AUR#777 Oct 20 Grain Markets Disrupted By Sudden Government Actions, IKEA $2 Billion Ukraine; EBRD 100 M Euro To Save Energy; Sell Russia Valuable Assets

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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
                                 FARMERS AND GRAIN TRADERS
Financial Times, London, United Kingdom, Tue, October 17 2006


UkrAgroConsult, Kyiv, Ukraine, Thursday, October 19, 2006

                             FOR GROWERS AND GRAIN TRADERS
                             Quota set by the Government is way too low
International Centre for Policy Studies (ICPS)
Kyiv, Ukraine, Thursday, October 19, 2006

Ukrainian Grain Association (UGA), Kyiv, Ukraine, Wed, Oct 18, 2006

Ukrainian News Agency, Kyiv, Ukraine, Wednesday, October 18, 2006

COMMENTARY: Ukrainian Agricultural Markets Newsletter (UAMN)
Kyiv, Ukraine, Friday, October 20, 2006

Ukraine ACC, Kyiv, Ukraine, Wednesday, September 27, 2006
COMMENTARY: Ukrainian Agricultural Markets Newsletter (UAMN)
Kyiv, Ukraine, Tuesday, October 17, 2006

                        CREDITS FOR ENERGY EFFICIENCY
Interfax-Ukraine, Kyiv, Ukraine, Wednesday, October 18, 2006

Interfax-Ukraine, Kyiv, Ukraine, Wednesday, October 18, 2006


Metal Bulletin, London, UK, Thursday, October 19, 2006

                    Ukrainian aircraft do not meet international standards
Interfax-AVN military news agency website,
Moscow, Russia, in English 1300 gmt 18 Oct 06
BBC Monitoring Service, United Kingdom, Wed, Oct 18, 2006

Vedomosti, Moscow, Russia, Mon, October 16, 2006
CIS Oil & Gas Report, Moscow, Russia, Wed, October 18, 2006

            Arlington, VA Firm Buys Stakes in Projects in France, Bulgaria
       Largest international investor in Bulgaria with $1.4 billion power plant
By Steven Mufson, Staff Writer, The Washington Post

Washington, D.C., Thursday, October 19, 2006; Page D04

17.                            ADDICTED TO RUSSIAN GAS
COMMENTARY: By Borut Grgic, The Wall Street Journal
New York, New York, Thursday, October 19, 2006

                        STRUGGLE TO UNIFY FOREIGN POLICY
By Judy Dempsey, International Herald Tribune (IHT)
Paris, France, Thursday, October 19, 2006

Associated Press (AP), Kiev, Ukraine, Thursday, October 19, 2006 


Izvestia, Moscow, Russia, October 16, 2006
CIS Oil & Gas Report, Moscow, Russia, Wed, October 18, 2006
Interfax-Ukraine news agency, Kiev, in Russian 0856 gmt 17 Oct 06
BBC Monitoring Service, United Kingdom, Tuesday, Oct 17, 2006
TV 5 Kanal, Kiev, in Ukrainian 0810 gmt 19 Oct 06
BBC Monitoring Service, United Kingdom, Thursday, Oct 19, 2006
                      Replacing Russian candies with Ukrainian sweets
Mara D. Bellaby, AP Worldstream, Tbilisi, Georgia, Wed, Oct 18, 2006
UNIAN news agency, Kiev, in Ukrainian 1337 gmt 17 Oct 06
BBC Monitoring Service, United Kingdom, Wed, Oct 18, 2006
ANALYSIS & COMMENTARY: By Stephen Velychenko

CERES Associate and Research Fellow, Chair of Ukrainian Studies
University of Toronto, Ontario, Canada
Action Ukraine Report (AUR) #777, Article 25
Washington, D.C., Friday, October 20, 2006
Anna Melnichuk, AP Worldstream, Kiev, Ukraine, Wednesday, Oct 18, 2006
Marta Falconi, AP Worldstream, Rome, Italy, Wed, Oct 18, 2006
                             CAPITAL FROM KIEV TO KYIV
Associated Press (AP), Washington, D.C., Thursday, October 19, 2006
                            FARMERS AND GRAIN TRADERS

Financial Times, London, United Kingdom, Tue, October 17 2006

Trading giants such as Bunge, Cargill and Toepfer have played a big role
in rebuilding the agricultural sector of Ukraine, ranked as the world’s six
largest grain exporter.

But when the going gets tough on international markets, Kiev’s populist
governments have not, over the years, hesitated in squeezing the profit
margins of traders to keep food prices low for citizens.

The nearly $1bn (Euro800m, £540m) invested in Ukraine’s agriculture
sector by trading companies, and the benefits they bring to cash-strapped
farmers by offering top dollar for crops, is hardly a priority.

Despite repeated pledges to stick with market economics, officials all too
often resort to unorthodox methods.

Grain traders were reminded of this reality recently when state officials
tried bullying them into selling wheat at a $20 per ton discount after
failing to stock up reserves at lower summer prices.

When traders refused, pleading for a more acceptable resolution, officials
introduced licensing for wheat exports without warning. They also refused
to issue licences for a week.

The disruptions incurred millions of dollars in losses to the industry,
hurting the reputation of Ukraine as a reliable grain supplier. Struggling
farmers found themselves in a panic, unsure who to sell their grain to and
at what price. “We have faced restrictions in the past but never overnight
without warning like this,” said a manager at one leading corporation.

A week of protest produced a decision last week that the government sees
as a compromise: the replacement of licensing with stiff quotas until the
end of the year on wheat, barely, corn and rye.

In an FT interview last week, Ukraine’s President Viktor Yushchenko referred
to the chaotic state intervention as an early mistake of the new coalition
government of Viktor Yanukovich.                         -30-

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
UkrAgroConsult, Kyiv, Ukraine, Thursday, October 19, 2006

KYIV – The Ukrainian Grain Association has reported that the State Customs
Service does not accept licenses for grain exports granted by the Economy
Ministry. ‘The State Customs Service does not accept licenses for grain
exports ranted by the Economy Ministry,’ the report reads.

Ukraine’s largest grain traders, members of the Ukrainian grain
Associations, challenged the Cabinet of Ministers’ resolutions introducing
licenses and quotas for grain exports in Kyiv’s Business Court on October

In October, the Cabinet of Ministers introduced quotas for grain exports
until the end of 2006 refusing from its licensing. The decision took effect
on October 17.

According to the regulation, general quotas for agricultural products,
export of which is to be licensed in 2006, are set in the amount of 400,000
tons for wheat and wheat and rye mix (meslin), 600,000 tons for barley,
600,000 tons for corn and 3,000 tons for rye.

Premier Viktor Yanukovych claimed the government would cancel restrictions
on grain exports with the end of grain purchases to the state and regional

In September, the Cabinet introduced licensing of wheat and meslin export

up to the end of 2006. The market insiders believe that limitation of grain
export caused decreasing its price in the internal market.         -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
                        FOR GROWERS AND GRAIN TRADERS
                    The quota set by the Government is way too low

International Centre for Policy Studies (ICPS)
Kyiv, Ukraine, Thursday, October 19, 2006

The introduction of export quotas on grain will cause both growers and
grain traders losses, says ICPS Senior Economist Yevhenia Akhtyrko.

An 11 October 2006 Cabinet Resolution has instituted an overall 1.6 mn
tonne export quota on all kinds of grain until the end of the year. With
this quota, the Government is trying to limit the export of grain in order
to supply the domestic market.

This year, world grain prices have jumped considerably because of a poor
worldwide harvest and reduced grain reserves.

As a result, it is currently more convenient to export wheat then to sell it
internally on the Ukrainian market. For instance, DerzhReserv purchasing
prices for 3rd grade wheat are UAH 775-800/t and 4th grade is UAH
675-680/t, while the price for wheat under futures contracts signed 9
October 2006 for December 2006 delivery on US commodity exchanges
was US $181.60-195.60/t.

Ukraine has already sold nearly 5.5mn tonnes for export from this year’s
crop. The total potential for grain exports in this marketing year is 9-11mn
t according to different estimates.

According to Ms. Akhtyrko, the quota set by the Government is too low-and
even if it were twice as high, it would not lead to any shortages on the
domestic grain market.

In choosing between giving grain exporters the advantage and protecting the
domestic market, the Government tends to support the latter. The lack of
limits on exports could push domestic prices up, or to a possible shortage
of grain.

Should domestic grain prices go up, it would cause baked goods and feed for
poultry and livestock to also go up, which would cause a chain reaction in
prices for a slew of foodstuffs.

Should there be a shortage, Ukraine will be forced to import grain in the
middle or at the end of the marketing year for prices that will likely be
higher than current domestic prices.

The overly small volumes of exports, based on the current quota, will likely
cause an oversupply on the domestic market, putting downward pressure on
domestic purchase prices for grain. Even if the quota is removed next year,
world prices are likely to be lower at that point than they are currently.

Thus, placing severe restrictions on grain exports will cause losses not
only for grain traders but for Ukraine’s grain growers as well.

According to the ICPS economist, a more effective decision would be to set
the quota at around 4mn t until the end of the current marketing year, June
2007. This would allow grain traders more options when purchasing.
Andriy Starynsky, International Centre for Policy Studies
13-a Pymonenka Street Kyiv 04050, Ukraine
Phone: +38044 484-4400; Fax: +38044 484-4402
E-mail:; Web-site:

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

Ukrainian Grain Association (UGA), Kyiv, Ukraine, Wed, Oct 18, 2006

KYIV – On October, 18, 2006, Economic court (Kyiv) received a lawsuit,
filed by a group of the largest grain exporters, members of Ukrainian
Grain Association, against the Cabinet of Ministers of Ukraine demanding
to acknowledge Cabinet of Ministers Resolutions as of September, 28,
# 1364 and October, 11, # 1418 illegal and cancel them.

In their lawsuit, the suitors contend that in its adoption of Resolutions,
the Cabinet of Ministers of Ukraine violated the rights of exporters of
grain by the illegal implementation of licensing system initially, then
changing it into a quotation system of grains exports.

According to a law firm “Volkov and partners”, representing interests of
the suitors, the filed lawsuit is reasonably substantiated and has all the
necessary grounds in place to be satisfied for, while adopting mentioned
Resolutions, Cabinet of Ministers violated the Laws of Ukraine on “Grain
and grain market in Ukraine” and “Foreign economic activity”.

