AUR#779 Oct 24 For Cheap Gas What Is Ukraine Willing To Give To Russia?; IKEA; Tanks; Nuclear Fuel; WTO Football; Vat Reimbursement: Back To Corruption

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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
AFX Europe (Focus), Kiev, Ukraine, Monday, Oct 23, 2006


By Oleg Gavrish, Kiev; Natalia Grib
Kommersant, Moscow, Russia, Friday, October 20, 2006


Itar-Tass, Moscow, Russia, Friday, October 20, 2006

                              TO RUSSIA IN GAS PRICE TALKS 
Interfax-Ukraine news agency, Kiev, in Russian 1311 gmt 23 Oct 06
BBC Monitoring Service, United Kingdom, Monday, Oct 23, 2006

       “I b
elieve that this is the most cunning special operation since the time of
       Ukraine’s independence that Russia has conducted in relation to Ukraine.”

INTERVIEW: With Ihor Franchuk, former head of Chornomornaftohaz
INTERVIEW BY: Alla Yeryomenko, Zerkalo Nedeli,

Kiev, Ukraine, in Russian 21 Oct 06; pp 1, 4
BBC Monitoring Service, United Kingdom, Monday, Oct 23, 2006


                    TO CUT RED TAPE FOR $2.0 BLN INVESTMENT
Business Digest, Sofia, Bulgaria, Monday, October 23, 2006

Business Digest, Sofia, Bulgaria, Monday, October 23, 2006

By Marina Tsygankova, The Ukrainian Times
Kyiv, Ukraine, Monday, October 23, 2006


      CO & U.S. AMBASSADOR TAYLOR DISCUSS NUCLEAR ENERGY                          
              Enerhoatom and Westinghouse Electric Company (United States)
                       Second stage of the nuclear fuel qualification program.
Ukrainian News Agency,  Kyiv, Ukraine, Monday, October 23, 2006


Ukrainian News Service, Kyiv, Ukraine, Monday, October 23, 2006

                             LEADERS STRUGGLE FOR POWER
By Roman Olearchyk and Stefan Wagstyl
Financial Times, London, UK, Tuesday, October 24 2006

12.                                     WTO FOOTBALL
ANALYSIS & COMMENTARY: By Yuriy Skolotiany
Zerkalo Nedeli On The Web, Mirror-Weekly
International Social Political Weekly, No. 40 (619)
Kyiv, Ukraine, Saturday, 21 – 27 October 2006


ANALYSIS AND COMMENTARY: By Roman Bryl, Ukraine Analyst
IntelliNews – Ukraine This Week, Kyiv, Ukraine, Monday, October 23, 2006

    Choice of new Ukrainian security chief signals shift in president’s backing
By Oleksandr Chalenko, Mykhaylo
Hannytskyy and Yaroslav Malyuta
Segodnya daily newspaper, Kiev, in Russian 11 Oct 06; p 2
BBC Monitoring Service, United Kingdom, Thursday, Oct 12, 2006


Ukrainian News Agency, Kyiv, Ukraine, Monday, October 23, 2006

THE ISCIP ANALYST, An Analytical Review, Volume XIII, Number 3,
Institute for the Study of Conflict, Ideology & Policy at Boston University,
Boston, MA, Thursday, 19 October 2006

                   History proves that freedom dies when criticism ends.
: By Oksana Bashuk Hepburn, Canada

Maidan, Kyiv, Ukraine, October 2006

Oleh Ilnytskyj, Canadian Slavonic Papers
An Interdisciplinary Journal Devoted to Central and Eastern Europe
Volume 48, Numbers 1-2, March-June 2006
Department of Modern Languages and Cultural Studies
University of Alberta, Edmonton, Alberta, CANADA


Natalie Kononenko, Kule Chair of Ukrainian Ethnography
University of Alberta, Modern Languages and Cultural Studies
Edmonton, Alberta, Canada, October 2006


Ukrainian News Agency, Kyiv, Ukraine, Saturday, October 14, 2006

AFX Europe (Focus), Kiev, Ukraine, Monday, Oct 23, 2006

KIEV – Ukraine and Russia were due to sign a gas price agreement on

Tuesday aimed at calming Europe’s concerns about the reliability of Russian
energy supplies and pressuring Ukraine to moderate its pro-Western policies.

Under the deal, Kiev would face a higher gas bill, although still well under
the top price Russia demanded at the height of an energy crisis ten months

The Ukrainian government press service said only that Russian Prime Minister
Mikhail Fradkov would sign “three inter-governmental agreements” with his
Ukrainian counterpart Viktor Yanukovich.

However, Yanukovich said last week that he expected to sign a deal on
natural gas imports at the meeting and that the agreed price would amount to
“no more than 130 usd” for 1,000 cubic meters of gas, up from 95 usd paid

The question of gas prices is a critical one for Russian-Ukrainian
relations, as nearly all of Ukraine’s energy imports come from Russia, and
80 pct of Russian gas supplies to Europe pass through Ukraine.   -30-

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

By Oleg Gavrish, Kiev; Natalia Grib
Kommersant, Moscow, Russia, Friday, October 20, 2006

MOSCOW – Kommersant has learned from sources in the government and

in Gazprom that Moscow expects to complete gas negotiations successfully
when the prime ministers of the two countries meet in Kiev on October 24.

The price of the natural gas will be under $130 per 100 cubic meters, if
Kiev agrees to a package of Moscow’s demands, including economic and
political demands.

During Russian Prime Minister Mikhail Fradkov’s visit to Kiev on October 24,
conditions for the delivery of gas to Ukraine in 2007 will be discussed. A
source close to Gazprom says that big hopes are being placed on that

A few days ago, Ukrainian Prime Minister Viktor Yanukovich said that draft
federal budget had been written based on a gas price of $130 per 1000 cu. m.
and everything will be put in writing during the meeting of the Russian-

Ukrainian trade and economic commission in Kiev on October 24.
Fradkov will make a one-day visit to Kiev on that date.

Kommersant has learned that Moscow is offering Kiev a package deal. A
high-placed source in the Ukrainian leadership says that Ukraine is
promising several concessions to Russia in exchange for gas.

[1] The first is that a national referendum on NATO membership is to be

held in the near future, which is intended to put an end to all thoughts of
joining that organization.

Holding a referendum on NATO was one of the basic positions of Yanukovich’s
Party of the Regions. Then a clause on a national vote on NATO membership
was included in the so-called Universal signed on August 4 by the president
and the leaders of the anticrisis coalition.

Polls show that about 60 percent of Ukrainians are against NATO membership
and the results of such a referendum today would be completely predictable.
Thus Moscow is blocking Ukraine’s way to NATO, at least for several years,
by demanding a referendum.

[2] The second demand mentioned by the source is that Ukraine leave the
Russian fleet based in Sevastopol alone until 2017, as they had agreed, and
possibly even prolong the agreement.

Moscow and Kiev concluded a 20-year agreement on the Black Sea Fleet in
1997. But a scandal has been simmering around the fleet for more than a year

[3] The third condition on the deal is a Ukrainian guarantee to cooperate
with Rosukrenergo for at least five years, as agreed on, without initiating
a reconsideration of that agreement.

[4] Fourth, Kiev has to promise to receive gas from Turkmenistan exclusively
through Russia.

[5] Finally, Ukrainian must not change the transit price for Russian gas.

Those proposals were discussed at the meeting between Russian President
Vladimir Putin and Yanukovich in September. At that time, Russian

Ambassador to Ukraine Viktor Chernomyrdin told Kommersant that a price
of $130 per 1000 cu. m. was being discussed.

The elements of the deal are at different stages of advancement. Yanukovich
met with First Deputy Prime Minister of Russia and chairman of the board of
directors of Gazprom Dmitry Medvedev in the Crimea on October 15 and
discussed options for gas deliveries between 2007 and 2010.

That was reported by the press service of the Ukrainian cabinet. The results
of the negotiations were not reported, however.

It is also known that Ukrainian Minister of Fuel and Energy Yury Boiko met
with Russian Minister of Industry and Energy Viktor Khristenko in Moscow to
discuss state support for the gas business from both sides.

Gazprom is not commenting on information about the price of gas to Ukraine.
The Swiss company Rosukrenergo, 50 percent of which belongs to

Gazprombank and 50 percent to Dmitry Firtash, stated yesterday that contracts
for 2007 are at the stage of signing.

On the Ukrainian market, they called the economic conditions on the deal
“maintenance” of the current situation. “The agreement of January 4, 2006,
was made for five years, so obviously it is a matter of fulfilling current
obligations,” a Rosukrenergo spokesman in Kiev said. A source at Naftogaz
Ukrainy agreed, saying that “Russia has proposed that Ukraine preserve the
existing procedure for gas supplies.”

Minister Boiko stated at the beginning of this month that the transit price
for Russian natural gas across the territory of Ukraine would be kept at
$1.60 per 100 cu. m. per 100 km. in 2007, which is significantly lower than
world rates ($2.40-3.20) The Ukrainians decided on that in connection with
the replacement of Russian gas by Central Asian gas.

The fee for the transit of Russian gas in Ukraine mirrors the fee for the
transit of Central Asian gas in Russia. “After the conversion to Central
Asian gas, it will be unprofitable for Ukraine to change any transit fees
for Russia. That would lead to a direct loss,” explained president of the
Association of Natural Gas Traders Roman Storozhev. “Therefore, that
Russian demand has been met.”                        -30-

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

Itar-Tass, Moscow, Russia, Friday, October 20, 2006

MOSCOW – Ukraine, whose pro-Western President Viktor Yushchenko
has embarked on a course of bringing his country to NATO, seems to be
inclined to give up the goal in exchange for access to less expensive
Russian natural gas.

Russian Prime Minister Mikhail Fradkov and Ukrainian Prime Minister
Viktor Yanukovych will hold talks related to gas in Kiev next week.

Yanukovich said the country’s budget for next year has been drafted and
the price of gas factored into it stands at 130 U.S. dollars per thousand
cubic meters. This contrasts with Russia’s previous statements that it would
like to sell gas to the Ukrainians at a price a hundred U.S. dollars bigger.

Moscow-based Kommersant daily indicated that Russia has offered a
package deal to Ukraine.

[1] First, Ukraine holds a national referendum on NATO membership, in

which most Ukrainians are likely to answer in the negative, since more than
a half of Ukrainian nationals oppose that prospect.

“The referendum will shelve Kiev’s striving for alliance membership for
quite some time,” Kommersant said.

[2] Secondly, Moscow proposes the Ukrainians to leave alone the Russian
Black Sea Fleet based in the Crimea until 2017, the way the agreement on
deployment of naval forces that Moscow and Ukraine signed in 1997
envisions. Scandals around the Black Sea Fleet, which is one of Russian
Navy’s four major territorial branches, have been raging for about a year.

[3] Thirdly, the terms of the hypothetical deal presuppose that Ukraine should
continue cooperating with Rosukrenergo company in the gas sphere over
the next five years according to bilateral agreements on gas and that it
will not demand their revision.

[4] Fourthly, Kiev is expected to promise that it will receive Turkmenistani gas
via Russia only and, last but not least,

[5] that it will not alter the fixed rates for transits of Russian gas to European
countries via a ramified system of pipelines stretching across Ukrainian territory.

In response to this, Ukraine will be able to buy gas for 130 U.S. dollars
per thousand cubic meters instead of 230 U.S. dollars.

Sources told Kommersant the proposals were discussed during September
talks in Moscow between President Putin and Prime Minister Yanukovich.

Gazprom executives did not issue any comments on the information, while
spokespeople for the Swiss company Rosukrenergo, which is owned fifty-
fifty by Gazprombank and businessman Dmitry Firtash, said the agreements
for 2007 are still in the phase of signing.

Gazprom and Ukraine’s oil and gas monopoly Naftogaz Ukrainy agreed at
the beginning of the year that gas will be supplied to that country for 230
dollars per thousand cubic meters.

The sides established then that supplies will be handled by Rosukrenergo,
which will sell gas to Ukrainians for 95 dollars per thousand cubic meters,
while the difference in the price will be covered though inclusion in the
fuel balance of gas imported from Turkmenistan, Uzbekistan and Kazakhstan,

The latter fuel accounts for two-thirds of all supplies and is sold at 55
dollars to 65 dollars per thousand cubic meters.

In the meantime, the data of sociological polls in Ukraine show that about
60% respondents there dislike the idea of their country’s joining NATO
— the percentage that makes results of a hypothetical referendum quite

A poll taken by the Nikolai Gavrilov Analysis Service from October 1
through October 3 showed that three-fourths of those polled would not
support accession to NATO even if Ukraine were given membership of the
EU as a prize for this.

