AUR#798 Dec 18 Macroeconomic Situation Report By SigmaBleyzer; Russia & Uranium; Ukraine Risk Overview; Odessa-Brody; James Mace

                 An International Newsletter, The Latest, Up-To-Date
                     In-Depth Ukrainian News, Analysis and Commentary

                      Ukrainian History, Culture, Arts, Business, Religion,
         Sports, Government, and Politics, in Ukraine and Around the World       

                        “FOR SURVIVAL”
                    Now is the time….to reach out….to share….to give….
   Do it now, click here:
Mr. E. Morgan Williams, Publisher and Editor, SigmaBleyzer

              –——-  INDEX OF ARTICLES  ——–
            Clicking on the title of any article takes you directly to the article.               
   Return to the Index by clicking on Return to Index at the end of each article

MONTHLY ANALYTICAL REPORT: Olga Pogarska, Edilberto L. Segura
SigmaBleyzer Emerging Markets Private Equity Investment Group,
The Bleyzer Foundation, Kyiv, Ukraine, Monday, December 18, 2006
Southeast Europe is growth playground for Greek banks, Ukraine latest target
Elaine Green, Athens News, Athens, Greece, Tue, Dec 12, 2006

               Ukraine is the number one choice for domestic investors
Polish News Bulletin, Warsaw, Poland, Thu, Dec 14, 2006

By Stefan Wagstyl and Tom Warner
Financial Times, London, UK, Friday, December 15 2006 02:00

Interfax Ukraine News, Kyiv, Ukraine, Thursday, December 14, 2006

COMMENT & ANALYSIS: By Charles Grant
Financial Times, London, UK, Monday, December 11 2006

                 Ukraine should be careful in uranium deals with Russia
Kiyevskiye Vedomosti, Kiev, in Russian 12 Dec 06; p 7
BBC Monitoring Service, United Kingdom, Wed, Dec 13, 2006

Ukrainian News Agency, Kyiv, Ukraine, Thursday, December 14, 2006


          Myronivskyi Khliboprodukt to invest USD 170mn in development.
IntelliNews – Ukraine Today, Kyiv, Ukraine, Thu, Dec, 14, 2006 

Ukrinform, Kyiv, Ukraine, Saturday, December 16, 2006


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

12.                               UKRAINE RISK OVERVIEW
Ukraine: EIU Riskwire – Overview, The Economist Intelligence Unit Limited
New York, New York, Friday, December 8, 2006
13.                             “EURASIAN INDIFFERENCE”
           Kazakhstan has no immediate plan to use Odessa-Brody Pipeline
REPORT: By Maksym Arslanov
Kiyevskiye Vedomosti, Kiev, in Russian 15 Dec 06; p 13
BBC Monitoring Service, United Kingdom, Sat, Dec 16, 2006

Eurasia Daily Monitor, Volume 3, Issue 229
Jamestown Foundation, Wash DC, Tuesday, December 12, 2006


5th Channel, Kyiv, Ukraine, Friday, December 15, 2006
           Appointment of Ukrainian spy chief depends on high-level deal
ANALYSIS & COMMENTARY: By Viktor Chyvokunya
Ukrayinska Pravda web site, Kiev, in Ukrainian 1 Dec 06
BBC Monitoring Service, United Kingdom, Wed, Dec 06, 2006

17.                         JAMES MACE: CANDLE OF MEMORY
Ihor Siundiukov, The Day Weekly Digest, Kyiv, Ukraine, Tue, Nov 28, 2006

Nadia Tysiachna, The Day Weekly Digest, Kyiv, Ukraine, Tue, Dec 5, 2006

19.                                     CANDLE OF HOPE
             On the Day Commemorating the Victims of the Holodomor                           
Ihor Siundiukov, The Day Weekly Digest, Kyiv, Ukraine, Tue, Nov 28, 2006


Katie Fox, President, American Friends of “For Survival”
Action Ukraine Report (AUR) #798, Article 20
Washington, D.C., Monday, December 18, 2006
                               ASSOCIATION PROGRAM IN 2007
Ukrainian American Environmental Association
Rivne, Ukraine and Washington, D.C.
Action Ukraine Report (AUR) #798, Article 21
Washington, D.C., Monday, December 18, 2006


MONTHLY ANALYTICAL REPORT: Olga Pogarska, Edilberto L. Segura
SigmaBleyzer Emerging Markets Private Equity Investment Group,
The Bleyzer Foundation, Kyiv, Ukraine, Monday, December 18, 2006

[1] Ukraine continues to show remarkable economic growth as real GDP
expanded by 9% yoy in October 2006, bringing the cumulative figure to
6.5% yoy.

[2] Strong GDP growth helped to maintain fiscal stability in the country;
during January-October the consolidated fiscal surplus stood at 0.4% of
period GDP. Nevertheless, the government expects to incur a fiscal deficit
of 2.5% of GDP in 2006.

[3] Driven by continuing adjustment of utility tariffs, consumer price
inflation surged up to 11% yoy in October.

[4] Despite improving export performance, Ukraine’s merchandise trade
deficit continued to increase. However, thanks to surpluses in foreign trade
of services and transfers accounts, the current account deficit narrowed to
just $202 million (0.3% of period GDP) for January-September.

[5] In November – beginning of December, Ukraine accelerated the adoption
of legislation necessary for WTO accession.

                                   ECONOMIC GROWTH
The Ukrainian economy continued to demonstrate remarkable economic
performance in October. Supported by robust domestic demand, GDP grew
by 9% yoy during the month. For the first ten months of the year, total GDP
stood at UAH 400 billion (almost $80 billion), 6.5% up compared to January-
October of the previous year.

Though the industrial sector witnessed a deceleration of value added growth
in October, it was more than compensated for by the growth in the service

Acceleration of value added growth in domestic trade and transport to 15%
yoy and 9.5% yoy respectively explained almost 45% of total GDP growth
over January-October.

Strong payable demand for residential housing and industrial buildings
supported the dynamically growing construction sector where value added
expanded by 8.4% yoy, up from 7.6% yoy over the first nine months of the

The good harvest of vegetables, sugar beets and sunflower seeds, as well
as the healthy rates of growth in livestock farming, improved agricultural
performance; however, its contribution to total GDP growth remained

In particular, value added in agriculture declined by 0.7% yoy over
January-October, picking up from a 2.3% yoy decrease over January-

A successful winter crops sowing campaign, favored by good weather
conditions, should allow the sector to report marginal growth for the full

In October, industrial output growth slowed to 3.8% yoy compared to 6.2%
yoy growth a month before. Nevertheless, the cumulative growth rate is still
reasonably high – 5.3% yoy at the end of October. The major reason for the
slowdown was a sharp reduction of output in the coke and oil-refining

Since mid-2005, when import tariffs on oil products were substantially
reduced, the oil-refining industry faced increasing competition from higher-
quality imports. In 2006, it was exacerbated by the price hike on energy
resources and rising input costs.

Though world crude oil prices eased in the last few months after reaching
a peak in mid-July, they still remained at a high level.

In addition, after a series of increases, Russia’s crude oil export duty
reached record high level of $237.6 per ton in October ($179.6 per ton at
the beginning of the year). All of these factors resulted in imports
displacing domestic production of gasoline.

At the same time, the output decline by almost 30% yoy in October
(compared to 5.3% yoy a month before) was caused by routine repairs at
two oil refineries. (1)

Though machine-building, metallurgy and the chemical industry, accounting
for more than 40% of total industrial output, reported deceleration of
production, the cumulative growth rates remained at a decent 11.3% yoy,
8.5% yoy and 3.5% yoy respectively.

October’s deceleration in these industries may be attributed to weakening
external demand and an easing low
base effect.

Supported by buoyant consumption growth and anticipation of Russia’s
elimination of export bans on Ukraine’s milk, meat and dairy products,
production of foods accelerated to 12% yoy in October, bringing the
cumulative growth to 7.8% yoy.

Despite price hikes on energy resources (particularly natural gas and crude
oil), the Ukrainian economy was able to absorb the shocks. Real GDP is
expected to show strong growth of around 6.5% yoy in 2006, a rate that
favorably compares to Central and Eastern European countries.

Good macroeconomic performance in 2006, robust domestic consumption
and investment activity (both domestic and foreign) should allow GDP to
grow by 5-6% yoy in 2007 even considering a 37% increase in imported
natural gas prices.

However, Ukraine’s economy remains quite vulnerable to developments in
energy and steel prices. (2) Hence, the positive macroeconomic outlook in
future periods will crucially depend on Ukraine’s ability to speed up
fundamental economic reforms, necessary to improve business environment
and stimulate investments, including into energy-saving technologies.

                                      FISCAL POLICY
Strong GDP growth helped to maintain fiscal stability in the country.
Booming domestic trade, growing household income and improving enterprise
performance allowed the government to over-fulfill budget revenues.

In particular, tax revenues to the general fund of the state budget were
collected in an amount exceeding the target by 10.3% in October and 3.2% to
date. VAT proceeds, the weightiest component of tax revenues, exceeded the
target by 22% in October and 17.4% to date.

At the same time, a 40.5% yoy increase in VAT receipts in nominal terms over
January-October was achieved partly due to an accumulation of VAT refund

In particular, VAT refunds were under-fulfilled by 39.5% in October and
almost 14% for the first ten months of the year.

As the financial stance of enterprises continued to improve (the share of
profitable enterprises increased to 64.4% over January-September, while
profits before taxes were up by 13% yoy), corporate tax (EPT) collections
have also been recovering.

Thanks to above-target collections in the last few months (by 10% in
October), cumulative execution improved but remained 10.7% below the
targeted amount.

Expenditures from the general fund of the state budget were up 22.8% yoy
in nominal terms over January-October. At the same time, they were
under-executed by 12.7% in October and 4.8% to date.

However, in spite of the over-fulfillment of revenues and under-execution of
expenditures, the state budget deficit widened to UAH 2.7 billion (0.7% of
period GDP), an increase from a UAH 1.4 billion deficit over

Large surpluses in local budgets allowed the consolidated budget to stay in
surplus of UAH 1.5 billion or 0.36% of January-October’s GDP. Nevertheless,
the government expects to incur a deficit of 2.5% of GDP in 2006.

This implies considerable fiscal loosening through the end of the year.
Moreover, to meet all social liabilities, the government had to amend the
2006 budget law.

In mid-November, the parliament approved amendments to the budget
envisaging revenue and expenditure increases by 1.4% to UAH 127.5 billion
($25.3 billion) and UAH 140.2 billion ($27.8 billion), while the deficit was
kept unchanged.

Social expenditures will be increased thanks to extra budget revenues
received from over-fulfillment of VAT proceeds, saved funds from lower
expenditures for the election process and servicing public debt, and
reallocation of other expenditures.

Though the government resumed both domestic and external borrowings in
September-October, the rest of the funds received from the re-sale of
metallurgical plant Kryvorizhstal in October 2005 remained the primary
source of state deficit financing.

The absence of public borrowing in the first eight months of the year on the
back of prudent public debt servicing resulted in a 6.7% reduction of total
public debt since the beginning of the year to $14.4 billion (about 14.4% of
projected full year GDP).

However, to fully realize planned budget expenditures for 2006, the
government stepped up borrowing activity. Thus, it successfully placed $1
billion Eurobonds with a 10 year maturity and 6.58% yield in November.