Besides, the Cabinet of Ministers violated the whole procedure of regulatory
acts adoption.                                 -30-

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Ukrainian News Agency, Kyiv, Ukraine, Wednesday, October 18, 2006

KYIV – Ukraine’s largest grain traders, members of the Ukrainian Grain
Association [UGA], challenged the Cabinet of Ministers’ resolutions
introducing licenses and quotas for grain exports in Kyiv’s Business Court
on October 18.

Ukrainian News learned this from a statement by the press service of the
Ukrainian Grain Association, the wording of which was made available to
the agency.

“The Cabinet of Ministers violated the rights of grain exporters with the
endorsement of resolutions (No. 1364 of September 28 and No. 1418 of
October 11), as it illegally introduced the licenses for grain exports at
first and then substituted licenses with the regime of quotas for export
operations with grain,” the statement reads.

According to the Volkov and Partners law association, which is representing
the interests of the plaintiffs in the court, the suit is grounded and there
are all required grounds to satisfy it, since the Cabinet of Ministers in
endorsing the resolution acted beyond its authorities provided by the law on
grain and grain market in Ukraine and the law on foreign economic

“Furthermore, the Cabinet of Ministers almost absolutely neglected the
procedure of endorsing regulatory acts,” the lawyers said.

As Ukrainian News earlier reported, in October, the Cabinet of Ministers
introduced quotas for grain exports until the end of 2006 refusing from its
licensing. The decision took effect on October 17.

According to the regulation, general quotas for agricultural products,
export of which is to be licensed in 2006, are set in the amount of 400,000
tons for wheat and wheat and rye mix (meslin), 600,000 tons for barley,
600,000 tons for corn and 3,000 tons for rye.

Premier Viktor Yanukovych claimed the government would cancel restrictions
on grain exports with the end of grain purchases to the state and regional

In September, the Cabinet introduced licensing of wheat and meslin export
up to the end of 2006. The market insiders believe, that limitation of grain
export caused decreasing its price in the internal market.       -30- 

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

COMMENTARY: Ukrainian Agricultural Markets Newsletter (UAMN)
Kyiv, Ukraine, Friday, October 20, 2006

Considering the country is controlled almost totally by big business
interests stopping grain exports for a prolonged period of time allows
cancellation of all grain contracts, without recourse.

14 mil tons of wheat, from which the country needs 7 for milling
consumption, still leaves material for export, feed and milling.  There
5 mil more tons of barley than is exportable. Less than 1.5 mil tons has
gone out.

In June 07, as the season closes, the country will still have exported
10 mil tons of wheat, barley, and maize, instead of closing by February
and then having a slow spring of exports.

Being able to clear your contracts of sale today from a Ukrainian
company to a foreign company allows new sales in December at 40-50
$ higher, on 6 mil tons of Barley and wheat that is bringing to the real
Ukrainian company stockholders an additional 250-300 mil dollars.

PM Viktor Yanukovych did state last night, “he hopes” contracts will be
honored to foreign companies. (tongue in cheek)

The international grain company of course is the boogy man, but in
reality 80% of the grain stocks are owned/controlled by Ukrainian/Russian

At any time the state reserve can buy grains, it is not the 100 hryvnia
(20$) discount they claim they hope to inspire in the market that will make
any difference to the subsidized price of bread.

As of now, all licenses granted have been invalidated.  A quota system
is being put slowly in place.

Toepfer grain company finished a vessel at 02:00 earlier this week and
could not custom clear and leave.

Bunge had 90,000 in Ilyichevsk with a cancelled license and a vessel on
demurrage at $35,000 per day.

Glencore has a vessel sitting almost 2 weeks now requiring 2000 tons to
complete and is blocked.

Interests of the country at heart?  Or concern about bread prices?

Or a huge price windfall to those that now control the grain stocks and
those who want to buy the grain stocks at a low price such as animal
feeding companies and flour mills and the new government?

All at the expense of the agricultural producer, the farmer and the
local rural community who badly need the funds and who have been

ripped off by the bad government policies too many times before.  -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

Inna Sokolovska, Ukrainian News, Kyiv, Ukraine, Friday, October 13, 2006

KYIV – The Grain and Feed Trade Association (GAFTA) has called on

President Viktor Yuschenko, Parliament Speaker Oleksandr Moroz, and
Prime Minister Viktor Yanukovych to resolve the situation on the Ukrainian
grain market following the introduction of restrictions on export of grain.
GAFTA made the call in a statement, a text of which Ukrainian News obtained.

“The Grain and Feed Trade association (GAFTA) has … written an open letter
to the Ukrainian authorities, calling on them to take the necessary measures
to resolve the situation on the domestic grain market in accordance with
Ukrainian regulation and international trade law,” the statement said.

Grain market participants believe that the imposition of restrictions on
export of grain has essentially resulted in suspension of operations on the
grain market. Grain traders are unable to fulfill their contractual

“Port elevators are overflowing with products, ships arriving for loading
are idling, and fulfillment of the contractual obligations of traders is
impossible. Norms of international trading relations are being violated,”
the statement said.

GAFTA believes that the situation on the Ukrainian grain market is damaging
the image of Ukraine in general as a major grain exporter and not just the
images of traders and producers. “Ukraine is losing its position as a grain
country,” the statement said.

The Grain and Feed Trade Association (GAFTA) is an association of
international grain and feed trading companies. GAFTA has about 1000

members in 80 countries. Its headquarter is located in London. It has
regional offices in Kyiv (opened in April 2005) and Beijing (China).

As Ukrainian News earlier reported, grain-market experts have said that
grain prices are falling on the domestic market due to the introduction
restrictions on grain exports by the Cabinet of Ministers.

On October 11, the Cabinet of Ministers introduced a quota of 1.1 million
tons for grain exports.

Earlier, the Agricultural Policy Ministry had prepared a draft resolution on
introduction of quotas for exports of wheat, barley, rye, and corn with the
aim of preventing a threat to Ukraine’s food security. The draft proposed
introducing export quotas of 400,000 tons for wheat and wheat-and-rye
mixture, 600,000 tons for barley, and 100,000 tons for corn.

On October 3, a Cabinet of Ministers resolution on introduction of export
licenses for food-grade wheat and wheat-and-rye mixtures took effect.

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

Ukraine ACC, Kyiv, Ukraine, Wednesday, September 27, 2006
         Uniting Leading Companies from over 50 Nations across the Globe

Mr. Andriy Klyuyev
Vice Prime Minister
l2/2 Grushevskogo St.,
Kyiv 01008

September 27th, 2006

Re: Chamber Concerns Regarding Introduction of Export Restrictions

Dear Vice Prime Minister Klyuyev,

The American Chamber of Commerce in Ukraine (“Chamber”) expresses
its deepest respect and wishes you success in your work.

On behalf of the Chamber’s Agricultural Committee and the Membership we
would like to address you regarding plans to introduce restrictions on
business activities in the form of licensing and quotas for grain export
from Ukraine.

Chamber Members, who are the leading foreign agricultural companies
operating in Ukraine, have brought to our attention that the situation
surrounding export of grain has now reached a critical point and in the near
future the Government plans to introduce various non-market oriented
instruments. We strongly believe that these non-market mechanisms will not
only harm trading operations but the investment climate in general and will
have a negative impact on the domestic market and on the farming community.
Special concern relates to the possible starting dates of licensing and
quota implementation, procedures to be developed to implement the licenses
and quotas and how that will impact the contracts that have already been
signed by Chamber Members. All of the above are integrated and important
issues that are critical to be taken into consideration by appropriate
Governmental authorities to ensure that the tenets of a free market economy
and private property rights are not violated by the State.

Chamber Member companies, who are concerned over the recent announcements,
include legitimately operating organizations who are the major exporters of
grains and vegetable oils as well as investors at various levels within the
agro industrial complex of Ukraine who pay large amounts of taxes and are
integral to the success of this important area of Ukraine’s economy. They
directly employ thousands of Ukrainians in rural areas, and support the well
being of tens of thousands of farming families by purchasing their grains
and oilseeds in a transparent fashion in non-barter operations.

We would like to stress that for our Members this issue is very difficult
and unacceptable in a modern Ukraine striving to integrate into the larger
global community and attract additional foreign and domestic investments
into the agro industrial complex. We feel that without constructive
measures, the situation can eventually result in a crisis that would send
ripples across the agricultural market of Ukraine. Our experts, upon review
of the official numbers regarding grain production, existing reserves and
official level of export, do not believe there are any serious dangers
related to a shortfall in the grain market and therefore there is no such
need for restrictions on exports of grain. Senior managers of our Members
are ready and willing to cooperate with the various branches of the
Government to find a permanent solution to this problem.

We respectfully ask to begin an active dialog with yourself and
representatives from your team to work towards the resolution of the ongoing
problem with export licensing and export quotas and would be pleased to
participate in a high level Working Group that we would suggest be
established under your patronage. From the Chamber’s side we pledge to
provide our best specialists who bring with them international experience
and best practices to work towards a resolution of this problem that is
beneficial for Ukraine and her people and allows legitimately operating
companies in the agricultural sphere to conduct business without
damaging non-market impediments.

Please do not hesitate to contact our office at 490-5800 with any further
questions or for additional clarification.


Jorge Zukoski

CC: Mr. Yuriy Melnik
Minister of Agrarian Policy of Ukraine
24 Khreshchatyk, Kyiv
Board of Directors: Andreas Rickmers, Cargill Enterprises, Inc. – Chairman;
George Logush, Kraft Foods Ukraina – Vice Chairman; James Hitch, Baker &
McKenzie – Treasurer Stuart McKenzie, Pulse Ltd, – Secretary; Axel Hiuchy,
METRO Cash & Carry Ukraine Ltd.; Boris Krasnyansky, PricewaterhouseCoopers;
Bohdan Kupych, Kvazar-Micro Corporation; Jacques Mounier, Calyon Bank
Ukraine; Nadir Shaikh, Citibank (Ukraine); Myron Wasyluk, The PBN Company;
Adam Wojacki, Ukrainian Mobile Communications; Kamen Zahariev, European
Bank for Reconstruction and Development.
President, Jorge Zukoski
42/44 Shovkovychna vul., LL 1 Floor, Kyiv, 01601, Ukraine
Phone +380 44 490 5800 | Fax 380 44 490 5801,
[return to index] [Action Ukraine Report (AUR) Monitoring Service]


COMMENTARY: Ukrainian Agricultural Markets Newsletter (UAMN)
Kyiv, Ukraine, Tuesday, October 17, 2006
The new Ukrainian government’s sudden and deep intervention in the
grain markets is the usual Ukrainian government ineptitude, lack of
understanding and respect for the value of private markets, and interest
in controlling and manipulating grain prices for the personal financial gain
for those companies and individuals very close to the new government.
It is Soviet Economics 101 all over again. 

