of
Damocles, at least the article on exceeding powers.

Given all of this, nevertheless, if one gives special powers to an officer
specializing in combating money laundering, and also provides him with a
special Interior Ministry facility for residence (if only his own country
cottage), one needs to be as sure of him as of oneself.

When having Col Yerokhin subordinate to oneself personally and signing
operational detective files with one’s own hand, one should evaluate
everything, including, and perhaps primarily, operational information that
has to do with him.

But obviously, since the SBU response came in August, the minister’s request
timewise was connected with the disappearance of the subordinate rather than
with the time when Lutsenko was addressing the question of whether the DCOC
colonel merited such high trust.
The investigation is also interested in material in the criminal case of the
main directorate of the Ukrainian SBU for results of falsifying the election
of the president of Ukraine in 2004 (in the part of the involvement with the
charges against Yerokhin).

Is that involvement limited exclusively to handing out bonuses to
politically aware miners who had gone to Kiev to support their candidate
[current Prime Minister Viktor Yanukovych, who initially won the rigged
ballot]? Or is it a question of some other involvement?

Apart from that, the investigation is interested in information from Donetsk
banking institutions about the existence of deposit accounts of Yerokhin,
Chornyy and all members of their families in the period 2004-06. In itself
the question does not reveal anything, and the check may produce nothing.
But, we repeat, it should have been carried out before Yerokhin’s transfer
to Kiev rather than after it.

It is surprising, to put it mildly, how someone in relation to whom the
investigation has so many serious questions could have enjoyed such
confidence of the Interior Ministry leadership.

Apart from that, while paying our respects to the awareness of the compilers
of the plan quoted, we will make so bold as to add some points to it.

Is it true that material was found in Yerokhin’s office testifying to the
close interest displayed by Interior Ministry staff in particular in the
telephone conversations and movements of two political leaders – Tymoshenko
and Yanukovych?
Is it true that over the past few years Yerokhin visited the USA several
times on private invitations, obtaining the requisite permission from the
Interior Ministry leadership?

Is it true that the people detained in the case of Yerokhin’s murder
immediately named the person who ordered it – a people’s deputy of Ukraine –
and later denied their testimony? Is it true that their original evidence
was recorded on tape?

Is it true that when being transferred to Kiev in February 2006, Yerokhin
took with him the operational detection file on Ruslan Ts., who is
responsible for the activity of a bank whose effective owner is a citizen
known to many people by the nickname Kosa?

Why is a people’s deputy composing an alibi for a suspect in the case of
Yerokhin’s murder, giving obviously false evidence, when the “partner in
crime being given a helping hand” is in custody? Why has a criminal case not
been instigated in relation to that deputy?

But however many questions are raised by the investigation and however
professionally and procedurally independent the behaviour of the
investigators is, be they Interior Ministry or the PGO, alas there is a
great risk that the established truth may be edited out of all recognition
before being released to the public, as has already happened on more than
one occasion.

And the fact that a deputy of some political force will be named as the
instigator will depend in the very last place on the real evidence of the
suspects, but primarily on the political disposition of forces.

Incidentally, regarding the plans of the head of the law-enforcement
department in this context, there are masses of them, as the classic used to
say. Not only operational, as we said earlier, but also potentially far more
global, in particular concerning party construction.

The role of the foundation of that construction, according to Zerkalo
Nedeli’s information, is given to an organization that has several times
passed from hand to hand, whose name in ringing-growling alliteration calls
Ukraine forward.

And, as evil tongues would have it, a deputy interior minister who is very
competent in the performance of his duty and an eminence grise who, when
Lutsenko came to the ministry, had every chance of heading the traffic
police are directly linked with the consolidation of that foundation. The
question of who dealt with the creation of the party’s financial foundation
remains open.

Fishing out the truth in fragments in the flows of official speeches, we are
left to observe precisely which party will be “converted” into “gold” by the
death of police Col Roman Yerokhin. And it may be that we will find the
truth about who ordered the killing and the real motives many years later –
in the memoirs of the investigators.

Ukrainian Prosecutor-General Oleksandr Medvedko says that the material in
the criminal case of the murder of the former officer of the Donetsk DCOC
[Yerokhin] contains no information about the involvement of people’s
deputies of Ukraine in committing the crime.

