AUR#783 Nov 1 Nuclear Fuel Program; Ukraine Sells Electricity; Romania’s Economic Situation; Oligarchs; Waiting To Be Saved; Executions In Karelia, Russia

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  Critical program to provide Ukraine with an alternative source of nuclear fuel
Ukrainian News Agency, Kyiv, Ukraine, Monday, October 30, 2006
                         COOPERATION WITH WESTINGHOUSE
Interfax-Ukraine, Kyiv, Ukraine, Tuesday, October 31, 2006


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

Interfax-Ukraine, Kyiv, Ukraine, Friday, October 27, 2006

Interfax-Ukraine, Kyiv, Ukraine, Monday, October 30, 2006


                  USING RUSSIAN-UKRAINIAN LAUNCH VEHICLE                     
Interfax-Ukraine, Kyiv, Ukraine, Tuesday, Oct 31, 2006


By Faruk Akkan, Zaman Daily Newspaper
Istanbul, Turkey, Sunday, October 29, 2006


                       TO BUY ELECTRICITY FROM UKRAINE 
Interfax-Ukraine, Kyiv, Ukraine, Tuesday, October 31, 2006


       Has plans on economizing projects in Ukraine, Romania and Bulgaria
Interfax-Ukraine, Kyiv, Ukraine, Monday, October 30, 2006

              Ukraine’s neighbor will be entering the European Union soon
By Sergiy Kasyanenko,
Radu Mihai Balan, and Edilberto L. Segura
SigmaBleyzer Emerging Markets Private Equity Investment Group,
The Bleyzer Foundation, Bucharest, Romania, Wed, Nov 1, 2006

       Industrial Union of Donbass, already control sizable assets abroad, with
        steel mills in Poland and Hungary. Ukraine’s Privat business group has
         interests in ferro-alloy plants in the US, Poland, Romania and Russia.
By Roman Olearchyk in Kiev, Financial Times
London, United Kingdom, Tuesday, October 31 2006

12.                                    “LIFE IN PRIVATE”
    Ukrainian metals & banking tycoon Boholyubov not interested in politics
With Henadiy Boholyubov, Co-Owner, Pryvat Group
BY: Kipiani, Ukrayinska Pravda website, Kiev, in Ukrainian 6 Oct 06
BBC Monitoring Service, United Kingdom, Thu, Oct 26, 2006

COMMENTARY: Diena newspaper, Riga, Latvia, in Latvian 30 Oct 06
BBC Monitoring Service, United Kingdom, Monday, Oct 30, 2006


PRESENTATION: by Petro V. Kanana
Assistant to the Minister of Defense of Ukraine
Ukraine’s Quest for Mature Nation Statehood Roundtable VII:
Ukraine and NATO Membership
Washington, DC, 17-18 October, 2006

Associated Press (AP), Tallinn, Estonia, Monday, October 30, 2006

16.                                   WAITING TO BE SAVED
                  The region’s only blood cell separator is out of service
         World experience says juvenile cancer has a 70-90 percent cure rate
By Iryna Havrysheva, The Day Weekly Digest #34
Kyiv, Ukraine, Tuesday, October 31, 2006

17.                            THE REBELLIOUS IVAN DRACH
               A jubilee soiree was recently held in honor of the prominent
        Ukrainian poet, translator, screen writer, and public figure Ivan Drach.
By Iryna Kononenko, The Day Weekly Digest in English, #34
Kyiv, Ukraine, Tuesday, October 31, 2006

             “These graves hide thousands of unwritten books, unstaged plays,
               and thwarted discoveries. Whole pages of Ukrainian and world
                                  history were mercilessly ripped out.”
By Serhii Shevchenko, Journalist and Researcher
The Day Weekly Digest in English, #34
Kyiv, Ukraine, Tuesday, October 31, 2006

19.                      SUPPORTING DEMOCRACY — OR NOT
OP-ED: By Anne Applebaum, Columnist
The Washington Post, Washington, D.C.,
Tuesday, October 31, 2006; Page A21
  Critical program to provide Ukraine with an alternative source of nuclear fuel

Ukrainian News Agency, Kyiv, Ukraine, Monday, October 30, 2006

KYIV – The Enerhoatom national nuclear power generating company and the
Westinghouse Electric Company (United States) have begun the implementation
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).

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

The second stage of the nuclear fuel qualification program provides for the
production and supplies to Ukraine of 42 fuel cassettes for one complete
re-loading of the active zone of the third reactor of the Southern Ukrainian
nuclear power station.

As a result of the project, the U.S. company is to give Ukraine technologies
of designing of nuclear fuel and active zones, the licensing of the nuclear
fuel and the analysis of safety of reactors.

At present, the Southern Ukrainian nuclear power station is performing pilot
exploitation of six Westinghouse-made experimental fuel cassettes loaded
into its third reactor.

As Ukrainian News earlier reported, in August 2005, the Southern Ukrainian
nuclear power station loaded six Westinghouse-made experimental fuel
cassettes into its third reactor.

In October, the Fuel and Energy Ministry said that Westinghouse could

become the alternative supplier of nuclear fuel to Ukrainian nuclear power
stations along with Russian in two or three years.

The government of the United States decided in February to prolong the 
program for qualification of Ukraine’s nuclear fuel.

The program of qualification of nuclear fuel was working in Ukraine at the
cost of the U.S. government’s grants from 1996 to 2003, following which it
was suspended by the U.S. party that decided this program must be carried
out as a business project.

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.

The Russian TVEL corporation is the monopoly supplier of nuclear fuel to
four Ukrainian NPPs.  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]

Interfax-Ukraine, Kyiv, Ukraine, Tuesday, October 31, 2006

KYIV – The new head of the Energoatom national nuclear power generating
company, Andriy Derkach, has called on U.S. company Westinghouse,

whose officials visited Ukraine last week, to widen cooperation.

“Programs of cooperation on commercial terms should come to replace
programs of support. Given the features of the industry, it won’t be possible
to achieve that swiftly. But, the sooner we start moving in this direction, the
better for both sides,” he said at a meeting with the U.S. company

Westinghouse President Michael E. Kirst said the company was willing to

mull over the proposals from Energoatom.                -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
           Enerhoatom and Westinghouse Electric Company (United States) 
           introducing 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 company.

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]


Interfax-Ukraine, Kyiv, Ukraine, Friday, October 27, 2006

KYIV – Duferco and Ukraine’s Industrial Union of Donbas (IUD) have reached
agreement to ship up to 1.4 million tonnes of steel slabs annually to
Chicago-based Esmark Incorporated over a period of six years with a possible
extension, the companies said in a joint press release.

“We are very pleased to announce this arrangement with Duferco/ISD, two of
the world’s most respected steelmakers and leading providers of steel slabs
to the North American market,” said James P. Bouchard, Chairman and Chief
Executive Officer of Esmark.

“This agreement further strengthens Esmark’s strong domestic and
international partnerships. Duferco/ISD are committed to providing Esmark
with a low-cost supply of slabs that we believe could be used to restructure
the cost structure of Wheeling-Pitt in the event of a combination with
Esmark, the press release reads.

“Specifically, the Duferco/ISD agreement would provide a long-term slab
agreement that we believe would allow us to expand Wheeling-Pitt’s current
1.7 million ton per year electric arc furnace (EAF) output to 2.0 million
tons and increase Wheeling-Pitt’s total hot strip mill capacity to 3.4
million tons per year without running the high cost blast furnace.

In short, this agreement would provide the resources for a combined company
comprised of Esmark and Wheeling-Pitt to provide its domestic and
international customers with a low-cost steel supply chain.”     -30-

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Interfax-Ukraine, Kyiv, Ukraine, Monday, October 30, 2006

KYIV – Bunge Ukraine has asked Ukrainian Premier Viktor Yanukovych to
examine the situation around its CJSC Dnipropetrovsk vegetable oil refinery.
The company said in a report that it had sent its appeal to the premier.

“[Corporate] raiders have not given up their plans to illegally seize the
enterprise,” the company said, stressing the need for urgent and resolute
measures. Bunge Ukraine said it believes the problem can be solved if the
government gets involved.

In May 2006, a group of minority stockholders in the Dnipropetrovsk oil
refinery announced their intention to launch litigation to return to
employees a controlling stake in the refinery, which is currently owned by
foreign investors.

In turn, Bunge, which owns over 94% of the stocks in the refinery, reported
an attack on the refinery by raiders and unjustifiable rulings made by the
courts.                                                           -30-

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

                 Satellite marked the fifth Sea Launch mission in 2006.  

Interfax-Ukraine, Kyiv, Ukraine, Tuesday, Oct 31, 2006

KYIV – An XM-4 satellite, launched with a Zenit Russian-Ukrainian launch

vehicle early on Tuesday, has been put into orbit, Russia’s Mission Control
in Korolyov told Interfax-AVN.

“The orbit parameters are close to the targets. The customer will take
control of the satellite soon,” a Mission Control source said.

The satellite marked the fifth Sea Launch mission since the beginning of the

The XM-4 satellite was made by Boeing on order from a U.S.
telecommunications company, and gadgetry for the satellite was manufactured
by France’s Alcatel. The satellite has 170 digital channels and will provide
radio broadcasting services to 7 million users.

The Sea Launch complex comprises the Zenit launch vehicle, the Odyssey
launch platform and the command ship, the Sea Launch Commander. Satellites
are launched from the equatorial sector of the Pacific.

The Sea Launch company was formed in April 1995 by Boeing Commercial

Space Company (U.S. with a 40% stake,) Energia corporation (Russia, with a
25% stake,) Kvaerner Maritimea.s (Norway with a 20% stake) and the state
design bureau Yuzhnoye and Izhmash corporation (Ukraine, with a 15% stake.)
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
By Faruk Akkan, Zaman Daily Newspaper
Istanbul, Turkey, Sunday, October 29, 2006

Russian concerns that Russian energy giant Gasprom will be unable to supply
the required natural gas for this winter’s domestic electricity consumption
have prompted a decision to purchase Ukraine’s excess electricity.

Russia cut natural gas supplies to Ukraine in 2005 as part of a move to
pressure Ukraine, which rejected an increase in prices.

This time, Russia has demanded Ukraine’s excess electricity because of
Moscow’s concern about Gazprom’s ability to supply enough gas for

Russia’s Unified Energy Systems (EES) electricity monopoly is now buying
electricity from abroad because it is faced with a severe lack of gas to
power its generating plants for the winter.

In October, EES entered into negotiations with the Ukrainian Fuel and Energy
Ministry to buy excess electricity.

Moscow agreed to purchase some 6 billion kilowatt-hours from Ukraine to
make up for expected shortfalls in western Russia.

In the winter of 2005-2006, Gazprom was forced to briefly limit supplies to
Europe in order to keep the lights on in Moscow.

EES head Anatoly Chubais blamed Gazprom, which controls 25 percent
of the world’s gas reserves and 94 percent of Russia’s natural gas, for the
potential gas deficit.

Chubais said that Gazprom was unable or unwilling to supply generating
companies in Russia with enough gas and this had forced them to buy more
expensive diesel fuel to power their plants.

In 2006 the cost of diesel rose by over 85 percent, but electricity prices
remained stable.

According to Chubais, the gas shortage makes the present cost of diesel fuel
equivalent to $185 per 1,000 cubic meters of gas. EES buys gas from
Gazprom at $46 per 1,000 cubic meters.
                          GASPROM LACKS INVESTMENTS
Russian experts agree that the reason behind Russia’s domestic gas shortage
is due to Gazprom’s lacking investments and the company’s involvement in too
many different projects at the same time.

With Gazprom’s main gas fields running low, the company are reported to not
have enough financing. Instead, the company, which is $38 billion dollars in
debt, has concentrated on non-essential activities such as buying European
energy companies.

In September 2005 alone, Gazprom spent $13 billion to buy oil giant Sibneft
in a bid to transform itself into an integrated energy company.

Chubais believes that the gas market should be liberalized along European
lines and that Gazprom’s pipelines should be opened to independent gas
producers.                                        -30-

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                       TO BUY ELECTRICITY FROM UKRAINE 

Interfax-Ukraine, Kyiv, Ukraine, Tuesday, October 31, 2006

KYIV – Hungarian energy trader Emfesz Kft, the dominant player on

Hungary’s liberalized natural gas market, has signed a contract to buy
1,500 GWh of electricity from Ukraine in 2007, to be sold on Hungary’s
liberalized electricity market, Emfesz said on its website.

“Emfesz Managing Director Istvan Goczi signed a contract with Ukraine’s
Ukrinterenergo on the purchase of 1.5 GWh of electricity,” Emfesz
spokesperson Boris Shestakov was quoted as saying.