At the start of every season, the government usually puts artificial bans

in place through oblast regulations, or not allocating enough grain railway
boxcars that slow to a crawl the movement of the harvested grain, thus
forcing sales of grain to the state reserve.  Every year. Except this one.

There is so much political turmoil in Ukraine all about the personalities,
nothing to do with the country and its needs, someone must have forgotten.

The result is that no high quality milling wheat (for bread) was purchased
for the state reserve.

The wheat crop is short this year on account of the poor conditions that

existed for planting last fall and the subsequent short fall in the number of
hectares planted.  When you combine this with a poor quality (lack of bug
control) wheat crop this year and an international market that simply
exploded suddenly someone in the government got concerned and in
this conditions they always put in place Soviet type, anti-private market,
crisis regulations.

Due to poor crops of wheat in most producing countries, the result has

been price explosion.  The U.S. farmer is seeing the best wheat price in 10
years. This is only an episode not a structural change. The allows farmers
to bring in more desperately needed cash for their operations.

The Ukraine government always fears bread prices soaring, which they are

going to do with or without licenses.  They don’t seem to be alarmed that
they are tripling the cost of utilities.  They also do not seem to understand
that the flour mills are mostly private and will follow the market.

As the government did not fill the state reserve, they have embarked on a
crisis policy of blackmailing the grain trade to sell them wheat 100 hryvnia

below the current local price.  If a grain company does not sell under these
conditions to the government then there is that threat that no export licenses
for grain will be issued to that grain company.

By what imagination does any government suddenly impose licensing without

having put in place the means to apply for and obtain licensing? So ocean
vessels sit on the Black Sea and costs go up dramatically.

The government has also just decided also to place licenses on barley and

maize, neither of which are in short supply according to Ukrainian
government statistics. Why? Pressuring and intimidating the grain trade.

Should the state desire to be in the grain business (most of this policy
comes from the Economics minister, not the Ag minister and is driven by
political desire to maintain low bread prices, which they can not do) they
can simply go and buy 2 mil tons of good quality Kaz milling wheat, which
will come to the Ukraine market in any case.

The market is obliged to fill the gap for a good quality milling wheat.
License or not, will not change either price direction of wheat, or

ultimately bread.

Will Ukraine in the end export a predictable amount of grains for the
total season? Yes.

Will the private grain “trade” get hammered without recourse? Yes

Will the international grain companies be demonized, despite there being
MANY large Ukrainian political operators in the market?  Yes

Will this event once again hurt Ukrainian agricultural producers, rural
villages and rural development? Yes

Is there any contract sanctity in Ukraine for defaulted goods by
Ukrainian companies? No.

Will anyone give up on Ukraine? No.

Will this event help the Ukrainian people or give them better Bread prices?

That’s about it for now.                            -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

Interfax-Ukraine, Kyiv, Ukraine, Wednesday, October 18, 2006

KYIV – Sweden’s IKEA intends to invest $1.5-2 billion in the construction of
two shopping malls outside Kyiv. “We are prepared to start implementing the
investment project tomorrow,” IKEA representative Sven Holm said at a
meeting with Prime Minister Viktor Yanukovych in Kyiv on Tuesday, the
governmental press service said.

As it reported earlier, the Kyiv region administration offered IKEA a
50-hectare land plot for the construction of a large shopping mall.

The total volume of investment into this project is estimated at $200-250
million. IKEA had planned to build the mall in the city of Kyiv itself, but
the project was not implemented due to unsettled land arguments.

The government will create all the conditions necessary for attracting
investments to the Ukrainian economy, Yanukovych said at the meeting.

The cabinet will begin the restoration of priority development territories
with a special mode of investments, he said. “Your investment will be
expected in all Ukrainian regions. I would like IKEA to become a sample
investor, which will give an example for other foreign companies,” he said.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

                       CREDITS FOR ENERGY EFFICIENCY

Interfax-Ukraine, Kyiv, Ukraine, Wednesday, October 18, 2006

KYIV – European Bank for Reconstruction and Development will allocate

EUR100 million under a program to extend credit lines to Ukrainian banks
to credit private companies implementing energy efficiency projects and
renewable energy projects.

As Interfax-Ukraine learned from press secretary of EBRD in Kyiv Anton

Usov, the decision was taken by the bank’s board on Wednesday.

It is expected that technical assistance for the project will be provided by
the Austrian and Swedish governments, and consultants will be attracted for
training the banks’ staff and carrying out a technical audit of borrowers.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

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Interfax-Ukraine, Kyiv, Ukraine, Wednesday, October 18, 2006

KYIV – Britain’s Cardinal Resources Plc plans to invest from $25 million to
$42 million in the development of its business in Ukraine in 2006 and 2007,
the company’s press service reported on Tuesday, referring to Cardinal
Resources Corporate Communications Director Kate Spiro.

According to a company press release, the money will be invested in
conducting thorough repairs of seven wells at the Bilousovsko-Chernukhinska
and Pivnichno-Yabluniska licensed deposits; drilling seven new wells at
these deposits, four of which will be completed by the end of 2007;
completing the building of gas treatment facilities at the Bilousovsko-

Chernukhinska deposit; and increasing hydrocarbon production to
2,500-3,000 barrels of oil equivalent per day.               -30-
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Metal Bulletin, London, UK, Thursday, October 19, 2006
LONDON – Arcelor Mittal is considering buying upstream and downstream
assets in Ukraine to complement its Mittal Steel Kriviy Rih mill.
“We had a problem in producing pig iron because of the low supply of
coking coal. We have been buying coking coal from Russia and Kazakhstan
and we have even started looking to China

“If Ukraine can`t produce it we have to find it somewhere else,” Kriviy Rih
spokesman Frank Pannier said on the sidelines of the Metal Forum exhibition.

Mittal may seek to develop its own coking coal assets within Ukraine to
avoid reliance on producers “[which] are not fulfilling their contracts”, he

As well as looking at acquiring coking coal mines, the company is also
considering hardware manufacturers and transport facilities, he said.

It is already in touch with the owners of potential acquisitions in the
hardware products sector.

“We will be looking carefully at the development of the hardware sector.
We`re one of the biggest players in that market in Europe, we have factories
in Germany and other countries.”

Regarding transport facilities, he pointed out there are plans to lift
rolled products output to over 9 million tonnes by 2010 from 6.2 million
tonnes last year.

“At the moment about 80 percent of that goes for export so clearly the
question of a port or rail facilities is a big one,” he said. He added that

he expects domestic sales be at least maintained and probably increased
in coming years.

Pannier also re-iterated Arcelor Mittal`s desire to take on the idled
state-owned Krivoy Rog GOK (KGOKOR) pelletizing plant, the fate of

which is still to be decided by the Ukrainian government.     -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
                  Ukrainian aircraft do not meet international standards

Interfax-AVN military news agency website,
Moscow, Russia, in English 1300 gmt 18 Oct 06
BBC Monitoring Service, United Kingdom, Wed, Oct 18, 2006

ASTANA – Kazakh Prime Minister Daniyal Akhmetov has criticized the

Skat air company’s purchase of Ukrainian Antonov An-148 planes.

“If we are to use modern types of aircraft, then we should encourage air
companies to buy world brands. Who needs the An-148?” the prime minister
said at a governmental meeting dedicated to the implementation of
Kazakhstan’s transportation strategy on Wednesday [18 October].

The aircraft will “comply with the requirements of neither JAR [the Joint
Aviation Regulations], nor the US authorities,” the premier said. Kazakh
Transport and Communications Minister Serik Akhmetov said at the meeting
that the Skat air company had signed a contract to purchase seven An-148
aircraft in late 2005.

It was reported earlier that the Ukrainian Transport and Communications
Ministry is expecting Kazakhstan to sign another contract to deliver between
seven and ten An-148 aircraft.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

Vedomosti, Moscow, Russia, Mon, October 16, 2006
CIS Oil & Gas Report, Moscow, Russia, Wed, October 18, 2006

MOSCOW – Ukraine intends to repay Russia for maintaining concessional

gas prices by “helping” Russian state-controlled companies to privatize
aviation and energy sector assets in Ukraine.

Moscow has agreed to negotiate, but insists that Ukrainian privatization and
gas prices are two independent issues.

In August and September 2006, Ukrainian Prime Minister Viktor Yanukovych

met with President Vladimir Putin and Prime Minister Mikhail Fradkov, and
managed to persuade Gazprom’s trader, RosUkrEnergo, to retain a
concessional gas price for Ukraine in the fourth quarter ($95 per thousand
cubic meters).

RosUkrEnergo subsequently calculated that this would cost it over $400
million. Gazprom also helped Ukraine to reach an agreement on supplies of
Central Asian gas for 2007.

Gazprom staff say that the price for this has not yet been set, but two
sources close to the talks maintain that it will be minimal – $130 per
thousand cubic meters.

Both sides explained that these concessions have been made “with a view to
the prospects for expanding cooperation” beyond the gas sector. Fradkov
noted that the primary direction for expansion is Ukraine’s electricity
sector. According to our sources, the second sector could be aviation.

A former high-ranking Yushchenko administration official says that in
exchange for cheap gas, Yanukovych promised to “assist” Russia in
privatizing aircraft-building plants in Ukraine.

A Russian Cabinet staff official also confirms that Russia is negotiating

on participation in the forthcoming privatization of Ukraine’s electricity
sector and aviation industry.

But this source emphasizes that Moscow does not intend to “mix” these

talks with gas negotiations; after all, Ukraine will get the gas right now, but
privatization will take years.

Ukraine’s electricity sector and aviation industry have been off limits to
privatization so far; but the State Property Fund and the Ukrainian
government are currently compiling a list of assets that will be part of the
privatization program for 2007, primarily in these sectors. A

 Ukrainian member of parliament notes that these are Ukraine’s “most liquid”
assets, and by selling them off, Ukraine is hoping to cover a $2 billion gap
in its budget. The former Yushchenko administration official maintains that
more details about Russia’s participation in Ukrainian privatization will be
forthcoming after Fradkov’s visit to Kiev on October 24.

Duma member Alexander Lebedev, owner of blocking stakes in Aeroflot and
Ilyushin Finance, proposed uniting the aviation industries of Russia and
Ukraine back in 2004. Nothing came of it at the time, he says.

However, discussion of such a project was resumed after Yanukovych’s
appointment as prime minister. A source close to the Unified
Aircraft-Building Corporation, a Russian project now under construction,
says that in August, Yanukovych “very symbolically” gave Fradkov a button
depicting an An-148 plane.