The idea of solving the NATO problem through a nationwide referendum
was one of the basic program provisions of Yanukovich’s Regions Party.
After that, an article on holding the referendum was included in the
so-called Universal (Charter) of National Unity that President Yushchenko

and leaders of the anti-crisis parliamentary coalition signed August 4.

Yanukovich made a statement in August, in which he urged the authorities to
suspend adoption of the Plan of Action on NATO Membership as the
population had very sparce information on it.

The Supreme Rada, Ukraine’s national parliament, issued a resolution soon
afterwards where it approved of Yanukovich’s position, and cabinet ministers
joined the MPs in endorsing it the next day.

The ministers said this position reflected the domineering moods among

Reaction from NATO came through its press service that told Kommersant-
Ukraina newspaper the alliance would keep its doors open for the
country but the process of accession should be based on real achievements.

It is noteworthy that Kiev did not receive an invitation to attend a NATO
summit due in Riga November 28 and November 29. The information was
revealed by Ukrainian Foreign Ministry’s chief press spokesman Andrei

The decision was taken in Brussels following Yanukovich’s statement that
the country was unready to join NATO, Deshitsa said.

On the face of it, Boris Makarenko, a deputy director general of the Center
for Political Technologies believes it would be highly unrewarding for
Yanukovich to press forward with the referendum now.

“Ukraine won’t get into NATO until the referendum is held and that’s why
Yahukovich will have limitless opportunities for bargaining with Russia,”
Makarenko indicated.

He believes that the main thing for the Prime Minister — the most powerful
Ukrainian politician now — is to avoid deterioration of relations either
with the West of with Russia.

“He will be sending signals in both directions to see where the yield is
bigger,” Makarenko said.

As for President Yushchenko, his positions are so feeble now that it would
be totally irrational for him to raise the NATO issue, since he might
suffer another loss on it, the expert said.                  -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

                            TO RUSSIA IN GAS PRICE TALKS 

Interfax-Ukraine news agency, Kiev, in Russian 1311 gmt 23 Oct 06
BBC Monitoring Service, United Kingdom, Monday, Oct 23, 2006

KIEV – Ukrainian Deputy Prime Minister Andriy Klyuyev has categorically
rejected statements that the Ukrainian government is ready to make political
concessions that go beyond the political interests of Ukraine at gas talks
with Russia.

“The current government’s constructive work and effective management in the
gas sector are a key component that makes us hope for the positive outcome
of the talks between Ukrainian Prime Minister Viktor Yanukovych and his
Russian counterpart Mikhail Fradkov,” Klyuyev said in an interview with
Interfax-Ukraine on 23 October.

A number of Ukrainian media reports last week assumed that the Ukrainian
government managed to get a privileged price of gas of 130 dollars [for
2007] in comparison to neighbouring countries because of political
concessions to Russia in European integration, the [Russian] Black Sea

Fleet [deployed in Ukraine’s Crimea] and privatization.

Klyuyev said that the topics the Ukrainian media referred to, are not on the
agenda of bilateral intergovernmental negotiations, whose key objective is
to improve the efficiency of economic cooperation between Russia and

[Passage omitted: Russian Prime Minister Mikhail Fradkov arrives in

Ukraine on 24 October.]                                     -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
    Send in names and e-mail addresses for the AUR distribution list.
              Ukraine’s energy minister accused of mismanaging gas industry
      “I believe that this is the most cunning special operation since the time of
      Ukraine’s independence that Russia has conducted in relation to Ukraine.”

INTERVIEW: With Ihor Franchuk, former head of Chornomornaftohaz
INTERVIEW BY: Alla Yeryomenko, Zerkalo Nedeli,

Kiev, Ukraine, in Russian 21 Oct 06; pp 1, 4
BBC Monitoring Service, United Kingdom, Monday, Oct 23, 2006

The former head of Chornomornaftohaz, Ihor Franchuk, who is contesting his
dismissal in court, heavily criticizes Fuel and Energy Minister Yuriy Boyko
for his activity as Naftohaz Ukrayiny chairman in 2003-05.

In an interview, Franchuk implies that Boyko is Moscow’s agent infiltrated
into Ukraine to bankrupt the state monopoly Naftohaz Ukrayiny and free
market space for Russian Gazprom-affiliated companies.

The following is the text of the interview Franchuk gave to Alla Yeryomenko
entitled “Ihor Franchuk: Naftohaz Ukrayiny in state of bankruptcy” published
in the Ukrainian analytical weekly Zerkalo Nedeli on 21 October; subheadings
have been inserted editorially:

The facts that the start of the heating season in Ukraine was disrupted
[central heating is normally switched on 15 October], that Naftohaz Ukrayiny
[state oil and gas company] has not been an independent, let alone an
influential company on the domestic gas market for a long time, and that
Naftohaz’s affiliate company, Haz Ukrayiny, actually has no gas to be able
to supply the sharply increased demands of enterprises of municipal heating
are a logical outcome of the activity of Naftohaz leadership in recent

And whereas some time ago everything happening in the gas sector was
explained, to put it mildly, by the lack of professionalism of the state
company’s management, now that the oil and gas complex and power engineering
of Ukraine have been virtually handed over to the complete control of the
twice ex-head of Naftohaz, the fuel and energy minister, Yuriy Boyko, we can
probably talk about targeted work, well-planned, by someone (not only in
Ukraine), the result of which evidently should be

[1] the collapse of Naftohaz,
[2] the surrender of Ukraine’s national interests and
[3] direct expansion of non-Ukrainian capital, in particular of [Russian gas
monopoly] Gazprom to the whole Ukrainian market as such rather than
just the oil and gas market.

Zerkalo Nedeli has written several times, expressing its theories of what is
happening, about how Naftohaz Ukrayiny is being deliberately taken to the

Ihor Franchuk also has his own theory. He is party to the deeds of Ukraine’s
oil and gas industry, since from 2001 right up to 29 August 2006 he headed
the State Joint-Stock Company (SJC) Chornomornaftohaz [Black Sea Oil and
Gas], which is part of Naftohaz Ukrayiny.

However, Mr Franchuk does not consider himself dismissed even now, since he
intends to prove that his work contract was extended to 2011 by the chairman
of the supervisory board (!? – Ed.) of Chornomornaftohaz and former head of
Naftohaz Ukrayiny, Oleksiy Ivchenko. Perhaps it is this circumstance that
explains why Franchuk avoids talking about the dark period in the life of
Naftohaz when it was headed by Ivchenko.

But it was not about his dismissal that we talked with Franchuk at the
editorial office of Zerkalo Nedeli, but about the situation in the country’s
oil and gas industry as a whole and in Naftohaz in particular over the
period from 2003 to the present day.

In a word, about how we sank into such a “gas-free” life. We hope that
Franchuk realizes what he said in the interview.

[Yeryomenko] Mr Franchuk, in 2003 Naftohaz Ukrayiny was headed by the
present fuel and energy minister, Yuriy Boyko.

In what condition, in your opinion, did he find Naftohaz Ukrayiny and what
was the position of Ukraine then on the post-Soviet and European gas

[Franchuk] At the time of Yuriy Boyko’s arrival, the system of Naftohaz
Ukrayiny had about 10bn cubic metres of gas in underground storage (its own
gas). In those prices its value was about 600m dollars. Naftohaz had about
300m dollars in Gazprom accounts.

True, there was a current debt to Turkmenistan of 150m dollars. But
nevertheless, the company’s positive balance amounted approximately to

700m dollars with tax obligations to the state fully paid.

Apart from that, Naftohaz Ukrayiny had a balance of gas within the country.
It had the possibility to export its gas, including to countries of Europe
to support its investment projects and to have the financial potential to
supply gas to the population at a comparatively low price.

Through its pricing policy Naftohaz fully covered all exploitation
expenditure in the modernization and exploitation of the gas transport

It worked with Gazprom as an equal in questions of supplies to Europe. At
that time there was no blatant diktat on the part of Gazprom and could not
have been!

Ukraine had intergovernmental agreements up to 2015 and contracts with
Russia and Gazprom, where all the conditions of delivery and transit of the
gas were clearly fixed.

Apart from that, the agreement up to 2007 with Turkmenistan allowed us
annually to buy Turkmen gas at a volume up to 30bn cubic metres.

A draft agreement with Turkmenistan up to 2025 had also been drawn up for
signing on annual supplies at a volume of 50bn-60bn cubic metres of gas.

Such was the situation in Naftohaz Ukrayiny at the time that the chairman of
its board, Kopylov, left and when Boyko arrived there.

Of course, this state of affairs did not suit Gazprom. Already then the
Russian gas monopoly had embarked on implementing its plan of expansion into

From 2003 Gazprom and the highest officials in Russia undertook masses of
attempts to accuse Ukraine of stealing export gas.

They were saying everywhere that the Ukrainian gas transport system (GTS)
was unreliable and needed urgently to be modernized etc. Nevertheless,
Gazprom did not allow anyone to approach Naftohaz in questions of the work
as an independent national company.

When in 2003 Boyko was delegated to Naftohaz Ukrayiny, it looks as if a
“road map”, as the president [Viktor Yushchenko] now likes to say, was

In my view, Boyko was given a clear task, including four basic points:
[1] to weaken Naftohaz economically;
[2] “to bury” forever direct contracts for gas supplies from Turkmenistan;
[3] to mix up definitively the system of the balance of gas; and to make
[4]Naftohaz fully dependent on external gas suppliers.

                                 BOYKO’S FIRST MOVES
What was the Naftohaz head’s first move? At his initiative, a new commercial
structure – Eural Trans Gas [ETG] – was brought into the scheme of supplying
Turkmen gas to Ukraine instead of the Itera company that had been operating
on the instruction of Gazprom.

But with the former gas supply operator we had an excellent point in all the
agreements saying that all the Central Asian gas that Itera supplied was
sold on Ukrainian territory and at a price of 50 cents lower than what we
were buying from Russia.

Itera did not engage in direct sales of gas on Ukrainian territory as RUE
[Swiss-registered RosUkrEnergo middleman company] now does. It was
exclusively Naftohaz Ukrayiny that did that.

But it did not end with the introduction of the new commercial structure:
ETG was allowed first to engage in the transport of Turkmen gas up to the
Ukrainian-Russian border and then in transporting gas via Ukrainian
territory and its storage in Ukrainian underground stores (prices for ETG
were specially cut from nine to two and a half dollars). The price tariff
for gas transit was also cut for that structure.

And later, instead of Naftohaz, only that operator got the right to export
gas from Ukraine. Thereby a full stop had been put to the possibility of
Naftohaz to work independently both with Turkmenistan and on the European
gas market.

[Yeryomenko] Turkmenbasy [Turkmen President Saparmyrat Nyyazow] was

also put in a difficult position; after the conclusion of the union between Kiev
and Moscow, he essentially was left one to one with Gazprom.

[Franchuk] For Turkmenistan Ukraine was the only possibility of getting
Turkmen gas out to Europe. At present that channel does not exist.

[Yeryomenko] What happened in the financial plan of Naftohaz Ukrayiny?

[Franchuk] Imaginary, mythical projects of extraction and prospecting of gas
and oil “are being developed” in Libya, Egypt, the UAE and Kazakhstan.
Naftohaz is starting to attract enormous credit resources.
                         GRADUAL LOSS OF INDEPENDENCE
[Yeryomenko] When did this process get going?

[Franchuk] Precisely under Boyko. Naftohaz was getting into financial
dependence on creditors. Naturally, not a single financial resource (credit,
loan) was used for its intended purpose.

What is more, during the time that Boyko was in charge of Naftohaz there was
no modernization of the GTS, even though it was constantly declared.

When preparations were under way to set up a gas transport consortium, the
whole of Ukraine’s GTS was studied. And back then it was calculated that it
needed about 700m dollars for the complete modernization of the GTS,
including compressor stations and construction of new pipeline strings.

[Yeryomenko] Annually?

[Franchuk] Altogether. This is not such big money for a company like
Naftohaz Ukrayiny. It could be saved up comparatively quickly through
tariffs on the transportation of transit gas.

Further, losses of gas (technological, commercial) have mounted in a
surprising way for regional gas supply companies: from 1.3bn to 2.6bn-3bn
cubic metres a year.

We must find out where that gas is. Technological losses have grown in
Ukrtranshaz [Ukrainian gas transport company] both production and

Mr Boyko consolidated all this by legislation in order to safeguard himself
from criminal investigations as to why and whence those losses occurred.

We did not start pumping more gas; the population did not start consuming
more. But in two years the commercial losses for regional gas supply
companies increased by over 120 per cent!