The contract is valid for one year. Distributing the imported electricity in
Hungary will mark Emfesz’s debut on the liberalized electricity market.

So far Emfesz has concentrated on Hungary’s liberalized gas market, where

it has carved out an 80% market share with annual gas sales of 2.6 billion
cubic meters, mostly selling gas imported from Central Asia.

Shestakov told Interfax earlier the company has “no fears” that the imported
electricity will remain unsold, with Emfesz targeting customers both in
Hungary and in third countries.                          -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

      Has plans on economizing projects in Ukraine, Romania and Bulgaria

Interfax-Ukraine, Kyiv, Ukraine, Monday, October 30, 2006

KYIV – Czech company Blackstone Global Ventures, a CO2 emission

allowances asset manager, will invest EUR 850,000 in Ukrainian tire maker
Dniproshina’s green project in order to save CO2 emission allowances,
which the Czech firm will then resell, Blackstone told Interfax Monday.

“We made a verbal agreement with the Ukrainian government about our
participation in the so called ‘green investment program,’ in which the
profit from Ukrainian alternatives to CO2 emission allowances will be
reinvested into clean technologies,” Blackstone director Stanislav Kolar
told Interfax.

Kolar said that the company signed a deal for the first project within the
scope of the governmental agreement with tire maker Dniproshina, in the
Dnipropetrovsk region, to finance 10% of the total EUR 8.5 million
investment into the implementation of a more efficient energy and heat
production turbine facility – a combined heat and power (CMP) unit. This
project should be finalized by the end-2007.

According to Kolar, the deal with Ukraine brings new possibilities for the
Czech energy companies in their greenhouse gas emissions’ reduction and

CO2 emission allowances trade.

In addition, Blackstone has plans on economizing projects in Ukraine,
Romania and Bulgaria, which will save some two million tones of CO2

emission allowances per year, corresponding to some CZK 750 million a
year, according to current CO2 emission allowance prices on world markets.

The projects are implemented within the Kyoto Protocol, which makes it
possible for Czech companies to invest through Blackstone in such projects
in Ukraine, Romania or Bulgaria.                             -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
                Ukraine’s neighbor will be entering the European Union soon 

Radu Mihai Balan, Edilberto L. Segura
SigmaBleyzer Emerging Markets Private Equity Investment Group,
The Bleyzer Foundation, Bucharest, Romania, Wed, Nov 1, 2006

[1] In January-August, industrial output continued to accelerate growing by
7.2% year-over-year.

[2] On October 13th, the Government of Romania approved a draft budget
for 2007, which envisions a deficit of 2.8% of GDP.

[3] Over the first eight months of the year, the consolidated budget surplus
amounted to RON 5.27 billion (EUR 1.58 billion) or 1.58% of full year
GDP. Due to optimistic growth of fiscal revenues, the year-end budget

deficit is expected to be below the projected level of 2.5% of GDP.

[4] In September, strong disinflation dynamics persisted as consumer
price inflation fell to 5.48% yoy from 6.02% a month ago.

[5] During the first eight months of 2006, the merchandize trade deficit
(FOB/CIF) widened to EUR 8.43 billion, expanding by 44.7% yoy.

[6] In January-August, the current account deficit widened to EUR 5.9
billion growing by 51% yoy. Net FDI inflows in the amount of EUR 4.33
billion allowed for financing of about 73.1% of the current account gap.

[7] Moody’s improved Romania’s sovereign credit rating to investment
                                ECONOMIC GROWTH
In January-August, industrial output continued to accelerate, growing by
7.2% year-over-year (yoy); however, the upward trend of the growth rate
of industrial production flattened due to the deceleration of the monthly
output expansion in mining and manufacturing, where growth rates have
been slowing after hitting record levels in May 2006.

During the first eight months of this year, output in manufacturing grew by
7.7% yoy against the same period of the previous year supported by the
robust growth of the food processing industry (up by 16.3% yoy), chemical
industry (19.2% yoy), automobile industry (17.9% yoy), wood processing
industry and furniture production (up by 7.5% yoy and 21.4% yoy

In January-August, output contraction in fuel processing was registered

for the first time since the beginning of the year as production fell by 1.2%
yoy for the period.

Performance in the machine building sector has been disappointing since
February and continued to deteriorate in August as output fell by 1.4% yoy.
Moreover, despite a modest growth of production in the leather and footwear
industry by 0.6% yoy, the stagnation of light industry is unlikely to stop
as production of clothes and textiles shrank by 8% yoy and 15.5% yoy
respectively in January-August.

In August, the growth rate of industry decelerated to 6.7% yoy from 10%
yoy in July, driven by the slower output expansion in mining (up by 0.3%
yoy) and manufacturing.

Output in manufacturing decelerated to 7% yoy from 10.4% yoy in August
due to the record high contraction rates in machine-building and fuel
processing, where production dropped by 12.7% yoy and 13.9% yoy
respectively. In addition, weaker performance of several other sectors
exerted a downward pressure on the growth of the real sector.

In particular, wood processing and furniture production has been steadily
decelerating since May, though in August both sectors still grew faster
than their average growth rates during the first four months of 2006.

In August, output in metallurgy posted a considerably slower growth rate,
increasing by only 0.7% yoy as compared to 22.4% yoy in the previous

However, this deceleration can be explained by the especially weak
performance of metallurgy during the second quarter of 2005 when the
average monthly contraction rate exceeded 10%.

Consequently, the exceptionally high growth rates of metallurgy in the
second quarter of 2006 can be attributed to the robust recovery of
domestic demand supported by the notable expansion of construction
and industry. Furthermore, the rapid growth of imports of metallurgical
products is additional evidence of stronger domestic demand.

At the same time, a large share of these imports represents semi-processed
products that will undergo final processing stages in Romania, as many
domestic steel processing mills operate under processing arrangements
with foreign contractors.

Finally, in August the growth of the real sector was strongly supported
by the record high expansion of the chemical industry (up by 56.2% yoy),
robust growth of output in utilities (14.2% yoy) and accelerated production
in the automobile industry (18.7% yoy).
                                   FISCAL POLICY
On October 13th, the Government of Romania approved a draft budget for
2007 that envisions a deficit of 2.8% of GDP up from a projected 2.5% in
2006. In 2007, consolidated budget revenues are expected to increase to
35.18% of GDP or EUR 38 billion.

The budget is based on the following projections of the fundamental
macroeconomic indicators: GDP is expected to grow by 6.4% in real
terms, while nominal GDP is set at EUR 108 billion.

In 2007, the average inflation and exchange rate are forecasted at 4.5%
and RON 3.53 to EUR 1, respectively. In addition, the inflow of EU
funds to finance post-accession adjustment programs (Romania is
expected to co-finance these programs in the amount of 0.56% of GDP)
is anticipated to reach 2.1% of GDP in 2007, while Romania will
contribute EUR 1.1 billion (1.02% of GDP) to the EU budget.

Notably, the government plans to channel about 6.6% of GDP to
capital expenditures, with the lion’s share of these funds absorbed by
infrastructure projects.

On October 10th, the IMF issued a statement arguing that a high deficit
would deepen macroeconomic imbalances as procyclical fiscal loosening
may threaten the disinflation process and widen the current account deficit.

In particular, the IMF urges the government to refrain from large wage
increases and warns that the 18.2% planned hike of the minimum wage
(from RON 330 to RON 390) could be a major obstacle to meeting
inflation targets in 2007.

Furthermore, according to the IMF, the capacity of the government to
implement massive capital investments is not properly developed; as a
result, unutilized funds may be spent on current expenditure exacerbating
demand pressures.

In January-August, consolidated budget revenues continued to post strong
growth rates, increasing by 22.2% yoy to RON 68.04 billion while budget
expenditures grew by 16.25% yoy to RON 62.74 billion. As a result,
over the first eight months of the year, the consolidated budget surplus
amounted to RON 5.27 billion (EUR 1.58 billion) or 1.58% of GDP.

Robust growth of fiscal revenues, moderate expansion of government
spending, as well as the availability of unutilized funds within the
ministries improve the likelihood that the budget deficit will not achieve
the projected 2.5% of GDP this year. Notably, in January-August
consolidated budget expenditures reached only 54% of total planned
expenditure for this year (RON 116.9 billion).

To meet this target, the government should accelerate budget spending to
about 30% yoy on average during the next four months. However, under
Romania’s commitment to prudent and transparent fiscal procedures,
such acceleration is hardly feasible.

According to the ministry of Public Finance, consolidate budget revenues
totaled RON 71.43 billion in January-September or 22% higher against the
same period of the previous year.

On the back of rapid growth of wages and household incomes, the growth
of income tax revenues accelerated to 39.3% yoy from 38.8% yoy in January-
August. Despite slight deceleration, the collection of VAT remained strong
as well, growing by 25.2% yoy to RON 19.7 billion (EUR 5.6 billion).

However, with the exception of proceeds from customs duties (which
increased by 19% yoy), revenues from profit tax and excises continued to
slow, growing by 14.6% yoy and 11.4% yoy respectively.

According to the National Bank of Romania, the stock of medium and
long-term external debt grew at a slower rate, increasing by only 0.46%
month-overmonth (mom) to EUR 25 billion in August. Public and
publicly guaranteed debt continued to decline (falling by EUR 40 million),
while private external debt experienced a moderate increase in the amount
of EUR 155 million.
                                 MONETARY POLICY
In September, strong disinflation dynamics persisted as consumer price
inflation (CPI) fell to 5.48% yoy from 6.02% a month ago. Favorable
developments were registered in all three components of the CPI as
price indexes of foods, non-foods and services posted slower growth rates
than in August.

The prices of foods increased by only 2.08% yoy as compared to 5% yoy
growth registered in September 2005. In 2006, modest price increases of
food commodities were supported by the relatively stable supply of
agricultural products due to the stronger performance of agriculture (thanks
to more favorable weather conditions.)

While prices of vegetables, meat, milk and bread (commodities that account
for more than 1/4 of the consumer bucket) surged by 30.7% yoy, 8.7%
yoy, 8% yoy and 6.4% yoy respectively in September 2005, in the same
month of this year prices of vegetables and meat fell by 1.2% yoy and 0.8%
yoy while prices of milk and bread grew much slower, increasing by 5.3%
yoy and 2.1% yoy.

In September 2006, prices of non-food commodities decelerated to 7.5%
yoy from 8% yoy in August. Higher prices of utilities and tobacco (up by
12% yoy and 29% yoy in September) are key factors influencing the
evolution of the non-food price index.

Furthermore, the contribution of these factors to year-end CPI is likely to
be around 3 percentage points, as further upward adjustments of excise
duties and administered tariffs, (which had the highest impact on the
prices of these two commodities) will probably be postponed until 2007.

In addition, decelerating prices of fuels (up by 2% yoy in September) due
to declining world oil prices could mitigate the impact of higher prices of
other non-food commodities on CPI.

Finally, service tariffs slightly decelerated to 8.26% yoy in September. At
the same time, the resistance of the service price index to losing speed is
due to steadily increasing tariffs of all service categories, as their
prices grew on average by 8% yoy in September.

In particular, water supply tariffs increased by 20.3% yoy, tele-
communication tariffs by 4.2% yoy and transportation fares by 7% yoy.

In September, CPI inched up by 0.1% month-over-month (mom) driven
by accelerated inflation of service tariffs, which grew by 1.2% mom –
the highest monthly increase in 2006. Higher tariffs of telecommunication
services (up by 2.2% mom in September) contributed about ¾ of the
monthly increase of the service price index.

A downward trend in phone tariffs, which supported strong deceleration
of service tariffs during the first five months of the year, reversed in
June and a record growth rate of phone tariffs of 3.06% mom was
registered in September.

Notably, in January-September, CPI increased by only 2.76% since the
beginning of the year as compared to 5.8% inflation registered for the same
period of the previous year.

As a result, relatively moderate inflation during the first nine month of
2006 allows to expect that the year-end inflation target of 5% ±1% is
likely to be feasible for the central bank.

On the back of a flatter upward trend of the growth rate of non-government
credit, money supply decelerated slightly in August as monetary aggregate
M2 grew by 28.10% yoy to RON 98.3 billion, compared to the 29.4%
growth rate registered in July.

