AUR#799 Dec 20 Impact Of Gas Price Increase On The Economy Of Ukraine In 2007; WTO Accession; Farmland Sales Stopped; Children’s Hospital Telethon

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                            ECONOMY OF UKRAINE IN 2007

                                                   [Article One]
Mr. E. Morgan Williams, Publisher and Editor, SigmaBleyzer

              –——-  INDEX OF ARTICLES  ——–
            Clicking on the title of any article takes you directly to the article.               
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                               ECONOMY OF UKRAINE IN 2007
ANALYSIS & COMMENTARY: Edilberto L. Segura, Olga Pogaska
SigmaBleyzer, The Bleyzer Foundation, Kyiv, Ukraine
Action Ukraine Report (AUR) #799, Article 1
Washington, D.C., Wednesday, December 20, 2006

2.                              UKRAINE’S ENERGY FUTURE
REMARKS: By Yuriy Boiko, Minister of Fuel and Energy of Ukraine,
At the Ukrainian Business Forum at the Waldorf-Astoria in NYC
During the official visit of Prime Minister V. F. Yanukovich
New York, New York, Wednesday, December 6, 2006
Action Ukraine Report (AUR) #799, Article 2
Washington, D.C., Wednesday, December 20, 2006


         Energy sector important part for country’s economic development
Kateryna Illyashenko, Ukraine analyst, IntelliNews-Ukraine This Week
Kyiv, Ukraine, Monday, November 27, 2006

Associated Press (AP), Kiev, Ukraine, Friday, December 8, 2006

5.                                WTO MEMBERSHIP IN SIGHT

INFORM, Yuliya Tymoshenko Bloc (BYUT) Newsletter, Issue 24,
Kyiv, Ukraine, Tuesday, 19 December 2006

Kabar news agency, Bishkek, in Russian 0406 gmt 19 Dec 06
BBC Monitoring Service, UK, Tuesday, December 19, 2006

UkrAgroConsult, Kyiv, Ukraine, Tuesday, December 19, 2006

8.                                 PROMISES FORGOTTEN?
         Grain export quotas may have adverse consequences for Ukraine
By Vitalii Kniazhansky, The Day Weekly Digest #41
Kyiv, Ukraine, Tuesday, December 19, 2006

Ukrainian News Agency, Kyiv, Ukraine, Tuesday, December 19, 2006

                       SALES, ONCE AGAIN, TO JANUARY 1, 2008
Interfax Ukraine Business Express, Kyiv, Ukraine, Tue, December 19, 2006

               Six countries pledge to protect and develop the Carpathians
The Day Weekly Digest, Kyiv, Ukraine, Tuesday, December 19, 2006

               Program of the Ukraine 3000 International Charitable Fund
Ukraine 3000 International Charitable Fund
Action Ukraine Report (AUR) #799, Article 12
Kyiv, Ukraine, Wednesday, December 20, 2006

13.                               HURRY TO DO GOOD DEEDS
             Fund-raising for children’s hospital became nation-wide action
Olha POKOTYLO, The Day Weekly Digest #41
Kyiv, Ukraine, Tuesday, December 19, 2006


         Vaccines were packaged locally into Ukrainian language outer boxes
GlaxoSmithKline (GSK), Kyiv/Lviv, Monday, 18 December 2006

15.                               ESCAPING FROM EMPIRE
                 Postscript to 15th anniversary of referendum affirming
                           Act proclaiming Ukraine’s independence
Ambassador Extraordinary and Plenipotentiary of Ukraine and
Director, Center for Global and Regional Studies, Kyiv-Mohyla Academy
The Day Weekly Digest #41, Kyiv, Ukraine, Tuesday, Dec 19, 2006

BBC Monitoring research in English 19 Dec 06
BBC Monitoring Service, UK, Tuesday, December 19, 2006

   About the elderly survivors currently living in the Chornobyl exclusion zone
Irene Zabytko, Producer, Writer
Action Ukraine Report (AUR) #799, Article 17
Washington, D.C., Wednesday, December 20, 2006
                            ECONOMY OF UKRAINE IN 2007

ANALYSIS & COMMENTARY: Edilberto L. Segura, Olga Pogaska
SigmaBleyzer, The Bleyzer Foundation, Kyiv, Ukraine
Action Ukraine Report (AUR) #799, Article 1
Washington, D.C., Wednesday, December 20, 2006

The expected increase at the beginning of 2007 of the imported gas price to
$130 per 1000 m3 will have a significant impact on the Ukrainian economy.
Nevertheless, the economy should be able to perform reasonably well during
the year.