“We know about it from statements in the media. The material of the criminal
case contains no information regarding the involvement of any people’s
deputies in committing this crime,” he said at a news conference in Kiev on
8 September.

At the same time he stressed that there might be such information in
operational material. He also said that he had already issued an instruction
to study the operational detection file.

Medvedko also added that the PGO had taken on the case of Yerokhin’s

murder, since it takes over all high profile cases.          -30-
[return to index] Action Ukraine Report (AUR) Monitoring Service]
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BBC Monitoring research in English 30 Aug 06
BBC Monitoring Service, United Kingdom, Sunday, Sep 10, 2006

Newly-appointed Coal Industry Minister Serhiy Tulub, an associate of Prime
Minister Viktor Yanukovych from his days as Donetsk governor, has the
reputation of a highly effective manager who follows instructions to the
letter and is not inclined to take personal initiatives.

In 2004-2005, Tulub served in Yanukovych’s previous government as fuel and
energy minister – a post he had earlier held in 1999-2000. He also headed
the state nuclear power company Enerhoatom from 2002 to 2005.

After the Orange Revolution, some media close to the new authorities accused
Tulub of financial and other improprieties at Enerhoatom, including
diverting funds from the company for Yanukovych’s presidential campaign and
pressurizing managers to ensure favourable results for Yanukovych in
districts around the country’s nuclear power plants.

In June 2005, the then head of the Main Auditing Directorate, Mykola
Syvulskyy, reported its finding that despite increasing output, Enerhoatom
made a loss of about 8m dollars in 2004, apparently because it was paying
inflated sums for supplies while bad debts were allowed to mount. However,
Tulub does not appear to have been investigated in connection with any
specific offences.

Tulub, who is married with two grown-up children, entered parliament in the
March 2006 parliamentary election as No 49 on the list of Yanukovych’s Party
of Regions. In line with the constitution, he will have to step down as an
MP if he is to continue to serve in the government.
                                            DONETSK ORIGINS
Born in Donetsk in 1953, Tulub started his career as a miner at a local
colliery in the 1970s. In 1976, he graduated from the Donetsk Polytechnic
Institute. Tulub joined the Communist Party committee of the Donetsk-Region
city of Khartsyzsk in 1981. Two years later, he was appointed director of a
local mine. In 1986, he became first secretary of the Khartsyzsk Communist
Party committee.

After holding a number of senior mining-industry positions in the early
1990s, Tulub was appointed head of the main directorate for coal-mining and
energy of the Donetsk regional administration in 1997. When Viktor
Yanukovych was appointed regional governor the same year, he made Tulub his
deputy in charge of energy, transport and communications.

In June 1998, Tulub was appointed coal minister in the government of Valeriy
Pustovoytenko. When the Coal Ministry was transformed into the Fuel and
Energy Ministry a year later, Tulub remained at its head.
                                  YUSHCHENKO GOVERNMENT
Tulub’s tenure in the cabinet of Viktor Yushchenko in 1999-2000 was marked
by open conflict with the prime minister and his deputy prime minister for
fuel and energy, Yuliya Tymoshenko. In a newspaper interview in January
2000, Tymoshenko went out of her way to praise Tulub’s professional

But, in April, Tulub backed President Leonid Kuchma’s calls for Yushchenko
to dismiss Tymoshenko, reportedly saying that the existence of the post of
deputy prime minister for fuel and energy offended him because he considered
it an indication of distrust.

The following month, as Tulub and Tymoshenko drafted alternative programmes
for reforming the electricity market, Tulub sent a letter to Kuchma accusing
Yushchenko and Tymoshenko of blocking the ministry’s work. Tulub resigned in
June citing irreconcilable strategic differences with his government

Shortly afterwards, in August, Tulub was appointed deputy secretary of the
National Security and Defence Council – reportedly on the recommendation of
the leaders of the United Social Democratic Party, Viktor Medvedchuk and
Hryhoriy Surkis, who were also outspoken critics of Yushchenko’s and
Tymoshenko’s energy policies. Tulub used the position to continue criticism
of the cabinet’s handling of energy issues.