This will cause slight acceleration of public debt through the end of the
year; however, its level will remain among the lowest among peer countries.

                                     MONETARY POLICY
Driven by continuing adjustment of utility tariffs, consumer price inflation
surged up by 2.6% month-overmonth (mom) in October. Such high monthly
inflation had not been observed since fall 2000. In annual terms, CPI growth
approached 11% yoy.

During the month, service tariffs increased by 7.8% mom, driving the annual
growth to 41% yoy. The largest increase was registered for utility and
housing tariffs -71.6% yoy in October.

In the run up to the heating season, local authorities raised the cost of
heating, hot water supply and housing services in a number of regions.

The process of tariffs adjustment to cost covering levels differs in speed
and magnitude throughout Ukraine. Service inflation is expected to further
accelerate through the end of the year, as several times tariff adjustment
in Kyiv, one of the weightiest components of Ukraine’s economy, is
scheduled for December 1st.

Though painful for end-users, the adjustment of service tariffs to
cost-covering levels may help restore the solvency of the utility sector,
enhance sector modernization and prompt more efficient utilization of

Besides services, October’s inflation was also driven by food price growth.
Following the upturn in September, food price inflation accelerated to 1.4%
mom, which translated into a 4.7% yoy increase in annual terms.

The price growth acceleration was reported for bread and cereals (which
can be explained by the adjustment to higher production costs), meat, milk
and dairy products (related to expectations of elimination of Russia’s ban
on Ukraine’s export of these products.)

Following the pattern of world crude oil prices, domestic gasoline prices
declined by 6.1% mom in October. This allowed non-food prices to
decelerate in annual terms to 2.7% yoy.

In November, the pace of inflation may decelerate as the government
negotiated a further decrease in gasoline prices with gasoline traders and
initiated the revision of price levels on selected food products (meat,
milk, sugar). However, these efforts may be outweighed by growing
demand side pressures.

An upward adjustment in the subsistence level and minimum pensions as of
October 1st, anticipated considerable fiscal loosening at the end of the
year, and booming credit to the private sector on the back of high
expectations will largely contribute to inflationary pressures in the coming
months. Hence, we believe that year-end inflation will be around 11.5% yoy.

The monetary impact on inflation has remained moderate so far. Though
monetary base growth accelerated to 22.4% yoy, money supply growth
continued to decelerate to 36.7% yoy.

In monthly terms, the monetary base expanded by 3.5% driven by the NBU’s

net foreign exchange purchases on the interbank market, which amounted to
$363 million in October, and the decline of government cash balances on the
account with the NBU by 8.3%.

Their impact, however, was mitigated by the increase in commercial banks
reserves kept at the corresponding accounts with the NBU following the
increase of mandatory reserve requirements since October 1st.

At the same time, the money supply reported a moderate increase of 1.8%
mom due to the decline in the money multiplier.

Moderate money supply growth was accompanied by increasing money
demand, with the latter stimulated by robust growth of household income,
improved access to commercial banks’ credit resources and recovered
investment and business activities.

Decent growth of deposits (up by 41.8% yoy in October), the NBU’s
refinancing operations and active borrowing from abroad allowed the
commercial banks to keep their lending growth rates at a high 66.1% yoy
in October.

Differentiation of reserve requirements by currency resulted in acceleration
of national currency deposits growth to 33.3% yoy in October and
deceleration of foreign currency deposits to 56.7% yoy (down from 64.1%
in September).

At the same time, to make deposits more attractive in light of recent
acceleration of consumer inflation, commercial banks had to increase deposit
rates. However, quite different patterns were observed for national and
foreign currency borrowings.

The lending rate on hryvnia-denominated loans has been declining throughout
the year to 14.3% pa in October, while the rate on foreign currency loans
increased from 11% pa in July to 11.3% pa in October.

However, Ukrainians still prefer borrowing in foreign currency. In
particular, foreign currency loans accelerated to 91.1% yoy in October,
bringing their share to 48.5% at the end of October compared with about
43% at the beginning of the year.

Favored by strong external demand, Ukraine’s export performance continued
to improve. In September, for the fourth month in a row, merchandise exports
reported higher rates of growth than imports – 31% yoy and 29.4% yoy

However, due to poor performance in the first half of the year, the
cumulative growth of imports considerably outpaces exports.

In particular, exports increased by 10.4% yoy over the first nine months of
the year while imports expanded by 22.2% yoy. As a result, the merchandise
trade deficit continued to widen, reaching $4.1 billion at the end of
September, which is equivalent to about 5.1% of period GDP.

By product breakdown, the largest contributors to the overall growth of
goods exports remained metals, whose trading volumes expanded by 12.4%
yoy over January-September, followed by machines and transport equipment
and chemicals.

On the import side, imports of machines and transport vehicles expanded by
about 37%, indicating strong investment demand in the country.

However, traditionally the largest contributor to merchandise imports growth
remained oil and gas imports. Accounting for 30% of total imports, imports
of energy resources were up 18% yoy over the first nine months of the year.

Despite a widening merchandise trade deficit, Ukraine’s current account
balance has been improving. According to preliminary estimates of the NBU,
the CA deficit declined to $202 million at the end of September, down from
a $782 million deficit reported for the first half of 2006.

The CA surplus in the third quarter of the year was achieved on account of
surpluses in the foreign trade of services and transfers accounts. Indeed,
the State Statistics Committee reported a $2.4 billion surplus in Ukraine’s
foreign trade of services.

Considering recent balance of payments improvements, the CA deficit may be
around 0.5% of GDP for the year. Plentiful FDI, estimated at $3.6 billion as
of the end of September, allowed the country to not only finance CA deficit
but also replenish international reserves ($19.5 billion at the end of

                                   INVESTMENT CLIMATE
Following Fitch’s upgrade of Ukraine’s long-term rating outlook, Moody’s has
also revised its outlook for Ukraine’s B1-rated medium and long-term
government bonds in foreign and national currency and its “B2”-rated foreign
currency bank deposit ceiling to positive from stable.

According to agency experts, the revision was due to the greater political
stability following the appointment of the new coalition government.

As of the end of November, Ukraine had completed bilateral agreements with
all countries but Chinese Taipei and Kyrgyzstan. Hence, bringing legislation
into compliance with WTO requirements remained the main stumbling block
on Ukraine’s way to WTO accession.

In November – beginning of December, Ukraine accelerated the adoption of
legislation necessary for WTO accession. In particular, the amendments to
the laws regulating banking, insurance, veterinary industries, export duties
on live cattle and raw stock taxation on agriculture, export duties on iron
and steel and non-ferrous scrap were adopted.

Ukraine hopes to obtain a positive report at the organization’s meeting on
December 21st and join the WTO in early 2007. Moreover, it is enhanced by
the recent agreement on WTO between Russia and the USA. This agreement
raises the chances of Ukraine’s and Russia’s synchronized entry into the
organization.                                          -30-
(1) There are six oil refineries in Ukraine. Two of them are not functioning
since the beginning of the year due to planned repairs and fundamental
reconstruction. In October, two more oil refineries stopped for two-week
routine repairs.
(2) Despite the fact that the price for imported natural gas for Ukraine was
increased by about 42% in 2006 and will be raised by another 37% in 2007,
Ukraine will be paying only about 46% of the “European” price.
NOTE: To read the entire SigmaBleyzer/The Bleyzer Foundation

Ukraine Macroeconomic Situation Report for November 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 Romania. They are
 published at
Director, Government Affairs, Washington Office, SigmaBleyzer,
Washington, D.C.,,
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
Southeast Europe is growth playground for Greek banks, Ukraine latest target

Elaine Green, Athens News, Athens, Greece, Tue, Dec 12, 2006

ATHENS – HAVING acquired much of what is on offer in the Balkans,
Greek banks have already begun to stretch their reach to Turkey. But the
virgin territory is Romania’s neighbour, Ukraine.

“Greek banks have expanded substantially across the Balkans – in Bulgaria
alone Greek banks control 25 percent of the market,” said Belgian-based
Lode Beckers, the founder of consulting firm Lobo and an authority on EU
enlargement. He was keynote speaker at an Economist conference in Athens
on December 5-6.

His words were echoed by speaker after speaker at the well-attended event.
“Greeks were forward-thinking on Balkans expansion,” said the general
manager of EFG Eurobank, Giorgio Pradellie, noting that in just three weeks
Romania and Bulgaria will achieve the coveted status of EU membership.

The Balkans region could rocket on the back of the developments that go hand
in hand with EU membership. Pradellie gave the example of Spain which
entered the EU 20 years ago as a relatively underdeveloped nation, and is
now one of Europe’s leading economies.

The Balkans has much growth potential, especially in the loan sector, from
which Greek banks are set to gain substantial profits. “Growth over the last
few years has been spectacular in a region that is on our doorstep,”
Pradellie said.

It is this close proximity that has been the secret of Greek banks’ boom in
recent years, said numerous speakers, including George Aronis, general
manager of Alpha Bank.

“Greece is a small country, yet we have been able to expand our domestic
base significantly. Moreover, in banking it is difficult to be a big player
if your home base is small. But Greek banks have increased the home base
by spreading to the Balkans.”
                          JUMPING ON THE BANDWAGON
The new territory is Ukraine. “Everybody is interested in Ukraine,”
Pradellie said, referring to the flurry of mergers and acquisition activity
in the banking sector there, and the number of Greek banks looking to get a
piece of the action. The banking sector in Ukraine is vast and ripe for
consolidation, say experts.

Almost all the big Greek banks are said to be looking to buy one or more
Ukrainian banks.

They want to mimic the success of Balkans expansion on new turf. TAS
Kommerzbank and Forum Bank in Ukraine are among the many targets. TAS is
understood to have an open bidding process to be overseen by HSBC, whilst
Forum Bank will also auction to the highest bidder and is being advised by

There are thought to be three to four bidders in each case. Forum Bank is
seen as a particularly attractive target and has around 85 branches, assets
of 854 million US dollars and market shares of 2 percent.
                         ALPHA POISED FOR UKRAINIAN BUY
Hot on the heels of announcing its intention to buy Turkey’s Alternatifbank,
owned by Turkish conglomerate Anadolu Holding, Alpha Bank is poised to
acquire a Ukrainian bank.

Alpha has not only been evaluating a number of banks in Ukraine, but is in
exclusive talks to acquire a private bank, an Alpha bank source told the
Athens News. The target has around 100 branches, for which Alpha could
pay around 1 billion US dollars, he added.

The National Bank of Greece has been the most acquisitive in the region.
With a large Turkish bank, Finansbank, firmly under its wing and the
possibility of Romania’s CEC a deal still in the process, National is also
on the prowl in Ukraine, a source familiar with the matter told us.

“Ukraine definitely is on our radar,” he said, whilst being tight-lipped
about targets. Piraeus Bank too could make a purchase in the near future.
EFG Eurobank is also considering buying a small bank in the eastern region
of the country, having already established a presence in the west of
Ukraine, another source told this newspaper.
                                 SWALLOWING THE BRANDS
Greek banks were early movers in the Balkans, taking advantage of aspects
of shared culture as well as an awareness of differences,” Beckers told his

He likened Greek players’ conquest of banks to aspects of the beer industry.
“Like beer, local brand leaders will prevail in southeastern Europe,” he
said.                                                   -30-

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
                Ukraine is the number one choice for domestic investors

Polish News Bulletin, Warsaw, Poland, Thu, Dec 14, 2006

WARSAW – Ten years ago, leading domestic enterprises such as Grupa Lotos,
PKN Orlen, PZU or most Polish banks were as large as they were poorly
managed and uncompetitive.