At the same time a surprising thing is happening, which, in essence, also
remained unnoticed by many people – work started on buying up stakes in
Ukraine’s gas supply companies.

[Yeryomenko] Everyone was chasing the regional electricity supply companies
and few people were interested in the regional gas companies.

[Franchuk] Share packages in regional gas companies started being
consolidated exactly at the time when Boyko headed Naftohaz. And although at
that time the work was not taken to its logical conclusion, it is being done

And its aim is very simple: through the influence of a commercial structure
connected with Russia, UkrGazEnergo, to get control of the system of
marketing gas directly to consumers, to wit the population. In that case its
becomes far simpler to influence people economically, psychologically and
even politically.

Having a gas supplier today in the person of a company linked with Russia
(RUE) and having a marketing company today linked with Russia
(UkrGazEnergo), we are losing our state independence. Today it is a matter
not even of the privatization of the GTS.

It is a matter of the privatization of Ukraine with all its inhabitants and
enterprises. I think that today’s prime minister [Viktor Yanukovych] does
not yet fully realize the danger connected with the appointment of Boyko as
Ukraine’s fuel and energy minister.

[Yeryomenko] You are expressing yourself so precisely about Yanukovych, as
if shielding him… [ellipsis as published] Do you not allow the possibility
that he didn’t want to realize it?

[Franchuk] I believe that today he does not yet realize the depth of the
problems that will be disclosed in six months, in a year at most. And he
will be faced with the facts. I say this seriously, because today the prime
minister is the prime minister, the president is the president, and I
believe that in this situation they are in the same boat.

Just as Boyko blackmailed [ex-President Leonid] Kuchma at one time, so he
later blackmailed Yushchenko. How did it end?

With an agreement under which [ex-Prime Minister Yuriy] Yekhanurov was
removed and in accordance with which, the price of gas for Ukraine rose
abruptly to 95 dollars for 1,000 cu.m. The next one to be blackmailed will
be the prime minister.

The collapse of the country’s oil and gas system today is racing ahead and
one has the impression that “they” are in a great hurry, understanding that
if the regional gas companies are not “yielded”, and share packages in them
are not consolidated, if modernization of the GTS doesn’t start, primarily
of the compressor stations, (for which Naftohaz cannot pay) and if, as a
result, for debts to commercial structures connected with Russian capital it
all moves into the ownership of those structures and will not be run by
them, then “they” will not carry out their main task, for which the special
operation was carried out, codenamed “getting Boyko penetrated into
I believe that this is the most cunning special operation since the time of
Ukraine’s independence that Russia has conducted in relation to Ukraine.

[Yeryomenko] Do you know what is now happening at the negotiations between
Ukraine and Russia?

[Franchuk] At present they are discussing how to consolidate the result they
got when Ukraine was deprived of its resources… [ellipsis as published]

[Yeryomenko] Do you mean legalizing the January 2006 accords between
Gazprom, Naftohaz and RUE, transferring them to an intergovernmental

[Franchuk] Absolutely correct. And in essence today information about whose
gas was pumped and at what price into Ukrainian underground storage
facilities shows what we can expect next year.

[Yeryomenko] Can we talk about this in a bit more detail, please, because
Boyko says that 25bn cubic metres of gas have been pumped into the
underground storage facilities. But there has been no word about whose gas
it is and at what price Ukraine will be able to use it when the cold weather

[Franchuk] Of the 25bn cubic metres only 5bn are Ukrainian gas, and there
has never been such a low indicator in the history of Ukraine. The rest is
gas from commercial structures.

RUE has pumped in about 10bn cubic metres at the so far declared price of
230 dollars per 1,000 cubic metres. But that gas will cost the final
consumer 40 dollars more, taking transport expenses into account.

[Yeryomenko] What about the other 10bn cubic metres?

[Franchuk] This is gas of UkrGazEnergo pumped in at a price of 130 dollars.
On sale it will cost 170 dollars for 1,000 cu.m.

Therefore in January next year I think that the question will be put in all
probability to the government of Ukraine that Naftohaz is bankrupt and that
henceforth RUE should be in full control of Ukraine’s entire gas balance.

[Yeryomenko] Why do you say that gas pumped in at 130 dollars by
UkrGazEnergo is completely a non-Ukrainian resource? After all, 50 per cent
of the stock in that company belongs to Naftohaz.

[Franchuk] Because 50 per cent is precisely a formula specially chosen to
ensure that the management of UkrGazEnergo is absolutely unsinkable.

There is only an appearance that this structure has something to do with
Naftohaz. Yes, the company will declare minimum profit. But it is illusory
to count on there being some dividends and that Naftohaz will receive its
share of the profit.

[Yeryomenko] Do you know the financial indicators of UkrGazEnergo since it
started operating?

[Franchuk] They report their financial indicators and are currently actively
attracting credit resources for pumping gas.

It is exactly the policy that Boyko pursued in Naftohaz: getting the maximum
amount of credit resources from Western institutions (and, in essence, their
Russian owners) so as to be able later from that side too, and not just from
the side of Russia, to blackmail Ukraine if some steps are taken to restrict
the profitability of that company’s work or cut its share of the market, or
remove it from the market altogether.

[Yeryomenko] Boyko set the start of the RUE scheme, but then Naftohaz was
headed by Ivchenko, who also excelled in external loans. Are you
deliberately not commenting on his work and the Ivchenko period of Naftohaz?

[Franchuk] It is still too early to comment on the period when Naftohaz was
headed by Ivchenko, because there is a lot of criticism today, and often it
is not entirely professional.

In my opinion, Ivchenko continued working on the same rails that were
created by the previous leadership of Naftohaz, and even had he been a
super-professional of the oil and gas industry, he still could not have
changed the situation.

[Yeryomenko] I vehemently disagree with you on this. And yet, if Boyko is
now dismissed, can the situation be changed?

[Franchuk] It is not too late today to talk about partnership and normal
relations with Russia, Turkmenistan, Uzbekistan and Kazakhstan.

Prime Minister Yanukovych, who is currently supported by Moscow, is able

at will to tackle certain questions, including economic ones, at the highest

He should act to ensure that Ukraine keeps its system of Naftohaz and
returns to the period of probably 2003 in the framework of intergovernmental
agreements signed at the time.

The mistakes made in that period must be admitted, let’s put it that way,
but it must be understood that Russia should be a partner rather than the
owner of Ukraine as a state in questions of energy.
                                    NAFTOHAZ SIDELINED
[Yeryomenko] Boyko recently said that contracts had already been agreed for
2007 for 42bn cubic metres of Turkmen gas, 8.5bn of Kazakh gas and 7bn of
Uzbek gas for Ukraine.

[Franchuk] In all his statements it’s a matter of commercial structures.
Naftohaz at present does not have a single direct contract with gas
producers, and will not have.

[Yeryomenko] When you told the media that the present head of Naftohaz,
Volodymyr Sheludchenko, should not allow his opinion to be ignored, what did
you have in mind?

[Franchuk] The fact that Naftohaz today is effectively removed from accords
being reached that are disadvantageous for Ukraine or criminal in relation
to it, but which Naftohaz has to carry out.

And so Sheludchenko now (and I consider him to be a good specialist and I’ve
worked with him) needs to gather a group of experts who would analyse the
situation in Naftohaz. If, of course, he wants to.

[Yeryomenko] The scheme whereby Boyko appears to have reached agreement

on gas supplies to Ukraine seems strange.

It means that Gazeksport, which is the owner of the Turkmen volume, sells
that gas on the Russian border to RUE. RUE then brings it here, as far as
the border and sells it to Naftohaz and UkrGazEnergo. Why such complexities,
if it is possible to conclude direct contracts?

[Franchuk] I completely agree that there has been a deliberate pushing aside
(moreover through decree, and this is documented) of Naftohaz from work

with Central Asian countries.

This means that Naftohaz today is deprived of the possibility to transport
gas, deprived of the possibility to talk about any joint projects in those
countries among other things.

It is not too late today to break that scheme. I think that for those
central Asian states Ukraine is very important, as is, by the way, work
precisely with the state company as well. And they also perceive today’s
work exclusively through middlemen very negatively there, I think.

But they are forced to consider that they have to accept the position that
Boyko is voicing today at all meetings as the position of the Ukrainian

I doubt profoundly that all these nuances and all these subtleties today are
known either to Prime Minister Yanukovych or the deputy prime minister for
the fuel and energy complex, [Andriy] Klyuyev.

[Yeryomenko] You say that Yanukovych today could have reached agreement

on changing the Kremlin’s attitude. But a loyal attitude of the Kremlin does
not happen just like that; correspondingly the prime minister will have to
make some economic and political concessions.

Payment will have to be made, for example with the time frame of WTO entry
suitable for Ukraine, European integration, enterprises and so forth.

[Franchuk] We don’t need to pay, but to receive dividends from the fact that
80 per cent of Russian gas is exported via Ukrainian territory. After all,
gas is the most important source of replenishing the budget and
stabilization fund of the Russian Federation.

Therefore, today we don’t have to ask, but to say how it was in 2003 and
what we are demanding in order for us to have equal relations as a partner.

If we’re talking about a gas transport consortium, the conversation needs to
be continued not in the Ukraine-Russia framework, but in the framework of
the countries that produce and consume the gas.

[Yeryomenko] According to our information, the Ukrainian side is proposing a
scheme whereby it will not only be Russia and Ukraine that will join the
consortium, as Moscow wants, but also France, Germany, Turkmenistan and

even Libya. What do you think of a scheme like that?

[Franchuk] The scheme is somewhat weird. The scheme may certainly include
Ukraine, Russia, European countries and countries that are extracting and
transporting gas today – Turkmenistan, Uzbekistan and Kazakhstan. That’s the
formula according to which the structure can work.

[Yeryomenko] Are you calling the scheme “weird” because of Libya?

[Franchuk] It’s one of those mythical projects to which it will again be
necessary to attract financial resources and deepen still further the
serious position of Naftohaz at the level of financial obligations.

[Yeryomenko] How do you feel about Boyko’s idea to remove from the
composition of Naftohaz the company that engaged in resuscitating the gas
transport system and purchases of equipment for it?

It is being said that this company might be headed by Sheludchenko’s deputy,
Ukrayinskyy. In terms of purchases he has eaten up not puppies, but a whole

[Franchuk] I believe that today it is a direct violation to create some
structures that engage in such targeted purchases. In essence, it has even
been banned by legislation and a number of provisions of the Anti-Monopoly

Companies such as, for example, Chornomornaftohaz and Ukrnafta should
independently conduct a transparent policy on the purchase of all equipment.

And the fact that an attempt is now being made to consolidate it into a
single system and send money flows there shows that once again purchases
will be absolutely non-transparent and the amounts of contracts will
unjustifiably reach astronomical figures.
Naftohaz virtually bankrupt, needs restructuring

[Yeryomenko] Why is it, do you think, that Sheludchenko, who demanded the
dismissal of his deputy, [Ihor] Voronin, has not taken the matter to its
conclusion, and the latter still combines the duties of deputy head of
Naftohaz and chairman of the board a commercial structure – UkrGazEnergo?

[Franchuk] Mr Voronin heads a commercial structure, UkrGazEnergo, which is
working in the interests of Russia. It is precisely the Russian side that
needs the company’s business.

And I think that Mr Sheludchenko has enough arguments today allowing him to
say that first and foremost the domestic system of Naftohaz Ukrayiny needs
to be protected from the encroachments of other sides and countries. And
this applies to all staff in Naftohaz, and his deputy all the more so.

[Yeryomenko] We know that Sheludchenko in a fit of temper threatened to
resign if Finance Minister [Mykola] Azarov insisted on a significant
increase in the tax burden on Naftohaz. It is a matter of a difference, even
in comparison with this year, of several billion dollars.

Sheludchenko, who inherited Naftohaz in a catastrophic condition, not having
the necessary levers of influence and enough financial resources (after all,
the greater part of industrial gas consumers, who actually bring income to
gas traders, are clients of UkrGazEnergo today) believes that it will
finally finish off Naftohaz.

In other words, Sheludchenko today has to fight on several fronts. But how
to resolve the contradiction with the finance minister, who can also be
understood – he has a threadbare budget?

[Franchuk] I dealt with Naftohaz budget problems for a fairly long time, in
particular Chornomornaftohaz, and I can say that the attitude of the finance
minister (in relation to any economic entity) will always be like this: get
as much tax as possible for the budget. The attitude of any taxpaying
entity, including state companies, is to pay less.