However, in order to sustain economic growth over the longer-run, the
government should enhance structural economic reforms to encourage
investments, including in energy-saving technologies.

     [1] The negative impact of the gas price increases in real GDP growth
in 2007 is estimated at 1.5-2 percentage points. Despite this, GDP growth is
expected to grow by 5-6% yoy in 2007.

     [2] Year-end inflation in 2007 will depend on the government policy
response and budget performance; however, we believe inflation will be at
about 10%, almost 3 percentage points higher than projected by the
government for the 2007 fiscal budget.

     [3] The foreign trade balance will continue to deteriorate, driving the
current account deficit to about 2.5% of GDP in 2007. We expect the deficit
to be covered by robust FDI inflow and extensive borrowing from abroad.

     [4] Despite expected sufficient inflow of foreign currency to Ukraine,
currency depreciation pressures may emerge. The exchange rate may be
allowed to slightly depreciate to 5.1-5.2 UAH/$.

     [5] Although the draft 2007 budget law envisaged the increase of
natural gas prices, additional pressures to the successful execution of the
fiscal budget may emerge. Nevertheless, we believe that the government has
enough tools to keep the fiscal budget deficit at the projected 2.5% of GDP
in 2007.

     [6] In view of anticipated further increases in the cost of imported
energy resources, in order to reach sustainable economic growth in the
long-run, the economy has to boost investments, including into energy-
saving technologies.

At the beginning of 2006, Ukraine and Russia agreed on a new 5-year
agreement, according to which:

     [1] Ukraine obtained 34 billion of natural gas of mixed origin
(primarily Turkmenistan) at $95 per 1000 m3 at the Russia-    Ukrainian
border. Though the price was set for the first half of the year, it was
later prolonged for the whole year, despite the increase in the price of
Turkmen gas at the Russian border from $65 per 1000 m3 to $100 per
1000 m3 as of October 1st 2006.

     [2] The transit fee for Russian natural gas through the territory of
Ukraine was increased from $1.09 per 1000 m3 per 100 km in 2005 to
$1.6 per 1000 m3 per 100 km and fixed until 2011.

     [3] The company RosUkrEnergo (RUE) was defined as the unique importer
of natural gas coming from the Russian Federation, though it did not mean
that the imported gas was solely of Russian origin. Indeed, the majority of
gas obtained by RUE was from Central Asia (mostly Turkmenistan).

     [4] To sell imported natural gas to Ukrainian users, a joint venture
UkrGazEnergo (with a parity ownership between RUE and Naftogaz Ukrainy)
was established a few weeks after the agreement was signed.

Since Ukraine’s total demand for natural gas was estimated at 76 billion m3
in 2006 and its own production amounted to about 20 billion m3, Ukraine
needed to import 56 billion m3 in 2006.

In addition to the 34 billion m3 from RUE, Ukraine planned to receive an
additional 22 billion m3 of Turkmen gas in 2006 under a separate contract. (1)

However, these plans were not realized as Turkmenistan stopped gas delivery
to Ukraine, substantiating this decision by Ukraine’s indebtedness for
imported gas in previous periods.

To compensate for the deficit, Ukraine negotiated larger amounts of gas
imports from Russia. We assume that these amounts were delivered to
Ukraine by RUE at $95 per 1000 m3.

Since Ukraine was paying only 38% of the international price for natural
gas, in mid- 2006 it became clear that the price of $95 per 1000 m3 Ukraine
would be raised in the future.

On October 24th, Ukraine and Russia agreed that in 2007 RUE will deliver
no less than 55 billion m3 of natural gas (of Central Asian origin) and up
to 62 billion m3, at a price of $130 per 1000 m3.

The price is set for the entire year.  Although this price represented an
increase of 37% over the 2006 price, it is still only about 47% of
international prices.

At the same time, the transit fee was left unchanged. Since the gas
agreement contains a provision that Ukraine has no right to re-export gas
received from RUE, it is very likely that only the minimum amount of gas
will be delivered to Ukraine in 2007 (i.e., 55-57 billion m3).