At that time, the majority of domestic companies were reluctant to engage in
any business ventures abroad, with the total value of Polish investments
carried out in foreign countries between 1989 and 1997 amounting to only

Nonetheless, with the course of time the situation has radically improved:
at present, PKN Orlen is on the verge of completing the biggest foreign
transaction in Polish history, as on 15 December it is to acquire the
Lithuanian refinery of Mazeikiu for over EUR1.75bn.

Since 1997, the value of the investments conducted abroad by domestic
enterprises has risen nearly tenfold; in 2005, it amounted to nearly
EUR5.5bn, increasing over two times year-on-year. According to the data
collected by the National Bank of Poland (NBP), so far in 2006 this value
has exceeded EUR618m, which means that a new record may be set at the

end of the year.

Polish companies are encouraged to invest in foreign markets not only by
their high consumption potential, but also by the occasionally arising
opportunities to acquire well-developed local companies at bargain prices.

At the same time, they are attracted to Central East European countries by
the low labour costs there. In the last few years, private metallurgical
holding Zlomrex has been gradually taking over companies operating on the
domestic market. Presently, it is looking forward to expanding abroad.

For starters, it intends to purchase Voestalpine Stahlhandel, the commercial
arm of Austrian steel giant Voestalpine AG. Following several months of
negotiations, the Polish company has gained exclusivity rights to continue
the talks at a more advanced level, which are to be completed by the end of

By acquiring Voestalpine Stahlhandel, which is operating on the Bosnian,
Croatian, Czech, Hungarian, Slovakian and Romanian markets, it will gain a
strong presence in Central Southern Europe. At present, Zlomrex , whose
revenue in 2006 will probably exceed ZL2bn, employs 2,500 people. Apart

from being a raw material supplier to steel works, it has also become a steel
producer and steel products trader.

While the majority of Polish businesses carry out their foreign investment
in fellow EU member states, they are also increasingly interested in
launching projects in countries such as Russia, Romania, or even China.

However, so far it is Ukraine that has been the number one choice for
domestic investors, who by the end of 2005 have initiated projects worth
EUR170m in that country. While most of these projects were small-scale
ventures, recently Cersanit and Barlinek have locally launched large
investments worth over ZL300m.

At the same time, the bank Pekao SA has also revealed plans to expand into
Ukraine. Additionally, a new facility in the country is to be set up by
spices maker Kamis, with automotive equipment producer Inter Groclin Auto
planning to develop its local factory.

Expansion eastwards was particularly successful for paint and varnish
producer Sniezka, which so far has managed to grab an over 11-percent share
in the Ukrainian market. At present, its local branch reports a revenue of
ZL50m, with profitability exceeding 20 percent, mainly due to low labour
costs and investment allowances.

A few years a go, the majority of Polish companies were too small to
seriously consider expanding abroad. Since then, however, they have grown
sufficiently to engage in such endeavours. Moreover, such ventures are
encouraged by the high inflow of capital and the boom experienced both in
domestic and international economy.

Additionally, the favourable economic situation has made it much easier for
investors to obtain loans for carrying out foreign takeovers from financial
institutions. Still, with the value of Polish investment abroad
corresponding to only 7 percent of foreign investment in Poland, it can be
safely assumed that the real expansion of domestic enterprises into foreign
countries is yet to begin.                            -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]


By Stefan Wagstyl and Tom Warner
Financial Times, London, UK, Friday, December 15 2006 02:00

Dmytro Firtash, the secretive Ukrainian businessman who emerged in April as
a key player in the European gas market, is nervous at the start of his
first media interview.

“I feel I am losing my virginity,” he says. Mr Firtash reluctantly went
public after it was disclosed that he is the main partner of Gazprom in
RosUkrEnergo, a joint venture trading company that in January won a big
contract to supply gas from central Asia to Ukraine and other European

Gazprom owns 50 per cent of RosUkrEnergo, and the other 50 per cent is
controlled by Centragas Holding, a company in which Mr Firtash has a 90 per
cent stake.

It is a far cry from Mr Firtash’s humble origins in Bohdanovka, a west
Ukrainian village near the city of Chernivtsy. After military service, he
started trading, specialising in meat, butter and other foods, as well as
second-hand cars.

In 1993, he persuaded associates to back him in a deal supplying meat on
credit to Turkmenistan. When the buyer, a state company, failed to pay, the
economy minister offered to pay in natural gas, of which Turkmenistan has
huge reserves.

The minister introduced Mr Firtash to a Ukrainian gas trader who was buying
gas on behalf of Ukraine. “He said he could buy as much gas as I wanted to
sell,” says Mr Firtash.

The deal became the foundation of his wealth. He imported food to
Turkmenistan and bartered it for gas which was sold to Ukraine. There, he
was paid in cash and he used this to finance shipments of food and other

Following Vladimir Putin’s election in 2000, new managers were brought into
Gazprom who insisted on greater control of operations, including the central
Asian transit trade. Mr Firtash presented himself as an experienced trader.

By 2004, Gazprom wanted a more direct stake in the transit trade. It signed
a new arrangement with Mr Firtash in the form of RosUkrEnergo, which began
operating in 2005 and expanded its role with the Russia-Ukraine deal.

Mr Firtash is aware outside scrutiny will become more intense. But he is
ready for it. “I have nothing to hide.”                       -30-

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
    Send in names and e-mail addresses for the AUR distribution list.

Interfax Ukraine News, Kyiv, Ukraine, Thursday, December 14, 2006

KYIV – Total trade between Ukraine and the United States was worth more

than $2 billion in January through October, the U.S. Embassy in Ukraine
reported on Wednesday.

Ukraine’s exports to the United States totaled $1.378 billion over ten
months, whereas the U.S. exports to Ukraine totaled $627 million.

The current tendencies give grounds to expect that trade between the two
countries in 2006 could be more than 2.5 times the amount of trade of 2003,
according to the statement.

The embassy voiced hope that direct foreign investment in Ukraine from the
United States would significantly grow in the view of Ukraine’s being very
close to joining the WTO.                            -30-

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

COMMENT & ANALYSIS: By Charles Grant
Financial Times, London, UK, Monday, December 11 2006

The enlargement of the European Union has lost momentum. Bulgaria and
Romania will enter the EU in January, but there is then likely to be a long
gap before any other country joins. The EU has used the accession process

as its main method to promote economic and political reform in its
neighbourhood. But now it needs new methods.

Germany, which takes over the EU presidency next month, has promised that

a new “European neighbourhood policy” will be a priority. Such a policy is
urgently needed. A key challenge for the EU next year will be to build
stronger ties with neighbours that are not on the road to membership.

The EU cannot afford to be indifferent to the arc of instability that runs
from Belarus to North Africa, passing through Ukraine, Moldova, the western
Balkans, the Caucasus and the Middle East. Unless the EU takes
responsibility for steering its neighbourhood towards prosperity and good
governance, it risks paying a heavy price.

Political instability, religious extremism, ethnic conflict, organised crime
and illegal immigration could all spill over from the neighbourhood to the
union and in some cases already are.

The EU’s current neighbourhood policy, in place since 2004, is proving
inadequate. It involves the union negotiating an “action plan” with each
neighbour, promising trade, aid, political contacts and participation in EU
programmes – though not membership – in return for a series of specified

Action plans with Armenia, Azerbaijan, Georgia, Israel, Jordan, Morocco,
Moldova, the Palestinian Authority, Tunisia and Ukraine have already been

Several such plans have been modestly successful. Ukraine has adapted some
laws and standards to be closer to those of the EU and will gain an easier
visa regime.

Morocco and Moldova have improved border controls. Jordan, Morocco and
Tunisia have set up forums on governance, democracy and human rights. But
the ENP has failed to transform neighbours in the way the accession process
transformed much of eastern Europe.

The carrots held out by the EU are not juicy enough to motivate political
elites to undertake many of the painful reforms required.

Although the EU cannot feasibly promise membership to neighbours, it must
offer them a more attractive package. Germany plans to integrate neighbours
with EU energy markets and transport networks.

The Commission has approved a scheme to offer Ukraine and other neighbours
“deep free trade”. That would mean scrapping not only tariffs but also some
non-tariff barriers to trade and investment.

The union should go further. It should offer the best-performing neighbours
partnerships in the Common Foreign and Security Policy (CFSP). If countries
such as Georgia and Ukraine make steady progress towards becoming liberal
democracies, the EU should ask them to send diplomats to the Council of
Ministers in Brussels.

They would take part in discussions on policies of common interest, such as
Black Sea security, non-proliferation, counter-terrorism and illegal
immigration. The partners would help to shape EU policy but, not being
members, could not vote on it. Once EU governments had decided a policy,

the partner would be free to sign up to it, or not.

Such partners would gain several benefits. Their politicians and bureaucrats
would learn about the EU’s ethos of compromise. These neighbours would find
it much easier to adopt the acquis communautaire in foreign policy – much of
which is declarations – than in other areas, such as the single market.

Above all, joining the CFSP would make countries such as Ukraine and Georgia
feel a little safer. Many Georgians and some Ukrainians view Nato membership
as the best guarantee of their security. But since that goal remains a
distant prospect, they may favour closer security ties with the EU as an
interim step.

The EU should offer the same deal to candidates for membership, such as
Turkey, which are excluded from talks on CFSP. Of course, there would be a
risk that too many governments around the table could slow decision-making.
So the scheme should begin with a few chosen topics.

If it worked well, the EU and the partners could extend it to more policy
areas. In any case, if EU governments found neighbours and candidates were
being obstructive, they would be free to move ahead and take their own

Such ideas to strengthen neighbourhood policy will only work if they are
seen as “membership neutral”. Some Georgians and Ukrainians will sniff at
any offer that does not mention the goal of membership. But when they
realise that membership is not on the cards for the foreseeable future, they
may welcome other ways to move closer to the EU.

Similarly, some members hostile to enlargement will be reluctant to give
neighbours a status that could be seen as a stepping stone to membership.
But in time they may see that the union has a strategic need to foster
reform in its neighbours and that it must therefore give them a closer

The writer is director of the Centre for European Reform, which recently
published his pamphlet “Europe’s blurred boundaries: rethinking enlargement
and neighbourhood policy” (             -30-

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
                    Ukraine should be careful in uranium deals with Russia

Kiyevskiye Vedomosti, Kiev, in Russian 12 Dec 06; p 7
BBC Monitoring Service, United Kingdom, Wed, Dec 13, 2006

KYIV – Ukraine should resist Russian efforts to encroach on the development
of Ukraine’s own uranium deposits, a newspaper has reported. The author said
the director of the Ukrainian nuclear power company Enerhoatom, Andriy
Derkach, discussed the possibility of lowering the price of Russian nuclear
fuel in exchange for allowing Russia to extract uranium in Ukraine.

He said experts believed this would not be to Ukraine’s advantage. The
author said Ukraine should develop its own extraction as its deposits could
become a “gold mine” for future profit for the state.

The following is the text of the article by Andriy Zhumatiy, entitled “TVEL
asks the price of uranium: we could lose our last chance for energy
independence”, published in the Ukrainian newspaper Kiyevskiye Vedomosti on
12 December; subheadings have been inserted editorially:
Ukraine and Russia are discussing the possibility of joint investment in
extracting uranium on Ukrainian territory. Experts are of the opinion that
such cooperation could be ruinous for Ukrainian energy independence. A few
days ago, Enerhoatom Director Andriy Derkach paid a working visit to Moscow.