In November, a small explosive device went of at land plot where Tulub was
building a dacha. There were no injuries. Tulub viewed this as an attempt to
intimidate him due to his efforts “to end abuse by cabinet members in the
fuel and energy sector”.

                            FIRST YANUKOVYCH GOVERNMENT 
Tulub was appointed head of the national nuclear power company Enerhoatom in
June 2002. Although a court found that the previous Enerhoatom chief was
sacked unlawfully, Tulub kept the post.

In early 2003, the chairman of the Enerhoatom supervisory board, influential
businessman and MP Andriy Derkach, accused Tulub of corruption and failing
to ensure security at the country’s nuclear power stations. However, the
accusations were never officially confirmed, and in June 2003 the board was

Later, similar accusations against Tulub were voiced by the head of the
National Electricity Regulation Commission, Yuriy Prodan, but again they
were not confirmed.

In March 2004, Fuel and Energy Minister Serhiy Yermilov was dismissed –
reportedly due to his strong opposition to a Russian proposal to use the new
Odessa-Brody pipeline to pump oil to Odessa, rather than in the European

Tulub, who had earlier expressed doubts over the economic viability of the
pipeline, was reappointed as minister the following month. The Yanukovych
government eventually approved the reversal of the pipeline in July.

After his appointment, Tulub said completion of construction of new
generating sets at the Rivne and Khmelnytskyy nuclear power plants would be
his top priority. When the Khmelnytskyy reactor was connected to the
national grid in August 2004, Tulub received the title Hero of Ukraine. The
Rivne reactor was launched in October.

In a TV interview marking his 10th anniversary as president in July 2004,
Kuchma named Tulub, along with the late Transport Minister Heorhiy Kirpa and
state oil and gas company Naftohaz Ukrayiny chief Yuriy Boyko (now fuel and
energy minister), as a model state manager, praising his efforts to return
Enerhoatom to profitability from the verge of bankruptcy.          -30-

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
                      Nataliya Gotsii, a model from Borispol, Ukraine

By Natasha Singer, The New York Times
New York, New York, Thursday, September 14, 2006

NEW YORK – BEFORE she lets a makeup artist begin painting her face for a
fashion show, Nataliya Gotsii, a model from Borispol, Ukraine, performs her
own backstage grooming routine.

At the Tuleh show last Sunday at Fashion Week in New York, while models with
newly manicured and pedicured nails lounged in chairs waiting for their pale
lacquer to dry, Ms. Gotsii, 22, was rummaging in her Carolina Herrera
satchel in search of her favorite skin-care items.

“I am crazy about my skin,” she said. With one hand still in her purse, she
added, “Come on, if the nail gets scratched, who is going to see?”

Out of the carpetbag came a canister of Evian water she used to liberally
spray her face and neck. Next, an eye gel from Innoxa, which she patted
lightly under her eyes. And, finally, clarifying eye drops, squeezed into
each eye. “It makes the white part of your eye turn more white, almost

blue,” she said.

Ms. Gotsii’s career took off three years ago when she won in a regional
modeling search in Kiev, Ukraine. Sent to New York to compete, she was named
the Ford Supermodel of the World in 2003. She recently shot an advertising
campaign for a Carolina Herrera fragrance and is appearing in magazine ads
for the Valentino Red line.

Ms. Gotsii struts runways with a predatory, leonine gait and an icy stare
cold enough to freeze Lake Michigan. She is equally fierce about taking care
of her skin.

During Fashion Week, she drinks two to three liters of water a day. She
prefers tea to coffee, doesn’t drink alcohol, avoids tanning booths and
wears sunscreen daily, she said.

At night, in her Battery Park apartment, she prepares her own face
treatments by boiling a concoction of herbs like mint and chamomile; then
she freezes the mixture into ice cube trays.