The growth rate of non-government credit failed to accelerate for the first
time since April, though it still remained high, falling to 56.9% yoy from
57.1% yoy in July. Though the growth of RON-denominated credit
decelerated slightly to 104.9% yoy from 106.5% yoy in July, forex-
denominated credit resumed acceleration, growing by 24.13% yoy in

Although the central bank managed to curb rapid expansion of forex-
denominated credit (as the growth rates of forex-denominated credit has
been falling since April 2005), the growth rate of forex-denominated
credit leveled out and exhibited a slight tendency to increase starting May

Driven by the robust growth of loans denominated in foreign currencies
and issued to households, which grew on average by over 50% yoy
in 2006, and the slight acceleration of forex loans issued to other economic
agents, the growth rate of forex-denominated credit is likely to follow an
upward trend through the rest of the year.

In August, the share of consumer loans and mortgages in the total volume
of loans amounted to 40.9%. Consumer loans expanded by 101% yoy in
August supported by the brisk growth of RON-denominated consumer
loans, which gained 131% yoy against the same month of the previous year.

Though real-estate mortgages constitute only 20% of all loans issued to
households, their volume increased by 52.8% yoy in August due to the
rapid growth of RON-denominated mortgages (up by 167% yoy) and
forex-denominated mortgages (42.6% yoy).
In August, exports (FOB) continued to decelerate increasing by 7.4% yoy –
the second lowest growth rate registered in 2006, while imports (CIF)
slightly accelerated to 24% yoy, growing to EUR 3.35 billion.

Driven by the slower growth of exports, the monthly merchandize trade
deficit (FOB/CIF) hit another record high level, widening to EUR 1.35

Strong domestic demand for imports fueled by growing industry, robust
economic growth combined with a slower performance of exports
continued to support the rapid widening of the trade deficit.

During the first eight months of 2006 exports (FOB) increased by 17.3%
yoy to EUR 16.89 billion while imports (CIF) totaled EUR 25.32 billion
which, is 25.2% yoy higher compared to the same period of the previous

As a result, the trade deficit (FOB/CIF) amounted to EUR 8.43 billion in
January-August, expanding by 44.7% yoy. The dynamics of the trade
deficit are largely influenced by the evolving structure of exports.

While the exports of low value added commodities (such as textiles and
closing), which account for the large share of Romania’s exports, have
been steadily declining due to the stronger competition from the Asian
producers, the growth rates of exports of high value added products
(for example, machinery and equipment) were not sufficient to cover the
resulting gap in exports revenues.

In January-August, a deceleration of exports is mainly driven by the slower
growth rate of exports of mineral products (due to the declining world
prices of oil), which increased by only 19.3% yoy in January-August
as compared to 33.1% yoy in January-July.

At the same time, the growth rates of exports of machinery and textiles
were only marginally below the levels posted in the previous month.

On a positive note, exports of metals have been accelerating for the fifth
month and grew by 10.3% yoy in January-August. In addition, transportation
continued to be the most dynamic component of exports, as exports of
vehicles grew by 65% yoy.

In January-August, imports of vehicles, metallurgical products and
chemicals accelerated while the imports of textiles, machinery and mineral
products posted slightly lower growth rates than in January-July.

In January-August, the current account deficit widened further to EUR
5.9 billion, increasing by 51% yoy over the same period of 2005 fueled
by the accelerated growth of the trade in goods deficit to 51.8% yoy
from 46.9% in January-July.

During the first eight months of the year, the current transfer balance
improved, posting a 7.1% yoy gain as compared to a -2.6% yoy loss
registered in January-July. However, the incomes deficit deepened,
growing by 20.6% yoy to EUR 2.03 billion.

On the positive side, about 73.1% of the current account gap was covered
with FDI inflows, which amounted to EUR 4.33 billion in January-August.
Finally, foreign exchange reserves (including monetary gold) of the central
bank grew by EUR 167 million in September to EUR 20.3 billion and the
imports cover ratio settled at 6 months.
                             OTHER DEVELOPMENTS
In October, Moody’s improved Romania’s sovereign credit rating to
investment grade (Baa3) from speculative (Ba1). According to the agency,
this upgrade was prompted by improvements in economic institutions
and a reduction of the government’s debt burden.

The Ministry of Public Finance signed a memorandum with the European
Investments Bank (EIB) under which the EIB is expected to finance
projects in Romania with a total value projected at EUR 1 billion per

Additionally, the EIB agreed to lend Romania EUR 63 million for the third
stage of the Bucharest underground upgrade. In 1990-2005, the EIB issued
loans to Romania in the amount of EUR 4.3 billion for programs facilitating
EU accession, including transportation, environmental, health and education

The board of the European Bank for Reconstruction and Development
approved a credit facility in the amount of EUR 40 million for small and
medium enterprises in Romania, as part of a EUR 82.5 million loan.

In October, France and Belgium endorsed Romania’s EU accession treaty,
increasing the number of EU member states that have ratified this treaty to
23. Germany and Denmark are expected to ratify Romania’s EU accession
treaty by the end of the year.
NOTE: To read the entire SigmaBleyzer/The Bleyzer Foundation Romania
Macroeconomic Situation report for October, 2006 and previous monthly
reports in a PDF format, including several color charts and graphics click
on the following link:
NOTE:  SigmaBleyzer/The Bleyzer Foundation also publishes monthly
Macroeconomic Situation Reports for Bulgaria and Ukraine. They are
published at
Government Affairs, Washington Office, SigmaBleyzer, Washington, D.C.,,,
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

       Industrial Union of Donbass, already control sizable assets abroad, with
        steel mills in Poland and Hungary. Ukraine’s Privat business group has
         interests in ferro-alloy plants in the US, Poland, Romania and Russia.

By Roman Olearchyk in Kiev, Financial Times
London, United Kingdom, Tuesday, October 31 2006

KIEV – Ukraine’s billionaire businessmen have changed since the Orange
Revolution signalled an end to the cronyism that made them rich.

Opportunities for buying prized state-assets dirt-cheap are fading and
larger foreign competitors are moving in. Ukraine’s business elite is, as a
result, concentrating efforts on increasing shareholder value of assets
grabbed in the good old days.

Some moguls have sold large assets to foreign competitors at high prices.
Others are eager to remain big players in business. They are seeking
investment, strategic partners from abroad and expansion opportunities.

Take for example 32-year-old Kostyantin Zhevago, who controls a diversified
business empire with interests in banking, hydrocarbons, manufacturing and
ore mining.

Like many of Ukraine’s billionaires, Mr Zhevago recently brought in a
European management team to streamline his companies. Ferrexpo, his ore
business, has been entrusted to a former top executive of ore mining giant
BHP Billiton.

Mr Zhevago is following in the footsteps of System Capital Management,

which manages $12bn of assets for Ukrainian oligarch Rinat Akhmetov.
SCM started hiring foreign managers several years ago.

This year, it hired Garry Levesley, a top executive of US-based power
company AES Corporation, as a manager for DTEK, the holding company

for Mr Akhmetov’s energy assets.

“Of the six to seven leading financial industrial groups in Ukraine, three
or so are seriously looking at capital markets for raising investments to
improve efficiency at vast facilities inherited from the Soviet Union,” says
Mr Zhevago, in an interview for this special report. “Our goal is to look
like any other company listed in the US or UK. We understand that we need to
move fast and efficiently to remain competitive.”

More transparent ownership and management structures are replacing complex
offshore vehicles. Efficiency improvements are needed across the board, in
management and energy consumption. Soviet-built steel factories are, for
example, reliant on decades-old technologies.

Upgrades will increase competitiveness in global markets. International
accounting standards are being introduced, opening doors into global
financial markets.

European financial institutions have stepped up financing for Ukraine’s
largest business since 2004. Billions of dollars have been raised through
syndicated loans and Eurobond placements.

A handful of medium-sized companies capitalised on a surge of investors
following the Orange Revolution by listing shares on the London Stock
Exchange’s Alternative Investment Market. Ukraine’s largest business groups
are not far behind, having “changed significantly” in recent years, says
Volodymyr Kotenko, Partner at Ernst & Young’s Kiev offices.

“They are today focusing most of their efforts on improving operations to
increase their market capitalisation. These are relatively well-managed
businesses with great potential in a restructuring phase.

In two to three years, [they will be ready] to list shares on foreign
markets, raising investment needed to further increase shareholder value,”
says Mr Kotenko. Implementation of western standards has been

“challenging,” but “ambitions are high,” he adds.

Billionaire Viktor Pinchuk, son-in-law of former President Leonid Kuchma,
says he plans to list shares in his media and industrial assets through an
IPO on a western exchange within two years.

Mr Zhevago says strategic partnerships through M&A dealings with foreign
companies are also being explored. A minority stake in his Finance & Credit
bank might be sold to a foreign bank.

The plan for Ferrexpo is to cut inefficiencies and open new deposits –
thereby doubling output. A longer-term project under development involves
construction of new metallurgical factories in Ukraine and Hungary.

Financing from abroad will be needed.

Some groups, such as Industrial Union of Donbass, already control sizable
assets abroad, with steel mills in Poland and Hungary. Ukraine’s Privat
business group has interests in ferro-alloy plants in the US, Poland,
Romania and Russia.

Mr Akhmetov’s SCM is considered to have an edge in size and to be ahead

in its restructuring. Mr Akhmetov says that his companies might move to a
listing within a year or so.

“We have restructured our business to improve transparency, corporate
governance and create the most effective management structure for our
business,” says Oleg Popov, SCM’s Director General.

“A clear and transparent ownership and management structure is important to
ensure that SCM business is properly understood by financial institutions
and capital markets.

Our businesses have already been active in capital markets successfully
securing both syndicated loans and bond issues. While SCM itself will not be
the subject of an IPO, it is possible that the sub-holdings may choose this
route,” Mr Popov says.

Efforts to improve corporate responsibility by improving working conditions
and philanthropy have also shifted into higher gear.

Mr Pinchuk recently launched a modern art gallery in Kiev and funded a
holocaust film co-produced with Stephen Spielberg, for example. Mr

Akhmetov has started introducing benefits for employees at one of his
steel mill.

But the picture is not all rosy.

Protection of minority shareholder rights remains a thorny issue. Owners

of Zaporizhstal steel mill diluted stakes of minority western portfolio
investors while consolidating ahead of a possible IPO.

Asset-less trading companies used for tax optimisation were merged into

the mill through a share emission, sinking stock prices and diluting minority

Similar things have happened at other companies, reminding investors that
corporate governance is not a priority in Ukraine.

Another concern is that rising costs on Russian fuel imports could squeeze
industry margins. But Mr Zhevago is not worried.

“The [natural] gas price is rising, but we have strategic advantages in
logistics, infrastructure and raw material access all in a compact country
close to key markets.”                                  -30-
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12.                                “LIFE IN PRIVATE”
    Ukrainian metals & banking tycoon Boholyubov not interested in politics

INTERVIEW: With Henadiy Boholyubov, Co-Owner, Pryvat Group
BY: Kipiani, Ukrayinska Pravda website, Kiev, in Ukrainian 6 Oct 06
BBC Monitoring Service, United Kingdom, Thu, Oct 26, 2006

The co-owner of the Pryvat group that controls metals production and one
of the biggest banks, Henadiy Boholyubov, has said he has never been
interested in politics.

In an interview with the popular website, he denied any relations with
opposition leader Yuliya Tymoshenko. Boholyubov said his company buys
specific decisions rather than sponsors a specific political party or bloc.

The following is the text of the article headlined “Life in Private”
published on the Ukrayinska Pravda website on 6 October.
Henadiy Boholyubov is one of Ukraine’s most private billionaires.

The co-owner of the Pryvat group related in an exclusive interview that in
contrast to his closest friend and business partner, Ihor Kolomoyskyy, he
does not care for soccer, that he has not met with Yuliya Tymoshenko for
many years, and he talked about why Serhiy Tyhypko did not succeed in

[Kipiani] Why have you given only one interview during your many years as a
businessman? Why this reticence, which, by and large, is not characteristic
of Ukraine’s oligarchy of the 1990s?

[Boholyubov] No one has ever actively pursued me for an interview, and to
propose my services myself… [ellipsis as published]
It strikes me as not very ethical, for example, when people who have
achieved something in their lives talk about their wives, dogs, houses,
yachts, and everything else.
The nature of our business – building our company – does not envisage
publicity. I don’t feel that we need it.

[Kipiani] What about the Pryvat group’s nonparticipation in public politics?
Is that by intuition or calculation?
[Boholyubov] Ties between business and politics may not be bad for business
as such; in fact, they may be helpful. But we have always positioned
ourselves as a structure outside politics, and that has helped us.

Perhaps in the short term we lost out in some respects, but in strategic
matters, we always came out the winner. At the beginning, this was probably
intuition, but now it has become our policy.