During the meeting with acting president of Russia’s TVEL corporation Anton
Badenkov, the issue of joint investment into extracting uranium from
Ukrainian deposits was discussed as well as the issue of supplies of new
fuel for Ukrainian nuclear power plants. This topic was also raised in
recent negotiations in Kiev between Enerhoatom and TVEL.

Experts insist that if a formula envisioning cheap Russian fuel in return
for the chance to extract Ukrainian uranium forms the base of the agreement,
then it will not be advantageous for Kiev.

Having sold its deposits, Ukraine would lose one of very few cards which
could back up its interests in negotiations on the price of fuels with its
northern neighbour. It is no secret to anyone that Kiev depends completely
on Russia in terms of oil and gas supplies.
                                       GROWING PRICES
Uranium, as is known, is a good in wide demand, and extracting it brings
profit. Uranium has changed from being an element of exclusive use in arms
as it was half a century ago, into a significant energy resource.

In just the past three years, the price of a kilogram of uranium oxides on
the world market has grown 700 per cent and recently it has grown nearly
every week. Today the price is 160 dollars per kilogram, while at the
beginning of the year it was near 100 dollars per kilogram.

We also note that Ukraine sits in first place in Europe in terms of known
deposits of this energy resource and sixth place in the world, but extracts
only 30 per cent of uranium needed for its own domestic uses – 30 per cent
of the amount needed to prepare fuel for four Ukrainian nuclear power

It is also known that Russia is now experiencing a deficit of uranium and is
interested in increasing extraction of it. Not long ago, the Priargunskiy
ore and chemicals association, which is part of the TVEL company, was
declared the winner of a tender to refine uranium deposits in Chita Region
[Russia]. The Russians plan to finish work on the project in this region a
year earlier than the project called for.

This shows that in light of Russia’s aims to increase its nuclear capacity
(seven nuclear units are to be put on line by 2020), its neighbours will
feel an acute lack of raw material. In the near future, the Russians intend
to develop both their own known deposits (there is raw uranium in Siberia,
Yakutia and Karelia) and those in other states. Obviously, Ukraine’s
deposits are the most attractive to TVEL.

Ukrainian experts believe that the Russians can be attracted to developing
Ukrainian deposits, but only as an investor which could provide the material
for developing them. There should be no talk of removing the raw material

“I think investors can be attracted – domestic and Russian and Western
ones – but on the condition that the uranium extracted should not be
exported across the border. Of course, the investor should get their funds
and profit back, but Ukraine should reserve the right to extract uranium for

An agreement should be made on a commercial basis, and not based on the
export of extracted uranium”, Yuriy Koshyk, the director of the Ukrainian
institute of scientific research and development of industrial technologies
(Zhovti Vody), has told this newspaper.
                             A POTENTIAL GOLD MINE
Mykhaylo Vatahyn, the director of the EFEN-Kiev consulting group said a
number of parameters must be understood to know if such cooperation

would be good for Kiev.

“If parity of economic interests is present for all project participants,
then that has the right to exist. If we are talking about achieving personal
gain at the expense of state resources, that is something quite different. I
think that before the agreement with TVEL on cooperating to develop
Ukrainian deposits takes on a more specific shape, there is no reason to
speak of Russian expansion,” Vatahyn said.

One source wishing to remain anonymous told Vedomosti that Ukraine is fully
capable of independently increasing its capacity to extract uranium. He said
this could be done without attracting credits.

“If we wanted, we could have long ago extracted all 100 per cent of our
internal needs. One only needs desire and the political will. About 3bn
hryvnyas is allocated for the coal industry every year. A significant part
of this money is not used as intended.

We do not need so much to extract uranium; we can’t use that much in a year.
For one year, 500m [hryvnyas] would be enough and in three or four years, we
would provide ourselves with uranium,” the expert said.

He is convinced that the extraction of uranium needs to be developed using
state funds. Judging from rate at which the price of this resource is
growing on the world market, such deposits could be a “gold mine” and bring
the state large profits.                                    -30-

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

Ukrainian News Agency, Kyiv, Ukraine, Thursday, December 14, 2006

KYIV – Dnipropetrovsk-based Interpipe Corporation has plans to start Initial
Public Offering (IPO) at foreign stock exchanges in 2008-2009. Interpipe’s
founder Viktor Pinchuk said this in an interview with the Delo newspaper.

“The guiding line for Interpipe is 2008-2009,” he said, adding that
Ukraine’s accession in the World Trade Organization would facilitate the
corporation’s IPO.

Pinchuk said the share of securities to be placed at stock exchanges had not
been determined. “We will determine the tactics later. I don’t grudge – we
will do correctly,” he said.

He said the assets raised from the IPO would be used for purchasing
factories. “I believe it is necessary to buy more factories,” he said.
Pinchuk also disclosed the plans of the restructuring of Interpipe to turn
into an investment group from the industrial and financial group.

“Our new philosophy is that we are going from the maximization of profits to
the maximization of capitalization, from management over assets to
management over investment, from operational management to financial
control,” he said. He said Interpipe would concentrate on the pipe and wheel

“Interpipe will be a part of our new group. This will be the brand for our
pipe and wheel business. There will be other brands for other businesses and
companies of ours,” Pinchuk said.

He said the new investment group would acquire assets of science intensive,
high-tech, and actively developing sectors of economy in Ukraine, Europe,
Russia, and the United States. As Ukrainian News earlier reported, Interpipe
is the largest producer of pipes in Ukraine.

Interpipe controls Nyzhniodniprovsk pipe rolling plant; Novomoskovsk pipe
plant and Niko Tube Nikopol seamless pipe plant (Dnipropetrovsk region).

The key figures in Interpipe are Viktor Pinchuk (the corporation’s founder
and son-in-law of Leonid Kuchma), Mykhailo Scheholevskyi, and Oleksandr
Dementienko.                                         -30-

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
         Myronivskyi Khliboprodukt to invest USD 170mn in development.

IntelliNews – Ukraine Today, Kyiv, Ukraine, Thu, Dec, 14, 2006 

KYIV – Ukraine’s largest poultry meat producer Myronivskyi Khliboprodukt
plans to invest USD 170mn in development of its plants in 2007. It
particular these funds will be used to build Myronivska broiler factory. The
company also plans to expand in the fruit market by 2012.

Myronivskyi Khliboprodukt consists of 15 enterprises producing poultry,

meat and eggs. It also sells its own products to final consumers. According
to the company, over 98.5% of its shares belong to chairman of BoD Yurii
Kosiuk and about 1.5% to minority shareholders.

In 2007 the company plans to carry out IPO at London Stock. The company
intends to float around 20% of the shares, which is the minimum amount that
will make the IPO economically feasible.                   -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

Ukrinform, Kyiv, Ukraine, Saturday, December 16, 2006

KYIV – The national exhibition of Ukraine is winding up in Chicago on
Saturday. Opened on December 14 it was visited by thousands of guests

from all around the USA.

The participation of the Dnipropetrovsk region in the exhibition was very
fruitful. Its representatives held a number of meetings with officials and
businessmen of the State of Illinois, which proved interestedness in
interregional, scientific cooperation, investments and projects of drinking
water purification.

Negotiations between Illinois Department of Commerce and Economic
Opportunity Director Jack Lavin and Dnipropetrovsk Governor Nadiya

Deyeva were held, resulting in signing a protocol of drafting an agreement on
regional cooperation between the Illinois State and the Dnipropetrovsk
region.                                                -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

Ukrainian News Agency, Kyiv, Ukraine, December 12, 2006

KYIV – Premier Viktor Yanukovych and President of Microsoft International
Jean-Philippe Courtois have discussed investment climate in Ukraine.
Yanukovych and Courtois discussed the issue at a Tuesday meeting held in

Yanukovych noted that creation of a favorable climate for drawing in
investment into Ukraine’s economy was one of strategic directions in the
Cabinet’s work.

“We know what may interest investors and how we should move further to

form our economy and develop relations with investors,” Yanukovych said.

He noted that Ukraine was on the way of market transformations and
integration with the global economy, as well as development of the Stock
Market. He also said that ensuring private property rights was among the
government’s tasks.

As Yanukovych noted, he has visited the Untied States recently and held a
number of meetings with the US investors.

As Ukrainian News earlier reported, President of Microsoft International
Jean-Philippe Courtois also met with President Viktor Yuschenko. The

meeting was held in the frames of the advisory council for foreign
investments under the president. Courtois is a council member.   -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
If you are receiving more than one copy of the AUR please contact us.
12.                        UKRAINE RISK OVERVIEW

Ukraine: EIU Riskwire – Overview, The Economist Intelligence Unit Limited
New York, New York, Friday, December 8, 2006

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

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

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

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

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

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

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

Foreigners have not been targets of kidnapping but there have been attempts
at extortion. A rise in the number of physical attacks against foreigners
was reported in 2005, although these were still isolated incidents.
The approval of a new government in August 2006 means that a pre-term
election or cabinet reshuffle are no longer sizeable short-term risks. The
risk of further political instability is nevertheless still high, given that
the president now shares power uncomfortably with a heterogeneous coalition
drawn primarily from groups that until recently opposed him.

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

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

The March 2006 parliamentary election has returned many seasoned political
leaders to government, which should help to increase the level of
professionalism [and corruption – AUR].

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

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

Although it is possible for foreign firms to win court cases, particularly
at the higher levels, the judicial process remains slow and inefficient.
Ukraine is dominated by powerful local players who have successfully
excluded foreign capital. The risk that foreign investors’ assets will be de
facto expropriated is low, but recent examples of this exist.

The outgoing government’s record on promoting competition and restraining
unfair competitive practices was poor. Although the presidential
administration is more committed to a level playing field than the ones in
place before 2005, reforming the old system will take a while.

Private property rights are still not well protected. Local accounting
standards are well below accepted levels in the EU and the US.
Ukraine’s economic growth decelerated rapidly in 2005 and remained sluggish
in the first months of 2006, but has picked up recently and is expected to
reach 6.8% in 2006, and to be at around 6% annually in 2007-08. Inflation
has risen but remains moderate, and the currency is stable.

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

Fiscal policy has loosened since mid-2004, which is partly to blame for
higher inflation since then. Further inflationary pressures are to be
expected, as the government boosted incomes prior to the 2006 parliamentary
election and as gas and electricity prices are rising sharply.
In the event of a financial crisis, foreign-exchange availability would
rapidly diminish–as was apparent during the election-related turmoil in
late 2004. Discriminatory tariffs are a low risk but might be imposed in the
event of a grave economic crisis. There is a moderate risk of excessive
trade protection, and some capital controls are expected to remain in place.

The central bank has loosened currency controls in recent years. Not least,
it abolished the requirement that 50% of export earnings be converted into
the domestic currency. The central bank has long been under pressure from
exporters eager to see swifter currency depreciation, but it has thus far
resisted these demands.
The tax system poses some risks for business, since the tax regime lacks
predictability and transparency. Parliament made some progress in 2003 in
amending tax laws, including passage of a flat 13% income tax rate, which
entered into effect at the start of 2004.