Yushchenko recently revoked a decree issued by his predecessor, Leonid
Kuchma, on establishing the Energy Company of Ukraine. According to a
Ukrainian State Property Fund official, this indicates that preparations are
underway to sell off its electricity assets.

Roman Zakharov, an analyst with Foil Securities, maintains that Ukraine is
unlikely to give up control of the five largest electricity generation
companies; there is a greater chance of regional distribution companies
being privatized.

Russian companies are very interested in all Ukrainian electricity assets,
says Zakharov. They have more potential for growth than their Russian
counterparts (for example, they’re only using 40% of generation capacity),
and there’s also the possibility of exporting electricity to Europe.

According to sources in Russian state-owned companies, Gazprom hasn’t yet
considered Ukrainian electricity companies – but they could be of interest
to RAO Unified Energy Systems. Ruslan Pukhov, director of the Center for
Analysis of Strategies and Technologies (CAST), adds that the Ukrainian
aviation industry is also interesting, especially the Antonov plant and its

Ukraine’s main state-owned aviation assets (the Antonov plant, the Aviant
plant in Kiev, the aircraft repair factory in Kiev, and the Kharkiv plant)
were unified in 2005 to form a state corporation called Antonov National

The Ukrainian aviation industry’s turnover, including engine-building, came
to $230 million for the first five months of 2005.

State assets in the electricity sector are split into three companies, all
100% state-owned: EnergoAtom, UkrGidroEnergo, and the Energy Company

of Ukraine (hydro-electric power stations, distribution, and sales). According
to the Ukrainian parliament’s fuel and energy committee, annual turnover of
the Energy Company of Ukraine amounts to between $2 billion and $3.5
billion.                                         -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
          Arlington, VA Firm Buys Stakes in Projects in France, Bulgaria
       Largest international investor in Bulgaria with $1.4 billion power plant

By Steven Mufson, Staff Writer, The Washington Post
Washington, D.C., Thursday, October 19, 2006; Page D04

WASHINGTON – AES Corp. said yesterday that it bought minority stakes in a
French wind-farm developer, InnoVent SAS, and in a Bulgarian wind project.

The deals continue the expansion by the Arlington power company into wind
projects. AES entered the wind business in 2004, and it has 600 megawatts
operating and 200 megawatts under construction. The company would not
disclose the amount it paid for either of the stakes.

InnoVent has several projects in development and expects to add 50 to 100
megawatts of wind-power generation every year for the next five years. That
will mean wind farms with 25 to 50 turbines each, mostly in the breezier
north of France, said Ned Hall, president of AES Wind Generation.

If all the projects proceed, at the end of five years, AES and InnoVent
would generate enough power for a city roughly half the size of the

InnoVent, founded in 2001, has constructed seven small wind farms in
France. Hall said AES was seeking an experienced partner with an established
pipeline of projects.

In Bulgaria, AES has bought a stake in a 120-megawatt wind project near
the Black Sea in the northeastern part of the country.

AES, which is also building a conventional $1.4 billion power plant in
Bulgaria, is already the biggest foreign investor in the country. “We’ve
been able to use the relationship we’d established already,” Hall said.

In both cases, the wind projects will benefit from long-term purchase
agreements, Hall said. In the first 50-megawatt project in France, the
government will pay an undisclosed fixed price through the utility, the
EDF Group, for 10 years.

In Bulgaria, the utility company made a similar 10-year deal to buy power
from the wind project, he said.

He added that the Bulgarian project would qualify for carbon dioxide
credits, which it will be able to sell to European industries operating
under the continent’s “cap-and-trade” system that allocates limited rights
for greenhouse-gas emissions.                     -30-

FOOTNOTE:  AES is a very large investor in two companies producing
electricity in Ukraine. They are a member of the Ukraine-U.S. Business
Council in Washington.  AUR EDITOR
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
17.                           ADDICTED TO RUSSIAN GAS

COMMENTARY: By Borut Grgic, The Wall Street Journal
New York, New York, Thursday, October 19, 2006

Nine months after the Ukrainian-Russian gas dispute, Europe’s energy debate
remains in flux. Moscow’s use of its natural resources as a political weapon
has made the Old Continent rather jittery. But Europe’s leaders can’t agree
on how to reduce their increasing energy dependency on Russia.

Tomorrow, they’ll meet with Russian President Vladimir Putin to hammer out
a policy.

Russia has been particularly willing to flex its energy muscles in its
immediate neighborhood. The Kremlin is nervous about the deepening of ties
between the European Union and former Soviet Republics: Ukraine, Moldova
and those in the South Caucasus.

By putting the screws on Georgia, Moscow is sending a warning to Tbilisi and
telling Europe to stay out of its backyard. The EU imports over half of its
natural gas from Russian state-owned company Gazprom.

This makes Europe vulnerable to pressure from the Kremlin, while consumers
end up paying the monopoly premium.

So what can be done? Completely offsetting Russian gas supplies is
impossible. Russia will remain central to European energy security,
particularly as the Continent’s own oil and gas production capabilities are
declining. The objective should therefore be to better manage the dependency
on Russian gas.

The first priority for the EU this week is to convince Mr. Putin to spend
more on exploration and development of Russian gas fields. Gazprom’s
underinvestment in this sector risks turning Russia into an unreliable gas
supplier, not just for political but technical reasons.

Beyond that, Europe should expand its import base, particularly in the gas
sector, build more emergency capacity and improve its energy market

In other words, the EU needs better basic energy statistics, such as figures
on total spare capacity, grid efficiency and infrastructure capacity. This
would allow the EU to better assess what internal market possibilities exist
to reduce its dependency on imports.

Another EU priority will be to look at global energy trends and consumption
levels. Energy must become part of Europe’s common foreign and security
policy. Through trade agreements and pressure at the WTO, the EU should
push other countries to move toward greater energy efficiency.

It’s not so much the environment that’s at stake here but Europe’s economic
and security interests. China’s economic boom alone could cause a further
sharp rise in oil and gas prices.

European energy price stability is also closely connected to Caspian gas.
Part of the reason Europe is so tied to Russia’s Gazprom is because the
transport infrastructure already exists.

Pipeline construction is a huge upfront cost. The private sector will only
invest billions in new capacities if a clear market case can be made for it.

Building new Caspian gas pipelines makes no sense if the local market can’t
supply enough gas. The Caspian market is still largely underdeveloped.
What’s more, Gazprom is making a strong push to acquire production rights
there. Gazprom will prefer to use its existing infrastructure to move gas
out of the region and to the EU market.

For example, the Russian Blue Stream line to Turkey is currently operating
at only 20% capacity. Gazprom’s aggressive acquisition strategy — most
recently in Turkmenistan and Uzbekistan — is putting the Russian energy
giant a step ahead of its EU competition. More reason for Europe to redouble
its efforts there.

The EU needs to be more active in the South Caucasus to ensure political
stability there and future gas supplies. If the EU now turns its back on
Georgia and the region as a whole, unresolved regional conflicts could erupt
again while Iran and Russia could fill the power vacuum to expand their
influence. This could reverse the recent progress toward political openness
and economic growth.

Europe’s so-called Neighborhood Policy, relying primarily on technical and
development aid, is too bleak a response to the Russian and the Iranian

Unless Europe engages politically, which means offering the region some kind
of a European perspective, it will lose the South Caucasus and all its oil
and gas to Iran, Russia, and possibly even fundamentalist Islam.

The EU summit in Helsinki this week should discuss this issue in parallel to
the European energy security challenge. The two are linked.      -30-
Mr. Grgic is the director of the Institute for Strategic Studies in

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                        STRUGGLE TO UNIFY FOREIGN POLICY

By Judy Dempsey, International Herald Tribune (IHT)
Paris, France, Thursday, October 19, 2006

BERLIN – When eight former communist countries of Eastern Europe joined the
European Union in 2004, a shiver of trepidation rippled through many of the
15 states that already were members.

They feared that the new members would adopt a tough stance toward Russia
and upset the comfortable relationship Brussels enjoyed with Moscow.

But as EU leaders prepared for a meeting Friday in Finland with President
Vladimir Putin, the expectations that the Eastern Europeans would speak with
one voice had all but evaporated.

Analysts say Eastern Europe’s foreign policy is in disarray and even
cooperation among the Visegrad Group, the four most important countries in
the region – Poland, Hungary, the Czech Republic and Slovakia – is almost

At first, some of them lived up to expectations. During Ukraine’s Orange
Revolution of December 2004 and January 2005, two presidents at that time,
Aleksander Kwasniewski of Poland and Valdas Adamkus of Lithuania, took the
lead in mediating between the pro- Western presidential candidate, Viktor
Yushchenko, and the Russian-oriented Viktor Yanukovich.

They also pressed the EU to defend the democratic opposition in Belarus,
whose leaders were imprisoned during presidential elections last year.

But over the past year, members of the Visegrad Group, particularly Poland –
the biggest of the new EU entrants and the one to which others looked as
leader – have failed to make any impact in Brussels over Russia. Analysts
say the failure of these four countries damages the long-term interests of
the region.

“The countries in the region are beset with internal problems,” said Peter
Balazs, a political science professor at the Central European University in
Budapest. “The governments have no capacity to deal with foreign policy

In the late 1990s, these countries looked outward and made membership in the
EU and NATO their twin foreign policy goals. Their diplomats in Brussels
exuded energy and enthusiasm as they spoke about making a real difference to
a common EU foreign policy once they joined.

“Given how most of these countries depend on Russia for its energy, we
should have a united policy among ourselves and then in the EU over this
issue. But we don’t,” said Jiri Schneider, director of Pass, the Program of
Atlantic Security Studies, in Prague.

“The inward looking concerns of the Central European governments inhibit
their potential in shaping EU policy towards Russia.”

Poland’s nationalist-conservative coalition government has been in turmoil
since winning the parliamentary elections a year ago and still has not
agreed to a long-term strategy toward Russia.

“There is a degree of unpredictability in Polish policies,” said Jakub
Boratynski, foreign-policy analyst at the Center for International Relations
in Warsaw. “Foreign policy is losing its impact. Its potential is not being

Indeed, Warsaw’s policy toward Russia has become so confused that a long-
heralded meeting between President Lech Kaczynski and Putin has still not
been held.

Hungary, in contrast, has recently forged much closer ties with Putin, who
visited Budapest last May and apologized for the crushing of the 1956
Revolution by the Red Army.