[Kipiani] You felt no envy that Mr [Viktor] Pinchuk, for example, had his
own faction, Working Ukraine, in the Verkhovna Rada, that Mr [Hryhoriy]
Surkis had the Social-Democratic faction and party [United Social Democratic
Party], that [Rynat] Akhmetov has the Party of Regions and his own prime
minister, while Pryvat has nothing… [ellipsis as published]
[Boholyubov] No.

[Kipiani] How would you assess the results of being in politics for
Ukraine’s big businessmen? Are the results more positive than negative? Or
is it a matter of individual experience?..
[Boholyubov] Logic suggests that first you want money, and then power, or
first power, and then money… [ellipsis as published] That is, not everyone
is able to relax and force himself to be satisfied with what he has.

I, for one, do not feel comfortable in politics; I don’t understand
politics. And I am convinced that it is in fact impossible to direct any
faction or political figures from a distance. You have to go there yourself
and work there. And I was never prepared to do so, and now I don’t even

want to think about it.

[Kipiani] It has been written about Pryvat that instead of buying a deputy,
a faction, or an election campaign, you buy concrete decisions. Tell me
honestly, do you have to deal with political lobbyists in parliament or
other government bodies?
[Boholyubov] At times, yes.

[Kipiani] Was that the case in past years, or is it the case now, as well?
[Boholyubov] Now, too.

[Kipiani] A political commentator wrote in an article about the Pryvat
group: “In 2004, orange notes began to sound in the rhetoric of the group’s
leaders.” Is it true that you backed Yushchenko at the time?
[Boholyubov] We didn’t back anyone. As a large business structure, Pryvat
can never support anyone a priori. We are not politically predisposed
towards anyone.
Still less, by definition, can we ever support the opposition or be in the
opposition. We are, after all, a bank, an industrial group.

But the people who work in the company – owners, shareholders, managers,
and so on – all have their own likes and dislikes.
If you look at our regional representatives, one is a deputy to an regional
council from the Party of Regions, another, from the Yuliya Tymoshenko

In 2004, the director of one of our companies went to conferences with
[former President Leonid] Kuchma and [head of Kuchma’s Presidential
Administration Viktor] Medvedchuk, while all his co-workers closed the
office and went to the Maydan [Kiev’s Independence Square – the focal

point of the Orange Revolution] with banners and sandwiches… [ellipsis as

Each person has his own political views, but the company has always had its
own ideology. Our ideology is that we are ready to work with whatever
government is in power.
                                  YULIYA TYMOSHENKO
[Kipiani] In April 2005, Yuliya Tymoshenko told one news agency, either
jokingly or seriously, that she was considering nominating you for the post
of chairman of the Dnipropetrovsk Region state administration. How true was
[Boholyubov] She was joking, of course. [1] First of all, there was no way
that Tymoshenko could have seriously considered me as a candidate for this
post. And [2] second, I have never in my life seen myself in a government
This situation illustrates what I said earlier, namely that when you tie
your position or yourself to any political force or orientation, things that
are said stop being a joke and allow for all sorts of speculation…
[ellipsis as published]

[Kipiani] You did not react… [ellipsis as published]
[Boholyubov] I never even knew she made such a statement!

[Kipiani] But, in general, you maintain a relationship with your fellow
Dnipropetrovsk native?
[Boholyubov] I have no relationship with Tymoshenko. The last time I saw
Yuliya Volodymyrivna was when she still lived in Dnipropetrovsk and headed
the Ukrayinskyy Benzyn [Ukrainian Petrol] corporation. She worked with
[Pavlo] Lazarenko at the time. Later, we met once or twice, but those
meetings were of an official nature.

And after she joined the opposition, and when they started persecuting here,
we had no opportunity to communicate with her. When she came to power, it
was also difficult to consort with her, because she distanced herself from

[Kipiani] Yet she is persistently being called a lobbyist for Pryvat…
[ellipsis as published]
[Boholyubov] That, too, is the result of our nonparticipation in politics.
At one time this suited the purposes of another prominent Dnipropetrovsk
native – Mr Pinchuk.

It suited his purposes to link Tymoshenko’s position regarding the Nikopol
Ferroalloy Plant to us in order to win favour with the Yushchenko
government, which was then fighting with Tymoshenko. They accused her
of lobbying our interests. Even though that was not true.
[Kipiani] And are you satisfied with the performance of the current
government over the past two years? Have your expectations been met?
[Boholyubov] I would like to be more precise in answering this question.
Initially, I had great expectations, but later, after I had time to study
the work of this government, I realized that it could have been worse.

[Kipiani] The government of Viktor Yanukovych and Pryvat. Do they reckon
with you as a real factor in the economy, or are there problems?
[Boholyubov] I can tell you what I don’t like – what is happening with VAT
refunds. With the arrival of Mykola Azarov as deputy prime minister, things
reverted to the way they were before the Orange Revolution. During the last
year and a half, we worked in total harmony with the tax administration.

We undertook to pay profits tax within the limits set in our agreement, and
the tax administration was to refund us our VAT in a timely manner and not
“burden” us with needless audits. Now everything has changed: the old has
been destroyed and the new not yet created.

[Kipiani] Are you simply waiting? Have you taken a Buddhist approach,
or are you trying to solve this problem in some way?
[Boholyubov] A Buddhist approach… [ellipsis as published]

[Kipiani] But at some point even meek Buddhists pick up a bat and…
[ellipsis as published]
[Boholyubov] That point hasn’t been reached yet.
[Kipiani] I have noticed that when people talk about Pryvat, they name Ihor
Kolomoyskyy. They place an equal-sign between the two. In one version
of the list of the richest people in Ukraine, your partner is reported to be
worth 2.8bn dollars and you, 2.4bn dollars. Is that true?
[Boholyubov] As far as millions and billions, ratings and rankings are
concerned – it’s difficult for me to judge these things. Ihor Kolomoyskyy is
by nature a leader.
He is one of the smartest and most talented businessmen that I have ever
met. And it so happens that the result of his popularity has been that he is
perceived as the personification of the Pryvat group.
When we first began, which was long ago, in 1991, our business in
Dnipropetrovsk was started by the “marvelous five.” But now there are only
three of us, and we are absolutely equal partners in all projects.

[Kipiani] The project was begun by you, Kolomoyskyy, Oleksiy Martynov,
Myloslavskyy… [ellipsis as published]
[Boholyubov] The latter died.

[Kipiani] What can you tell us about him?
[Boholyubov] Leonid was also a nice, young, likable resident of
Dnipropetrovsk, and all of us together set up Pryvatbank… [ellipsis as
published] He had heart disease. And he died suddenly at 37. I talked with
him in the evening, and in the morning I learned he had died.

[Kipiani] And the fifth person? Was that Serhiy Tyhypko?
[Boholyubov] Yes, he was one of us.

[Kipiani] In other words, Tyhypko was not merely a hired manager.
[Boholyubov] At first he was a hired manager, then he became a shareholder,
and later, when he went into government, we bought out his share.
[Kipiani] Do you think that he worked successfully in government and in

[Boholyubov] Serhiy is my friend. I regard his role in the establishment of
the Pryvat group as invaluable, and therefore to pass judgment on his
political successes… [ellipsis as published] I am not a politician…
[ellipsis as published] But, if I were to offer a general assessment, then
Tyhypko in politics – well, yes, perhaps there were some failings, but
compared with all the others, he was not the worst.

What’s more, in my estimation, he has positive human qualities, and that

may be why he was not successful in politics.

[Kipiani] Some admire and others are angered by Pryvat’s persistent
positioning of itself as a regional financial-industrial group. Why this
[Boholyubov] It turned out that way for historical reasons. I call myself a
“regional” because of two factors: place of birth and the place where the
main office is located. My home is in Dnipropetrovsk, but lately I am

forced to travel a great deal. Ihor Kolomoyskyy basically lives abroad.

[Kipiani] The press reports that all of you live abroad.
[Boholyubov] Martynov spends all of his time in Dnipropetrovsk. And I

live ever more between Dnipropetrovsk and Kiev.

[Kipiani] Whom do you associate with?
[Boholyubov] I’m in business, so in new projects I look more for interesting
partners than for money.

[Kipiani] People who know you and Kolomoyskyy well tell us that you are
very different: he is loud, large, with a shock of hair… [ellipsis as
[Boholyubov] Whereas I, apparently, am small, quiet, and bald… (laughs)

[Kipiani] How do you get along?
[Boholyubov] Kolomoyskyy and I met more than 15 years ago. We started by
becoming fast friends. Then our business emerged on the basis of this strong
friendship. We have an interesting symbiosis, I don’t really understand how
it happened – this is not a business relationship, it’s more than

[Kipiani] In today’s Ukrainian politics, the main way to bring interests
closer together is to become godfathers to each other’s children. Jews don’t
baptize each other’s children… [ellipsis as published]
[Boholyubov] We have our own Jewish traditions. And, roughly speaking, I am
the “godfather” of Kolomoyskyy’s son. Although this word does not exist in
Judaism; there’s another term -“sandak.” Thus I’m the sandak of his son.

[Kipiani] So, you’ve become related.
[Boholyubov] Well, yes.

[Kipiani] Do you see each other often?
[Boholyubov] Lately, we’ve been keeping in touch by telephone. But
sometimes we meet in an informal setting.

[Kipiani] Once a month?
[Boholyubov] We have no set schedule. The Pryvat group’s different
elements – different sectors – are run by different managers. Kolomoyskyy
and I aren’t engaged in business; we are concerned with policy and strategy.

[Kipiani] Are you like Kolomoyskyy a choleric by temperament?
[Boholyubov] No. What kind of temperaments are there?

[Kipiani] Choleric, sanguine, melancholic, phlegmatic.
[Boholyubov] I am a very calm person, I never shout, it’s very difficult to
find anyone I’ve ever berated… [ellipsis as published]

[Kipiani] And do you ever use swear words?
[Boholyubov] I use them like any normal man in very intimate circles. I try
not to do so in the presence of women, or journalists, or in any official
company. But, essentially, I consider myself to be fairly tough, even though
it may not seem so from outward appearances.

[Kipiani] Dmytro Vydrin, a political scientist and deputy from BYuT [Yuliya
Tymoshenko Bloc], at one point shocked everybody with a quote from
Kolomoyskyy: there are two unalterable principles – never pay taxes and
never repay loans. Is that really true?
[Boholyubov] I am certain that there are no such principles. And I am also
sure that Ihor did not say that.
[Kipiani] According to the rating of the Polish magazine Wprost, Rynat
Akhmetov has a billion dollars more than Kolomoyskyy. The name
Boholyubov does not appear at all on the list of the richest Eastern
Is that because of your secrecy? Or just a mistake in compiling the list?
[Boholyubov] I don’t know how rich Akhmetov is, and, frankly, I don’t

know how rich we are.

[Kipiani] But isn’t it interesting to know one’s worth, an estimate of how
much I am worth… [ellipsis as published]
[Boholyubov] That is a difficult question and not for today’s interview.
But, in fact, you know, I’m not a very superstitious person, but I don’t
want to reach a point in life where I finally find out how much I’m worth.
Both literally and metaphorically. And so I don’t want to answer these
questions. Let the magazines write what they will.

[Kipiani] But are you not insulted that you are ranked a step below your
partner Kolomoyskyy? Or that they ignore you altogether.
[Boholyubov] I am very happy when they don’t mention me at all. I don’t find
it a very appropriate practice to hold some sort of “world championship” of
who has how much money… [ellipsis as published] It’s all very subjective.
A rich person and how much money that person has are very different things.
I have met many very rich people, yet they are in fact very poor, because
they don’t know how to spend their money.
That is why all these publications stand in the way of feeling truly rich,
of being able to live. I would be happy if they never wrote about me.
[Kipiani] The website of the Dnipropetrovsk Jewish Community states that
you are its president and financial supporter. Did you become a believer as
an adult, or was that a family tradition?
[Boholyubov] I was born and grew up in Dniprodzerzhynsk. In a family that
was not well-off, to put it mildly.
My father died early, I was left with my mother, our life was hard, and the
city itself is quite distinctive – there was nobody to teach me the Jewish
way of life.
I visited a synagogue for the first time when I was 33 years old.
Traditions are inseparable from faith. And one of the most important Jewish
traditions is to help the poor.
I also began with that, though in my youth I was a militant atheist. So far
I have not become a very religious person, but I no longer reject belief in
                        SOCCER AND LAZARENKO
[Kipiani] Many oligarchs, in addition to philanthropy, also buy soccer
clubs. Why is Pryvat not active in this sphere?
[Boholyubov] What do you mean? We own the Dnipro soccer club…
[ellipsis as published]

[Kipiani] The point is that the Shakhtar club and Akhmetov are like “twins”,
while Pryvat and Dnipro live separate lives… [ellipsis as published]
[Boholyubov] Separate lives. I’ll explain. It’s all very simple. To live “as
one” you have to love soccer. Akhmetov and Surkis – they most certainly

love soccer. I believe that these people do a great deal for their clubs and
for Ukraine’s soccer.
Earning money in one sphere, they invest it in their clubs and bring
hundreds of thousands of people enjoyment.
We, on the other hand, did not come to the Dnipro club because of our love
of sport. There came a point when someone had to come to the assistance
of a failing club, which was in a financial hole.
What’s more, if truth be told, we were forced to do so by Pavlo Lazarenko,
who was then the chairman of the regional state administration.