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

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

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

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

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

The telecommunications system requires massive investment. The road

network is large but in poor repair, with the railways suffering from similar

Power generation capacity is sufficient, but power cuts are possible at any
time and non-payment for energy is a concern. Information technology
infrastructure is inadequate for a country with Ukraine’s level of
education.                                          -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
         Send in a letter-to-the-editor today. Let us hear from you.
13.                      “EURASIAN INDIFFERENCE”
          Kazakhstan has no immediate plan to use Odessa-Brody Pipeline

REPORT: By Maksym Arslanov
Kiyevskiye Vedomosti, Kiev, in Russian 15 Dec 06; p 13
BBC Monitoring Service, United Kingdom, Sat, Dec 16, 2006

The future of the Odessa-Brody pipeline remains uncertain. Ukraine and
Kazakhstan have signed a protocol on economic cooperation. One of the points
envisages transit of oil via the Odessa-Brody route, but Astana has let it
be understood that loading the pipeline with its raw material is not part of
its immediate plans.

The question of the further fate of the scandalously famous Odessa-Brody oil
pipeline remains open. And although Kiev asserts that in a few years its
forward use will be advantageous, oil suppliers are in no hurry to sign

But after all it is precisely the absence of contracts with oil exporters
that has led to the fact that it proved possible to launch the trunk line,
built back in 2001, only in 2004, in reverse regime.

Today officials are saying increasingly often that instead of Russian oil,
Caspian oil will soon be transported along the pipeline from Odessa to
Brody. The authorities have even drawn up a comprehensive plan to develop
the Eurasian transport corridor, but it is not clear whether it will be
possible to implement it.

Talks showed that Caspian exporters are still interested in the Odessa-Brody
project, but are in no hurry to conclude contracts with Ukraine. One of the
potential oil suppliers for the long-suffering trunk line might be
Kazakhstan. However, Astana does not have available resources at its

“Before talking about the construction of a Brody-Plock pipeline, there
should at least be oil. But today the existing volumes have been
distributed,” said the minister of energy and mineral resources of
Kazakhstan, Baktykozha Izmukhambetov.

Kazakhstan extracts about 60m tonnes of oil annually. Approximately 10.2m
tonnes is used domestically. Another 15m tonnes goes along the Atyrau-Samara
route and 28.2m tonnes is to Novorossiysk along the pipeline Caspian
Pipeline Consortium (CTC).

That leaves a little over 6m tonnes of oil, but in 2006 Kazakhstan
commissioned a new artery, Atasu-Alashankoy, and is now supplying black gold
to a promising new market, China. Apart from that, by 2011 Astana intends to
increase the throughput of this facility from 10m to 20m tonnes a year. It
is indeed not easy to find available resources here.

“Kazakhstan is in talks with foreign investors, as well as with Russia, on
expanding the CTC. In accordance with the agreement that we intend to sign
in January-February 2007, the possibility arises of transporting up to 50m
tonnes of oil a year via the CTC. At present 25m tonnes is being pumped.

A superfluous volume of oil will appear that it will be possible to
transport via the Odessa-Brody. For that reason, today we intend first to
complete expansion of the CTC, and then we will have a real possibility of
conducting talks on the Odessa-Brody-Plock pipeline,” Izmukhambetov said.

In other words, the question of financing the construction of the second
branch of the CTC has not yet been solved. And this means that loading
Odessa-Brody with Kazakhstan oil is being deferred. In conclusion,
Izmukhambetov said that Astana still had an interest in the project. “In
principle, Kazakhstan has an interest in this, and we will examine it
jointly with Ukraine and Russia,” Izmukhambetov said.

Ukrainian officials are in talks on the use of the Odessa-Brody-Plock
pipeline, but the branch going to Poland has not yet been built. In the
opinion of the deputy prime minister for fuel and energy, Andriy Klyuyev,
this design can only be implemented in a team.

“We need to create a consortium of suppliers and consumers. After that, both
the economic and political advisability will appear. And only then will it
be possible realistically to speak about completing construction of the
pipeline,” he said. Apart from that, he suggests, another condition for
implementing the project is a decision on the question of a concession for
the trunk line.

“We need to pass a law on a concession for the pipeline. We have already
submitted it to the Supreme Council [parliament],” Klyuyev said.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

Eurasia Daily Monitor, Volume 3, Issue 229
Jamestown Foundation, Wash DC, Tuesday, December 12, 2006

Information released following the December 10-11 session of the
Ukraine-Kazakhstan Intergovernmental Commission on Economic Cooperation
suggests that Russia has successfully forced an indefinite postponement of
the Odessa-Brody-Plock oil transport project.

Kazakh and U.S. companies in that country were to have been the oil
suppliers and Poland the first among European Union consumer countries, once
the pipeline would be extended to Plock in Poland under a EU-backed project.

The Ukraine-Kazakhstan Commission’s co-chairmen, deputy prime minister
responsible for energy Andriy Kluyev and Energy and Mineral Resources
Minister Baktyhoja Izmukhambetov, made public the following information at
their concluding joint briefing:

At present and for some time to come, all oil volumes reaching the Black Sea
from Kazakhstan are allocated to export directions other than Odessa and the
pipeline to Brody. In plain language, this means that Russia does not allow
oil reaching Novorossiysk from Kazakhstan to be shipped to Odessa and pumped
through that pipeline.

A related implication (though it should not have had a direct bearing on the
Odessa-Brody-Plock project) is that the overall volume of oil pumped from
Kazakhstan to Novorossiysk through the Caspian Pipeline Consortium’s line
(CPC) is finite and stagnant, because Russia is blocking the expansion of
that pipeline’s capacity.

Evidently summing up Russia’s position (with which Kazakhstan differs),
Izmukhambetov said that it would first be necessary to complete the CPC
pipeline’s expansion and only then will it be possible to hold talks on
supplying oil from Kazakhstan to the Odessa-Brody pipeline for Europe. At
that future stage, the issue would have to be discussed jointly by
Kazakhstan, Ukraine, and Russia.

Again, what was left unsaid publicly is that Russia sets a number of
preconditions on the CPC pipeline’s expansion. Those preconditions include
extortionate financial terms for the U.S. oil companies involved in
extraction and transit as well as the demand that a Bosporus bypass
pipeline, Burgas (Bulgaria)-Alexandropolis (Greece), be completed before the
CPC pipeline is expanded.

Thus, Moscow’s squeeze on U.S. interests and Kazakhstan in connection with
oil transit from that country seems to be forcing an indefinite postponement
of the EU-backed oil transport project Odessa-Brody-Poland.

For its part, Kazakhstan seeks to obtain international financing by early
2007 to start the expansion of CPC. According to Izmukhambetov, Kazakhstan
has reached a “preliminary” agreement with Russia regarding transit of
“hydrocarbons” from Kazakhstan through Russian territory and on through
Ukraine to Europe.

However vague this sounds, such an outcome would nullify the basic purpose
of Odessa-Brody and other energy transport projects for Caspian fuels to
Europe. That strategic purpose is to bypass Russia’s territory in order to
preclude manipulation of the transit terms by Russian authorities.

Re-routing those planned transport lines through Russia would defeat,
instead of promoting, the declared EU and U.S. goals of supply security and

According to Kluyev, Ukraine’s cabinet of ministers has just forwarded draft
legislation to the Verkhovna Rada on turning the state-owned Odessa-Brody
line into a concession and creating a consortium of suppliers and consumers
to extend and operate the pipeline to Plock.

The Ukrainian side envisages the possibility that companies from Kazakhstan,
Russia, Azerbaijan, Poland, and “perhaps” U.S. ones might participate.

While that seems a long and uncertain prospect, Ukraine and Kazakhstan have
agreed on a smaller-scale project that adds to question marks about
Odessa-Brody. The new project involves connecting the Pivdenny oil maritime
terminal to the Prydniprovie pipeline system by laying a 52-kilometer
pipeline link.

The Pivdenny terminal serves the Odessa-Brody pipeline, which is being used
“in reverse” (north-south) by Russian oil companies, instead of the
originally intended “direct” use (south-north) for Caspian oil to Europe.

As confirmed by the Ukraine-Kazakhstan joint commission’s session,
construction work on the Pivdenny-Prydniprovie connector is expected to
start in early 2007 and be completed the following year, though
international financing has yet to be lined up.

UkrTransNafta and the KazMunayGaz Trading House (subsidiaries of the state
oil and gas companies Naftohaz Ukrainy and KazMunayGaz, respectively) had
signed in September 2006 the agreement setting up a joint venture to upgrade
the Pivdenny terminal and link it with the Prydniprovie system. The joint
venture will own and operate the new connecting pipeline.

In recent months and weeks, Ukrainian officials had repeatedly changed their
ideas and mixed their signals regarding the Odessa-Brody-Poland project.

In the latest maneuvers, President Viktor Yushchenko proposed to the
EU-Ukraine summit in October to pump oil from Brody via Slovakia to
refineries in the Czech Republic, instead of Poland.

Prime Minister Viktor Yanukovych advanced the same proposal in November

to the visiting Polish Prime Minister Jaroslaw Kaczynski, who indicated his

However, given the Odessa-Brody pipeline’s relatively modest capacity of
some 9 million tons annually (augmentable perhaps to 15 million tons through
the addition of pumping stations and chemical agents), any proposals to
subdivide the oil flow in several directions can only undermine the planned
line’s commercial viability and discourage investment in the project.

Moreover, according to some Ukrainian sources, Warsaw is beginning to lose
interest in the extension to Plock, out of concern that Russian companies
might ultimately take over the indebted Naftohaz Ukrainy, particularly if
the arrangements with RosUkrEnergo push the Ukrainian state company into
insolvency. (Eurasia Daily Monitor:  -30-
(Interfax-Ukraine, UNIAN, December 11; see EDM, November 16)
[return to index] [Action Ukraine Report (AUR) Monitoring Service]


5th Channel, Kyiv, Ukraine, Friday, December 15, 2006
KYIV – During a visit to Donetsk on Friday, Ukraine’s General Prosecutor
Oleksandr Medvedko announced that he doesn’t know who poisoned
Viktor Yushchenko.
He said that finding the guilty parties is actually not the job of his department
but rather should be done by the SBU State Security Service.

His statements directly refute those of President Yushchenko, who told press
Thursday that there is enough evidence in the case to make arrests. Medvedko
said he also doesn’t agree with President Yushchenko’s point of view
regarding ex-Odesa mayor Ruslan Bodelan.

Medvedko thinks the case has been too widely politicized and he feels a
verdict can only be obtained if Bodelan, now a permanent resident of Russia,
makes a court appearance in Ukraine.                        -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
           Appointment of Ukrainian spy chief depends on high-level deal

ANALYSIS & COMMENTARY: By Viktor Chyvokunya
Ukrayinska Pravda web site, Kiev, in Ukrainian 1 Dec 06
BBC Monitoring Service, United Kingdom, Wed, Dec 06, 2006

President Viktor Yushchenko has decided to sack Security Service chief Ihor
Drizhchanyy because of a conflict between Drizhchanyy and Yushchenko’s
secretariat, an article posted on a Ukrainian website has said.

The secretariat may have convinced Yushchenko that Drizhchanyy is in good
relations with his political opponents in parliament, the website says.