“If I wake up and I feel I need something, I wrap the ice in fabric – I do
not put ice directly on the face because it is bad for the capillaries – and
I put the cloth on my face,” she explained. “After 20 minutes, it takes off

But Ms. Gotsii has one habit that is not so skin-friendly: smoking.
“Smoking, yeah, it’s bad, and not just for your skin,” she said. “But
everybody does it.”                                  -30-

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
                              IS SIMMERED IN CULTURE

By Mat Schaffer, Boston Herald, Boston, MA, Wed, Sept 13, 2006

When Tania Vitvitsky is making bigos, you smell it as soon as you walk
through the front door. This classic sauerkraut and pork stew announces
itself with a distinctive pungent aroma that portends its bold, tart

“I grew up eating Ukrainian food,” said Vitvitsky, executive director of
Sabre Foundation, a Cambridge-based organization that distributes donated
books to developing countries. “But I warn you, this is a cross-cultural
dish, and some people consider it Polish.

My parents are from a part of Ukraine that was under all kinds of
occupations – Austrian, Polish, Russian and German. A lot of the food
comes from many different cultures.”

Born in a displaced person’s camp in Austria after World War II, Vitvitsky,
along with her parents and grandmother, came to the United States when she
was 4 and settled in Philadelphia. Her bigos recipe is her grandmother’s.

“In the Ukrainian diaspora, we traditionally serve this during the midnight
break at weddings,” she said. “Ukrainian weddings are elaborate affairs.
After you have your main meal, you dance a lot, and at midnight, there’s a
whole other spread – all kinds of smaller dishes. Bigos is served there. I
made it for my daughter’s wedding.”

Vitvitsky recommends you begin your bigos the day before you intend
to eat it.

“It takes a couple of hours to simmer, and the taste develops overnight,”
she said. “Like borscht, I believe it’s much better the next day because the
flavors blend.”

 There are apparently as many bigos recipes as there are Eastern European

“Some people use caraway; I don’t use caraway,” Vitvitsky said. “Some
people put ketchup in it; I don’t. I like the sauerkraut in a pouch – not
the can.
Some people use sauerkraut and not fresh cabbage. Some people put a whole
lot of meat in it; I just like it for flavoring. And I use salt pork, but
you can use kielbasa or any smoked meat. You can (also) make it meatless.”

 Vitvitsky’s daughter, Ksenia Olsen, a graduate of the French Culinary
Institute in New York City, continues the tradition.

 “Of course she makes bigos,” said her proud mom. “Yesterday she made
sauerkraut soup, which is another specialty of the family.”
                                    TANIA VITVITSKY’S BIGOS
1 lb. salt pork, rind removed and discarded, meat diced
1 T. oil
2-3 cloves garlic, peeled and diced
1 large onion, peeled and chopped
2 32-oz. pouches sauerkraut, drained and rinsed
1 14.5-oz. can diced plain tomatoes with their juices
1/2 small head cabbage, coarsely chopped
1 bay leaf
Salt and pepper to taste

 In a large, heavy kettle, brown the diced salt pork in the oil over medium
heat. Add the garlic and onion and saute, 2 to 3 minutes. Add the drained
and rinsed sauerkraut. Stir to combine.

Stir in the cabbage, tomatoes and bay leaf. Bring to a simmer, lower the
heat and simmer for 2 to 2 hours. Salt and pepper to taste. Before serving,
slowly reheat and correct the seasonings.

It is traditionally served with rye bread and kovbasa (Ukrainian) or
kielbasa (Polish) smoked sausage. Mezeria (cucumber-sour cream salad)

and mashed potatoes also are nice accompaniments.

Serves 4 to 6 as an entree, 8 to 10 as a side dish.
3 large pickling cucumbers, thinly sliced
1/2 small onion, peeled and thinly sliced
3-4 T. sour cream
1 T. fresh dill, chopped
Salt and pepper to taste
Combine all ingredients. Refrigerate for an hour before serving.
Serves 4 to 6 as a side dish.

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                      Poltava oblast hosts international folklore festival

By Ksenia Zalutska, Komsomolske, Poltava Oblast
The Day Weekly Digest In English, #27
Kyiv, Ukraine, Tuesday, September 12, 2006

“Guelder Rose Summer on the Dnipro” has become the calling card of
the city of Komsomolske in Poltava oblast, pulling in thousands of visitors
from 40 countries in the past seven years.

The idea of holding this festival belongs to Leonid Kotovsky, ex-director of
the municipal Palace of Culture and Art, who has been the festival organizer
for four years in a row.