[Kipiani] Allow me to interrupt you for a moment. Have you maintained your
relationship with Pavlo Ivanovych [Lazarenko]?
[Boholyubov] There is no relationship with Lazarenko at this time. Although,
of course, there was one in the past, and it makes no sense to deny it.
There was a time in Dnipropetrovsk when it was impossible to be in business
and not have dealings with Lazarenko. But after he left business and the
political arena, all contacts ended for good.

[Kipiani] Aren’t you sorry for him – he is sitting behind bars?
[Boholyubov] In a human sense, yes… [ellipsis as published] But, on the
other hand, I think had he not gone to prison there, he would have done so
here. And it’s hard to say where it would be better for him and where worse.

I have not seen or talked with him for a long time, so I can’t tell you
anything about him. Ten years will change everyone, especially the kind of
ten years he’s spent.

[Kipiani] Let’s get back to soccer… [ellipsis as published]
[Boholyubov] I’m not very fond of soccer. Of course, as an ordinary citizen
I rooted for Ukraine when our team played in the European championship. I
travelled to Germany, wore the team’s shirt, whistled… [ellipsis as

[Kipiani] And did you blow a horn!?
[Boholyubov] No, I didn’t have a horn! But I was very excited… [ellipsis
as published] But it’s Kolomoyskyy who is much more of a soccer fan. So
you should address all your questions about soccer to him.
I was once a professional sportsman. A master of sport in swimming. But
at my age I no longer go in for sports. I go in for physical culture.
                    I COULD PLAY TENNIS ALL THE TIME
[Kipiani] And physical culture means tennis, right?
[Boholyubov] Well, if I could play tennis all the time, I would, but as
things are, I play whenever the opportunity presents itself. Sometimes I’m
invited to amateur tournaments, or we organize them ourselves.

[Kipiani] Are these open tournaments?
[Boholyubov] No, they’re closed, to which we invite agreeable people,
businessmen, bankers. A total of 150-200 people.

[Kipiani] And where are they held?
[Boholyubov] I, for example, play in the Ukrainian association of tennis
amateurs in Kiev, Dnipropetrovsk, Donetsk, and Poltava. I personally am the
sponsor of two tournaments -one of them is held by the Cyprus branch of
Pryvatbank, and the other in Croatia.

[Kipiani] Who in the Ukrainian elite knows how to hold a tennis racquet? I
heard that Mykola Tomenko plays… [ellipsis as published]
[Boholyubov] We don’t invite Tomenko. Yanukovych plays tennis. Very

[Kipiani] And have you lobbed balls with him?
[Boholyubov] No. Akhmetov reportedly also plays tennis, but I haven’t
played with him either.

[Kipiani] What kind of person is Rynat Akhmetov?
[Boholyubov] I have great respect for him. He is a man who lives up to his

[Kipiani] Does he have any political prospects? They say that the time will
come when Yanukovych will leave and Akhmetov will take his place.
[Boholyubov] We are not involved in politics, so it’s difficult for me to
judge. If you ask me as an ordinary citizen of Ukraine, I think that he
doesn’t have such prospects, and it doesn’t even make sense for him to try
to create such prospects.
[Kipiani] The Russian oligarch Viktor Vekselberg, with whom you have a joint
business, made a gift of a unique collection of Faberge eggs to Russia
(read – Putin). Whereas you went to Yushchenko, but, as far as I know, made
him no gifts?
[Boholyubov] No, I didn’t give him any gifts. If we had Putin, maybe we’d
also have to give him some gifts… [ellipsis as published]

[Kipiani] It was reported that the Pryvat group will take part in creating
the Art Arsenal [Mystetskyy Arsenal] – a project under the patronage of the
head of state himself, in restoring churches in Baturyn, and so forth. Did
you have to donate to the general money box, or did you manage avoid
doing so?
[Boholyubov] No, we didn’t manage.

[Kipiani] Do you consider it proper for the president of Ukraine to engage
in fundraising?
[Boholyubov] Let me put it this way: I don’t know if it’s proper or not, but
nothing will happen without the president. There certainly has to be someone
who is the heart and soul of this cause. True, they raised the funds, yet
there’s no Baturyn, or whatever else there was… [ellipsis as published]

[Kipiani] Was it a waste of money?
[Boholyubov] No.

[Kipiani] It’s known that you have two children… [ellipsis as published]
[Boholyubov] Yes. My son is still very small, and my daughter is completing
her studies at the Kiev Institute of International Relations.

[Kipiani] Will she work at Pryvat?
[Boholyubov] I’m not sure. She does what she wants. If she had chosen
England or some other country, she would be studying there, but she decided
to study in Kiev. She and I have a very democratic relationship, and she has
the right to choose the kind of work she wants to do.             -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
             Send in a letter-to-the-editor today. Let us hear from you.

COMMENTARY: Diena newspaper, Riga, Latvia, in Latvian 30 Oct 06
BBC Monitoring Service, United Kingdom, Monday, Oct 30, 2006

There is a need for stability and stable deliveries of natural gas to
countries in Western Europe. Those were the main subjects discussed on
Friday [ 27 October] when the European Union held a summit meeting with
Ukraine in Helsinki.

The fundamentally important decision for Ukraine to ease the visa regime for
Ukrainian citizens who wish to enter the EU was approved.

EU citizens have not needed visas to enter Ukraine since last year, so a
similar gesture of good will was necessary on the part of the EU. To be
sure, an important role in taking this decision was performed by an
agreement which was signed in Helsinki on the readmission of illegal

This means that Ukraine will take back those illegal immigrants who have
arrived in the EU via Ukrainian territory. The possibility that illegal
migrants will use the EU territory to enter Ukraine is negligible or, more
precisely, only theoretical.
                                   POLITICAL STABILITY
It is more complicated to deal with political instability. In March there
was a parliamentary election in which the pro-Western and “orange” parties
won a small majority. These are Our Ukraine, founded by President Viktor
Yushchenko, the block established by Yuliya Timoshenko, and the Socialists.

As is occasionally the case in Latvia, the Ukrainians could not divide up
chairs – not “justly”, not proportionally to the number of MPs elected in
the election. It almost happened that an emergency election had to be held.

The Ukrainian constitution says that a new government must be established in
three months’ time. Unexpectedly, the Socialists stabbed the parliamentary
majority in the back by announcing that it would join the opposition – the
pro-Moscow party of Viktor Yanukovich and the Socialists. A completely new
majority emerged.

Here we must remember that constitutional amendments which significantly
narrow the powers of the president took effect. Parliament now approves or
sacks the government. True, the president has the right to appoint several
ministers (the defence, foreign and interior minister), but the government
as such is responsible before Parliament.

The president and the parliamentary opposition in a single governing
coalition and a government on the other side of the “barricades” – that
could create an explosive situation. It seemed that there would be a
solution – a grand coalition. Our Ukraine has joined the parliamentary

This occurred, and the Yanukovich government appeared. The grand coalition
survived for a month and a half, though – Our Ukraine is now again in
                               RELATIONS WITH RUSSIA
Before the election, the Region Party promised to improve relations with
Russia, to enhance the status of the Russian language, and to grant greater
independence to regions.

If the “friend of Moscow” is the head of government, that does not
automatically mean that Ukraine’s foreign policy course will change
radically. Yanukovich has already said publicly that Ukraine’s strategic
goals include access to the EU and NATO, adding that this must happen very

Yanukovich today is not the same Moscow puppet who, two years ago, made

use of dishonest elections to win the presidency. He prepared for this, but this
led to the “orange revolution.” One cannot say that Yanukovich did not learn

Over the last few years, the most visible indicators of the relationship
between Ukraine and Russia have had to do with the price of natural gas, as
well as the polemics (or lack thereof) about the Black Sea naval base which
Russia has in Sevastopol.

The territory of the naval base has been leased to Russia until 2017, and
this existence can formally be an obstacle against Ukraine’s accession to

That is because NATO will not accept countries which have territorial
disputes with neighbouring countries or which have military bases on their
territory which are controlled by countries which are not members of the
North Atlantic alliance.

Ukraine and Russia are engaging in polemics about how to control the
lighthouses on the shores of Crimea – that is something which is not
addressed in the basic treaty. No matter how the polemics are to end, it is
unlikely that Russia might move its fleet to a new base that is being
constructed at Novorosiysk.
                                            GAS PRICES
Three months before the parliamentary election, at the very beginning of the
year, Russia quadrupled the price of gas and made it clear to Ukrainian
voters that they must vote for those who can “reach agreement” with the
Kremlin – in other words, who will make Ukraine a Russian satellite.

The economic pressure probably had an effect on the results of the election,
but not to the point that was expected. Russia made the same mistake by
basically establishing economic sanctions against Georgia.

Moscow tried to tell Ukrainians how to vote, and it wanted to tell Georgians
that they had to overthrow their “bad” government. There have been few
supporters of this idea, particularly in the latter of those countries.

This year Ukraine is paying $230 per 1,000 cubic meters to Russia, at least
“on paper”. Realistically, the delivery costs $90 (gas from Turkmenistan is
received via Russia). Russian Prime Minister Mikhail Fradkov visited Ukraine
last week, and the new gas price was announced – $130. Latvia already pays

There was no talk of “global prices.” It has to be added here that this only
applies to next year and not several years, as was the situation in the
past. There has also been a hint to say that future developments will depend
on Ukraine’s “behaviour”.

The EU demands political stability in Ukraine, and that will be possible if
Yanukovich manages to postpone the campaign promises which split up

society, as well as Ukraine’s accession to NATO.            -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

PRESENTATION: by Petro V. Kanana
Assistant to the Minister of Defense of Ukraine
Ukraine’s Quest for Mature Nation Statehood Roundtable VII:
Ukraine and NATO Membership
Washington, DC, 17-18 October, 2006

Ladies and Gentlemen,

First of all, I would like to thank the Organizers for inviting me to participate

in Round Table #7 to discuss Ukraine’s possible NATO Accession,
the current status of the process and whether it should be called “Fast
Track”, Slow Track” or “On Hold”.

In my relatively short presentation, I will try to present some indicators
of the present state of affairs in Ukraine’s Road to NATO in the context of
developments at the Ministry of Defense and the Armed Forces of Ukraine.

Before I provide you with one more assessment in addition to the previous
speakers’ ones, I would like to remind you of a scientific fact.
Mathematicians recently carried out an analysis of world literature and
discovered that there exist only 12 basic plots.

Whether a book becomes a best-seller thus depends primarily on the talent of
the writer, who will take one of the twelve plots and apply it to the
situation of his time.

I dare say that all the esteemed diplomats, politicians, governmental and
non-governmental experts assembled here today are generally aware of what
has been happening in Ukraine since the disintegration of the Soviet Union.

I think that during our two-day discussions, we have learned lessons of the
successes of the new Allies. These tools can make the Ukrainian story a
happy one as well. For this to happen, however, we must keep in mind their
experiences while not forgetting Ukrainian realities.

In this context, I would call to mind NATO’s creation in 1991 of the NACC
and its historical decision in 1994 to launch the NATO/PfP Program for the
countries of the former Soviet Empire and Warsaw Pact.

These initiatives were the tools to help willing countries learn the basics
of democracy, the means of creating Civil Society and the procedures of
Democratic and Civilian control over the Security and Defense sector to
manage resources more efficiently and transparently.

In 1991, the fragments of the Soviet Union’s military machine left behind in
Ukraine included components of 5 services (Strategic Nuclear Missiles, Land
Forces, Air Force, Air Defence Force, and Navy.

Altogether these forces comprised a total of about 780 000 personnel and
encompassed 1 missile army, 3 combined-arms armies, 2 tank armies, 1 army
corps (land forces), 4 air force armies, a separate ADF army and the Black
Sea Fleet).

Over the years since independence Ukraine has substantially reduced its
Armed Forces. Now we have only 3 services (Army, Air Force, Navy) and at the
end of 2006 our Armed Forces will have only 221 000 personnel. Thus the
Ukrainian Armed Forces have been reduced by more than 3 times in the space
of 15 years.