However, the author also conjectured that a deal may have been done, with
the president agreeing to the dismissal of the interior minister, who was
sacked last week, in exchange for parliament ratifying his choice for the
new spy chief. The article ended by looking at possible candidates for the

The following is the text of the article signed by Viktor Chyvokunya,
entitled “Yushchenko’s new favorites and the fight for the SBU”, posted on
the Ukrayinska Pravda website on 1 December; subheadings have been

inserted editorially:

Although the Security Service of Ukraine (SBU) is regarded as a classified
department, the story regarding the dismissal of Ihor Drizhchanyy from the
post of head of the SBU has brought to the surface everything of a cunning
entanglement of intrigue, in which [Ukrainian President] Viktor Yushchenko
currently lives. The chronology of the last few days looks something like

Yushchenko’s new team wanted a long time ago to put the SBU under its
control, and it was with this aim in mind that it tried to push it own
people into the top posts of the SBU. On Wednesday [29 November]
Drizhchanyy was called to Bankova [Street, where the Presidential Secretariat
is located] to be told that Mykola Herasymenko now works as his deputy.

Drizhchanyy, who himself puts forward his own candidates for his deputies to
the president for confirmation was angry. He managed to fight off the attack
and Drizhchanyy went to bed with the thought that not everything is lost.
But on Thursday [30 November] morning an application to dismiss him from his
post was submitted to parliament.

Instead of breakfast Drizhchanyy was once again called to Bankova where he
was told about Yushchenko’s decision and advised not to keep running
backwards and forwards but to write a letter of resignation that he was
leaving of his own accord.

And he was to write it retrospectively by dating the document 29 November.
This is because this allowed [Viktor] Baloha [the head of the Presidential
Secretariat] to explain why the letter of resignation from the head of the
SBU went to parliament in the first batch of morning letters and

In order to close off the road for Drizhchanyy to retreat, Baloha managed to
secure his appointment as deputy secretary of the National Security and
Defence Council even though at that time there was no agreement on this from
parliament and there still is no agreement!

In this manner the Presidential Secretariat is trying to turn consideration
of the issue of Drizhchanyy’s dismissal in parliament into a formality. But
Yushchenko’s opponents understand this cunning.

The Donetsk guys [presumably Party of Regions faction in parliament] and
part of [pro-presidential] Our Ukraine are intent on upsetting the
president’s nerves. And there are no guarantees that parliament will agree
to the dismissal of Drizhchanyy.

The more so as the sectoral parliamentary committee, which is headed by [Our
Ukraine MP] Anatoliy Kinakh, several days ago recognized the work of the SBU
as satisfactory.

Drizhchanyy himself decided to give in. He wrote the resignation letter, to
be honest, without the words “of my own accord”. It is also said that
Drizhchanyy did not support the intentions of MPs, intent on fighting for
his continuing stay in the post, and asked that he be allowed to leave the
SBU in a friendly manner.
The basis for the change in leader of the SBU lies in the conflict between
Drizhchanyy and Yushchenko’s new team Baloha, [Arseniy] Yatsenyuk and
[Vitlaiy] Hayduk. Sources say that he fell into their bad books due to
several reasons. For example, Drizhchanyy refused to carry out certain
specific orders from Bankova.

Drizhchanyy regarded these orders as an attempt to take revenge on the
political and business opponents of Yushchenko’s entourage. Bankova regarded
this as disloyalty at the very least, or even as a conspiracy between
Drizhchanyy and those from Donetsk. And against this background the decree
on appointing Drizhchanyy deputy secretary of the National Security and
Defence Council looks like black humour.

It cannot be ruled out that the former head of the SBU will refuse to take
this post. Another complaint made by Bankova against Drizhchanyy is that his
deputy allegedly socializes with [Viktor] Medvedchuk [head of presidential
administration under the previous president, Leonid Kuchma].

After a check was carried out it was discovered that the said people were on
a business trip abroad on the day in question. In the president’s new team
at his secretariat Drizhchanyy was regarded either as a person close to
“dear friends” [allusion to Yushchenko’s entourage] or to Rybachuk [former
head of the presidential secretariat].

Although in reality the appointment of Drizhchanyy as head of the SBU on 8
September 2005 looked roughly like that. Before the signing of the decree he
entered the office of Rybachuk, the then head of the Presidential
Secretariat, in informal dress as he was on sick leave at the time.

Rybachuk had never seen Drizhchanyy and thought that this was an employee of
the Presidential Secretariat who had just been dismissed. And that is why
Rybachuk [ellipsis as published] began to explain to him the reasons for his
sacking. And it was only a few minutes later that Rybachuk understood that
Drizhchanyy, whom he had invited for an interview for appointment to the
post of head of the SBU, was sat in front of him [ellipsis as published]

And now the new head of the Presidential Secretariat, his first deputy and
the secretary of the National Security and Defence Council [respectively,
Baloha, Yatsenyuk and Hayduk] are trying to get rid of staff that they
inherited by exchanging them for people who are loyal to them.

In fact, Yushchenko currently speaks to the outside world through these
three people – Baloha, Yatsenyuk and Hayduk. A clearing out of the area
around Yushchenko is taking place in line with roughly this scenario.

At first they convince the president that any member of staff who is not
loyal to this trio favours taking another job. At the same time, they advise
the person being sacrificed to agree with the proposal of the trio because
“Yushchenko will dismiss you from your post anyway”.

Presidential press secretary Iryna Herashchenko and Andriy Kyslynskyy, the
head of Yushchenko’s office, were dismissed roughly in line with such a
scenario of “untruths”. Another reason for changing Drizhchanyy was that
Yushchenko was convinced that he is protecting Prosecutor-General Viktor

Who could, moreover, lose his post at any time Svyatoslav Piskun could
return to this post very soon on the basis of yet another court ruling.
Drizhchanyy received a black mark from the Presidential Secretariat when he
refused to agree with the appointment of Mykola Herasymenko as deputy head
of the SBU.

Herasymenko is regarded as an odious figure, who undertook the investigation
of the case of mass disturbances on 9 March 2001 during the mass protests
within protests held by the “Ukraine Without Kuchma” campaign. It ended with
prison terms for members of UNA-UNSD [Ukrainian National Assembly-Ukrainian
National Self-Defence].

Herasymenko himself demonstrated the initiative to investigate this criminal
case. Ukrayinska Pravda received a report written by Herasymenko in 2004 for
the then deputy head of the SBU, Mykola Obikhod. Ukrayinska Pravda managed
to find Obikhod in the past he was one of the biggest accusers in cases
involving [Yuliya] Tymoshenko-[Pavlo] Lazarenko.

He is currently working in a veterans organization of the
Prosecutor-General’s Office. Obikhod confirmed that this report is a real
report compiled in order to discover the role played by Herasymenko in the
investigation of the case regarding 9 March 2001 to give an \ [ellipsis as
published] incentive.

“In terms of its form, this report looks like a report of a subordinate
against his boss, who refused to investigate a criminal case witch had a
certain political colouring” Obikhod said.

However, sources from the camp which is lobbying for Herasymenko are saying
that he also has merits in the eyes of Yushchenko, that he allegedly opened
a criminal case on separatism during the Orange Revolution. In addition,
Heraysenko is also from Yushchenko’s part of the country, as he too hails
from Sumy Region.

Another person who whispered into Yushchenko’s ear the idea about a need to
dismiss Drizhchanyy was his old friend who hails from his village, Mykhaylo
Doroshenko, who thanks to his friendship with Baloha, has maintained his
influence on the president.

Half a year ago Doroshenko issued a series of articles compromising
Drizhchanyy in his [pro-presidential] newspaper Ukrayina Moloda. However,
the head of the SBU took the paper to court and won in the court of first
instance. Doroshenko told Ukrayinska Pravda that “I am not disputing that
through its articles Ukrayina Moloda played a part in Drizhchanyy’s

Doroshenko added that “Reforms undertaken in the SBU are not transparent
that is the conclusion of the parliamentary committee for national security
and defence. Drizhchanyy involved himself not in raising the effectiveness
of the SBU but in moving about staff in order to promote managers loyal to
him.” He also refuted that he lobbies someone’s candidacy for the post of
head of the SBU.

However, according to information obtained by Ukrayinska Pravda, Doroshenko
is putting forward Mykola Malomuzh, the current head of the external
intelligence service, for the post of head of the SBU. Apart from
Doroshenko, Malomuzh’s candidacy is also being supported by someone called
Mykola Shcherbyna.

He is a former adviser to Yushchenko and in the archive of Dorozhenko’s
Ukrayina Moloda newspaper, there is an interesting article about him. It
says that during the Orange Revolution, Shcherbyna planned a triumphant
drive in support of the Maydan\ [ellipsis as published] of tanks from the
Desna training centre for ground troops.

Sources say that Shcherbyna is certain of having control over Malomuzh as he
managed to get him appointed as head of the external intelligence service.
In his turn, Vitaliy Hayduk, the secretary of the National Security and
Defence Council, and the immutable adviser, Vira Ivanivna [Ulyanchenko, the
governor of Kiev Region], are lobbying Ihor Smeshko for the post of head of
the SBU.

However, the possibility of his returning to the SBU depends on whether
Yushchenko can be persuaded that not Smeshko but [Davyd] Zhvaniya was
involved in the poisoning of Yushchenko, as the latter was also present at
the infamous supper at the dacha of [Volodymyr] Satsyuk [at which Yushchenko
is said to have been poisoned].

The third candidate for head of the SBU is former Interior Minister Yuriy
Lutsenko [who was dismissed by parliament on 1 December]. The third
candidate is the head of the department of military counter intelligence of
the SBU during the Orange Revolution, Vitaliy Romanchenko, who played a part
in stopping internal troops of the Interior Ministry who were sent to quash
the protests on the Maydan. Romanchenko the candidate of Viktor Baloha, and
is currently a deputy emergencies minister.

At the same time, Bankova’s problem is clear Yushchenko does not have 226
votes in parliament necessary to appoint a new head of the SBU. To do so, a
candidate for the post of SBU chief will be forced to agree on a deal [for
votes] with the Party of Regions or the Yuliya Tymoshenko Bloc or the
Socialist Party.
In this way, the attempt by Bankova to receive a loyal head of the SBU can
end with the coming to power of a double agent both for Yushchenko and the
anti-crisis coalition [of Party of Regions, Socialist and Communist

This is because a new head of the SBU will simply not know whom to thank
more for his new post the president or the president’s opponents in

That is, of course, if we do not become witnesses of a big combination with
parliamentary MPs in the role of dolls: Yushchenko “gets rid” of Lutsenko in
exchange for the appointment of the desired head of the SBU.

It is hard to believe in the success of such a combination when one takes
into account the permanent “tricks” which the president and prime minister
have organized for each other over the last few months.    -30-

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
17.                 JAMES MACE: CANDLE OF MEMORY

Ihor Siundiukov, The Day Weekly Digest, Kyiv, Ukraine, Tue, Nov 28, 2006

The historian James Ernest Mace (Feb. 18, 1952- March 3, 2004), an
Oklahoma-born American from the Cherokee tribe, devoted his life to the
thorough study of the Ukrainian Apocalypse of 1932-33.

He examined its background, course, the totalitarian strategy of Stalin’s
regime, and the disastrous consequences of this unprecedented crime for
future generations of Ukrainians.

James Mace was the first person in the world to substantiate and prove the
genocidal character of the Holodomor. And had he done only this – he was
also an activist in Ukraine, staff writer for The Day from January 1998
until the last days of his life, and a professor at Kyiv-Mohyla Academy –
even then he would deserve the indisputable right to be remembered forever
by the Ukrainian people.