Considering that the Ukrainian economy is highly energy-intensive and thus
vulnerable to gas price changes, and that the recent increase will be the
second gas price shock in two years, the analysis below estimates the
impact of these two arrangements on the Ukrainian economy.

                                IMPACT ON GDP GROWTH
In order to estimate the impact of the increase in the price of imported gas
on GDP, we used the model presented in the SigmaBleyzer/The Bleyzer
Foundation paper issued in January 2006 entitled “Ukraine – Impact of Gas
Price Increase.” [Published by the Action Ukraine Report (AUR) #656,
Article 1, February 9, 2006] [Link to January 2006 impact of gas price
increase paper:]

On this basis, we estimate that the direct impact of higher gas prices on
GDP growth in 2007 will be a reduction of 1.5-2.0 percentage points relative
to the baseline forecast of GDP growth. (2)

In addition to 2007’s gas price shock, the Ukrainian economy will continue
to feel the effect of the gas price increase of 2006. Furthermore, there
will be indirect impacts on GDP through other channels.

In particular, the rise in imported gas prices in 2006 and 2007 would have
depressive effects on private consumption, as they leave consumers with
fewer resources to spend on other goods and services.

In addition, some energy-intensive industries, like chemicals and
metallurgy, may be severely hit with the new gas price shock. In 2006, many
of these industries adjusted to the new gas prices through gas substitution
with other types of fossil fuels and reductions in their profit margins.

Furthermore, strong real sector performance during May-October 2006 was
related to a favorable external environment for Ukraine’s major
export-oriented industries (like metallurgy (3), chemicals, machinery and
equipment) and to record high consumption growth related to banking credit

Though the metallurgy industry may be capable of absorbing the 2007 price
shock reasonably well, the effect of higher gas prices on the chemical
industry may be more damaging.

This is because in the chemical industries, energy represents a larger share
of production costs. The average share of energy cost in non-fertilizer
chemical production is up to 50% and approaches 70% in fertilizer

In 2006, the chemical industry absorbed the gas price increase through a
moderate reduction of profitability, which was possible due to strong
domestic and external demand. For January-October 2006, the industry
reported a 3.5% yoy increase in its output.

However, the second significant increase in natural gas prices in two years
may place many enterprises in the chemical industry below their
profitability levels.

On the other hand, the impact of the gas price increase for this industry
may be lessened by the government as it has already announced plans to
introduce price caps on natural gas supplied to chemical plants.

This notwithstanding, the gas price increase may contribute to a further
reduction of exports in Ukraine. The chemical industry accounts for about
10% of Ukraine’s total merchandise exports in 2006.

Although private consumption in 2007 will remain high due to a series of
recurrent income increases (minimum wages, pensions, etc.), its rate of
growth will be more modest in 2007.

Lower consumption growth and more moderate export growth in 2007 will
have a “multiplicative” impact on national income (GDP), since the decline
in aggregate demand represents exemptions into the circular flow of income,
which affect further rounds of consumption spending.

On a positive note, a compensating factor is that the gas price increases in
2006-2007 and the awareness that the cost of energy will continue to grow in
the future will stimulate investments, including into energy conservation

In addition, the Ukrainian economy may benefit from government policies and
reforms that would improve Ukraine’s business environment, thus enhancing
investment activity and increasing total factor productivity.

Furthermore, the likely accession to the WTO in the first half of 2007 may
also have a positive effect on economic development in Ukraine.

Taking into account direct and indirect effects of a gas price increase on
the economy, the negative impact on the growth rate of real GDP is
estimated to be within 1.5-2 percentage points.

The actual growth rate will crucially depend on the external environment
(particularly, the development of steel prices on international markets) and
the ability of Ukraine to implement economic reforms. Currently, we project
GDP growth to reach 5-6% yoy in 2007.

As in 2006, the most significant effect of gas price increases will be felt
by export-oriented industries such as chemicals and metallurgy, which
together account for more than 50% of Ukraine’s total export.

The crucial element for export performance in these industries is
development of world metal and chemical prices. Despite growing world
steel production, the global demand for steel has also been rising.

At the same time, the supply of raw materials for metallurgical industries,
particularly iron ore, has also been growing though at much slower pace.
The shortage of raw materials may be the primary reason for upward
pressures on world steel prices in 2006.