I think that in this situation a balance has to be found and a transparent
scheme for payment by Naftohaz in the form not only of rates, but also of
specific figures that would be based on the company’s production and finance

But at present we should not be talking of full payment by Naftohaz even in
the framework of this financial year, since Naftohaz’s debts are only
increasing. To date the overall debts of Naftohaz, the basis of which was
laid in 2003-05, amounts to about 18bn hryvnyas.

According to the conclusion of the auditing company Ernst & Young, Naftohaz
Ukrayiny is in essence in a state of bankruptcy. But people prefer not to
speak about this today.

[Yeryomenko] Do you not consider that Naftohaz Ukrayiny – a structure
created it is known by whom, it is known with whom and what for, that has
turned into a Klondyke for a group of the powers that be, penetrated by
corruption through and through – simply should not exist today?

Let today’s affiliate companies and enterprises of Naftohaz act as
independent economic entities – Ukrtranshaz, Ukrvydobutok,
Chornomornaftohaz, Ukrnafta… [ellipsis as published] Why such

[Franchuk] Naftohaz Ukrayiny was initially created as a holding company. But
there is a gulf between the idea of its creation and the present situation
in Naftohaz.

In this situation I would talk of the need to restructure it in order to
ensure that every structure in the oil and gas complex can work
independently and is run either by the Cabinet of Ministers or the State
Property Fund or the Fuel and Energy Ministry.

In order for it to show its profitability, it would pay taxes but would be
an independent economic entity.

But at present all the independent enterprises in Naftohaz Ukrayiny that
should have become joint-stock companies have been scrapped, apart from the
last enterprise, Chornomornaftohaz.

An absolute vertical power structure has now been set up for Naftohaz to
manage all the structures that are part of Naftohaz.

[Yeryomenko] It is known that Ukraine’s requirement for gas amounts to about
76bn cubic metres a year (not including so-called technical gas). The
population and the state-funded sphere consume about 20bn a year. That is
exactly how much is extracted in Ukraine each year.

Another 14bn cubic metres of gas are needed for enterprises of heating and
communal service energy. But payment for transit of Russian gas allows us to
buy that volume.

The remainder of the 76bn cubic metres of annual gas consumption in Ukraine
goes basically to privatized industry. So why should the state make any
economic and political concessions to Russia in haggling for cheaper gas for
major non-state capital?

[Franchuk] Supplying gas and haggling over prices for industry are indeed
not a function of the state. The function of the state is to balance the
internal gas market, of which at present is not even a trace.

We have to understand that Ukrainian industry today, buying gas from
UkrGazEnergo and other middlemen, is investing its profit in the gas
extraction of other countries rather than investing funds in the development
of domestic gas extraction.

It is incomprehensible in our situation why the Ukrainian government is not
doing anything, not stimulating investment in its own hydrocarbon extraction
and development of the domestic raw materials base.

I’ll quote the following example. In the last four years Chornomornaftohaz,
going through all the stages of bans and permissions, including the cabinet,
had the opportunity to sell gas to all categories of consumers, including
industrial ones.

Through this an investment component appeared that was invested in
developing the Ukrainian section of the Black Sea shelf.

As a result, in three years the extraction of gas and condensate doubled and
foundations were laid for supplying Crimea in 2007 with 100 per cent of its
own gas extraction.

But it turned out that now such a prospect is not beneficial, because there
is a commercial structure supplying gas to Ukraine’s industry, including
Crimea – UkrGazEnergo.

As a result, a paradoxical situation has come about: the country no longer
needs the gas being extracted on the Black Sea shelf!

Of the 1.4bn cubic metres of gas that will be extracted by the end of the
year, Chornomornaftohaz can sell only 500m cubic metres to the population.

The remaining gas is in underground storage free of charge. And now an
emergency situation has come about to halt gas extraction on the shelf and
“stop” the wells. If that happens, then it will be impossible to reopen the
wells: it’s an irreversible process.

[Yeryomenko] So Chornomornaftohaz today cannot sell gas extracted in

Ukraine on the domestic market?

[Franchuk] Yes. This is an example of how an individual enterprise (part of
Naftohaz Ukrayiny) literally in four months is being artificially brought
into default. The next stage is bankruptcy.

And a state enterprise that can at present ensure gas extraction and an
increment in extraction of 500-600 per cent in the next 10 years, in essence
may be liquidated as a front-ranking enterprise in the domestic oil and gas

What is more, it is a state enterprise operating on the Black Sea shelf, and
that shelf is 132,000 km, i.e. a quarter of the territory of Ukraine.

A tendency to cut oil and gas extraction in Ukraine is clearly discernible.
And that means only one thing – an increase in dependence not even on
volumes of imports of those hydrocarbons, but on indirect importers.

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

Business Digest, Sofia, Bulgaria, Monday, October 23, 2006

KYIV – Swedish furniture giant and mall operator IKEA is ready to spend

$1.5 bln (1.198 bln euro) to $2.0 bln (1.597 bln euro) for mall construction
projects in Ukraine, company representatives Sven Holm and Lennart Dahlgren
told Ukrainian Prime Minister Viktor Yanukovich on October 18, 2006, at a
meeting intended to untie some red tape for the ample investment.

Yanukovich welcomed IKEA’s expansion plans and expressed hopes that

the Swedish retailer would serve as an example to other strategic foreign
investors wishing to set foot in Ukraine.

[Editor’s note: For several years IKEA has unsuccessfully attempted to
purchase land for its first store in Ukraine.

On October 10, 2006, the Kyiv regional council offered a plot near the
city’s ring road area, where one ha is estimated at some $5.0 mln (4.0 mln
euro), the Ukrainian News Digest reported.] (Alternative name: Kiev);          -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

Business Digest, Sofia, Bulgaria, Monday, October 23, 2006

KYIV –  Ukraine’s leading state-owned armoured tanks producer Malyshev, in
the eastern Kharkiv region, and the Pakistani Defence Ministry are to sign a
contract for military equipment supplies worth $100 mln (79.3 mln euro) in
December 2006, Malyshev CEO Genadyi Gritsenko announced on October

23, 2006 but declined to give further details.

The Pakistani Government has assured Gritsenko that Malyshev will obtain the
supply order by the end of 2006. The substantial deal will boost Malyshev’s
financial results in the first two months of 2007, Gritsenko added.

Malyshev plant is one of the largest manufacturers of tanks and heavy-duty
diesel machines in the Commonwealth of Independent States (CIS). It also
produces equipment for the mining and oil industries.

[Editor’s note: Malyshev ended 2005 with a loss of 43.51 mln hryvnias ($8.6
mln/6.8 mln euro), as its net revenue slumped 33.7 pct or by 98.1 mln
hryvnias ($19.4 mln/15.4 mln euro) on the year, the Ukrainian News Digest
reported.] (Alternative name: Kharkov),
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
     NOTE: Send in a letter-to-the-editor today. Let us hear from you.

By Marina Tsygankova, The Ukrainian Times
Kyiv, Ukraine, Monday, October 23, 2006

KYIV – The protocol of certification of the helicopter Ka-26 has been signed
by the Vinnytsia aircraft factory and the Kamov aircraft design office of

According to Oleg Yaroslavsky, director of the factory, the European Union
will stop operation of Ka-26 on the territory of its member countries
starting March 2007.

In this connection Bulgaria, Romania and Hungary are faced with the problem
of using about 100 helicopters Ka-26.

Each aircraft must be overhauled and certified in compliance with the
requirements of the European Aviation Union. Previously, the Kamov design
office, together with the Vinnytsia factory, developed technologies of
renovating Ka-26.                                 -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

    CO & U.S. AMBASSADOR TAYLOR DISCUSS NUCLEAR ENERGY                          
           Enerhoatom and Westinghouse Electric Company (United States)
           reached an agreement in June on introduction of the second stage
                            of the nuclear fuel qualification program.

Ukrainian News Agency,  Kyiv, Ukraine, Monday, October 23, 2006

KYIV – The Enerhoatom national nuclear power generating company’s President
Andrii Derkach and United States Ambassador to Ukraine William Taylor have
discussed Ukrainian-American cooperation in the area of nuclear energy. The
press service of Enerhoatom announced this to Ukrainian News.

In particular, during a meeting on October 20 Derkach thanked Taylor for the
United States’ assistance in improving the safety systems at Ukrainian
nuclear power stations, training personnel, and in other areas.

‘We are prepared to deepen mutually beneficial cooperation within the
framework of an understanding that should be based on clear observance of
the Constitution of Ukraine, the Constitution of the United States, and the
interests of the two countries,’ Derkach said.

Taylor said he was personally involved in the drafting of proposals for the
United States government regarding provision of assistance to Ukraine in the
area of nuclear energy and that he participated in the realization of
several projects at the initial stage of the cooperation.

Taylor gave a positive appraisal of the level of economic development of
Ukraine and the level of public participation in the public and political
life and said that deepening coordination between the government of the two
countries would have a positive effect on development of mutually beneficial
partnership in the energy industry, particularly the nuclear energy

Derkach called on the United States to engage in constant dialogue and said
that he would be guided exclusively by the interests of the country in the
post of president of Enerhoatom while focusing his primary attention on
raising the level of safety at nuclear power stations and establishing
maximum transparency in the financial, production, and social aspects of the

As Ukrainian News earlier reported, Enerhoatom and Westinghouse Electric
Company (United States) reached an agreement in June on introduction of the
second stage of the nuclear fuel qualification program, which is being
realized at the third reactor of the Southern Ukrainian nuclear power
station (Mykolaiv region).

The project for qualification of nuclear fuel makes it possible to bring
American fuel in line with Ukraine’s standards after which it will be
possible to use it at Ukraine’s nuclear power plants.

Enerhoatom operates the four nuclear power plants in Ukraine and accounts
for about 50% of the total quantity of electricity generated in Ukraine.  -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

Ukrainian News Service, Kyiv, Ukraine, Monday, October 23, 2006

KYIV – Halychfarm, a major medicine producer based in Lviv, intends to
invest USD 10.315 million in development of its main production facilities
by the year 2012.

Ihor Kolodii, director of production operations at the Arterium corporation,
to which Halychfarm belongs, disclosed this to Ukrainian News.

Specifically, Halychfarm intends to invest USD 6.240 million in development
of production of solutions for injections by the year 2010: USD 0.700
million in 2006, USD 2.930 million in 2007, USD 1.910 million in 2008, and
USD 0.700 million in 2009.

Moreover, Halychfarm intends to invest USD 2.860 million in development of
its phyto-chemical production facilities by the year 2011: USD 0.250 million
in 2007, USD 1.730 million in 2008, USD 0.703 million in 2009, and USD

0.150 million in 2010.

It also plans to invest USD 1.215 million in production of ointments and
gels by the year 2012: USD 0.646 million in 2007, USD 0.400 million in 2008,
and USD 0.169 million in 2011.

As Ukrainian News earlier reported, the Arterium corporation, which consists
of the two major drug producers Kyivmedpreparat (Kyiv) and Halychfarm,
intends to invest UAH 57 million in production modernization and quality
control during the year 2006.

According to information from Halychfarm, 24.95% of the shares in the
company belong to Kyivmedpreparat, 19.73% to Newport Inc. (United

States), 19.73% to Statex Corp. (United States), and 19.43% to EastCoast
United Inc (United States).

Halychfarm produces about 80 prescription and non-prescription medicines,
including 15 medicines developed by the company.          -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

                      LEADERS STRUGGLE FOR POWER

By Roman Olearchyk and Stefan Wagstyl
Financial Times, London, UK, Tuesday, October 24 2006

A political compromise thrashed out this summer by Ukrainian President
Viktor Yushchenko and Viktor Yanukovich, his rival in the disputed 2004
presidential elections, has yet to deliver the stable reform-oriented
government it promised.

Mr Yanukovich took office as prime minister with Mr Yushchenko’s support in
return for backing for the president’s agenda of economic liberalisation and
integration with Nato and the European Union.

But Mr Yanukovich’s ties with Ukraine’s business oligarchs, who are loath to
offend Russia for fear of losing cheap energy supplies, have tempered his
enthusiasm for Mr Yushchenko’s aims.

The resulting power struggle has created concerns in the west about Mr
Yushchenko’s ability to develop his foreign policy and dismantle the corrupt
business-to-bureaucrat links that flourished under his authoritarian
predecessor, Leonid Kuchma.

Mr Yushchenko had hoped the deal with Mr Yanukovich, struck after three
months of negotiations following parliamentary elections in March, would end
conflicts dating back to the 2004 Orange Revolution.

The agreement came as a shock for many of the president’s supporters, who
saw it as a betrayal of the Orange Revolution. But Mr Yushchenko hopes he
can close an unhealthy divide between his supporters in western Ukraine and
Mr Yanukovich’s backers in the east.