The ceremony of unveiling and blessing Volodymyr Korin’s monument to Mace
was held at his gravesite on Nov. 18. Quite a few people gathered in a far
corner of Baikove Cemetery: James’s relatives and close friends, colleagues,
scholars, journalists, representatives of the Presidential Secretariat, and
members of the public.

Expressing their sincere condolences to Mace’s widow, the writer Natalia
Dziubenko-Mace, for whom time has not eased the pain of her irretrievable
loss, the participants of the meeting in Mace’s memory said that the candle
of sorrow, lit by him, is still burning in our hearts.

The Day’s editor in chief Larysa Ivshyna called on the participants to
reflect on the question: “Why did this son of far-away Oklahoma become so
inspired by the Ukrainian land’s pain?” “Because he had a heart of gold and
an acute sense of injustice, abhorrence of evil, and a restless conscience,”
Ivshyna declared.

“When James joined The Day, I had a feeling that a mighty “second front” had
just been opened. It is still continuing, although James left us two and a
half years ago.

“In my opinion, one of Mace’s most important lessons was that we must not be
afraid of pain and not forget that when millions and millions of our
brothers and sisters were dying a terrible excruciating death in Ukrainian
villages, many urban residents were eating their sandwiches.

“This was another attempt to disunite us. Let us not forget this – for every
sin must be expiated…Only then will deep unification come. Thank you to
James for the lesson of truth that he taught us!”

Stanislav Kulchytsky, a leading Ukrainian historian of the Holodomor, who
was closely acquainted with Mace, said that more and more James is becoming
a kind of symbol of purification.

The unveiling of a monument on his gravesite also had great symbolic meaning
because to this day there is only one official monument to the victims of
the Holodomor – the cross on Mykhailivska Square.

We have no right to forget, Kulchytsky said, that the Holodomor tragedy,
which had been concealed for roughly six decades, was revealed first of all
thanks to Mace’s efforts as the executive director of the US Congressional
Commission on the Holodomor.

But to a great extent our society still does not understand what occurred in
1932-33. So it is our duty to convey this terrible truth to everyone; Mace’s
short life was devoted namely to this.

Among the other speakers were:
[1] Professor Natalia Shulha of Kyiv-Mohyla Academy, who noted bitterly that
the world’s academic community still does not know the whole truth about the
Holodomor tragedy, and said this about Mace: “He was a man with a poet’s
soul, and ‘the world’s fissure,’ to quote Heine, pierced his heart”;
[2] the outstanding Ukrainian poet Ivan Drach, who shared his recollections
of his meetings with James, their visits to Telizhyntsi, Drach’s native
village, half of whose population starved to death during the famine;
[3] Natalia Sukhodolska, executive director of the Association of Holodomor
[4] the writers Lesia Stepovychka and Anatolii Kachan; and
[5] Professor Mykhailo Naienko of Taras Shevchenko Kyiv State University,
who said that James Mace’s cause is not over yet.

We still have to learn one more terrible truth: why did such an
unprecedented terror as the Holodomor happen? Was it not because the
totalitarian regime foisted its antihuman values on society? Has this legacy
been overcome?

On Nov. 17, 2006, the Verkhovna Rada refused to consider the question of
recognizing the Holodomor of 1932-33 as genocide against the Ukrainian

Not everyone present knew that James was very fond of the famous Ukrainian
folksong (and one of the saddest) “Za bairakom bairak” (A Ravine beyond the
Ravine), which contains the following words: “Here three hundred of us
perished like glass…”

The song was performed by kobza player Stepan Shcherbak. Afterwards,
everyone silently remembered Jim and gazed at the monument on which a
fragment of a poem by Natalia Dziubenko-Mace is engraved:

Adieu! And forgive us, my beloved,
Like a tear to you I will fly…
Ukraine, light the candle,
A widow’s, an orphan’s imperishable light
Ukraine, light the world!                                     -30-
[return to index] Action Ukraine Report (AUR) Monitoring Service]
     You are welcome to send us names for the AUR distribution list.

Nadia Tysiachna, The Day Weekly Digest, Kyiv, Ukraine, Tue, Dec 5, 2006

On Nov. 29, 2006, the Odesa oblast branch of the National Society of
Ukrainian Journalists awarded Larysa Ivshyna, The Day’s editor in chief, a
diploma and medal for the book Day and Eternity of James Mace. The awards
ceremony was part of the competition “Ukrainian, the Language of

Although the Mace book was published more than a year ago, this is its first
award. “This is an extremely important publication for Ukrainians because it
touches everyone in one way or another,” said Yurii Rabotin, the head of the
competition’s organizing committee. “When I saw it, I recognized at once
that it was our candidate for the prize.”

Clearly, this book, which represents the profoundest and most versatile and
humane research into the Ukrainian genocide, should be read and studied by
students, scholars, and ordinary Ukrainians.

Individual works of the late James Mace are already part of the curriculum
of seminars and optional courses at Zaporizhia and Kamianets- Podilsky
universities. However, one cannot dispense with the state’s support. But it
is not reacting.                                 -30-

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
19.                                  CANDLE OF HOPE
              On the Day Commemorating the Victims of the Holodomor
Ihor Siundiukov, The Day Weekly Digest, Kyiv, Ukraine, Tue, Nov 28, 2006

The death of any person is an extinguished candle, an irreparable loss for
the nation and the world. In the accursed years of 1932-33, millions of
indestructible candles representing our compatriots were extinguished in
Ukraine in keeping with the Kremlin’s criminal, meticulously planned, and
diabolical scheme.

Scholars are still arguing over the number of victims – 4, 7, or 12 million.
But is this simply a question of precise figures? (Even so, this information
is unquestionably vital for comprehending the horrible truth.)

Millions of future Ukrainian farmers, workers, poets (perhaps great poets of
genius), engineers, and doctors were wiped out in an inhuman and utterly
cruel way – by means of a terrible famine.

It was a deliberately engineered famine, not the result of a disastrous crop
failure, drought, or other disaster. No one will ever resurrect those

The world would have shuddered had it learned about this at the time. But it
did not find out because, before he masterminded the Holodomor, the 20 th
century’s most ferocious and sinister tyrant made strenuous efforts to erect
an impregnable “Iron Curtain” that reliably isolated Ukraine from the rest
of the world.

Perhaps, just like in the Apocalypse, he ordered millions of Ukrainian
peasants to be isolated from the surrounding world, thus condemning them to
an excruciating death by starvation.

Yes, Western Ukrainians knew about the Holodomor and were doing their

utmost to help their brothers beyond the Zbruch River.

Yes, honest and well-informed diplomats reported to their governments about
what was going on in Ukraine. For example, Sergio Gradenigo, a consul at the
Italian Embassy in Moscow, wrote the following in a dispatch to Rome on May
31, 1933: “The Moscow government has in fact knowingly caused this [famine]
by means of harsh requisitions.”

The Italian diplomat went on to say that the goal of this crime is
“undoubtedly the solution of the Ukrainian problem within a few months, with
a toll of 10 to 15 million human lives. Do not think this figure is
exaggerated: I think it has already been reached if not exceeded.”

On the whole, however, the European public, especially left-wingers,
dismissed the very idea of the Holodomor.

The “Iron Curtain” was working smoothly, which may be why the “successful”
American journalist Walter Duranty, who cynically denied the Holodomor, was
awarded the most prestigious prize in the US, the Pulitzer, in 1933.

It was James Mace, the Holodomor scholar, political writer, and contributor
to The Day, who had the idea of lighting candles in memory of the Holodomor
victims. The one who actually started this tradition is Viktor Yushchenko:
he did it when he was still in the opposition.

Now this tradition is a national policy, which is very important. The fact
that society supports this policy and that each November more and more
candles burn in our windows shows that we are becoming more human.

But in lighting a candle of mourning today in memory of the millions of
innocent victims of Stalinist terrorism, we must recognize one harsh fact:
the consequences of this spiritual and ideological “Iron Curtain” are even
more terrible and lasting in the consciousness of many of our compatriots
than it was believed earlier.

The problem lies in a warped public mentality, especially of part of the
political class – a striking example is the refusal of our parliament to
discuss the question of recognizing the 1932-33 Holodomor as genocide
against the Ukrainian nation – and in the deformation of human values, for
the Holodomor would have been impossible if the hysterical atmosphere of an
all-out class struggle had not been persistently imposed on society.

Was it purely by chance that Pravda published Maxim Gorky’s words: “If the
enemy does not surrender, he is destroyed” precisely in 1933?

In November 1933 that same Pravda published on Stalin’s diabolical order the
original Ukrainian version of a poem by the great Pavlo Tychyna, in which he
lauded our “beautiful and inimitable times.”

In the early 1920s the same Tychyna had written the strikingly powerful
poem, “Mother Was Peeling Potatoes,” (about the famine of 1921) in which he
recounts a heartrending example of a mother’s cannibalism. These shifts in
societal values, more than anything else, must have made it possible for
this Stalinist genocide to occur.

This 20th-century genocide (this classification is irrefutable, despite all
objections, because there is clearly a cardinal element – deliberate intent)
would have been impossible had it not been for Ukraine’s colonial status,
which Stalin wished to strengthen and perpetuate once and for all: this is
another motive of the crime.

It would also have been impossible without the voluntary and involuntary
assistance of our Ukrainian poor peasants and a small number of middle
peasants, who gave in to the calls “to fight the kulak exploiter” during
1929-30 collectivization in the hopes of benefiting somewhat from this
“struggle,” and who eventually paid a terrible price for this.

The Holodomor was organized by “outsiders” of non-Ukrainian ethnic descent.
It was organized by the Kremlin’s criminal Stalinist clique that strove for
a new, “red,” colonization of the Soviet republics – above all, Ukraine.

Our task is to discover the reason why all this was possible. In all
probability, this happened because Stalin managed to divide and demoralize
society along class and ethnic lines. (This applies to all the republics,
not just Ukraine.) In the former category there were “wealthy people” and
“working” people, and in the latter, there were “nationalists” and “Soviet

What is more, in Ukraine the “nationalist” label was attached to the vast
majority of those who considered themselves Ukrainian and behaved
accordingly both in the city and the countryside. They were all destroyed
later. Is this not ample proof of the genocidal nature of the Holodomor?

The Leader’s violence went hand in hand with the Great Lie. In his
autobiography the unforgettable Mace, who collected oral testimonies of
Holodomor victims in the 1980s, recounts an episode that stunned him: “On
the Zbruch River, the old Soviet-Polish border, starving peasants were taken
out at night and forced to dance in order to show their relatives on the
other side how good life in Soviet Ukraine was.” This was a macabre dance

of death, Stalin-style.

To prevent a repetition of such things, I think every Ukrainian should
realize that each of us has a set of inalienable civil and socioeconomic
rights (to life, freedom, aspiration to happiness, true information, decent
wages, etc.) on which neither the state as such nor a president or a prime
minister can encroach.

Any attempt to strip us of even one of these rights is tantamount to a banal
theft of property (personal property, if you like).

Once all Ukrainians come to share this point of view, we will be lighting
candles in memory of the Holodomor victims with the feeling of a complete
and irreversible victory over the evil of Stalinism.              -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
              American Friends of “For Survival,”

Katie Fox, President, American Friends of “For Survival”
Action Ukraine Report (AUR) #797, Article 14

Washington, D.C. Sunday, December 17, 2006

Dear Friends,
Please consider a holiday gift to help the elderly in Ukraine this year! As

many of you know, a group of Americans who have lived in Kyiv run a
small charity for impoverished Ukrainian seniors.