Prime Minister Ferenc Gyurcsany of Hungary visited Putin in his summer
residence in Sochi this year and Hungary sold some of its gas storage
facilities to Gazprom, Russia’s giant state-owned energy monopoly, and also
reached a deal to sell agricultural produce to Russia.

“The latter was an excellent bilateral agreement,” said Balazs. “But what I
can’t see is a long-term strategic objective of Hungarian foreign policy.
Joining the EU and NATO was the last objective.”

Besides, after Gyurcsany admitted that he had lied about the economy during
parliamentary elections last April, Balazs said, the government was “both
weak and unconvincing.”

Putin also visited Prague last May where he apologized for Soviet
internvention that ended the 1968 Prague Spring. President Vaclav Klaus
recently visited Putin in Moscow but the Czech government too has yet to
define its foreign-policy interests.

Schneider says one of the reasons is that the country has had no government
for four months. “The potential is less than it should be. We should be
talking to our neighbors and the governments in the region should be
coordinating. But they are not. They are obsessed with their own domestic

In neighboring Slovakia, Robert Fico, the leader of the government’s
coalition of social democrats and hard-line nationalists, is barely on
speaking terms with Gyurcsany because the Slovak nationalists want to curb
the rights of the 600,000-strong Hungarian minority.

“We have to settle out problems first with each other, our neighbors and
then start looking outwards,” said Balazs. “It means we are losing time in
working together to define a common strategy and our common interests with
Russia.”                                       -30-

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

Associated Press (AP), Kiev, Ukraine, Thursday, October 19, 2006 

KIEV – The European Union’s foreign policy chief said Thursday friendly
ties between Russia and Ukraine were important for European stability.

“Ukraine is a very important country for us, for Europe’s future,” Javier
Solana told reporters after his meeting with Ukraine’s Prime Minister Viktor

“We want it to come closer to Europe, but at the same time we want Ukraine
to have good relations with Russia to have stability between Kiev, Brussels
and Moscow.”

Amid a fierce gas price dispute between Russia and Ukraine, Russia’s
state-controlled natural gas giant OAO Gazprom (GSPBEX.RS) briefly turned
off the taps to Ukraine in January, which also triggered a brief shutdown of
supplies to western Europe after Ukraine began siphoning gas passing
westward through its pipelines.

Yanukovych said Ukraine is interested in “stable, transparent and
predictable relations” among Ukraine, E.U. and Russia, reassuring Europe
Ukraine is a reliable partner in the transit of Russian gas through its

“We will be successful only when we fulfill step by step our joint
obligations,” said Yanukovych, he said, adding winning E.U. membership
remains Ukraine’s strategic aim.

The E.U. has so far suggested only an agreement with Ukraine to cement
closer economic and political ties, not membership.

Ukraine’s President Viktor Yushchenko has sought to steer the nation of 47
million into NATO and the E.U., while Yanukovych has promised to defend the
rights of his large Russian-speaking constituency in the east and south and
improve ties with Moscow.

Yanukovych, who became prime minister in August after protracted
negotiations with Yushchenko, told NATO officials last month that Ukraine
wouldn’t push for quick entry into the North Atlantic pact.

Yushchenko, meanwhile, expressed concern his government was delaying a

key agreement with the E.U. to simplify the visa issuance process between
the ex-Soviet republic and E.U. countries.

He said the delay could affect plans to sign the final agreements at a
summit scheduled in Helsinki next week. It wasn’t immediately clear what

the  cause of the delay was.

Solana said the E.U. and Ukraine would have a summit on October 27 to

sign “a new cooperation agreement,” including a new visa regime.

Solana came to Ukraine Thursday for a one-day visit to discuss this
ex-Soviet republic’s aspirations to join the E.U. and other European
organizations. He is also scheduled to meet with Yushchenko.    -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

Izvestia, Moscow, Russia, October 16, 2006
CIS Oil & Gas Report, Moscow, Russia, Wed, October 18, 2006

On October 20, 2006, European Union leaders will gather for an informal
summit in Lahti, Finland. This is the first time that President Vladimir
Putin has been invited to attend one of these informal summits; the
discussion with him is expected to cover “strategic partnership between
Russia and the EU, including the energy sector.”

Discussion on last point is unlikely to be pleasant for either side: a week
before the summit, France and Germany, the EU’s most influential members,
issued a joint statement which essentially rejected Russia’s latest energy
sector proposals.

France and Germany announced that they will establish their own bilateral
energy alliance, and called on Russia to ratify the EU Energy Charter, which
is disadvantageous for our country.

The French-German statement is a clear message to Russia. Angela Merkel

and Jacques Chirac wish to develop direct contacts with the resource-rich
countries of Central Asia and with transit countries, especially Ukraine.

The conclusion to be drawn from this is simple: France and Germany don’t
wish to see Russia at the helm of European energy security.

In Europe, it’s become fashionable to fear Russia. Only six months ago, the
Europeans got a fright when Russia revealed its determination to expand into
new markets for oil and gas – China and other Asian nations.

The EC feared that there might not be enough gas for Europe if Russia builds
the Altai gas pipeline to China.

The EU started demanding delivery guarantees from Gazprom. Gazprom

countered with a demand of its own: guaranteed sales – that is, access to
Europe’s gas distribution and sales networks. Russia was then accused of
engaging in “energy blackmail.”

And then Russia tried to give Europe an unexpected gift. One of the world’s
largest new gas fields – the Shtokman field – would supply gas to Europe,
rather than to America.

This would put an end to all differences, surely; after all, the Europeans
would be supplied with gas for decades to come.

Yet it hasn’t worked. The Europeans are still scared – scared of becoming
increasingly dependent on raw materials from Russia, while being denied
access to Russian fields and pipelines. And they want that access so much!
That’s precisely why they are demanding that Russia join the Energy Charter.

The Europeans used to have it so easy. Russia had neither the money nor the
technology to develop its own mineral resources.

That was when Production Sharing Agreements were invented, giving foreign
companies stakes in Russian fields and all profits until their investments
had been repaid.

The foreign companies inflated their costs more and more, thus threatening
to deprive the Russian budget of tax revenues – and eventually this led to a
scandal over the Sakhalin-2 project. Russia offered to buy out Shell’s stake
in Sakhalin-2.

The Shtokman situation isn’t easy either. The project is estimated to cost
the astronomical sum of $20 billion, and Russia had expected to provide only
51% of that.

Foreign companies were fighting each other for the remaining 49%, offering
technologies and money for a stake in the project.

After considering all offers, Gazprom decided to do something different:
keep the Shtokman project entirely Russian-owned, using foreign companies

as subcontractors.

Why don’t the foreign companies like this? After all, Russia is only
strengthening the positions of its own companies. It’s only doing what any
other state with vast oil and gas reserves and plenty of money would do.

But the foreigners are outraged. Of all Gazprom’s partners, only the
Americans – Conoco Phillips and Chevron – haven’t made any public statements
about the decision. The Norwegian and French companies didn’t conceal their

“This project will require a great deal of capital – it’s the project of the
century. No country in the world takes on such projects on its own,” said
Inessa Varshavskaya, Total VP for Public Relations.

Their chief argument is that Gazprom can’t handle this alone. But Gazprom
never said it would get by without any foreign assistance at all! Foreign
companies will participate in the project, but as paid contractors rather
than as shareholders.

This, of course, will make it impossible for them to manipulate the cost of
production and boost their profits by inflating costs, as they have done at
Sakhalin. This is the main reason for their outrage.

It’s interesting to note that Total’s statements are being interpreted
differently in Russia. A Total VP said: “We’re not a service company. Our
objective is to have access to production, in exchange for our experience
and risks.”

Some Russian observers hastened to interpret these words as a rejection of
partnership with Gazprom; others said that bargaining will continue, and the
French will offer Gazprom their gas transport networks and abandon
Production Sharing Agreements.

All the same, everyone understands that the Shtokman project can’t get by
with some assistance from foreign companies. The only question is in what

The offended Europeans might now protect their domestic gas market even

more fiercely against Russia’s attempts to enter it. This is one possible
interpretation of German Chancellor Angela Merkel’s actions in reaching
agreement with France on an energy alliance within the EU, not involving any
other countries – in other words, not involving Russia.        -30-
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Interfax-Ukraine news agency, Kiev, in Russian 0856 gmt 17 Oct 06
BBC Monitoring Service, United Kingdom, Tuesday, Oct 17, 2006

KIEV – The chairman of the executive committee of the [propresidential]

Our Ukraine People’s Union party [OUPU] and Our Ukraine MP, Mykola
Katerynchuk, has said that he would like to see Ukrainian President Viktor
Yushchenko as the party’s real leader and not honorary chairman.
Katerynchuk was speaking to journalists on 17 October.

“I would like very much the president to come to the congress (the OUPU
congress is scheduled for 21 October – Interfax-Ukraine). I would like him
to give up the status of honorary chairman and be the real leader of the
party,” Katerynchuk said. He said that this would allow the party to have
“broader discussions and support from the president”.

Katerynchuk said that this would enable the party to have an influence on
everything that is happening in Ukraine as well as on the president’s

Katerynchuk said that if Yushchenko is elected OUPU chairman, he would

get “the most effective” tool for implementing his programme [the 10 steps
towards people, Yushchenko’s election manifesto during the presidential
campaign in 2004].

Katerynchuk also said that the president’s powers are “insufficient to
implement his programme” in conditions of the parliamentary-presidential
republic [the constitutional reform that came into force from 1 January 2006
has cut the president’s powers in favour of parliament and the prime

He also said that the president has actually no possibility to impact on
Ukraine’s economy, except for suspending the Cabinet of Minister’s
resolutions and sending them to the Constitutional Court.

Katerynchuk said that the chairman of the party should be elected at the
party’s congress by a secret vote.

Asked by Interfax-Ukraine whether the congress would vote for Yushchenko’s
candidacy for the post of chairman, Katerynchuk replied: “Certainly, because
this is his party.” At the same time, Katerynchuk noted that the president’s
wish alone is needed for such a decision.                -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

TV 5 Kanal, Kiev, in Ukrainian 0810 gmt 19 Oct 06
BBC Monitoring Service, United Kingdom, Thursday, Oct 19, 2006

KYIV – Several ministers representing the pro-presidential Our Ukraine party
in the cabinet of President Viktor Yushchenko’s former election rival Viktor
Yanukovych have announced their resignation.

Justice Minister Roman Zvarych said the decision was taken because the
cabinet was not honouring the commitments Yanukovych undertook when
Yushchenko accepted his nomination as the next prime minister.