However, the president’s plans for a broad coalition were dashed last week
when his own Our Ukraine party refused to back the Yanukovich government.

This failure has undermined him. It has also weakened the Yanukovich
government by cutting the coalition’s strength in parliament from more than
300 (enough to override presidential vetoes) to about 240 seats in the
450-member chamber.

Unlike Mr Kuchma, Mr Yushchenko cannot bulldoze his way out of trouble.
Under the settlement that ended the Orange Revolution, the president
surrendered powers to parliament, notably the right to nominate governments.
He is fighting to maintain his influence – but the prime minister is fighting back.

The most public example of the power struggle has been over Nato. When Mr
Yanukovich visited Brussels last month, Mr Yushchenko expected him to ask
for a membership action plan – a co-operation programme that precedes Nato
membership. But Mr Yanukovich did no such thing.

Mr Yushchenko remains committed to Nato. Mr Yanukovich wants the issue
postponed, saying the Ukrainian public today opposes Nato membership so a
referendum would be lost.

On the EU, both men say they want membership and both recognise that it will
be a long process. Mr Yanukovich said in an FT interview that Ukraine should
work towards establishing both a “free trade zone” with the EU and a “free
economic zone” with Russia.

In Mr Yanukovich’s view, membership of the World Trade Organisation – a
prerequisite for deeper EU co-operation – should be pursued in tandem with

The two men have different philosophies. In Mr Yushchenko’s view, Ukraine’s

destiny lies with the west, though good relations with Russia must be maintained.
Mr Yanukovich and his business backers are more pragmatic.

They see long-term advantage in westward integration, not least because it
will help boost the value of their industrial assets.

But with the EU in no hurry to accommodate Kiev, they see no reason to rush
to Brussels. Instead, they want to maximise short-term benefits from Moscow
in the form of cheap energy.

This policy is not so much a pro-Russian stance as a conservative defence of
the status quo. Mr Yanukovich accepts energy prices will rise but he is
playing for time.

Meanwhile, the economy is growing fast, at 6 per cent this year. Foreign
investors relish the opportunities but are worried that instead of pushing
ahead with reforms officials are busy re-establishing influence over
business and perhaps discriminating in favour of oligarchs.

One example, is a battle over VAT refunds. After the Orange Revolution, the
government set up rules for prompt VAT repayments for exporters, ending a
longrunning dispute.

Mr Yanukovich suspended the payments – except for the oligarch-dominated
steel industry. The tax authorities argue vertically integrated steel
companies are easy to police, but some foreign investors see the action as

But bureaucrats and oligarchs alike recognise the Orange Revolution has
changed Ukraine, especially in creating independent media.

Petro Poroshenko, an Our Ukraine leader, says: “I think there’s a big danger
of them wanting things as they were three years ago. But it’s impossible,
because this is a different country now.”                -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

 If you are receiving more than one copy of the AUR please contact us.
12.                               WTO FOOTBALL

ANALYSIS & COMMENTARY: By Yuriy Skolotiany
Zerkalo Nedeli On The Web, Mirror-Weekly
International Social Political Weekly, No. 40 (619)
Kyiv, Ukraine, Saturday, 21 – 27 October 2006

Never, in the whole history of its independence, has Ukraine been so close
to the WTO accession as now. Yet it looks like this year we will not see the
final goal scored in this game for a higher place in the world trade league.

The new players of the national political team started passing the ball to
one another in their field, but the exercise is so cyclical and pointless
that the spectators suspect they have fixed the match with the opponent and
are even receiving instructions from the contending team’s coach.

Like in real football, time is running out very quickly, but the desperate
fans still pray for a miracle: may they show their will again; may they do
it. Alas, the miracle does not occur. No wonder, given the selection of
players in Ukraine’s political premier league.

A long-awaited breakthrough towards WTO accession that the country made
in late 2005-early 2006 (thanks to it getting market economy status, signing
a mutual market access protocol with the USA and the US Congress’ abolition
of the Jackson-Vanick amendment) inspired our hopes for a victory in the
thirteenth WTO season.

However, the play-makers who assumed leading positions in the national
political team, having formed the “anti-crisis coalition”, rushed to
implement the strategy and tactics with regard to WTO incongruous with
their commitments under the National Unity Pact.

Prime Minister Viktor Yanukovych was the first to kick the ball into
Ukraine’s own goal by stating, on the fourth day in office, that his Cabinet

planned to revise all draft laws required for the country’s accession to WTO
so as to make sure they expedite Ukraine’s national interests and ascertain if
there was a need to discuss them in public hearings.

The Prime Minister’s request that the WTO partners postpone the reduction
of import duties for a few years was also indicative of his government’s
true intentions.

Of course, it could be justified by the desire to create better conditions
for Ukrainian manufacturers but, in fact, it entailed additional
negotiations with the WTO member-states who had already signed bilateral
agreements with our country.

Understandably, new negotiations meant yet another delay with the WTO
accession. These new negotiations could take years.

Characteristically, Viktor Yanukovych first mooted these ideas while
introducing the new-old Foreign Minister Borys Tarasiuk to the ministerial

In principle, one could expect something like that from the Party of Regions
leader, given that back in November 2005 the party announced, through its
press service, it would not vote for the WTO laws “because of the conflict
of interests with Ukrainian manufacturers”.

So Mr Yanukovych’s stand over the matter would have looked consistent
but for his signing the National Unity Pact, which provides (in Item 24) for
“immediate adoption of legislation required for joining the World Trade
Organization and accession to this organization by the end of 2006″.

This document is not legally binding, it is true, but in August, upon
returning from Moscow, the Prime Minister assured the President that he
would work towards including the Pact provisions into the Cabinet’s action

Later Yanukovych, on numerous occasions, advertised the government’s
intention to ensure Ukraine’s speedy accession to WTO, albeit with a
reservation “on terms acceptable for Ukraine”.

In order to find out if the passage of WTO laws would create acceptable
conditions and terms, the Ministry of Economy held public consultations on
the draft laws pertaining to industrial and agrarian policy on 5-6 October

According to the official website of the Ministry of Economy, it invited
representatives of concerned central executive power bodies, manufacturers’
associations, civil society, academic and legal communities to take part in
the discussion.

The press release reads: “Based on the discussion outcomes, analytical
materials will be prepared and necessary amendments proposed so that the
Cabinet of Ministers could incorporate them into the draft laws and submit
the latter to Parliament”. Hence, there were no serious objections to or
criticisms of the draft laws.

Deputy Minister of Economy, Valeriy Piatnytsky confirmed this when
commenting on the WTO-relating processes for ZN:
“It is noteworthy that the WTO laws will not change the effective
legislative framework in any dramatic way, nor will they introduce any
sweeping regulatory innovations. Instead, they will just fill in the
existing gaps in legislation.

Our national legislation, for the most part, has been amended to meet the
standards and requirements of international organizations whose membership
Ukraine either gained in the previous years or is seeking at the moment. I
mean, in particular, the agreements currently in effect within the World
Trade Organization.

So these laws should be adopted, irrespective of our plans to join WTO.
Ukraine is already so closely integrated into the world economy that it
needs to harmonize its national legislation and trade regimes with the
international ones; otherwise we will never become active players on the
world market.

If we really want to maintain, and improve, our national economy’s
competitiveness in the world marketplace, we should grasp this opportunity
to complete the accession process: another chance could be a long time

We should revise and update our approaches to and instruments of protecting
national manufacturers. Permanent support of ineffective enterprises will
lead us to a dead end, so we should take an alternate route.”

Unfortunately, traditional bureaucracy hijacked the process of fine-tuning
the draft laws. On 11 October, Olexander Chaly, Deputy Head of the
Presidential Secretariat, declared that his office would foster a swift
passage of the required legislation in Parliament: “We have very little time
left for the adoption of all the necessary laws, since the decision on
Ukraine’s accession to WTO is due on 21 December”.

Yet the discussion of draft laws in the Supreme Rada Committee for Finance
and Banking, scheduled for 11 October never took place because, according to
the Committee Chair Petro Poroshenko, the Cabinet of Ministers failed to
submit them to Parliament.

Tensions were further heightened when Ian Boag, Head of the European
Commission Office in Kyiv, stated on 16 October that Ukraine’s accession to
WTO would be put off for another year unless the Supreme Rada passed the
WTO legislation by the end of the week.

He also underscored that the EU was going to start negotiating a free trade
agreement with Ukraine in early 2007, but will have to defer the talks
should the country fail to make it into the WTO.

On the same day, the press service of the Cabinet of Ministers, citing
Yanukovych’s speech at a joint session of the coalition coordination board
and the government, reported that the Prime Minister “expects Ukraine to
access to WTO in January-February 2007, provided the Supreme Rada
adopts the necessary legislation”.

According to the press service, Yanukovych insisted on speeding up the
consideration and passage of the WTO-related draft laws by the Rada. Later
that day Viktor Yanukovych said at a press conference that he instructed the
Cabinet to submit the drafts in question to Parliament by mid November.

As of October 16, he maintained, three drafts had been sent to the Rada,
another five were being analyzed by ministries and agencies, and the
remaining ones were being scrutinized by the Cabinet’s legal experts in
preparation for their discussion at one of the government’s forthcoming
meetings. “It will not take longer than two to three weeks,” – promised the
Prime Minister.

Amazingly, it was on 16 October that the conference board of the Supreme
Rada committee hears and faction leaders decided to reschedule for a later
date the parliamentary hearings on Ukraine’s progress in WTO accession.

Speaker Moroz tried to reassure the journalists that it did not mean the
Rada would also put off the deliberations of draft laws at the plenary
sessions during the week.

Thus, the parliamentary hearings on Ukraine’s preparation for the WTO
accession were rescheduled from 18 October to 1 November. Volodymyr
Zaplatynsky, Chair of the Supreme Rada Committee for Economic Policy, put
that down to the need for a “more careful preparation for the discussion, as
the WTO accession is a major policy issue of today”. In addition, he said
the Cabinet has yet to submit the WTO draft laws to Parliament.

President Yushchenko met with Speaker Moroz to voice his concern over the
situation with legislative support to Ukraine’s accession to WTO and warn
that he would resort to his constitutional powers so as to ensure compliance
with all accession procedures.

On 18 October, Hennadiy Udovenko made a statement in the Supreme Rada, on
behalf of the “Our Ukraine” faction, demanding that Parliament consider and
adopt all draft laws conducive to Ukraine’s WTO accession by 27 October.

“Our Ukraine reckons, – the statement reads, – that the top officials in the
government and Supreme Rada spare no means to freeze the discussion and
passage of required laws and disrupt Ukraine’s accession to WTO. It is
obvious that the anti-crisis coalition and officials that it delegated into
executive power bodies neglect Ukrainian people’s legitimate interests and
promote the interests of another state”.

In response, Speaker Moroz called these claims “totally groundless”. “If one
wants to accelerate this work, one can draft the legislation in question and
we will adopt it, – the Supreme Rada Chairman riposted. – In November, i.e.
by December 1 as envisioned by the schedule, we will have passed the laws,
provided they are properly prepared. And I am positive all of them will be
ready by that time. One cannot set tasks to be fulfilled by 26 October
knowing only too well that these tasks are unrealistic. I think it is a
wrong thing for the authors of the statement to do”.

Arseniy Yatseniuk, First Deputy Head of Presidential Secretariat, argued
that the draft laws should be adopted by 27 October and told the press that
President Yushchenko submitted his own package of legislation defining it as
top priority.

“If this package of 16 draft laws submitted by the President and three draft
laws that are already in Parliament are passed in the first reading by the
end of this week and finally adopted next week, we will be able to finalize
Ukraine’s accession process at the session of the unofficial working group
on October 27,” – said Mr Yatseniuk.

He reminded the journalists that the process of Ukraine’s accession to WTO
has been under way for 14 years: “If this is fast, tell me what is slow”.
Today Ukraine is amongst the few countries that still do not belong to the
WTO club, along with Yemen, Iraq, Iran, Afghanistan and Tajikistan.

A little earlier, however, MP Vitaliy Shybko, Chair of the Supreme Rada
Committee for Foreign Affairs, suggested Ukraine should not hurry to join
WTO: “We should not regard this process as a moving train that one wants to
jump into just to go somewhere”.

What is the bottom-line? None of the WTO draft laws were considered last
Thursday, in spite of their urgency and priority. Neither were they put on
Friday’s agenda. Instead, our “progressive” MPs prolonged for another year
tax vacations for agrarians, passing draft law #2299 of 10 October 2006
almost unanimously (with 422 affirmative votes out of 423 present

It is exactly what Ukraine will have to give up once it joins WTO.
Concurrently, MPs sent back for revision, without even looking at it, a
draft law cancelling the age requirement for imported motor vehicles, as
envisioned in WTO regulations.