We started the charity, “American Friends of For Survival” 10 years ago to
immediately and directly help the elderly, many of whom were begging on
Kyiv’s streets as a result of the economic collapse accompanying the break
up of the Soviet Union.

This charity is an all volunteer effort, run by Americans here and in Kyiv.
Every cent of the funds we collect from donors goes directly to a poor
elderly person. It is often the only way they can afford lifesaving medicine
and decent food, as well as housing and clothing.

Ukraine’s elderly need our help again this year. Though pensions have risen
in Ukraine, the cost of living has risen even faster.

A respected business survey recently ranked Kyiv more expensive than Los
Angeles or Chicago – making survival a struggle when the minimum pension is
equivalent to $65/ month.

Significant increases in home heating prices are forecast for this winter, a
blow to all Ukrainian consumers that will hit those on fixed incomes
                            Your help is desperately needed!
American Friends of  For Survival currently provides some elderly with
special needs $20 per month and others $10 per month. With prices rising

so rapidly we would like to increase most, if not all supplements to $20.

     A contribution of $240 provides an elderly Ukrainian $20 per month for
     the entire year.
     A contribution of $120 will provide necessary assistance for 6 months.
     A donation of any amount is needed and much appreciated.

A contribution of $240 only amounts to a bit more than $4.50 per week!
That’s slightly more than many of us spend on coffee every morning. Each
contribution will help an elderly Ukrainian buy food and medicine and, of
course, your generous donations are tax deductible.

We want to make it easy for you! You can now donate directly with any
major credit card on our new website,, or if you prefer

you may contribute by check made payable to: “For Survival”, c/o Katie
Fox, 3100 Connecticut Ave NW #235, Washington, DC 20008

Dyakuyu! (thank you) very much, from the bottom of our hearts.
Have a wonderful year!

Katie Fox, President, American Friends of ‘For Survival”

PS Please be sure to visit our new website,
and tell a friend! Please contact us:,
FOOTNOTE:  The AUR urges you to donate to the “For Survival”
program.  We have known about this very cost effective program for
several years.  AUR Editor Morgan Williams
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
       Please contact us if you no longer wish to receive the AUR    
                              ASSOCIATION PROGRAM IN 2007
Ukrainian American Environmental Association
Rivne, Ukraine and Washington, D.C.
Action Ukraine Report (AUR) #798, Article 21
Washington, D.C., Monday, December 18, 2006

Dear Friend of the Ukrainian-American Environmental Association:

We are writing to ask you to consider making a tax-deductible financial
contribution to the Ukrainian-American Environmental Association

(UAEA) during this holiday season.

Now beginning its fourth year, UAEA is a network of nearly 800
Ukrainian and American NGOs, academic researchers, businesses, and
government officials created to facilitate the exchange of information
on a broad array of environmental issues including, but not limited to,
energy policy, climate change, air and water pollution, toxic wastes,
soil conservation, sustainable agriculture, and wildlife and wilderness

With offices in Ukraine and the United States, UAEA is unique as the
only organization working in both countries with a sole focus on
environmental and sustainable energy issues.

Through its electronic newsletter “Ukraine and the Environment” as well
as short reports, letters, media releases, and meetings with government
officials, UAEA has worked to promote an improved environment and
public health.  And UAEA’s growing list of institutional contacts on
its web page is becoming an invaluable resource for others.

In addition, UAEA has been providing an additional service to the
Washington DC community through its publication of a weekly calendar of
upcoming cultural, social, educational, and other local Ukraine-related

For your information, we have enclosed with this letter a copy of
UAEA’s “Annual Report – 2006” which provides more details on our
activities during the past twelve months.  Also enclosed below is a
copy of UAEA’s “Program Plans – 2007” which outlines our goals for the
coming year.  The latter is ambitious but, with your support, we
believe it is doable.

So, we thank you for considering a contribution to support our efforts
in encouraging bilateral efforts to protect Ukraine’s environmental
quality and to promote a sustainable energy future.

Our best wishes to you in the coming new year.
Sincerely, Taras Lychuk, Co-Director; Ken Bossong, Co-Director
Ukrainian-American Environmental Association

P.S. The U.S. arm of UAEA is a 501 c-3, tax-exempt organization and
contributions are therefore tax deductible. Contributions may be made

by check payable to the Ukrainian-American Environmental Association
and sent to: Ukrainian-American Environmental Association
8606 Greenwood Avenue, #2, Takoma Park, MD 20912
U.S.A. Address: 8606 Greenwood Avenue, #2; Takoma Park, MD 20912
Ukraine Address: 11 Strutynska Street, #18; Rivne, Ukraine 33003
                              ANNUAL REPORT – 2006
The Ukrainian-American Environmental Association is a private,
non-governmental organization founded in 2004 and chartered in both the
United States and Ukraine.  It is a network of nearly 800 Ukrainian and
American NGOs, academic researchers, businesses, and government
officials to facilitate the exchange of information on a broad array of
environmental issues including, but not limited to, energy policy,
climate change, air and water pollution, toxic wastes, soil
conservation, sustainable agriculture, and wildlife and wilderness
UAEA operates from two offices: one in Rivne, Ukraine with a part-time
paid staff and one in Takoma Park, Maryland (near Washington DC) with a
volunteer staff.
The following is a summary of the primary accomplishments of the
Ukrainian-American Environmental Association (UAEA) during 2006.
Twenty-six issues of the bi-weekly newsletter “Ukraine and the
Environment” were issued during 2006 with each issue containing 20 – 40
news stories as well as some information on upcoming conferences,
funding opportunities.
During the year, the number of subscribers increased by more than 50%
from fewer than 500 in January 2006 to more than 750 in December 2006.
In addition, UAEA published throughout 2006 a second newsletter
“Upcoming Washington DC-Area Ukrainian Events” sent weekly to 450
UAEA’s online database of organizational resources nearly quadrupled
during 2006, from fewer than 100 in January 2006 to more than 360 at
year’s end.  New entries continue to be added.  The database, available
in English and Ukrainian, lists non-governmental organizations,
businesses, academic resources, and governmental agencies working on
sustainable energy, climate change, wilderness & wildlife issues, clean
air and water, soil contamination, solid waste, and toxics among other
environmental issues.  See the UAEA web page under “Resources.”
During 2006, UAEA issued six letters (most in both English and
Ukrainian) to U.S. and Ukrainian government officials outlining policy
recommendations on several current environmental issues affecting
Ukraine.  A news release was distributed with each to American,
Ukrainian, and international media.  (See the UAEA web page for copies.)
Also during the year, UAEA expanded its media database, which now
includes e-mail contacts for more than 400 print and broadcast media
outlets in Ukraine as well as the Ukrainian diaspora in the United
States and international Ukrainian media.
                                       IN UKRAINE:
UAEA prepared a report “Renewable Energy in Ukraine – Today and
Tomorrow” on the economic potential of solar, wind, biomass,
geothermal, and hydropower to meet Ukraine’s near-term energy needs.
The paper was eventually published by the U.S.-Ukraine Foundation in
its “Potential” magazine.  The English and Ukrainian language versions
of the report can be found at:
Beginning in October 2005, UAEA served on an advisory committee which
helped plan a three-day international conference in Kyiv in April 2006
to commemorate the 20th anniversary of the Chornobyl nuclear accident.
More than 200 persons from across Europe and North America
participated. UAEA also served as a speaker during a workshop on
“Developing a Sustainable Energy Roadmap for Ukraine.”
During 2006, in addition to the above-mentioned Chornobyl conference,
UAEA organized and/or participated in dozens of meetings with
governmental, business, NGO, and academic representatives in both
Ukraine and the United States on environmental and other policy issues,
including a recent public session with Ukrainian Prime Minister Viktor
UAEA met with the U.S. Ambassador to Ukraine, William B. Taylor, twice
during the past year and in September 2006 organized a meeting with him
in Kyiv of top Ukrainian non-governmental environmental organizations
to discuss energy and environmental concerns. A follow-up meeting is
anticipated in early 2007.
UAEA also served as a member group of the Jackson-Vanik Coalition,
which successfully persuaded the U.S. Congress in March 2006 to lift
the Jackson-Vanik trade restrictions on Ukraine.  The coalition has
since renamed itself the Coalition for a Secure & Democratic Ukraine,
with energy policy as one of its areas of interest.  UAEA is also
represented on the governing board of The Washington Group – a
network of Washington DC area Ukrainian professionals.
UAEA staff regularly provides information in responses to inquiries
received from its subscribers and other interested persons and
organizations that write or telephone with questions on a range of
Ukrainian environmental issues.
During 2006, UAEA established an initial Board of Advisors consisting
of the following six individuals.
1.) Andriy Konechenkov – Chief Editor of “Green Energy” Magazine,
Vice-President of Renewable Energy Agency;
2.) Matt Hagengruber – Journalist, Returned Peace Corps Volunteer
(2004-2006), Uzhgorod;
3.) Ulana Bihun – Analyst, Natural Resource and Environment U.S.
Government Accountability Office;
4.) Oleksiy Kalinichenko – Master of Environmental and Energy Policy;
5.) Andrew Bihun – President, Global Trade Development. The
Washington Group, Director-Business Development Forum;
6.) Paul Ivanicky – Expert on Sustainable Agriculture and Land
Income: $2,100.00 – Small Donations
Expenses: $1,437.50 – Salary (Ukrainian staff); $50.00 – Internet
Consultant $49.40 – Internet, Phone; $  141.20 – Government Fees
$100.00 – Web Page; $1,778.10 – Total Expenses
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
   If you are receiving more than one copy of the AUR please contact us.

    Please contact us if you no longer wish to receive the AUR.    
       You are welcome to send us names for the AUR distribution list.
   If you are missing some issues of the AUR please let us know.
         A Free, Not-For-Profit, Independent, Public Service Newsletter
                With major support from The Bleyzer Foundation
      Articles are Distributed For Information, Research, Education
                Academic, Discussion and Personal Purposes Only
                                  Additional readers are welcome.
                              Action Ukraine Report (AUR)
               Holodomor Art and Graphics Collection & Exhibitions
          “Working to Secure & Enhance Ukraine’s Democratic Future”
1.  THE BLEYZER FOUNDATION, Dr. Edilberto Segura,
Chairman; Victor Gekker, Executive Director, Kyiv, Ukraine;
      Additional supporting sponsors for the Action Ukraine Program 
                        will be published again later this week.
If you would like to read the ACTION UKRAINE REPORT- AUR,
around four times a week, please send your name, country of residence,
and e-mail contact information to Information about
your occupation and your interest in Ukraine is also appreciated.
If you do not wish to read the ACTION UKRAINE REPORT please
contact us immediately by e-mail to  If you are
receiving more than one copy please let us know so this can be corrected

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

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

Emerging Markets Private Equity Investment Group
President (Acting) and Chairman, Executive Committee of the
Board of Directors, Ukraine-U.S. Business Council
P.O. Box 2607, Washington, D.C. 20013, Tel: 202 437 4707;
       Power Corrupts and Absolute Power Corrupts Absolutely.
return to index [Action Ukraine Report (AUR) Monitoring Service]

Leave a comment

Filed under Uncategorized

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s