Why did Ukraine do this?

It is clear for us present here today that one reason was the lack of
resources provided by every Ukrainian government for sustaining and
developing the Armed Forces. Yet another one was clearly linked to the
external institutional environment.

In joining NACC and PfP, Ukraine began to actively participate in
consultations and cooperation with NATO Allies and PfP Partners, creating in
the process a situation that allowed us to reduce the Armed Forces without
creating a risk to the country’s security.

Our cooperation with the Alliance helps us address the practical problems
that face our country and our Armed Forces. That is why Ukraine has been
steadily increasing the quantity and quality of our cooperation with NATO.

This was not always clear to our tax-payers, however, because some political
parties (e.g. Communist, Socialist, Progressive Socialist parties) chose to
speculate on Soviet stereotypes.

Assessing their actions, one can conclude that they do not care about
Ukrainian National interests, but are rather pursuing the interests of our
Big Northern Neighbor. Currently these parties make up only a small
percentage of seats in the Verkhovna Rada, our Parliament, but they are part
of the Parliamentary coalition that forms the Government. This is the first
challenge we are faced with.

The second challenge is to find the right direction of our Euro-Atlantic

Reforms in Ukrainian society in general and in the Armed Forces in
particular have been, to quote Hrihoriy Perepelytsia: “Inefficient also
because of the unclear political course.” (Hrihoriy Perepelytsia, National
security and defense #8,2004, p.20)

The close and fruitful cooperation with NATO in the political and other
spheres has made clear the importance of the Alliance to the national
security of Ukraine.

Therefore, it was only logical that on 19 June 2003 the Verkhovna Rada
adopted the Law of Ukraine “On the Foundations of the National Security of
Ukraine”, which stated that one of directions of State policy is support of
Ukraine’s participation in European and in regional systems of collective
security, including accession to the EU and NATO.

Even generals with a Soviet background started, if slowly, to understand
that Ukraine should not be a neutral country, but take part in collective
security architecture building.

The Former Defense Minister, Army General of Ukraine Kuzmuk, expressed his
views on what the Armed Forces of Ukraine have to be prepared for: “It is
necessary to note also that we have spent a lot of time talking about
neutrality, although it is clear now that the future of Ukraine is within
the system of collective security.” (National security and defense   No.
8,2004, page 26).

Another former Minister of Defense, Yevhen Marchuk, stated that: “In
addition to the merely practical tasks of defining perspectives for Ukraine’s
Armed Forces for 2015, this process (Defense Review-P.K.) has a profound
political meaning, since it has occurred simultaneously with Ukraine’s
official announcement of its political course towards NATO integration.”

Thus, by 2002 with the signing of the Action Plan at NATO’s Prague summit,
Ukraine’s political course was at last determined to the point where the
authorities of Executive power, including the Ministry of Defence, could
develop distinct plans.

Regarding to Ukraine’s Ministry of Defense’s activities, the new Minister of
Defense Anatoliy Hrytsenko has noted that: “The new political course of our
country towards seeking NATO accession is leading the way in progressing the
reforms of the defense sector, according to internationally accepted
standards.” (White Book 2005/ Ukraine’s Defence Policy).

Thus, the plans of the Armed Forces’ development, according to the State
Program were designed taking into account Ukraine’s participation in the
NATO/PfP Program and the goals of Annual Target Plans in 2003, 2004,

2005 in the framework of the NATO-Ukraine Action Plan, which I could
call “the training period” before joining the Membership Action Plan (MAP).

As for MAP, Minister of Defense Hrytsenko has noted that: “As the Minister
and as a citizen, I can firmly say: everything that is written down in this
Plan is what we Ukrainians need first of all.

Moreover, irrespective of whether we become a NATO member or not, an
effective economy and competitiveness, efficient laws and judicial
authority, an effective electoral system, strong army and socially protected
servicemen are indispensable to all of us.

And all of these things are included in MAP. All these things exist in the
Plan. They are guaranteed within the EU and NATO and we must develop

them as well”. (

These are the circumstances in which the Ministry of Defense – with
assistance of NATO and Allies – has been striving to implement the reforms
in the Ministry and in the Armed Forces.

Myriad projects have been launched together with the Alliance: the NATO/PfP
Trust Fund II for disposal of surplus munitions, expert assistance on the
clean-up of the Novobogdanivka depot, help in improving munitions safety and
management to prevent future accidents, the Professional Development
Programme to improve abilities of civilian personnel in the MoD, the Project
of Adaptation and Resettlement of retired personnel, and much, much more.

I would like to stress that cooperation with NATO has helped Ukraine
transform its military from a massive, tank-heavy force prepared for WWII to
a force that is able to meet today’s risks and challenges and is a
substantial contributor to international security and stability. And today
Ukraine is not only a consumer of, but an increasingly important contributor
to regional and world security.  This is one more challenge for us.

Participation of military units and personnel in operations around the globe
has created favourable conditions to form Ukraine’s positive image in the
World Community.

The servicemen of Ukraine’s Armed Forces take part in NATO-led and EU-led
Peace Support Operations (Crisis Response Operations-CROs), as well in the
UN and the OSCE-led initiatives (in the Balkans, Afghanistan, Mediterranean
Sea and Iraq).

The President of Ukraine has commended the more than 28000 servicemen who
have gained the experience of participating in peace-keeping operations. In
Iraq, for example, the Ukrainian contingent was the only one which could
complete training of a brigade with 2700 servicemen for the Armed Forces of

Ukraine has provided its strategic airlift capabilities in the framework of
NATO operations and exercise to several Allies: the UK, Italy, Canada, the
Netherlands, Germany, Poland, the USA, France, the Czech Republic, Romania.
More than 800 flights were carried out by aircrafts of ASTC “Antonov” in the
interests of the NATO members since 2001.

130 flights by IL-76 aircrafts of the State enterprise of the Ministry of
Defense of Ukraine “UATC” were made including transportation of
peace-keeping contingents and military cargoes of a multinational brigade
SEEBrig in January – February of this year (392 servicemen and 395 tons of

As the Ministry of Defense in any country might, we also face the Budgetary

I would like to emphasize that all plans for development of the Armed Forces
of Ukraine 2006-2011 are based on the projections of the budget, provided by
the Cabinet of Ministries of Ukraine to the Ministry of Defense.

In 2005, the Ministry of Defence, jointly with the Ministry of Finance,
started to develop the modern, effective, scientifically proved mechanism of
budgetary planning to ensure transparency of budget drafting and spending.
(White Book/ page 101).

On October 25, 2005, speaking about financial development of the Armed
Forces, Chief of the General Staff – Commander-in-Chief of the Armed Forces
of Ukraine, Colonel General S. Kirichenko noted that according to the
projections of the Cabinet of Ministries, the Defense budget for 2007 will
have 10 billion  UAH.

In light of such a level of financing, one can state that we are making the
step forward from a maintenance budget to a development budget.

On September 26, 2006 the question was posed as to whether resources still
exist to implement the defined plans. The answer is that we at the Ministry
of Defense have to wait for the first reading of the draft Budget for 2007
and, in parallel, do everything in our power to ensure that the State
Program is implemented to the high possible extent.

In addition, I would like to mention that NATO-Ukraine cooperation has
already helped Ukraine widen reforms beyond defense and has helped put
security sector reform, building democratic institutions, judicial reform,
economic reforms and anti-corruption firmly on the political agenda.

Therefore, I can once more stress that moving to MAP would only strengthen
this positive effect. I trust that our politicians, at least the majority in
the Verkhovna Rada (Parliament), will understand that we have to continue
those reforms not because it is requested by NATO and EU, but because it is
needed by UKRAINE.

All the above mentioned considerations show that the so- called “Fast Track”
is the most preferable variant for Ukraine, because the new generation of
Ukrainians should have democratic values in their lifetime despite the lack
of understanding from the old, Soviet-educated generation.

Unfortunately, the “Slow Track” is likely to continue as long as the
Communists and Socialists are in the parliamentarian and governmental

I would love to be wrong, but the recent events surrounding Tuzla, Feodosia,
Psy-Ops about CIA Camps in Ukraine, as well as L. Kravchuk’s words about

KGB agents in the Ukrainian Parliament show that some members of the
Parliament are being manipulated by our Big Northern Neighbor and are
preventing our country from working for the Ukrainian people.

“On Hold” – is nonsense, to use the most diplomatic language, because
Ukraine clearly needs reforms in the security sector and non-military
spheres as well.

Having said that, I would like to conclude that there is no magic potion for
making a country democratic and prosperous.

Education and accurate information will help the majority of Ukrainians
understand correctly that for the sake of their future Ukraine should be a
NATO member.

And a new generation of political and state leaders, one which thinks first
and foremost in terms of national interest, will be able to make Ukraine a
member of the Euro-Atlantic Family.

I thank you for your attention and am ready to answer your questions.

CONTACT: Walter Zaryckyj, Program Coordinator, Ukraine’s Quest
for Mature Nation Statehood Roundtables, Center for US-Ukrainian
Relations, New York, NY, waz1@nyu.edu
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

Associated Press (AP), Tallinn, Estonia, Monday, October 30, 2006

TALLINN, Estonia – Ukraine’s foreign minister said Monday that his country
could hold a referendum on North Atlantic Treaty Organization membership in
2008 at the earliest.

“Should the referendum take place now, the answer…would be ‘no.’ But
nobody has plans to conduct this referendum” in the next few months, Foreign
Minister Borys Tarasyuk told reporters in the Estonian capital, Tallinn. “My
guess is that the referendum may take place not earlier than 2008,” he said.

In September, Ukraine’s parliament adopted a resolution supporting Prime
Minister Viktor Yanukovych’s move to put the country’s bid to join NATO on
hold. He also pledged to submit eventual NATO membership to a referendum.

Recent opinion polls show that most Ukrainians oppose NATO membership as
many fear it would damage ties with neighboring Russia while bringing little

Tarasyuk said the government must inform citizens on the NATO issue “so that
Ukrainians may take the decision consciously on the grounds of deep

Under Ukraine’s constitution, the president is in charge of foreign policy,
but on a question such as NATO membership he would need the support of the
prime minister and government. President Viktor Yushchenko has agreed to the
idea of a NATO referendum.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
16.                             WAITING TO BE SAVED
                The region’s only blood cell separator is out of service
       World experience says juvenile cancer has a 70-90 percent cure rate

By Iryna Havrysheva, The Day Weekly Digest #34
Kyiv, Ukraine, Tuesday, October 31, 2006

ZAPORIZHIA – “The lives of 120 children in Zaporizhia are threatened by
leukemia and other blood disorders. The region’s only blood cell separator
is out of service.” This was a news bulletin broadcast on Interkanal’s
Podrobytsi in July 2006.

Two months later I happened to learn that the problem has still not been
resolved. To find out why, I visited the hematology ward of the regional
children’s hospital in Zaporizhia.

A blood cell separator is a special device used to extract thrombocytes
(cells responsible for coagulability) from donors’ blood.

In cases of hemorrhaging, one or two doses of thromboconcentrate can
save a patient’s life, especially in chemotherapy cases. Zaporizhia had one
machine like this, but it broke down.

The last produced dose was administered to a seven-year-old boy named
Vladyk Havrylichev. The hemorrhaging was stopped, the child survived,
and then his mother did all she could to get the broken separator replaced.

She called the Inter channel and wrote to local newspapers. On Aug. 30
Vladyk had another hemorrhage. It could not be stopped without
thromboconcentrate, and he died.

The Day asked Volodymyr Bessikal, the physician in charge of the regional
children’s hospital, to comment. He assured me that “after parents concerned
about their children created an uproar, the oblast council gave us money to
buy a new separator. We’ll have it within a month.”

But parents do not believe in these promises. They say that “in a month” has
been said ever since the oblast found itself without this necessary
equipment. They are afraid to continue their children’s chemotherapy because
it adds to the risk of hemorrhage.

Without proper treatment every child will die of cancer. These parents are
forced to choose the lesser evil.

Parents with money and contacts in high places refuse to make this choice
and are paying for their children to be treated in other clinics that have
the necessary equipment and conditions required for such long-term complex
treatment. But such parents are few, and most of them simply pray that their
children do not have a hemorrhage.

When I was interviewing the parents of these children, I noticed that that
those whose children have been sick for a long time talk with strangers and
ask for their help directly. Those parents whose children were recently
hospitalized mostly rely on their own resources.

No one at the ward relies on any help from the government, which abandons
parents to their problems as soon as their child is diagnosed. What the
Ukrainian government is doing to help such children is just the proverbial
drop in the ocean.