Can the skeptics be right arguing that Yanukovych and Moroz agreed with the
Russian leadership on the synchronization of the two countries’ accession to
WTO during their respective visits to Moscow? And what does it all have to
do with the national strategic interests? Is it a component of the price
that we have to pay for the undervalued gas at USD 130 per 1000 cubic

Sad as it is, we have to admit, yet another again, that Ukraine can hardly
be expected to demonstrate spectacular advances in either foreign policy or

Most probably, we will have to wait until generations change in both premier
football and political leagues.                           -30-

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
             Send in a letter-to-the-editor today. Let us hear from you.
                  During last several months VAT  reimbursement poor

ANALYSIS AND COMMENTARY: By Roman Bryl, Ukraine Analyst
IntelliNews – Ukraine This Week, Kyiv, Ukraine, Monday, October 23, 2006

KYIV – After the return of Victor Yanukovich as PM and Mykola Azarov as
finance minister certain shortages in VAT reimbursement to big exporting
companies appeared.

Information regarding these shortages was announced on Oct 5, when the
FinMin informed that the plan on VAT reimbursement was 10.2% under

performed in Jan-Sep. And the situation worsened mainly in the last several
months. In particular, the reimbursement plan was only ¾ fulfilled in August
and eptember.

After receiving this information president Victor Yuschenko ordered
secretary of national Security and Defense Council Vitaliy Gayduk to examine
the situation and to pay special attention to corruption and selective
approach towards exporters that receive reimbursement.

Mainly exporters from Donetsk region receive VAT reimbursement in
advance —–

Earlier ex-finance minister Victor Penzenyk disclosed the information that
average level of VAT reimbursement made up 76.1% all over the country. But
at the same time exporters from Donetsk region obtained 222% of
reimbursement of the tax (i.e. they received the funds in advance).

On the other hand, the tax volume for companies from Volyn region amounted
only to 2.4% out of volume planned. Even Kyiv region the exporting power of
which is only 2-fold less compared to Donetsk region obtained 12-fold less
of reimbursement funds compared to Donetsk region.

Thus in Jan-Sep exporters from Donetsk region received USD 502mn of VAT
reimbursement, including USD 160 paid in advance.

General Prosecutor Office finds nothing suspicious in current scheme

of tax returns —–

After analyzing the data General Prosecutor Office decided to inquire about
possible corruption related to VAT reimbursement. However, it concluded that
there was no reason to believe that the tax is paid using the selective

General Prosecutor Office informed that government should pay USD 2.52bn of
reimbursed funds and it actually paid USD 2.48bn in Jan-Sep. So the gap is
too narrow, the Office concluded.

But at the same time the representatives of 10 largest exporting companies
informed that the combined debt of non-reimbursed funds made up at least USD
150mn. So, the figure is much higher than what was presented by General
Prosecutor Office.

Problems with VAT reimbursement also seen when Yanukovich was

PM in 2003-2004 —–

Nervousness of president Victor Yuschenko regarding problems with VAT
reimbursement can be easily understood. This tax belongs to the main of
state budget earnings and 23% of budget revenues come from this tax.

Notably, during the last year when officials made significant effort to
organize VAT reimbursement, the revenues from this tax increased by

The problems with this tax collection also were seen in 2002. In 2003-2004
when Victor Yanukovich headed the government the situation only worsened.
During this period of time the revenues from VAT dropped to 4.29% of GDP
comparing with 5.97% of GDP in 2002.

Partially, this drop was explained by the increase of export volumes.
However, the opponents of PM insist that a lot of false export transaction
increased significantly during this time.  The independent analysis made
World Bank gave another picture of VAT reimbursement problems.

In 1999 internal VAT (VAT paid to domestic producers) made up 84% of
earnings received from this tax, while in 2004 this figure made up 72%.

It appeared that exporters, who mainly cause GDP growth more funds as
reimbursement than they pay to the state budget. It also explains why
Donetsk region receives the lion’s share of reimbursement: in this region a
larger part of the exporting enterprises is located.

In 2005 situation with returnable funds improves —–

The data for the last year showed that the increase in VAT collection gave
message that it could be possible to collect more funds from this tax.
Problems were mainly rooted in the performance of tax authorities.

Current situation with VAT reimbursement has two reasons. The first one is
that the government faces problems in filling the state budget and it
decided to postpone the reimbursements. The second reason is that the level
of corruption in this area rose significantly recently.

Tax authorities tend not to be diligent in following VAT reimbursement
legislation —–

Obviously that the best way to improve the situation with VAT reimbursement
is to change the performance of tax authorities and make them independent
from politics and organized crime. It is not a secret that VAT reimbursement
has already become a very profitable crime business.

There are several reasons for that. At first the whole procedure
unjustifiably complicated and takes a lot of time to complete.

At second thanks to “personalized” management of the process of
reimbursement by tax authorities and by state treasury this process is not

Also there is no common opinion on amount of funds that should be returned
to one company or another. Documentary revisions of the legality of VAT
reimbursement are often protracted.

Because of this, the funds that should be returned are put off until next
accounting periods and it becomes difficult for tax authorities to pay off
all the money in full.

This situation can be demonstrated using several enterprises, as an example.
Isteel metallurgical company suffered the USD 37.6mn loss because of
non-returned VAT, but Donetsk tax authority insists that the sum of debt
makes up only USD 13.5mn. TNK-BP petroleum company has about USD

74.4mn of non-returned funds.

Country cannot abolish VAT, but it needs to make deep changes in its
collection —–

When the  president asked secretary of national Security and Defense Council
Vitaliy Gayduk to examine the situation with VAT reimbursement he made only
the first step. Afterwards, the internal investigation of performance of
suspected taxpayers and state officials should be carried out.

However, the main step forward is out of the situation is to simplify
procedure of VAT reimbursement. International experts from World Bank

also considered that internal investigations could yield very few results. Huge
fines for those who break law on VAT could replace it.

Local companies just want the tax authorities to behave within the
legislation they established. The most radical way out is to abolish VAT and
to introduce the tax on sales. But the procedure of the new tax introduction
is too complicated and it could bring unexpected results.

Besides VAT is an obligatory law existing in most countries, which is are
trade partners of Ukraine. Finally, the process of integration of the
country to European institutions also demands to keep VAT.   -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
   Choice of new Ukrainian security chief signals shift in president’s backing

COMMENTARY: By Oleksandr Chalenko, Mykhaylo
Hannytskyy and Yaroslav Malyuta
Segodnya daily newspaper, Kiev, in Russian 11 Oct 06; p 2
BBC Monitoring Service, United Kingdom, Thursday, Oct 12, 2006

KIEV – Vitaliy Hayduk, recently appointed by President Viktor Yushchenko as
secretary of the National Security and Defence Council, is a tycoon from
Donetsk, a paper controlled by another Donetsk tycoon, Rinat Akhmetov, has

Hayduk, a former ally of Akhmetov and premier Viktor Yanukovych, is meant

to use his wealth to ensure Yushchenko’s re-election and act as a foil to the
prime minister.

The following is the text of the article by Oleksandr Chalenko, Mykhaylo
Hannytskyy and Yaroslav Malyuta entitled “Yushchenko banking on other
Donetsk people” published in the Ukrainian daily Segodnya on 11 October.
Subheadings are as published:

The newly appointed NSDC [National Security and Defence Council] secretary
[Vitaliy Hayduk] will try to organize a second term for the president.

Yesterday, [President] Viktor Yushchenko finally found a secretary for the
NSDC. And what a secretary!

Vitaliy Hayduk was appointed to the post – a billionaire, co-owner of the
Industrial Union of Donbass [IUD], one-time eminent comrade-in-arms of
[Prime Minister] Viktor Yanukovych and [Donetsk-based tycoon MP] Rinat
Akhmetov and in general a through and through Donetsk person.

However, after the Orange Revolution Hayduk enjoyed the favour of the
president. And during the past month the head of state has in general
surrounded himself with “fledglings from the IUD nest” – the corporation’s
former top manager, Oleksandr Chalyy, became deputy head of the secretariat.

The first deputy head of that agency, Arseniy Yatsenyuk, is also named in
the media as someone close to the corporation, as is the recently appointed
presidential adviser, Oleksandr Zinchenko. And now we have Hayduk.

In this way both the policy of the Yanukovych government and the policy of
the president are now basically determined by representatives of the same
team that ran the Donbass at the end of the 90s.

True, since those times the paths of its leaders have radically diverged.
And there is another big question of how they will work harmoniously from
opposite sides of the barricades.

So far it can certainly be said that along with the arrival of Hayduk there
will be a definitive setting of the star of [propresidential] Our Ukraine
and [Yushchenko’s close allies] the “dear friends” ([Petro] Poroshenko,
[Oleksandr] Tretyakov, [Davyd] Zhvaniya and so on).

It is also likely that the group of the first deputy head of the
secretariat, Ivan Vasyunyk, will be removed from taking serious decisions;
at the beginning of the year the group seriously fell out with Hayduk over
the question of gas (Hayduk was against RosUkrEnergo [middleman firm
supplying gas to Ukraine] and Vasyunyk was in favour).

Political circles are now discussing the option of creating a new
centre-left propresidential party under the auspices of the NSDC secretary
to replace Our Ukraine. Perhaps headed by Zinchenko or [Interior Minister
Yuriy] Lutsenko.

“Hayduk’s appointment is a sign that the president has given up on Our
Ukraine and decided to bank on a new party that will probably be funded by
the IUD,” political scientist Vitaliy Kulyk believes.

This party and the renewed team of the president in general have to
personify the new image of Yushchenko for the people – without the
nationalist “Bandera people” [Stepan Bandera was a nationalist leader who
fought against Soviet power in West Ukraine] from Our Ukraine, without the
“dear friends”, without officials compromised by the gas deals of early
2006, lastly without the Euro-Atlanticists that irritate Russia, like
[Foreign Minister] Borys Tarasyuk (who may be retired and replaced by

Here you have “the father of all Ukraine” rather than just its western part.
It is also understandable why this image is needed – 2009 is not that far
off, when Yushchenko will have to stand for re-election for a second term.
Both Hayduk and the IUD may well become the main managers of the project.
                                   THE CONCILIATOR 
The only thing that is unclear is how the project is to be implemented –
through confrontation with their Donetsk compatriots from the government or
through an amicable understanding (including through cancelling nationwide
elections of the president and the re-election of Yushchenko for a second
term in parliament).

So far it seems that events will unfold according to the latter scenario.
The “regionals” [Yanukovych’s Party of Regions] took the appointment of
Hayduk very calmly and even joyfully.

“It’s good news for us. He is someone inclined to reach agreement. He and
his team are pragmatists and good specialists,” says Taras Chornovil, one of
the leaders of the Party of Regions.

Andriy Shkil, a representative of the opposition Yuliya Tymoshenko Bloc, has
exactly the same opinion. He is sure that Hayduk as a person is inclined to
compromise and will become a means of definitive conciliation between
president and prime minister.

On the other hand, the very same Yatsenyuk, albeit apparently an “IUD man”,
is now acting as the main pioneer in the campaign to fight the government
for the president’s powers.

And indeed, it is unlikely that Hayduk would have been appointed as NSDC
secretary at all if he had not promised Yushchenko to protect him against
Yanukovych’s pretensions.

Most likely, the confrontation between the president (strengthened by IUD
resources) and prime minister will continue right up until the moment when
it becomes definitively clear whether Viktor Andriyovych is capable of being
re-elected for a second term at nationwide elections or not. And that is
still about a year and a half away.                -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

Ukrainian News Agency, Kyiv, Ukraine, Monday, October 23, 2006
KYIV – Political experts believe that Presidential Secretariat First Deputy
Chief Arsenii Yatseniuk is the main candidate for the post of council
chairman of the Our Ukraine People’s Union party (OUPU).

“To date, Yatseniuk is candidate number one,” said Volodymyr Fesenko,
chairman of the Center for Applied Political Studies.

Likewise, Oles Donii, who heads the Center for Political Values Research,
thinks that President Viktor Yuschenko, an honorary chairman of the OUPU,
regards Yatseniuk as the party leader.

“According to the latest reports, the president insists on Arsenii Yatseniuk
leading Our Ukraine,” Donii said.  Vadym Karasiov, head of the Institute of
Global Strategies, said that Yatseniuk’s candidacy, like some other new
people in the party, is good because of his positive image.