He singled out policies on NATO membership, accession to the WTO and

fight against corruption.

Our Ukraine chairman Roman Bezsmertnyy said five ministers – for justice,
health, culture, sports and internal affairs – had tendered their
resignation, but the interior and culture ministers were not at the news
conference to confirm this.

The two ministers appointed under Yushchenko’s personal quota – for

defence and foreign affairs – remain in the cabinet.

The following is an excerpt from the live news conference by Roman
Bezsmertnyy, Roman Zvarych, Health Minister Yuriy Polyachenko and

Sports Minister Yuriy Pavlenko carried live by Ukrainian television TV 5
Kanal on 19 October:

[Zvarych] Hello. I will try briefly to explain the reasons why Our Ukraine’s
ministers have decided to resign.

First and most important, the policies of the cabinet give us not the
slightest reason to believe that it is going to honour the commitments
undertaken in the Declaration of National Unity.

[The declaration was signed by President Yushchenko and the leaders of all
parliamentary parties except the Yuliya Tymoshenko Bloc before Yanukovych’s
appointment. It is understood that Yushchenko insisted that Yanukovych sign
the declaration outlining key domestic and foreign policies as a
precondition for accepting his nomination as prime minister.]

I would like you to understand the nature of this document. Because often
people say that it is a declarative document whereas that is not so.

The declaration was written to be obligatory. These were commitments
undertaken by the sides. Today, we can justifiably say that when signing the
declaration, some political forces were not being honest, in an attempt to
make sure that the president accepts the nomination [of Viktor Yanukovych]
as the next prime minister and to form the cabinet. Now about specific
clauses of the declaration.
I would like to clarify the position on NATO, particularly the Membership
Action Plan. Yes, this issue was not written as a separate clause of the
declaration of national unity.

However, I would like to mention it for the first time, as a participant of
the talks, that the Party of Regions undertook that after forming the
cabinet chaired by [Viktor] Yanukovych, it will send a letter to Brussels to
say that the Ukrainian government is ready to enter negotiations regarding
the agreement on the Membership Action Plan. This commitment has not been
honoured and we have no grounds to say that it will be any time soon.
About the WTO. There are reasons to say that the cabinet, whose members we
were, is not ready and will not make any step to ensure Ukraine’s membership
of the WTO.

We cannot see why the cabinet has not submitted to parliament the bills to
ensure the country’s WTO membership. We want to stress that the issue is not
just about the WTO.

I personally accompanied the prime minister to Brussels when the EU’s high
officials, including its Secretary-General [Javier] Solana, told Ukraine
that WTO membership is a prerequisite for signing a free trade zone between
Ukraine and the EU, a new extended cooperation agreement with the EU and an
agreement on simplified visa regulations for our citizens. Thus, torpedoing
the WTO issue is linked to the pace and progress of European integration.
About the language. This cabinet is not making any steps to comply with
commitments undertaken in line with the Declaration of National Unity.

Quite the opposite, when the Justice Ministry submitted a bill on the
amendments to the law on advocates, which proposed to allow foreign
advocates to work in Ukraine as it was requested by the WTO, and we put a
demand, which we usually put to our advocates, meaning they must speak
Ukrainian, the cabinet did not approve the bill namely due to this reason.

It has not been referred to parliament yet, which shows that this cabinet is
not ready to honour its commitments in this part of the declaration.
About the anti-corruption laws. If you saw what was going on in the
parliament chamber, you would agree with me that we have no grounds at all
to say that the anti-crisis coalition is ready to fight corruption in

Judging from what is going on in the Supreme Council [parliament], we can
say Ukraine is not ready to undertake the commitments that were already
undertaken by nearly all countries of the world. For some reason, this
process is being torpedoed.

[Passage omitted: Zvarych denies Canadian financial assistance to the
Justice Ministry during his tenure.]
                              PRESIDENTIAL DECREES 
And the last thing I wanted to say. The so-called war of decrees. [The
cabinet has refused to carry out some presidential decrees, saying they need
to be countersigned by the prime minister first.] There are speculative
allegations that the constitution demands that the president’s decrees must
be approved by cabinet members.

I would like to turn your attention to Part 3 of Article 106 of the
Constitution of Ukraine which clearly says that the president’s decrees that
fit the framework of his remits are compulsory.

Part 4 of this article says that ministers must carry them out. I ask any
lawyer to find any constitutional clause that demands that the president’s
decrees must be approved by cabinet members. There are no such clauses.

Taking into account everything that I have said, there could be no other
decision for us but to resign.                       -30-

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
                       Replacing Russian candies with Ukrainian sweets

Mara D. Bellaby, AP Worldstream, Tbilisi, Georgia, Wed, Oct 18, 2006

TBILISI – The jobseekers come every morning to wait under the bridge, their
tools protected from the rain under sheets of plastic. For the lucky, just a
couple of hours pass before a car pulls up and they are hired for a
construction job; others wait for days.

It’s a temporary paycheck these laborers seek, but their quest has become a
permanent fixture in this impoverished ex-Soviet republic, where patience
isn’t so much a virtue as a necessity.

Many Georgians say such work is what will sustain them through their
country’s angriest spat yet with Russia: last month’s diplomatic fallout
over Georgia’s detention of four purported Russian spies.

Bristling at the perceived insolence of a country whose population is less
than half that of Moscow’s, the Kremlin responded with a punishing blockade
and deportations, effectively severing this nation of 4 million from its
biggest market and supplier.

“For the next six months, it will be very, very painful,” said Niko
Orbelashvili, a Tbilisi-based economist. “But, eventually, slowly, people
will adapt.”

Two weeks into Russia’s transport and postal blockade, Russian products

such as canned foods, cooking oil, Russian-language women’s magazines
and sausage are already disappearing from Georgian markets.

Georgian businesses say millions of dollars worth of orders are stuck at
Russian checkpoints. Georgian Airlines, banned from flying to Russia,
predicts its losses will exceed US$600,000 (A479,000) by the end of the

Hundreds of Georgians have been deported from Russia, and more are

rumored to be on the way, putting at risk the estimated US$2 billion
(A1.69 billion) that Georgians working in Russia send home annually.

Some analysts predict the blockade could shave 1 percent off the country’s
GDP growth rate of around 6 percent. No one knows how long Russia’s

fury will last. Many Georgians remain unfazed.

“Is this going to bring us to our knees? Nonsense,” said Zauri
Kbakhadzhelidze, 54, as he sold cheese in a sprawling 2,000-stand food
market in central Tbilisi. “Come back next year and find me and see if I’m
worse off. It’s all nonsense.”

For all the bravado, pain is unavoidable, experts predict.

Georgian President Mikhail Saakashvili dreams of attaching this Caucasus
Mountain nation to the European Union and NATO, but 15 years after the
collapse of the Soviet Union, Georgia remains very much dependent on Russia.

Estimates suggest that a quarter of the population works in Russia, and many
Georgian imports – from Western-brand cigarettes to Moscow-manufactured
candy to wheat supplies – come via Russia.

In return, Georgia exported 70 percent of all its wines – the country’s
premier export, accounting for 10 percent of export revenues – to Russia,
and some 60 percent of its famous mineral waters to its northern neighbor.

Georgian wines and mineral waters have both been barred from Russia since
May; Russia cited quality concerns, but Georgians insist it is retaliation
for their pro-Western ambitions.

“The cumulative effect will add up,” said Amy Denman, head of the American
Chamber of Commerce in Georgia. “But it is not necessarily a good thing for
Russia, either. When companies locate a new supply source that is feasible
and stable, they are likely to stick with it.”

Lolita Cherkezishvili, 41, already replaced her depleted stocks of
individually-wrapped Russian candies with Ukrainian sweets. “Georgians

love Russian candy, but what can I do,” she said. “They’ll learn to like
Ukrainian.” Customers were grumbling, but purchasing handfuls on a recent

“We used to be like this with Russia,” said Uram Svanidze, 19, twisting two
fingers together to symbolize what many here still call their “brotherly
relations” despite more than a decade of tension. “I can’t imagine that
relationship won’t return.”

Not all Georgians share Svanidze’s optimism. Some are fearful that picking a
fight with a powerful neighbor could end badly for this tiny nation, which
has pinned its hopes on an expansion-weary European Union and ties with
Washington, distracted by Iraq and North Korea.

Irakli Chervigiya, 25, together with his mother and wife, depends on the
US$200 ($156) that his father, working as a security guard in Moscow, sends
home every couple of months.

With the dispute potentially threatening money transfers from Russia, he’s
sketching out a new route for the money via friends in Ukraine.

“It is bad that we depend so much on Russia, but we do,” he said. “It has

to be acknowledged.”

Georgia’s official unemployment rate is 13 percent; the unofficial rate is
rumored to be much higher. The average salary is 125 lari (about US$75,
A60), and jobs are scarce.

Prices have more than doubled in recent years, as Saakashvili has taken on
the black market that made up much of this nation’s economy. Georgians are
still supporting hundreds of thousands of people displaced from two
separatist conflicts in the early 1990’s.

“Georgia doesn’t need another crisis,” said Kaka Kutanidze, 39, who drags
his drill out to the roadside to look for work daily, often returning home
after a 12-hour day waiting with nothing to show for it. “But a crisis
doesn’t last forever, right?”                          -30-

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

UNIAN news agency, Kiev, in Ukrainian 1337 gmt 17 Oct 06
BBC Monitoring Service, United Kingdom, Wed, Oct 18, 2006

KIEV – Russian consul in Lviv Yevgeniy Guzeyev regards Russian media reports
about the alleged discrimination of the Russian language in Ivano-Frankivsk
(regional centre in western Ukraine) as ungrounded, the UNIAN news agency
reported on 17 October.

Guzeyev, who had examined the language situation in the town, said this at a
meeting with Ivano-Frankivsk mayor Viktor Anushkevichus on 13 October.

The leader of the Russian community of Ivano-Frankivsk, Oleksandr Volkov,
who attended the meeting, confirmed the absence of an ethnic conflict in the
city. He described the life of the Russian community as “comfortable” and
the Russian media assessment of the language situation in the town by as
“much exaggerated”.

In September, the Russian website published a report about what
it called a “language inquisition” in Ivano-Frankivsk, saying that the city
authorities were banning the Russian language from many spheres of life. The
article was based on the complaints Volkov had been sending to the Russian
embassy in Ukraine over the last two years, provoked a lively media

On 27 September, the Russian Foreign Ministry made an official statement to
this effect.