Although likely increases in iron ore supply may reduce the price of raw
materials, they may still remain at a relatively high level in 2007, thus
not allowing for a sharp decline in steel prices.

Most likely, Chinese and European steel prices, the main destinations of
Ukraine’s steel exports, will show only a moderate decline in 2007. The
extent of government support for the chemical industry will depend on the
international price of Ukraine’s chemicals and commitments under the WTO.

It is likely that some chemical and metal enterprises may turn unprofitable
in 2007, thus reducing the volume of Ukraine’s goods export.

On the import side, the increase in the cost of imported energy resources
will cause further deterioration of the merchandise trade deficit. Unlike in
2006, it will not be compensated for by a larger surplus in foreign trade of
services as the transit fee will remain unchanged.

Also considering the limited opportunities for Ukrainian natural gas
exports, the direct negative impact on the current account balance is
estimated at about 1.8% of GDP. Coupled with the impact on export-oriented
industries, the full year current account deficit may reach 2.5% of GDP.

                         CONSOLIDATED FISCAL BUDGET
The 2007 budget, currently approved in the first reading by the Verkhovna
Rada, forecasts a deficit of about 2.5% of GDP.  In the preparation of the
budget, the increase in gas prices for 2007 was already envisaged. However,
the successful execution of the budget plan may be a challenging task for a
number of reasons.

[1] First, budget revenues may turn out to be overestimated taking into
account the rather optimistic forecast by the government of real GDP growth
in 2007.

[2] Second, budget revenues may fall short of the targeted amount due to
resumption of free economic zones and territories of priority development.

[3] Third, higher gas prices, though expected to be passed on to consumers,
will increase expenditures on low-income assistance programs. Combined with
the government plans to support the most effected industries, the budget
deficit may reach 3% of GDP.

At the same time, we believe the government has enough tools to control
other expenditures and keep the budget deficit at a projected 2.5% if GDP.

The imported gas price increase in 2006 became a catalyst for adjustment
of all utility tariffs to cost-recovery levels (some of the utility tariffs
had not been revised for more than 6 years).

As a result, consumer price index growth will exceed the government
projection of 10% yoy in 2006, and may reach 11%-12%. We expect that

the gas price increase will be passed on to consumers in 2007, though
some relief will be granted to low-income households. (4)

Though natural gas per se holds a rather small share in the consumer

basket (5), the increase in imported gas will pressure utility tariffs,
transportation costs and producer prices. The latter, in turn, will spill
over into consumer prices with some lag.

In addition, due to the absence of a clear privatization plan for 2007 (the
government plans to receive about $2 billion of privatization receipts,
representing two thirds of deficit financing in 2007) on the back of
considerable social expenditures in the budget (6), the likely fiscal budget
deficits may cause inflation pressures.

Taking this into account and assuming that the process of service tariffs
adjustment to cost-covering levels will continue in 2007, we believe the
government forecast of 7.5% yoy inflation in 2007 is very optimistic. We
expect inflation to be around 10% yoy in 2007.

                                     EXCHANGE RATE
During 2006, the hryvnia exchange rate against the US dollar was maintained
stable at 5.05 UAH/$, despite current account pressures at the beginning of
the year.

The deterioration of foreign trade performance was compensated for by
surpluses in transfers and financial accounts (due to the robust inflow of
FDI estimated at about $3.6 billion for the first nine months of 2006 and
active private sector borrowing from abroad). This allowed the NBU to
further replenish its reserves, which are expected to reach $20 billion at
the end of the year.

 In 2007, exchange rate dynamics will be affected by a further worsening of
the foreign trade balance, which will lead to a current account deficit of
about 3% of GDP.