“They must be new promising, optimistic managerial persons associated with
optimism rather than defeats, scandals and anti-ratings,” he said.

At the same time, Yatseniuk has some minuses like the lack of experience in
managing and developing the party, insufficient support inside the OUPU
itself and a deficit of time because of his post at the President’s

“He could become an artificial leader whom a significant part of the party
might not accept. I don’t even mention the heads, the founders of Our
Ukraine. A significant part of the party might not accept him, despite the
fact that his is a favorite of Yuschenko. Yatseniuk has got one more
problem. He has absolutely no experience in party work,” Fesenko opined.

At the same time, Yatseniuk may become a good candidate for the top position
on the election list of the party and this is the strong side of the idea of
appointing him as party leader, Donii added. “As a PR product, he is winning
lot,” he said.

The second likely candidate is parliamentary deputy Viacheslav Kyrylenko,
the third one is Mykola Katerynchuk, Fesenko said.

The latter, however, is believed by experts to have insufficient support
inside the party and among the president’s entourage.
Moreover, Katerynchuk prefers Yulia Tymoshenko as the leader for the
opposition camp, while Our Ukraine does not like it, Fesenko added.

“Our Ukraine is not only a pro-Yuschenko party, it is an anti-Tymoshenko
party. This is the specifics that people often forget about. It is true,
Katerynchuk has become the symbol of Our Ukraine renewal, criticism of the
heads, but he has insufficient support either on the part of Yuschenko’s
circle or inside the party,” the analyst said.

Despite this, the political exerts forecast that Katerynchuk will retain his
high position in the party, so as current OUPU leader Roman Bezsmertnyi
owing to his experience, knowledge and ability to maintain balance between
different influential groups inside the party.

Karasiov expects these three politicians to take top posts in the party: the
post of political council head, the post of presidium head and the post of
executive committee head. “It will help achieve balance at the management
level,” he said.

The experts agreed on the point that Presidential Secretariat Chief Viktor
Baloha may become one of the party heads thanks to his perfect
organizational skills.

They do not think Internal Affairs Minister Yurii Lutsenko will appear at
the head of the OUPU as the president’s protege.

It could only be possible if he resigned from the ministerial post and if
Yuschenko requested him directly, Fesenko commented.
Analyzing the candidacy of Lutsenko, Fesenko said that he will not be
accepted in the party; besides, Lutsenko has an ambition to create his own
political project.

The experts believe that despite changes inside the party, MPs Petro
Poroshenko, Oleksandr Tretiakov, Mykola Martynenko, David Zhvania and
Zaporizhia Region Governor Yevhen Chervonenko – all of them were involved in
the September 2005 scandal following corruption accusations – will remain in
the party.

“They don’t want to go and nobody can make them going,” Karasiov stated,
pointing to the influence of these politicians on regional chapters of the
party and party factions, and their contribution to the OUPU budget.

“The fact that the president has decided to build it [the political project]
on renewal of Our Ukraine means that they can be pushed aside for a certain
period of time, but not expelled,” Donii said.

Fesenko noted that these politicians are the people who finance the OUPU

and are important to the party from this point of view. In his opinion, the
party needs to find alternative sources of financing if it wants to reform.

“As an option, involvement of DIU in financing is possible, but it shouldn’t
be ruled out that Pinchuk’s or Pryvat’s money could be there based on the
principle of diversification of the sources of financing. This is one of the
most important guidelines for rebuilding the OU activity – to make it
independent from Poroshenko, Tretiakov and Martynenko,” Fesenko said.

As Ukrainian News earlier reported, the OUPU has postponed the election of
party heads and consideration of statute changes from October 21 to three
weeks later.

Yatseniuk joined the OUPU on October 19. Katerynchuk heads the executive
committee of the party; Bezsmertnyi heads its council and presidium.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

THE ISCIP ANALYST, An Analytical Review, Volume XIII, Number 3,
Institute for the Study of Conflict, Ideology & Policy at Boston University,
Boston, MA, Thursday, 19 October 2006

On Tuesday, the pro-presidential political bloc Our Ukraine (OU) registered
as an opposition party in Ukraine’s parliament. (1)  President Viktor
Yushchenko’s bloc officially pulled out of previous agreements with Prime
Minister Viktor Yanukovich’s ruling Party of Regions and suggested that its
ministers would be withdrawn from the cabinet.

If this occurs, it would leave President Yushchenko with little real
representation in the cabinet, where all domestic (and some foreign) policy
is controlled.  It could also add to the strength of the current
parliamentary opposition, led by former Prime Minister Yulia Tymoshenko.

The “opposition” is still an evolving concept in Ukraine, but already plays
a crucial role in a country still grappling with questions of government
accountability and rule of law.

Given Our Ukraine’s history of vacillation between political partners and
political positions, however, the eventual outcome of this latest twist is
difficult to predict. At a minimum, Our Ukraine’s switch to opposition means
that the bloc, at least temporarily, has halted lengthy, laborious
negotiations with Party of Regions representatives over a legal coalition
agreement.    Beyond this, however, much remains to be seen.

Our Ukraine and the majority of its membership historically have rejected
opposition-oriented alliances, preferring instead to be as near to “the
power” as possible.

Indeed, the bloc’s halting of negotiations this month seems to have had more
to do with the inability of its leadership to secure satisfactory levels of
power-sharing than disagreements over policy.

Despite recent assertions by Our Ukraine that Yanukovich’s policies have led
to the “demolition of Ukraine’s internal and external course,” (2) the Prime
Minister’s policies have not shifted significantly since President
Yushchenko and Our Ukraine signed a “Declaration of National Unity” with
him on 2 August as a condition of his nomination as prime minister.

This agreement listed Ukraine’s domestic and foreign policy objectives and
was hailed by Yushchenko both as a starting point for coalition negotiations
between OU and Regions, and as a guarantee that Yanukovich would follow the
president’s policy objectives.

In reality, the document was vague, lacked enforcement mechanisms and
provided Yanukovich with significant room to maneuver within (or slightly
outside of) the agreement’s stipulations.  He has done so skillfully, while
simultaneously spurning suggestions from Our Ukraine that the bloc is needed
within the governing coalition.

The ruling coalition unites Regions with the Socialists and the Communists,
providing a majority of about 242 out of 450 without Our Ukraine.   Despite
some tension among the participants, the coalition agreement has held well
since its creation.   This has allowed Yanukovich to challenge the president’s
authority – exploiting constitutional inconsistencies over spheres of

On 17 October, OU leader Roman Bezsmertny suggested that, under the
Yanukovich government, “Ukraine’s process of integration into the WTO is
being wrecked, the program of Ukraine’s accession to the EU has been
basically stopped and there has been a fundamental block on Ukraine’s entry
into NATO.”  (3)

It is true that Yanukovich and his coalition have halted preparations for
NATO entry, slowed preparation for the WTO and paid little attention to EU
reforms.  But, given Yanukovich’s previous anti-NATO rhetoric and his
consistent caution towards the WTO and the EU, this should be of little

In fact, the “Declaration of National Unity” provides no timetable for NATO
and EU preparation – Yanukovich refused to sign it if it did.  And, although
the document states that the Yanukovich government and parliamentary
majority will enact reforms “necessary for entering the World Trade
Organization by the end of 2006,” the coalition partner Communist Party
always refused to endorse this particular article of the agreement,
immediately calling it into question.  (4)

Therefore, Our Ukraine could not, or should not, have expected any behavior
other than that which is being exhibited currently by the Yanukovich
government.  Upon signing the “Declaration,” perhaps they had hoped to be
able to influence Yanukovich more heavily, or perhaps they had expected to
be given greater control over government and parliamentary activities.
Neither of these things happened.

Nevertheless, some members of Our Ukraine remain hesitant to make the
transition to the opposition.

Cabinet ministers nominated on the personal quota of President Yushchenko –
who remains the honorary leader of Our Ukraine – have expressed reluctance
to resign.  A spokesman for Foreign Minister Borys Tarasyuk suggested, “A
decision on his resignation is for the president to make.” (5)

Tarasyuk is the leader of one of the largest parties in the Our Ukraine
bloc – a party whose ruling council supported the call for all Our Ukraine
ministers to leave the cabinet and join the opposition.  Interior Minister
Yuriy Lutsenko, Defense Minister Anatoliy Hrytsenko and Justice Minister
Roman Zvarych also have so far rejected the call to resign, while most Our
Ukraine-nominated ministers have remained silent.

President Yushchenko himself initially objected to the idea of his party
going into opposition, despite Yanukovich’s attempts to assert his control
over what have historically been presidential matters.

On 11 October, Yushchenko urged a resumption of negotiations between Our
Ukraine and the Party of Regions.  “I feel most of the participants of the
talks think the negotiations are incomplete and that there is still some
chance to compromise,” he said. (6)

In a clear rebuke – the first of its kind from his party – this idea was
immediately rejected by Our Ukraine.  But at the same time, Bezsmertny
provided confusing answers regarding the type of opposition Our Ukraine will

His most concrete suggestion has been that his bloc will not work closely
with the bloc of former Prime Minister Yulia Tymoshenko, which declared its
“radical opposition” status on 3 August, immediately after Yanukovich’s

Tymoshenko is widely viewed as the country’s primary opposition leader, and
attempted last month to form an inter-party opposition.  Our Ukraine quickly
rejected that idea.

“Our Ukraine does not conduct any negotiations,” Bezsmertny said. “If Yuliya
Volodymyrivna [Tymoshenko] makes relevant proposals, we are ready to renew
a dialogue,” he added.  (7) But they will not approach her, he underscored,
while suggesting that there should be only one opposition bloc.

The remark is reminiscent of Bezsmertny’s comments in 2002 in advance of the
second round of the so-called “Rise Up! Ukraine” protests against
then-President Leonid Kuchma.  Tymoshenko, the Socialists and the Communists
had been leading protests for months, while Our Ukraine’s leadership had
declined to endorse the original protests.

Then, in a change of course at the end of 2002, Bezsmertny suggested that
Our Ukraine “should be the leader of the protests rather than follow
Tymoshenko or anyone else.” (8)  This thought process seems still to be
prevalent in Our Ukraine in 2006.

To underscore their point, this week, Our Ukraine hosted a meeting of
potential opposition partners to create what it calls a “constructive
opposition.”  Nine parties or blocs were invited to the meeting.  The Bloc
of Yulia Tymoshenko – already in opposition – was not.

The omission underscores the animosity between Tymoshenko and certain
members of Our Ukraine; the former prime minister earlier accused several
leaders of the bloc of improperly profiting from their government
connections.  They denied these charges.

The omission also underscores the difficulty Ukrainian politicians will have
in pursuing a unified program.  In recent days, votes in the parliament have
shown serious division between Tymoshenko and Our Ukraine, with both blocs
sometimes voting with the majority, but rarely with each other.

This could have serious, negative consequences for the country’s course to
Europe, which is already endangered, and for President Yushchenko’s agenda.

Yushchenko, Tymoshenko and Our Ukraine’s various leaders have all denounced
the 2007 budget proposal from Yanukovich’s government, suggesting is
backtracks on previous reforms.  The document is said not to use accepted
IMF macro-economic standards for evaluating revenues and expenditures.

 It reportedly cuts funds from social programs championed by Yushchenko,
alters the tax system to provide significant breaks for large businesses
that may be associated with government ministers, and funds regional budgets
based on an arbitrary system that gives regions supporting Yanukovich a much
bigger piece of the pie.

Yushchenko has already stated that he will not sign it if passed as is –
setting up the first real power struggle between the two men.

Yushchenko’s Our Ukraine likely will need the help of Tymoshenko to alter
the budget on behalf of the president.  Bezsmertny’s party holds 79 seats,
while Tymoshenko controls 122.  The apparent attempt to marginalize
Tymoshenko could lead to the failure of Our Ukraine’s legislative proposals.