Everywhere else in the world juvenile cancer is considered curable in 70 to
90 percent of cases, depending on the form of the disease. There are
effective treatments, and with every passing year this treatment becomes
more finely tuned, which means that the ailing organism needs additional

In Zaporizhia children are being treated with the same procedures, except
that the survival rate is considerably lower. In the West doctors not only
kill cancerous cells, but also struggle to alleviate the side effects of
chemotherapy. Thromboconcentrate is always available in case of

When a patient’s immunity falls to a critical level, they can administer
special agents. Every ward is almost sterile, and chemotherapy is
administered by special dosers.

Cancer-stricken children in Zaporizhia can only dream of being treated this
way. There has been no thromboconcentrate supplied to this oblast for more
than four months, and the clinic has never received any immunity-enhancing

Patients have to answer the call of nature by using a toilet in another
section of the hospital. They have to shoulder their way through crowds of
visitors, who cough and sneeze, and whose footwear has tracked in all sorts
of bacteria.

A special doser called Infuzomat is the only one in the ward, and it is
donated by foreign sponsors. There are practically no chemotherapy agents,
so parents of sick children have to buy them with their own money. Most
families cannot afford these drugs.

“If not for some good people all over Ukraine and elsewhere, those who
learned about our grief and donated money, I would have signed my child out
of the hospital and taken him home,” says the grandmother of seven-year-old
Vladyk Voliov.

“Vladyk is an orphan. His mother died when he was three years old. We have
to buy everything: cotton, alcohol, and very expensive chemotherapy agents
and antibiotics. Even disposable syringes and IV drips are available in this
ward only once in a while.

As for Vladyk, his case became aggravated after chemotherapy, and he had
to have a course of treatment that costs 400 hryvnias a day. How can an
ordinary family afford this?”

Viktor Barabanov is another orphan whose treatment is almost completely
financed by a young couple that decided to take care of the boy a year and a
half ago. Their own daughter is 18 months old.

Olia Polonikova, a mother of three beautiful boys (Kyriush, the youngest, is
only six months old) is paying for most of the required medicines. Her
oldest son Ruslanchyk was diagnosed with acute leukemia.

Later, he developed iron-deficiency anemia. It is anyone’s guess how this
large family is coping with paying for the boys’ treatment and upkeep.

“If it hadn’t been for Ruslan’s sickness, we would have been the world’s
happiest family,” says Olia, “but I am an orphan and my husband’s parents
are middle-aged, so there is no one to look after my younger sons at home
when I have to be away from the house with Ruslanchyk.

The other kids take turns being here with me. My heart aches when I have to
ask friends to take care of them. The main thing now is to cure Ruslan.
Thank God, strangers are sending money for his treatment and special
mixtures for Kyriusha. I don’t know how we could cope without this help.”

When I was studying my interviews with the parents of these sick children, I
realized that they often mention their gratitude to ordinary people –
pensioners, college students, men and women who have helped and sometimes
even saved their children. I heard affectionate words about volunteers who
try to find sponsors and help these sick children.

In contrast, the official health service system has only been able to
establish these wards and provide salaries for two physicians. Two doctors
take care of 25 children with complicated illnesses.

Why are ordinary Ukrainians capable of saving the lives of children they
have never seen? Why is the Ukrainian state abandoning these sick children?

According to local bureaucrats, there is one week left before the new blood
cell separator is installed and put into operation. This is wonderful news,
except it will never help Vladyk Havrylichev whose mother literally broke
down office doors to obtain drugs for her son, who is no longer among the

Every year a dozen children are diagnosed with leukemia in Zakarpattia.
Although this figure is relatively low based on nationwide statistics, it is
high on the district and oblast levels.

The impact of this disease on a single family is too painful to visualize.
The terrible diagnosis bursts into a family home, devastates it, and teaches
it to live with the disease.

This subject was discussed by a circuit session of Uzhhorod’s Reform Club.
Journalists visited the regional children’s hospital in Mukachiv. Mykhailo
Rad, the acting Chief Physician of the Zakarpattia Regional Children’s
Hospital, said that his hospital treats approximately 10,000 children every
year (medical treatment and consulting).

Nearly 500 children need professional help from experts of the oncology and
hematology departments. Some patients have relatively uncomplicated blood
diseases and benign tumors. But every year a dozen leukemia cases are
recorded in Zakarpattia.

Blood diseases constitute one-third of all oncology cases. Treatment is very
expensive, as child survivors have to be kept under constant medical
surveillance for the rest of their life.

“Our little patients have not committed any sins against God and our people.
Juvenile oncology cases are especially hard on families, they build up
psychological tensions,” says Dr. Rad, who told me there are staff
psychologists who work with families of sick children.

As for the cost of treatment, the hospital has been receiving state funds
for cancer treatments since 2002. The clinic was supposed to receive 300,000
hryvnias this year, but it has received no money to purchase drugs for
cancer-stricken children.

Meanwhile, the cost of one round of treatment for one child with cancer is
in the range of 10,000-15,000 dollars. Needless to say, no state funds can
cover these costs.

People who volunteer to help save children’s lives mostly rely on
philanthropists, like the people are paying to save the lives of two
children in Zakarpattia, who must have immediate bone marrow transplants.

Liubov Kulchykovska, head of the oncology-hematology ward, says that
mercifully no increase in the incidence of leukemia has been recorded. Among
the other causes of this fatal disease experts mention the ecological
situation and heredity. A diagnosis established in Zakarpattia is always
verified by experts from the Republican Oncology Center.

According to Dr. Kulchykovska, 70 to 80 percent of patients can go into
remission. If a patient feels well for five years, he is congratulated on
his full recovery.

Tvii Yanhol (Your Angel) is the name of a national charitable foundation
that was established this year. Its goal is to provide effective treatment
for children afflicted with cancer. Foundation representatives and
journalists recently visited the Zakarpattia Regional Children’s Hospital.

Serhii Medvedev presented the foundation’s principles and urged the medical
personnel of the oncology-hematology ward to apply for assistance.

He said that ‘Your Angel’ has helped the oncology ward at the Odesa Regional
Children’s Hospital and the Kyiv oncology center by purchasing and donating
expensive equipment.

The foundation is enlisting the help of a number of businesses and wealthy
Ukrainian individuals by trying to revive the old Ukrainian tradition of

The clients of Tvii Yanhol are young patients who have problems with their
health, social adjustment, or physical or psychological development. These
are children who cannot rely on full-fledged assistance from the Ukrainian
state because the adults do not have enough money.

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
17.                    THE REBELLIOUS IVAN DRACH
           A jubilee soiree was recently held in honor of the prominent
    Ukrainian poet, translator, screen writer, and public figure Ivan Drach.

By Iryna Kononenko, The Day Weekly Digest in English, #34
Kyiv, Ukraine, Tuesday, October 31, 2006

Ivan Drach, a gifted and talented personality, can be called a living
classic and conscience of the nation. Poetry, cinema, politics, and public
activities have always been closely intertwined in Drach’s destiny. The
event in the House of Cinema was not just an author’s soiree but a dialogue
about time.

The master recounted stories about the people who made an impact on his
life. Guests recited the verses that Drach dedicated to his friends of the
“1960s generation” (shistdesiatnyky) – both to those still living and those
who have departed this life, such as Ivan Dziuba and the late Viacheslav
Chornovil, Ivan Svitlychny, and Mykola Vinhranovsky. Clips were also
shown from the legendary movie A Well for the Thirsty.

“Ivan Drach celebrated his birthday in his native village of Telizhyntsi,”
Mykola Zhulynsky, member of the Ukrainian Academy of Sciences, told
The Day.

“The poet’s relatives and fellow villagers gathered near a small church.
They congratulated him not only on his 70th birthday but also on being
awarded the great title of Hero of Ukraine.”

I paid special attention to the warmth and inspiration with which Drach
listened to children reciting his poems. I thought perhaps that the
celebration had sparked the warmest and happiest feelings in him. Then he
recounted his difficult life, recalling some interesting facts from his
childhood and youth.

“Incidentally, Ivan was always rebellious – he never accepted Soviet power.
Where did he get this character, this infernal and unquenchable thirst for
revolt, and such profound concern for Ukraine’s destiny?

Ivan Drach is an eternal rebel, both in politics and in poetry. A brilliant
illustration of this is his poem A Knife in the Sun, which appeared when
Drach was 25, and the first collection of his verses,

The Sunflower, published in Literaturna Ukraina. Everyone who feels poetry
understands that Drach broke the ideological coded circle of regimented
poetry that was dictated by the norms and methods of socialism.

In the 1960s, Ukrainian literature exploded with wonderful metaphors,
unrestrained spirit, and fantasy.

An innovator, who introduced new images, symbols, and generalizations,
entered poetry. With his hyperbolized generalizations the poet Ivan Drach
was able to ascend to such heights to which Ukrainian poetry of the time
had not even come close.

Ivan is constantly searching: this is the Ukrainian people’s unflagging
energy, which is capable of renewing itself and flouting all kinds of canons
and prescriptions.”
                                   THE DAY’S REFERENCE
Ivan Drach was born on Oct. 17, 1936, in the village of Telizhyntsi, Kyiv
oblast. In 1964 he graduated from the Higher Script-Writing Courses of the
USSR State Committee for Cinema (Hryhorii Chukhrai’s studio).

He wrote scripts for the films A Well for the Thirsty, The Stone Cross,
Coming Back to You, The Lost Decree, The Left-Flank Forward’s Granddad,
And in Sounds Will Memory Ring Out, My Dear and Beloved Mother, The
Zone, Wedded to Death, and others.

He is also one of the founders of the Popular Movement of Ukraine (Rukh),
chairman of the Ukraine Society, winner of the Shevchenko Prize, and Hero of

He is the author of numerous poetry collections, including The Sunflower,
Poems, The Root and the Crown, To the Sources, Kyiv Sky, Telizhyntsi, Fire
from Ashes, Dramatic Poems, A Letter to a Guelder-Rose, and In the Kingdom
of Rex.                                                    -30-

[return to index] Action Ukraine Report (AUR) Monitoring Service]
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            “These graves hide thousands of unwritten books, unstaged plays,
              and thwarted discoveries. Whole pages of Ukrainian and world
                                  history were mercilessly ripped out.”

By Serhii Shevchenko, Journalist and Researcher
The Day Weekly Digest in English, #34
Kyiv, Ukraine, Tuesday, October 31, 2006

KYIV – Next summer will be 10 years since researchers located the site of
the mass executions of repressed Ukrainians in the tract of land known as
Sandarmokh in Karelia, Russia.

In response to public demand, in October 2004 a granite Cossack cross,
funded by donations from the worldwide Ukrainian Diaspora and inscribed
with the words “To the Slain Sons of Ukraine,” was erected near the village
of Povenets, in Medvezhegorsk raion.

Every year pilgrims from Ukraine visit this memorial and pray for the souls
of their compatriots whom the Soviet government executed in pursuance of
the communist idea.

In this place were massacred thousands of northern inhabitants (Karelians
and Finns) as well as forced-labor migrants, former inmates of the Solovets
labor camps, and prisoners who built the White Sea Canal – including Soviet
citizens and foreigners, men and women.

“This is a crime against not only Ukraine but all of humanity,” President
Yushchenko said about the Karelian pantheon.

“These graves hide thousands of unwritten books, unstaged plays, and
thwarted discoveries. Whole pages of Ukrainian and world history were
mercilessly ripped out. But remember, there is no statute of limitations on
crimes against humanity” (from the collection To the Slain Sons of Ukraine:

When we honor our nation’s “executed renaissance” on the Days of Memory,
we recall the names of such repressed intellectuals as Les Kurbas, Mykola
Zerov, Mykola Kulish, Valerian Pidmohylny, Pavlo Fylypovych, Myroslav
Irchan, Stepan Rudnytsky, Matvii Yavorsky, Mykhailo Lozynsky, Mykola
Trokhymenko, Anton Krushelnytsky, Volodymyr Chekhivsky, Mykhailo Poloz,
and others.

Articles and books have been written about these distinguished figures of
Ukrainian culture, scholarship, and politics (e.g., articles in The Day and
history journals, the book The Ukrainian Solovky (2001), and forthcoming
publications by the author of The Special-Purpose Archipelago, etc.).

Sandarmokh was the last earthly address of many Ukrainian prisoners in the
Solovets Islands. But no one has yet honored the memory of such victims of
political terror as Mykola Liubynsky, Ivan Shtefan, and Yakiv Movchanivsky
(Bishop Afanasii) near the execution pits beyond Lake Onega.