Russian pop singer Philip Kirkorov, who gave a concert in Ivano-Frankivsk
on 16 October, also did not see any signs of language discrimination in this
city, UNIAN said in a separate report. Kirkorov said this to the local
audience during a short break in the concert.

“I am mostly embarrassed by the lies that my name was allegedly written on
billboards as Pylyp (Ukrainian transliteration). I do not agree with the
statements about language discrimination in Ivano-Frankivsk and find it a
very hospitable city,” he said.                        -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

ANALYSIS & COMMENTARY: By Stephen Velychenko

CERES Associate and Research Fellow, Chair of Ukrainian Studies
University of Toronto, Ontario, Canada
Action Ukraine Report (AUR) #777, Article 25
Washington, D.C., Friday, October 20, 2006

RE: PART I. “The Politics of Public Language-Use in Ukraine or Why

English Should be Ukraine’s Second Language”
Published by Action Ukraine Report #692, Article 7 Washington, D.C.,
Wed, May 3, 2006; & The Ukraine List 389, #19, Canada, 26 April 2006

With the return of the Party of Regions to power this summer their leaders
are again trying to give official status for Russian in Ukraine.

In their statements they ignore social and historical circumstances and try
to present Russian-speakers as a “typical minority” that is asking for
rights that any democratic and “typical” national state would obviously
grant a sizable minority.

This is a false analogy, however. Official status for a minority that less
than 20 years ago was the ruling imperial minority is fraught with danger
for Europe.

Russian speakers in Ukraine are not a “typical” minority and Ukraine is not
a “typical” European national state. Ukraine is a recent, not long
established,  independent country.

It is ruled by a restorationist elite and its former imperial master
covertly and overtly seeks to reestablish its domination. In addition, there
is a sizable Russian-speaking minority in the country whose political
loyalties lie with Moscow rather than Kyiv.

This minority refuses to recognize Ukrainian independence and is seeking to
turn the Crimea, and perhaps Luhansk and Donetsk provinces, into local
variants of Northern Ireland. No discussion of language rights in Ukraine
can  ignore these variables.

Ukraine attained political but not economic or cultural independence only in
1991. And because this happened peacefully the old regime elite was not
executed or exiled.

These old leaders who remained in power after independence did  almost
nothing to remove the country  from the Russian language communications
sphere (movnyi  prostir).

In particular, they did nothing to dismantle the production and distribution
infrastructure that kept Ukraine in the Russian language  communications

For their part,  national-democrats do not popularize the use of English in
Ukraine as the logical counterweight to Russian, and  ignore the role of the
market and private organizations in maintaining Russian public language use.

Ukraine’s public language sphere became Russian because of conscious
government policies which took decades to realize.

[1] First, up to 1917  tsarist policies forbade teaching and publishing in
Ukrainian. The association of literary Russian with empire in addition, gave
Russian social prestige.  The failure of the national revolution in 1921
meant that this legacy was not overcome.

[2] Second,  between 1929 and 1947, centrally directed  immigration and
“ethnic dilution,” combined with centrally planned deportations and millions
of unnatural Ukrainian deaths, created large Russian-speaking urban enclaves
in the country’s easternmost provinces.  Overall, between 1897 and 1989 the
total number of Russians in Ukraine doubled.

[3] Third,  soviet educational and media policies after 1929 channeled
upwardly mobile non-Russian rural migrants into Russian-speaking culture,
and allowed urban Russian settlers  to work and satisfy their
cultural/spiritual needs in the Russian culture and language.

This reinforced the pre 1917 pattern. Subsequent generations of  urban
Russian immigrant-settlers and assimilated migrants, consequently, saw no
need to learn Ukrainian, spoke in Russian and were Moscow-oriented
culturally and intellectually.

[4] Finally, because independence came peacefully, these millions of Russian
speakers produced by soviet policies did not emigrate – as did the French
from Algeria, or the Japanese from Korea, the Dutch from Indonesia or the
British from Africa or India.

Ukraine’s Soviet Russophile elites, meanwhile, remained in power  and
enacted no effective legislation to change Ukraine’s linguistic status-quo
in the public sphere, nor did they cut soviet -era distribution networks.

After 1991 most of the urban population accepted the legitimacy of the
Ukrainian state, but they did not  change their language-use or Russian
intellectual/cultural orientation. They did not do so  because the
underlying   infrastructure  of the Russian language communications sphere
remained untouched.

Since there were no Ukrainian language materials on the market it made
little sense to change language use. This is crucial to understanding
language issues anywhere because choices are not made in vacuums, but in
specific circumstances.

There is no “free choice” to use Ukrainian in Ukraine because as  of 2000,
only 10 percent of the  annual published book titles, 12 percent of
magazines, 18 percent of  television programs and 35 percent of newspapers
were in Ukrainian.

Everything else is in Russian although Russian speaking Russians are only

20% of pop. In other words, the  institutional infrastructure still directs
people away from Ukrainian and towards Russian.

In Ukraine  since 1991 there has been an institutional  infrastructure for
scholarship, high politics and high culture. But  modern mass culture does
not consist only of “the classics”. It  includes lots of  written, filmed
and recorded garbage. The yellow press in all languages sells in millions of
copies, while the quality press sells only tens of thousands.

In Ukraine,  the institutional infrastructure of mass culture is Russian.
Private companies already producing 10’s of millions of copies for the
Russian market  dump their cheap products in Ukraine with no extra effort
since they face no import restrictions. Or, they produce in branch plants
and sell cheap.

Thus, Ukrainians not interested in scholarship, high politics, or high
culture have little choice but to  buy and watch cheap Russian/ Russian
dubbed junk-films  and read cheap garbage newspapers in Russian, because
there are no cheap Ukrainian-language junk-films or garbage newspapers.

Oligarchs like Akhmetov, Taruta, and Surkis have made no effort to produce
these kinds of cheap Ukrainian-language audio-visual products, mass
circulation dailys  or pulp-literature. Dubbing /subtitle laws were passed
in 2006 but it remains to be seen if the Ianukovych government will enforce

Loyal Russian-speakers realize this and make no complaints about the public
sphere because they know it is Russian. They see no problems in sending
their children to Ukrainian schools and filling-out government forms in
Ukrainian. They are as critical of Putin’s Ukrainian policies as they are of
his domestic policies and have no wish to be associated with Russia.

The problem, rather, lies with restorationist  Party of Region Leaders like
Kushnarov, and extremists like Vitrenko and Symonenko who cannot accept

the reality of Ukrainian independence.

They fear the prospect of Ukraine becoming part of  Europe and they fear the
possibility that educated Ukrainians, like the educated in the rest of the
world, will begin learning English as their second language, instead of the
language of the old imperial ruler.

They know that keeping Ukraine in the Russian language communications sphere
will reinforce its continued subordination to Russia – and bring them status
as local potentates.

An analogous situation would be if, the French and their native
collaborators in Algeria, or the Japanese and their collaborators in Korea,
or the Dutch and their collaborators in Indonesia, had come-back to power
after the formal separation of these countries from the old empires and
then, as part of efforts to reestablish the imperial tie, make the language
of the old empire official in their respective countries.

Although the Kravchuk government made Ukrainian the official language,
neo-Soviet deputies dominated parliament when the language law was

adopted, and  they ensured it included no legal sanctions. As a result, it is
impossible to charge anyone for ignoring it.

Thus, people like Kluev and Azarov became  government ministers even though
they demonstratively refuse to learn or speak in Ukrainian. Government
officials outside the three western-most provinces address citizens in
Russian regardless of the language citizens use, and no one gets fined or

Although English was already the world language in 1991, it was not made
compulsory in schools. Without the market for books that this would have
produced, no English language companies had economic reason to establish
themselves in Ukraine to produce affordable versions of their publications.
15 years after independence, as a result, Ukrainian libraries cannot  afford
to buy English- language books.

Students consequently still use Russian-language books to study  and
research non-Ukrainian related subject matter. This reinforces the average
educated person’s participation within  the Russian language communications
sphere and keeps them  isolated them from the rest of the world – which
speaks English.  Individuals learn English. But statistically Ukraine has
the lowest Eng language learning-rate in east Europe.

Neo-soviet Russophile politicians who control Ukraine are not simply
indifferent but they are hostile to use of Ukrainian in the public-sphere.

They allowed Russian publishing companies and distributors to set up branch
offices in Ukraine without obliging them to publish in Ukrainian and
exempting them from import duties during the 90s. They did not follow the
lead of the Russian government and abolish taxation on domestic
Ukrainian-language publications.

Thus, Russian-language products in Ukraine are often cheaper than Ukrainian
or English-language products, more widely distributed, and more easily

In Donetsk, the 38% of the population who are Russian- speaking Russians,
have  approximately 1000 Russian-language newspapers and magazines.

There is one Ukrainian language newspaper.

In 2005 provincial politicians stopped the subsidy of 43 000 hryvnia they
had provided until then to schools and libraries for the Ukrainian paper,
and voted a 800 000 hryvnia to those institutions to buy  the three major
Russian newspapers.

These same politicians complain about infringements of Russian-speakers’
rights and give interviews about official status for Russian.

Non-Russian foreign owners who entered Ukraine after 1991 help Russians and
Russophiles keep the country in the Russian-language communications sphere.
Mr. Jed Sundin in Kiev, publishes  KYIV POST. He also publishes 12 glossy

These are all in Russian and thereby Sundin, a man who supports Ukrainian
independence is Russifying Ukraine. In his offices work people who can’t
speak or write in Ukrainian.

Hollywood producers and distributors do not make Ukrainian versions of

their products. Bill Gates does not produce a Ukrainian version of Windows. 
Women’s magazine conglomerates like Burda do not distribute Ukrainian-
language versions of their products.

Russian domination of the public sphere does not promote political loyalty
to Russia. What it does do is  maintain and promote ID of Ukrainian with
rural folklore and Russophile cultural intellectual orientations.

These reinforce the old imperial Russian tie, and thereby  impede the
creation of mental-cultural  ties with the EU and the rest of the world –
which speaks English.

Logically, there is no necessary correlation between language use and
loyalties. Scots, Irish, Indians, Americans, Australians, and Canadians have
all expressed their nationalisms in English. Corsicans and Bretons have used
French, and Latin Americans have used Spanish.

We also  know  that few of Ukraine’s Russian speakers support political
reincorporation into Russia, and that Ukrainian Russian-speakers can be
Ukrainian patriots – as witness Ukrainian soccer-fans this summer.

This raises the distinct possibility that Ukraine could become an eastern
European Ireland. But will giving Russian official-status make this more
likely? Is that what advocates want?