This is, of course, if Our Ukraine chooses to remain in the opposition.  On
18 October, Our Ukraine’s Minister for Sport, Family and Youth Yuriy
Pavlenko, suggested that his party may return to the bargaining table with
Yanukovich. (9)  At the same time, though, Pavlenko suggested that he is
prepared to resign, while Yushchenko urged Our Ukraine’s ministers to
implement the will of their party. (10)                     -30-
                                        SOURCE NOTES:
(1) “Our Ukraine officially joins opposition (Part 2),” Interfax, 0854 GMT,
17 Oct 06 via (
(2) Agence France Presse, 1309 GMT, 17 Oct 06 via Lexis-Nexis.
(3) Ibid.
(4) See Ukrayinska Pravda
( for the English
language text of the Declaration.
(5) “Ukraine ministers reluctant to form shadow govt. despite party appeal,”
RIA Novosti, 1710 GMT, 17 Oct 06 via (
(6) “President wants to resume coalition talks,” Press Office of Viktor
Yushchenko, 1620 GMT, 11 Oct 06 via
Ukrayinska Pravda, 0951
CET, 17 Oct 06 via (
(8) “Ukrainian Opposition Fails to Unite,” Ukrainska Pravda, 12 Dec 2002.
(9) Ukrayinska Pravda, 18 Oct 06 via (
(10) “President lets OU ministers resign,” Press Office of Viktor
Yushchenko, 1930 GMT, 18 Oct 06 via
By Tammy Lynch (  Institute for the Study of
Conflict, Ideology & Policy at Boston University, 141 Bay State Road,
Boston, MA 02215.

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
                History proves that freedom dies when criticism ends.

COMMENTARY: By Oksana Bashuk Hepburn, Canada
Maidan, Kyiv, Ukraine, October 2006

The announcement by President Yushchenko’s Our Ukraine (OU) party to
go into opposition to the government does not surprise.

The greater surprise happened a few weeks ago when the President called on
Victor Yanukhovych to form a coalition government comprising the Party of
Regions (PR), the Socialists (SPU), the Communists(CPU) and OU. Now
OU is leaving.

In reality, the coalition is untenable. It has no ideological base, no
common policies and no cohesion. Yesterday’s enemies artificially forced a
relationship designed to achieve immediate political imperatives.

The OU wanted to regain some power—get appointed to head ministries
after forfeiting a viable Orange forces coalition; the PR was anxious to
neutralize opposition.

To cover up major political fault lines the parties signed the National
Unity Universal document. To her credit, Yulia Tymoshenko refused to join
the coalition and formed an opposition to the government. Nor did she sign
the document.

Now, it appears, the poyedynokl z dijavolom, the alliance with the devil as
the Ukrainians call unsavory unions, is in jeopardy. Last week Roman
Bezsmertnyj, the party leader announced that OU is joining the opposition
and pulling ministers from the government.

The immediate kicker was the Prime Minister’s negative stand to NATO in
Brussels however, OU accuses him of wider disregard for the Universal.

No surprise here. Once the Universal had served its purpose and once he was
firmly in power, Mr.Yanuchovych was less bound to its principles like the
European integration, quick move towards WTO, promotion of national
Ukrainians symbols, freedom of the press, and, of course, NATO.

Such principles never comprised his party’s political ideology to begin
with. Moreover, it appears, the Universal is not enforceable by law; not
worth the paper it’s written on.

In reality, the Prime Minister can sign it then disregard it as much as he
likes without political consequence. His position is secure as long as he
controls the majority in the Rada, Ukraine’s parliament, or until the people
have had enough of these shenanigans and demand a new election.

It looks like the OU has been outmaneuvered. No surprise here. It has a
history of political ineptness. Consider the following. Its forerunner, and
still an influential component, Rukh championed the independence
movement in 1991.

Over 90% of the populations supported them. Since then, its force has
disintegrated into several parties, including OU. The result? Failure to
capture political control of Ukraine.

Reunited in the 2004 presidential election, the now called Orange forces
again rally tremendous popular support. They surprise and earn respect
from most of Ukraine, the world, with this success.

Not two years later, the political capital squandered by its leaders,
parliamentary power is handed over to Russia’s preferred man Victor
Yanukovych .

The reinvention of OU as the opposition may be its political salvation. It
has lost much support among the people and will no doubt lose more if it
continues to associate with the PR which its electoral base does not.
Ideologically, OU is a much better fit with BYuT than with the PR.

It might distinguish itself once again by joining forces with her to raise
Ukraine to a new level of democratic evolution: a two party system; one in
power and one in opposition.

Democracy, as defined by ancient Greece, and still true today, is a society
in which citizens take turns in being rulers and the ruled. Rulers are those
who win control of parliament in a fair election; the opposition, those who
lose but want to win and rule next.

There were times in history when criticism of the government—the main role
of the opposition—was considered treason, punishable by prison or worse.
This was the reality in the USSR, a one party dictatorship with no
opposition. And death for some 30 million who dared!

Such pathological paranoia may explain the loathing and scorn which still
clings to many politicians, who come from the Communist formation, against
opposition to their “correct” way. Such people are clearly identifiable.
They hurl invectives at those not inclined to support them be it coalitions
or other political views.

Fascist nationalists and emotional national crisis generators, come to mind,
as do the appalling animal name-calling hurled by Mr. Yanukhovych at the
Orange protestors of the falsified presidential elections. These are
yesterday’s people who do not understand the indispensable value of a
opposition and the need for Ukraine to go forward in its political

What does the opposition do? It debates and criticizes; asks embarrassing
questions and makes statements to the press about government’s
questionable dealings. When the public good is at stake, it has the right
and duty to oppose the government’s policies and actions.

By doing so, it is convincing the electorate to give it power to govern in
the next election because it, the opposition, can and will do a better job.

In democracies, the evolution from multi-part to a two-three party systems
clarified the role of the opposition. It became the party whose elected
members do not support the government and who offer themselves to the
voters, not just as individual candidates, but as an organized and
alternative government.

This is exactly what Yulia Tymoshenko did when she declared that BYuT
would not join the PR but sit in parliament as the opposition. If Ukraine is
continue its transformation into a modern state it is imperative that it
moves in this direction. The OU’s decision to join the opposition is a good
step forward.

What might be some others? What is in Ukraine’s best interest?

Ukraine needs what every democracy needs– a strong, forceful opposition,
ideologically united to fight policy battles on important issues with the
government on behalf of the citizens, and in so doing get itself ready for
the next election. And victory.

To win the next election Ukraine’s opposition, like those throughout the
world, needs a winning strategy. To begin, here are six key steps:

[1] Decide that it is an “Orange opposition” understanding that the greater
the integration and movement towards a single party, the greater its chances
of galvanizing the electorate’s support.

[2] Distance itself from losers, former political lights that have disgraces
themselves.l The people do not forget;

[3] Seek models of how other oppositions do it—the Poles, the Brits, the
Americans. Use what fits. Learn quickly, elections are but a few years away;

[4] Establish a shadow cabinet using the best people for the job sharing
positions among the various factions to strengthen cohesion. Reallocate
portfolios periodically to broaden experience, reward talent and deal with
inadequate performance. Develop winners;

[5]  Provide solid debate on issues facing Ukraine– energy and the Russia
factor; foreign affairs; the despicable social inadequacies. The budget is
an excellent time to query spending and financial accounting. Use the media
as much as possible.

[6] Be fearless in criticizing the government in parliament, the media, in
meetings with the electorate, but be fair. Remember, their turn to criticize
will come when they are in the opposition.

Surprise Ukraine again by leading it to a new political reality.      -30-
Oksana Bashuk Hepburn, Canada, President U-CAN a consulting firm is

writing a book about her experiences in Ukraine. 
[return to index] Action Ukraine Report (AUR) Monitoring Service]
     You are welcome to send us names for the AUR distribution list.

Oleh Ilnytskyj, Canadian Slavonic Papers
An Interdisciplinary Journal Devoted to Central and Eastern Europe
Volume 48, Numbers 1-2, March-June 2006
Department of Modern Languages and Cultural Studies
University of Alberta, Edmonton, Alberta, CANADA

The latest issue of Canadian Slavonic Papers contains articles on Ukrainian
literature, Anti-Semitism in Ukraine, and a discussion of Rus’ and national
identity as well as other interesting contributions.
Svitlana Kobets, “Quest for Selfhood and Dystopia in Valerii Shevchuk’s
Eye of the Abyss”
Michael Magner, “La société civile communiste en Pologne et en Hongrie
avant et après 1989″
N.G.O Pereira, “Negative Images of Jews in Recent Russian Literature”
Andrew B. Pernal, “‘Ready to Lay Down His Person and Fortune at Her
Feet’: Prince Boguslaw Radziwill’s Proposal for Marriage with Mary Stuart,
Princess Royal of England and Princess of Orange in 1653-1654″
Per Anders Rudling, “Organized Anti-Semitism in Contemporary Ukraine:
Structure, Influence and Ideology”
T. Allan Smith, “Death and Transfiguration: The Final Hours of Muscovite
Gary H. Toops, “A Contrastive Perspective on Several Morphosyntactic
Features of Upper Sorbian”
Charles J. Halperin, “Rus’, Russia and National Identity”
Oleh S. Ilnytzkyj, “Reply to Charles J. Halperin (“Rus’, Russia and
National Identity”)”
Charles J. Halperin, “Reply to Oleh S. Ilnytzkyj (“Rus’, Russia and
National Identity”)”
For more information (including abstracts of articles), please visit
Canadian Slavonic Papers, 200 Arts Building
Department of Modern Languages and Cultural Studies
University of Alberta, Edmonton, Alberta, CANADA, T6G 2E6
Telephone: 780-492-2566; Fax: 780-492-9106; E-mail:
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

Natalie Kononenko, Kule Chair of Ukrainian Ethnography
University of Alberta, Modern Languages and Cultural Studies
Edmonton, Alberta, Canada, October 2006

Dear Colleagues,

I am writing to announce a different sort of addition to our website
at  Up to now, we have tried to
document Ukrainian folklore in Ukraine.  Since moving to Edmonton,

we have begun documenting Ukrainian folklore in Canada.

Two items are now up.  One is a 3-D model of a Ukrainian Catholic
church just north of Bruderheim called Church of Jaroslaw.  It is in
danger of being closed and so it is the building we documented first.
Narratives that go along with the church (I conducted interviews
while Peter Holloway filmed) should be up shortly.

The other item is 3-D images of pysanky collections.  Last summer
Mariya Lesiv, one of the graduate students, did the photography.  We
are now beginning to convert the photos to 3-D models and to display
them.  We have a “page” up from four of the collections we did.  In
other words, we have samples and should have more material shortly.

Feedback and suggestions welcome.  We would particularly welcome
comments on Pysanka resolution.  Currently, you have a choice of high
or low.  Does the resolution make a difference to you?  Is it worth
giving high resolution images in spite of the time they take to
download?  Are the low resolution images adequate for you purposes?
Natalie Kononenko, Kule Chair of Ukrainian Ethnography
University of Alberta, Modern Languages and Cultural Studies
200 Arts Building, Edmonton, Alberta, Canada T6G 2E6
Web:                 -30-

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
Ukrainian News Agency, Kyiv, Ukraine, Saturday, October 14, 2006

KYIV – President Viktor Yuschenko has approved the national concept for
cooperation with Ukrainians abroad. This follows from presidential decree
No. 875/2006 dated October 13, a copy of which was made available to
Ukrainian News.

According to the document, the concept is aimed at developing the national
awareness of the Ukrainians who live abroad, satisfying their national and
cultural, educational, language and informational needs. Yuschenko
commissioned the Cabinet of Ministers to ensure implementation of the
concept provisions.

The concept says that the state policy is based on recognition of Ukrainians
abroad as integral part of the world Ukrainian community.

Ukraine undertakes to ensure observance and protection of rights, liberties
and interests of Ukrainians abroad, satisfaction of their cultural,
informational, educational, social and humanitarian needs. Ukraine also
pledges to facilitate opening of culture and information centers in the
countries where Ukrainians live.

Ukraine plans to provide support to citizens in creating unions and
particularly help the Ukrainian World Coordination Council deepen
cooperation with Ukrainians abroad.

Executive power agencies in Ukraine should organize and provide
informational support in work with Ukrainians abroad and their public
organizations, facilitate preservation and development of the Ukrainian
language and culture, implementation of educational programs and projects,
create conditions for Ukrainians abroad to get education in Ukraine, ensure
informational coverage of democratic transformations in Ukraine.

Also, executive power organs intend to cooperate with Ukrainian businessmen
abroad in order to channel investments into Ukraine, to take part in work of
corresponding commissions for cooperation in protecting rights of national
minorities, to facilitate organization and holding of festivals, forums,
meetings, Olympiads, contests and other cultural and educational events in
Ukraine and abroad.

Executive power organs will monitor observance of rights and interests of
Ukrainians abroad, analyze tendencies in their environments and in their
relations with power organs in foreign countries.

As Ukrainian News earlier reported, on July 26, the Cabinet of Ministers
approved the state program for cooperation with Ukrainians abroad for the
period until 2010.                                       -30-

FOOTNOTE:  It will be interesting to watch and see if this program turns
out to anything most than just a piece of paper. Given the government’s
budget limitations and the party in power it will be surprising if anything
actually happens.        AUR EDITOR
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