As it turns out, they also lie beneath the Karelian pine trees in the “place
where sentences were usually carried out.” Until recently, neither the
general public nor historians knew about the fate of these sons of Ukraine
after their imprisonment. But ongoing research in the archival labyrinths
occasionally brings forth new finds and discoveries.
                                   MYKOLA LIUBYNSKY
The Ukrainian diplomat and political figure Mykola Liubynsky – Secretary of
State for Foreign Affairs, i.e., the head of the Ukrainian National
Republic’s Foreign Ministry from March 3 to April 28, 1918, and a member

of the UNR’s delegation at the Brest peace talks – was born into the family
of Mykhailo and Kateryna Liubynsky in Strikhivtsi, Novoushytsk district,
Podillia gubernia, on Oct. 5, 1891 (his 115th anniversary is being marked this

GPU-NKVD papers classified him as being “of noble origin, a former SR”
(Socialist Revolutionary – Ed.).

In April 1917 Liubynsky was a member of the Ukrainian Central Rada and the
Lesser Rada. Later he headed the Ukrainian National Revolutionary Party (a
faction of the Party of Socialist Revolutionaries that demanded the
rejection of the “Provisional Government’s Instruction to the General
Secretariat,” some of whose members even called for an armed struggle
against Russia’s Provisional Government).

As a participant in the Brest peace talks (December 1917-February 1918),
Liubynsky signed on behalf of the Ukrainian delegation the “Appeal to the
German People” about the need to provide military aid to the Ukrainian
National Republic.

When the remaining UNR government troops were retreating from fire-ravaged
Kyiv towards Zhytomyr, the first international legal act on the cessation of
World War One was signed on the night of Feb. 9, 1918.

It envisaged the mutual recognition of sovereignty and borders, diplomatic
and consular relations, exchange of POWs, etc. But on Feb. 18, under
pressure from the new allies, the Ukrainian government had to sign a
convention on the stationing in Ukraine of a nearly half-million-strong
Austro-German force “to fight the Bolsheviks.”

The historian Dmitrii Viedieneiev says that, according to the protocol on
economic cooperation, dated April 23, the UNR was to supply 60 million poods
(1 pood = 16.39 kg – Ed.) of grain, millions of poods of sugar, meat, and
other goods, in exchange for industrial products. But real life proved to be
more dramatic.

In March-April 1918 Liubynsky was a member of the Vsevolod Holubovych
government. Before that, the Central Rada’s foreign affairs department was
headed by Oleksandr Shulhyn, Secretary General for Foreign Affairs, Minister
of Foreign Affairs (December 1917-Jan. 24, 1918). Later Holubovych himself
was the minister (Jan. 30-March 3, 1918).

The UNR began to open embassies and consulates of the Quadruple Alliance
states (alternative name of the Central Powers). For example, Bulgaria was
represented by Ivan Shishmanov, who recorded the following humorous episode
of Ukrainian diplomacy, which was still in its infancy. German Ambassador
Baron Mumm von Schwarzenstein paid a courtesy call on Ukraine’s new foreign
affairs chief, the 27 year old MykolaLiubynsky.

His Excellency the Minister lived in a two-room apartment on the mezzanine
of a small house on a narrow Kyiv street, and when the ambassador arrived he
was helping his wife do the laundry in the kitchen.

A deputy minister, who luckily was also there, explained to the baron’s
aide-de-camp: “His Excellency is out at the moment.” The meeting took place
the next day in the mansion of the foreign ministry on Tereshchenkivska

In the 1920s Liubynsky lived in Kyiv and was a research associate at the
Institute of the Ukrainian Scientific Language and co-editor of the Bulletin
of the Institute of the Ukrainian Scientific Language.

The ex-minister was sentenced in 1930 to three years’ imprisonment and five
years of internal exile under the political Article 58 4 of the Criminal Code
of the Ukrainian SSR.

Russia recently sent this archival evidence: “Nikolai Liubinsky. Lived in
the village of Povenets, Karelian Autonomous Soviet Republic, worked as a
registrar at the White Sea Canal Administration.

Arrested on Nov. 12, 1937. Sentenced to the highest degree of punishment
on Dec. 15, 1937, by a special troika of the Leningrad Regional NKVD

Executed by firing squad in Sandarmokh, Karelia, on Jan. 8, 1938.” This

date of execution also occurs in dozens of other documents concerning the
Ukrainians who were shot en masse in Sandarmokh.
                                   YAKIV MOVCHANIVSKY
For a long time, there was no information about Bishop Afanasii (Yakiv
Movchanivsky, b. 1887 in the village of Parkhomivka, Skvyra district, Kyiv
gubernia) after he was deported to the Solovets Islands. Researchers assumed
that the life of the disgraced hierarch may have ended “no earlier than
December 1934.”

Bishop Afanasii was an uncommon personality. The son of a deacon, he
graduated from the Kyiv Theological Seminary with a doctorate in theology.
According to the historian Serhii Bilokin, he served at the Church of the
Presentation of the Holy Virgin and then at St. Nicholas’s Church. Following
this, he took his monastic vows and actively fought against the
“modernization tendency.”

He was arrested in August 1924 and taken into preventive custody. Upon

his release in September 1925, Father Afanasii lived in Kyiv for nearly one
year. In 1925-1926 he lived in St. Jonah’s Monastery.

In mid-May 1926 Bishop Afanasii was banished to Kursk and then – via
Moscow – to Omsk. On July 26, 1929, a Special OGPU Committee
“sentenced” him to three years’ imprisonment in the camps.

He served his term in the Solovets Islands. He was re-sentenced in 1933
to three years (again in the Solovets Islands) under Article 58-10 of the
Criminal Code of the RSFSR.

The Ukrainian cleric did not break down in captivity. In 1935 he was
punished for “counterrevolutionary sedition:” all his completed workdays in
the camp were canceled. After being released in 1936, he lived in Povenets
and worked as an inspector of the White Sea Canal Sanitary Service.

During the Yezhov purges, he was rearrested (Oct. 14, 1937) on charges of
“conducting systematic counterrevolutionary agitation among prisoners and
the free populace against the leaders of the party and the government,
counterrevolutionary criticism of the Soviet government’s measures, and
voicing defeatist views.”

On Dec. 19, 1937 a special troika of the Leningrad Regional NKVD Directorate
handed down a decision that the “counterrevolutionary” was to be shot. The
sentence was carried out in Sandarmokh on Jan. 8, 1938.
                               IVAN SHTEFAN AND OTHERS
Another high-ranking Ukrainian statesman, Ivan Shtefan, lived and worked in
Povenets after obtaining an early release from the concentration camp, only
to be rearrested during the “Great Terror.”

He was born in 1878 in the village of Kozelshchyna, in Kremenchuk district,
Poltava gubernia, into the family of a well-to-to farmer.

He was a member of the Party of Socialist Revolutionaries, UNR deputy
minister for post offices and telegraphs, and minister for post offices and
telegraphs in the government of the Directory.

In 1931 he was sentenced to three years’ imprisonment under the political
Article 58-11 of the Criminal Code of the RSFSR). In 1937 he was a
departmental chief at the general supplies directorate of the White Sea
Canal Administration but was rearrested on Oct. 9, 1937.

The sentence of the Leningrad Regional NKVD Directorate, dated Dec.
19, 1937 (capital punishment), was carried out on Jan. 8, 1938.

The night after Christmas was the last one for over three dozen more
Ukrainians (mostly peasants from Podillia and residents of Polissia).

Among them were Semen Beliuk, Petro Bereza, Viktor Vyhovsky, Petro
Vyshnevsky, Andrii Hnatyshyn, Panteleimon Gotz, Andrii Zahorudko, Fedir
Karpunets, Oleksandr Kovba, Luka Kohut, Adam Krashevsky, Ivan Krychun,
Yakiv Melnyk, Kyrylo Moskaliuk, Avksentii Oliinyk, Ivan Panchuk, Yosyp
Radziievsky, Oleksandr Rovenets, Yakiv Syshchuk, Myron Tkachuk, Demyd
Turchak, and Petro Skrobot.

They were all shot at the same tract of woodland past Povenets Bay.

Perhaps thanks to this article some descendants of these repressed
individuals will find information about their relatives and learn about
their place of burial, or will write to me for more information about those
who were executed in Karelia.

There have already been such cases: a newspaper article helped Kyiv resident
Yakiv Derevynsky learn the fate of his grandfather, a political prisoner who
served his term in Russia’s Far North.

I am sure this newspaper report will interest another Kyivite, Serhii
Klymenko, who has collected information on six generations of his family,
including the Liubynskys.                                    -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

OP-ED: By Anne Applebaum, Columnist
The Washington Post, Washington, D.C.,
Tuesday, October 31, 2006; Page A21

With a clutch of new books , a multitude of speeches and a score of
conferences already underway, no one can claim that the 50th anniversary of
the 1956 Hungarian Revolution has gone unmarked.

The Hungarians themselves commemorated their tragic revolt against Soviet
communism with a street riot: Just as post-revolutionary France remained
divided for decades between royalists and Bonapartists, so, too, is much of
post-communist Europe still divided between former communists and former
anti-communists, and nowhere more so than in Budapest.

But as the anniversary moves into its second week, I’d like to celebrate in
a different way — by asking what, if anything, we in the West have learned
since 1956. As many have observed, the American role in the Hungarian
Revolution was hardly admirable.

Although American governments had spent much of the previous decade
encouraging Hungary and other Soviet satellite states to rebel — using
radio broadcasts, speeches, even balloons carrying anti-communist
pamphlets — no one was prepared for the real thing.

As late as June 1956 a clueless CIA (sound familiar?) published an internal
document declaring that “there really is no underground movement” in Hungary
at all.

As a result, the initial American reaction was confused, to be polite about
it. The White House at first dithered about whether the president ought to
call a “day of prayer” or call on the Red Cross or get the United Nations to
do something.

Only after four days of street fighting did the American secretary of state,
John Foster Dulles — a man who had spoken often of liberating the “captive
nations” of Eastern Europe — finally declare that the U.S. government did
not consider the Hungarians “potential allies.” The message was clear: The
West would not intervene.

Or almost clear: At the same time Dulles was reassuring everybody that
nothing would be done, Radio Free Europe was explaining to its listeners how
to make molotov cocktails and hinting at the American invasion to come.

To use contemporary language, a part of the U.S. government was “promoting
democracy.” Another part was “advocating stability.” The result was a bloody

The Hungarians kept fighting even after Soviet tanks arrived, believing help
was on the way. Hundreds died. And Western policy in the region suffered a
setback from which it took nearly 40 years to recover.

Has anything really changed since then? Once again we have an American
president who speaks openly and no doubt sincerely about human rights and
democracy in the Middle East and around the world.

He’s supported by Congress, the media and even whole fiefdoms of the State
Department that dedicate themselves to democracy promotion.

Nongovernmental organizations, sometimes with U.S. government funding, have
emerged around the world to do the same. It would hardly be surprising,
then, if a group of Arab democrats came to assume that we would naturally
support an anti-totalitarian rebellion in their country today.

And yet — what if they acted on this assumption? Try to imagine what would
happen if an imaginary group of pro-democracy Saudis staged a street
rebellion in Riyadh. No one, of course, would be prepared. No one, of
course, would have ever heard of any of the rebels before.

Some in the administration, in Congress and in the media would immediately
hail the “new democrats,” just as in 1956. Arab-language radio stations,
staffed by Saudi exiles, might broadcast messages of encouragement to the
rebels, just as in 1956.

Meanwhile, others in the administration — alarmed by the potential for a
Middle Eastern war, worried about oil supplies, horrified by the unknown
rebels — would support the ousted royal family and call for maintaining the
status quo, just as in 1956.

The White House would mutter something about humanitarian aid, call on the
United Nations — and finally wind up supporting the old regime, just as in

The result: By simultaneously supporting democracy and stability, we would
anger the rest of the Arab world, make U.S.-Saudi relations impossible
however the rebellion was resolved, and probably damage, in multiple
unforeseeable ways, U.S. interests all over the world.

Scholars always bang on about the debate between “realism” and “idealism” in
U.S. foreign policy, but the truth is that for most of the past century
we’ve been simultaneously realistic and idealistic — in favor of democratic
change and deeply wedded to status quo stability — much to the confusion of
everyone else.

And the moral? Don’t blame George W. Bush: Chaos in U.S. foreign policy is
nothing new.

But pity those, whether the Hungarians in 1956, or the Shiites in 1991, who
take our democracy rhetoric too literally: Sometimes we really mean it —
and sometimes we don’t.
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