In sum, Russian language use in the public sphere was established by
government policies. Since 1991 it has continued because the government 

is neo-soviet and Russophile (except between 2004-06) and done little to
reverse these policies.

Nor does it enforce what little  legislation does exist  or extend that
legislation to apply to privately-owned media and publishing companies.

Thus, the old infrastructure established by the old policies remains. That
soviet era production  and distribution network  produces and disseminates
cheap  Russian language products.

Ukrainians outside the three western-most provinces consequently,  have no
choice with respect to  public language- use and inevitably will “choose” to
use and buy Russian.

De facto Russian domination of the public sphere, and the mental dependency
on Russia it produces, is thus prolonged. This, in turn, impedes Ukraine’s
integration with the EU and the  rest of the world.

Ukraine’s loyal Russian-speakers realize the public-sphere is de facto
Russian and have no problems in accepting that since they live in Ukraine,
they should at least have passive knowledge of Ukrainian. Nor are they very
enthusiastic about closer-ties with Putin’s resource -based autocracy and
its wars.

An extremist minority and Party of Regions leaders, however, using the
pretext of official status for Russian, are seeking to reinforce old
imperial ties, and to reverse the foreign-policy priorities of President
Yushchenko. As a result they will threaten the EU with instability on its
eastern border.                                  -30-
NOTE:  Stephen Velychenko is an CERES Associate and the
Research Fellow, Chair of Ukrainian Studies, Munk Center
University of Toronto, Canada,
[return to index] [Action Ukraine Report (AUR) Monitoring Service]


Anna Melnichuk, AP Worldstream, Kiev, Ukraine, Wednesday, Oct 18, 2006

KIEV – Steven Spielberg on Wednesday presented a documentary about the

Nazi massacre of tens of thousands of Jews at the Babi Yar ravine in Ukraine,
several weeks after Ukraine marked the 65th anniversary of the tragedy.

The film by Ukrainian director Serhiy Bukovsky, “Spell Your Name,” for which
Spielberg worked as co-executive producer, contains the testimony of Jewish
survivors who escaped brutal execution and those who rescued friends and
neighbors during the Holocaust.

“The stories and experience of survivors in Ukraine need to be seen and
heard by the people of the world, who may not know what happened in

Ukraine during the Holocaust,” Spielberg said at a news conference.

The massacre began in late September 1941 when Nazi forces occupying Kiev
marched Jews to the brink of the steep Babi Yar ravine and shot them. More
than 33,700 Ukrainian Jews were killed over 48 hours.

In the ensuing months, the number of people killed at Babi Yar grew to more
than 100,000, and included Roma, or Gypsies, as well as other Kiev residents
and Red Army prisoners.

“I really believe that listening to the stories of Holocaust survivors from
all around the world is going to change the world and already has in many
ways,” Spielberg said.

The film was produced by the USC Shoah Foundation Institute, a Los
Angeles-based organization founded by Spielberg in 1994.

With a collection of nearly 52,000 video testimonies from Jewish survivors,
political prisoners and war crimes trial participants, the Institute’s
archive in one of the largest visual history archive in the world. “I could
imagine making a film from every single one,” Bukovsky said.

“This film is one of the steps forward to complete understanding of the
terrible tragedy of mankind, which shouldn’t happen again,” said Anatoly
Kerzhner, a historian at a Kiev-based institute who attended the

“This film is not only the memory of my people, this is the memory of my
family, too,” said Kerzhner, whose grandmother was shot dead at the Babi

Yar ravine.

The premier marked Spielberg’s first trip to Ukraine, where his grandparents
came from. “I was brought up in a home where grandparents only spoke

Russian and Yiddish,” Spielberg said. “I got out of the plane at the airport
today and said: ‘I’m at home!'”                       -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

Marta Falconi, AP Worldstream, Rome, Italy, Wed, Oct 18, 2006

ROME – Oscar-winning director Giuseppe Tornatore said his latest movie,

a tragic portrait of an abused Ukrainian woman, is not an expose about
exploitation, but a “simple story” about a woman’s quest to come to terms
with her past.

“I’ve chosen to tell this story through mystery and not through an expose.
If you know something, you go to the police, there’s no point in trying to
expose (dramatic things) with a movie,” Tornatore told reporters Wednesday,
hours before the movie, called “La Sconosciuta” (“The Unknown”), was to

open at the inaugural Rome Film Festival.

“I know in real life this is tougher, but I wanted to concentrate on simple

The drama tells the story of a Ukrainian woman who is hired as a maid by an
Italian family whom she believes adopted the daughter who was taken away at
her birth. She has a shady past as a prostitute and this past – personified
by her pimp and brutal torturer – is still chasing her.

Tornatore, who won an Oscar in 1990 with his film “Cinema Paradiso,” said

he was inspired by a news report years ago. “I had all the background
information to tell my story freely,” he said.

Russian actress Ksenia Rappoport, who played the Ukrainian woman, said

her character was difficult to interpret. “It’s a hard, tragic story and it
wasn’t easy for me,” she said. “I have a big fear to disappoint Tornatore.”

The first-ever Rome Film Festival has drawn a handful of stars promoting
their films to the Italian capital, although the 16 films in competition are
mostly smaller films. “The Unknown” was being shown out of competition.

The festival runs through Oct. 21.                  -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
                            CAPITAL FROM KIEV TO KYIV

Associated Press (AP), Washington, D.C., Thursday, October 19, 2006

WASHINGTON – The U.S. State Department said on Thursday a

government decision to change the spelling of Ukraine’s capital to Kyiv
from Kiev had nothing to do with politics.

“I don’t think this decision has anything reflective in it, said Tom Casey,
a department spokesman. About half of Ukraine’s population of 47-million

are Russian speakers, and Kiev is the Russian spelling.

Ukraine’s Western-leaning President Viktor Yushchenko, elected on the

wave of the 2004 Orange Revolution mass protests against election fraud,
has sought to take his nation out of Russia’s orbit and join NATO and the
European Union.

Casey said the decision to change was more in keeping with how Ukrainians
themselves pronounce the name of their capital. He said international
organizations such as NATO and United Nations already are using the

spelling the department has adopted.

The Associated Press continues to spell the name of the capital Kiev.

In the 900s, Kiev, one of the oldest cities in Europe, became the capital of
Kievan Rus, the first Russian state.

The department announced the change in a memorandum Oct. 3, instructing
officials to use he Kyiv spelling in all communications regarding Ukraine.

When a reporter asked about the change Thursday, Casey said to laughter he
welcomed the question because “I have been waiting for this for several

He explained there is a U.S. Board of Geographic Names that includes
representatives from several government departments, including the State
Department, to establish and maintain uniform geographic name usage
throughout the federal government.

Asked why the spelling of Burma had not been changed to Myanmar

as the country’s military leaders call it, Casey replied, “I’ll have to get back
to you on that…But for now Burma is known as Burma.”   -30-
FOOTNOTE: This story was first reported in the news by your editor
two weeks ago in the Action Ukraine Report (AUR) #769, Article Four,
on Friday, October 6, 2006, “U.S. State Department Reported Ready
to Use ‘Kyiv’ Instead of ‘Kiev’ for the Capital of Ukraine.”
The actual text of the decision by the U.S. State Department which was
sent to their offices in the United States and around the world was:
  “On October 3, the Board on Geographic Names (BGN) unanimously
  voted to change the BGN standard transliteration of the spelling of the
  Ukrainian capital to ‘Kyiv’. This decision affects the whole USG, although
  ‘Kiev’ remains the BGN conventional spelling for this city.  All State
  Department offices and operations are requested to immediately begin
  using the new spelling ‘Kyiv’ in all written communication. The American
  diplomatic post there will henceforth be called Embassy Kyiv.”
It is well known that the present U.S. Ambassador to Ukraine, William
Taylor, strongly supported the change from Kiev to Kyiv. The decision
is not automatic for all U.S. government departments.  Each department
now has the option to use Kiev or Kyiv where before they had to use
Kiev. Many of the news articles yesterday did not report this fact correctly.
AUR EDITOR Morgan Williams

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McConnell, President; John Kun, Vice President/COO; Vera
Andruskiw, CPP Wash Project Director, Washington, D.C.; Markian
Bilynskyj, VP/Director of Field Operations; Marta Kolomayets, CPP
Kyiv Project Director, Kyiv, Ukraine. Web:
13. WJ GROUP of Ag Companies, Kyiv, Ukraine, David Holpert, Chief
Financial Officer, Chicago, IL;
14. EUGENIA SAKEVYCH DALLAS, Author, “One Woman, Five
Lives, Five Countries,” ‘Her life’s journey begins with the 1932-1933
genocidal famine in Ukraine.’ Hollywood, CA,
15. ALEX AND HELEN WOSKOB, College Station, Pennsylvania
16. SWIFT FOUNDATION, San Luis Obispo, California
17. TRAVEL TO UKRAINE website,,
A program of the U.S-Ukraine Foundation, Washington, D.C.
18. BUYUKRAINE.ORG website,
A program of the U.S.-Ukraine Foundation, Washington, D.C.
If you would like to read the ACTION UKRAINE REPORT- AUR,
around four times a week, please send your name, country of residence,
and e-mail contact information to Information about
your occupation and your interest in Ukraine is also appreciated.
If you do not wish to read the ACTION UKRAINE REPORT please
contact us immediately by e-mail to  If you are
receiving more than one copy please let us know so this can be corrected
              SPAM BLOCKERS ARE A REAL PROBLEM                 

If you do not receive a copy of the AUR it is probably because of a
SPAM BLOCKER maintained by your server or by yourself on your
computer. Spam blockers are set in very arbitrary and impersonal ways
and block out e-mails because of words found in many news stories.
Spam blockers also sometimes reject the AUR for other arbitrary reasons
we have not been able to identify. If you do not receive some of the AUR
numbers please let us know and we will send you the missing issues. Please
make sure the spam blocker used by your server and also the one on your
personal computer, if you use a spam blocker, is set properly to receive
the Action Ukraine Report (AUR).

                          PUBLISHER AND EDITOR – AUR
Mr. E. Morgan Williams, Director, Government Affairs
Washington Office, SigmaBleyzer, The Bleyzer Foundation

Emerging Markets Private Equity Investment Group
P.O. Box 2607, Washington, D.C. 20013, Tel: 202 437 4707
Mobile in Kyiv: 8 050 689 2874;
        Power Corrupts and Absolute Power Corrupts Absolutely. 
                           TRUTH IS A REVOLUTIONARY ACT
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