This year’s festivities began with a special liturgy at St. Nicholas
Cathedral. Afterwards the festival procession visited the Cossack Grave,
laid flowers and wreaths at the Eternal Flame, and marched through the city
streets. Various ensembles performed one number each from their repertory at
every intersection.
This year festival visitors were enchanted by the Portuguese ensemble As
Salineiras de Lavos from Figueira da Foz. The group, whose name means “the
women who extract salt in sea lagoons,” was founded in 1959. The members
make their own costumes based on 110-year-old patterns, and their shoes
(sabots) are made of cork.

The seven-kilogram baskets that the women hold on their heads during their
performance are filled with real sea salt. Before every appearance, the
dancers wet the salt to keep it from crumbling; that’s why it looks

Throughout the 47 years of its existence, this Portuguese folklore group has
toured Spain, France, Germany, Italy, the Netherlands, Belgium, and Sweden.
This was their first visit to Ukraine.

Toradi, a traditional Korean dance group, also wowed audiences. The dancers
speak Korean, Russian, and Ukrainian (they were born and raised in Kyiv).
Toradi was founded six years ago under the aegis of a Kyivan-Korean
association to encourage Ukraine’s ethnic Korean women to study their
ancestral culture and traditions.

The ensemble’s repertory consists of 10 numbers, including dances performed
at Buddhist temples and imperial palaces, as well as shamanic and folk

This is the girls’ second appearance in Komsomolske. The audience especially
liked their “Dance of the Three Drums.” The history of this dance dates back
to the days when shamanism was widespread in Korea. It was thought that the
sound of drumbeats could drive evil spirits from people and their dwellings.

The Polish regional folklore group Nawojowyczi performed folk songs and
dances, many of which are well known to Komsomolske audiences.

The exotic group Kobama presented the cultural heritage of Central Africa’s
Republic of Togo. The ensemble is named after the old singer Kolani Baba
Mamadou, who used to sing for the king of the Mandingo Empire of Mali.

Since their repertoire consists of traditional ritual dances, the group is
often invited to perform at festive events, such as weddings and birthday
parties. The group’s members are French-speaking.

The folk song ensemble Vechorka from Chalna, in Russia’s Karelia region, was
founded in 1988. All the members, aged 15 to 20, studied singing. The
ensemble has a serious repertory. Toward the end of the festival, the group
performed a game involving some city residents, including Mayor Oleksandr

After their performance the Vechorka singers said that Karelian folk songs
are the star feature of their repertory. Owing to the fact that previous
governments did not encourage the Karelian language and traditions, they
began to die out. A large number of Karelians moved to Finland.

Now Karelia is populated by Pomors, Vepses, Finns, Russians, and even
Ukrainians. Our Karelian guests were very glad that there was balmy weather
in Ukraine because it was already snowing in Chalna.

The folklore group Matitsa from Kaliningrad was founded in 1989. Its 15
young members perform songs, and dances, and enact games and ritual and
calendar feasts from Russia’s different regions.
The program of “Guelder Rose Summer on the Dnipro” featured guests from

the near and far abroad and two Ukrainian groups: the folk dance ensemble
Besarabsky Souvenir (Bilhorod-Dnistrovsky) and the Slavutych Folk Choir
from Komsomolske, which added national coloration to the festival program.

Turing the final gala concert, the jury named winners in the nominations
“Oldest and Youngest Festival Participants,” “Miss and Mr. Festival,” and
“Audience Prize.”

The youngest participant was Sergei Fomin, 11, from Karelia (Russia), while
82-year-old Bronislaw Bukanski from Poland was the oldest.

Gbteglo Saso from the Republic of Togo (Africa) was chosen Mr. Festival,

and Hanna Nedialkova (Bilhorod-Dnistrovsky, Ukraine) was proclaimed Miss

When the festival ended, the visiting performers left the city, but not all
of them left the country. The groups from Portugal, Karelia, and Togo are
going on a tour of Ukraine and will take part in the international folklore
festival “Polissian Summer and Folklore” to be held in Lutsk.    -30-

LINK: http://www.day.kiev.ua/168559/
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