However, we believe the inflow of foreign capital (either in the form of FDI
or borrowings) will be enough to cover the current account deficit. At the
same time, we anticipate that some depreciation pressures may occur
throughout the year, during which the exchange rate may be allowed to
depreciate slightly to 5.1-5.15 UAH/$.                       -30-
(1) According to the agreement, the price of imported Turkmen gas at the
Russian border would have been $50 per 1000 m3 in the first half of the year
and $60 per 1000 m3 in the second. Even including transit fee payments, the
price of Turkmen gas at the Ukrainian border would have been lower than
under the contract with RUE.
(2) The main assumptions and calculations necessary to estimate the impact
of a gas price increase on GDP were the following:
a)  56 billion m3 of natural gas will be delivered to Ukraine in 2007.
b)  In 2006, Ukraine imported 56 billion m3 at a price of $95 per 1000 m3.
c)  Natural gas transit through the territory of Ukraine will constitute
about 122 billion m3 in both 2006 and 2007 (according to official
statistics, natural gas transit to Europe through the territory of Ukraine
has declined by about 7%. The decline is explained by lower gas consumption
by European countries due to very warm weather and shortage of gas delivery
at the beginning of the year due to unresolved gas supply issue between
Ukraine and Russia. However, we believe gas consumption will increase in the
coming months following the traditional seasonal pattern).
d) Though the 2006 increase in gas prices was passed on to industrial
consumers at the beginning of the year, utility tariffs for households were
raised mostly in the second half of the year. In addition, strongly revived
investment activity (about 10% yoy in 1H 2006 in real terms) may suggest
that the gas price increase stimulated investments in energy-saving
technologies.  In the residential sector, this process is much slower with a
negligible impact on elasticity in the first year (2006). We assume that the
2007 gas price increase will be passed on to utility tariffs to a
considerable degree in 2007. Hence, we believe that gas price elasticity of
demand will increase in 2007, though not as strongly as we previously
anticipated, with a more conspicuous effect in subsequent years.
e) According to the forecasted gas balance for Ukraine in 2006, Ukraine
plans to export about 8 million m3 of natural gas (of its own production).
The State Statistics Committee of Ukraine reported that Ukraine exported
natural gas in an amount equivalent to $0.59 million over January-September.
Extrapolating this figure for the whole year, we obtain the export price of
about $100 per 1000 m3. We assume that in 2007, Ukraine will be able to
export a similar amount of natural gas. It also looks reasonable to assume
the price for it will exceed $130 per 1000 m3 but will be lower than the
European average. We assume that the price will be in the range of $150-200
per 1000 m3.
f)  GDP was estimated at $100 billion for 2006.
g)  The ratio of gas imports to DP was estimated at 5.32% in 2006. But this
ratio would be about 2.6% of GDP if corrected for gas transit and gas export
(3) Unlike expectations of a moderate decline in 2006, world steel prices
resumed growth in April 2006 and on average were comparable to 2004 prices.
(4) The government may choose to keep energy prices unchanged on the
domestic market. However, such a policy response will lead to distortions in
market-correction mechanisms, thus sending wrong signals to business,
accumulation of inflationary pressure and their transfer on future periods.
Since such a policy may also cause the budget deficit to expand beyond the
3% of GDP level, we believe the government will allow for a price adjustment
to a substantial extent.
(5) Housing services, gas, water supply and electricity together comprised
less than 7% of the consumer basket as of mid-2006.
(6) Though the 2007 draft budget law envisages a rather moderate increase in
minimum wages, pensions and other social expenditures, due to the recurrent
increases in the previous two years, social spending will represent a
significant share in the budgets in future years.                -30-
NOTE:  SigmaBleyzer/The Bleyzer Foundation also publishes monthly
Macroeconomic Situation Reports for Ukraine, Bulgaria and Romania.
They are published at
Director, Government Affairs, Washington Office,
SigmaBleyzer Emerging Markets Private Equity Investment Group,
Washington, D.C.,,

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
2.                           UKRAINE’S ENERGY FUTURE

REMARKS: By Yuriy Boiko, Minister of Fuel and Energy of Ukraine,
At the Ukrainian Business Forum at the Waldorf-Astoria in NYC
During the official visit of Prime Minister V. F. Yanukovich
New York, New York, Wednesday, December 6, 2006
Action Ukraine Report (AUR) #799, Article 2
Washington, D.C., Wednesday, December 20, 2006

Dear Friends,

Thank you very much for finding the time to join us today.  I am happy to be
back in the United States and to be here as part of the new government led
by Prime Minister Viktor Yanukovich.

The Government, together with President Yushchenko and our partners in
Parliament, are united by our commitment to fulfill all the potential that
our country and people represent.

We are also united by a commitment to be a strong partner in our common
quest for peace, prosperity and democracy around the world.  Because of the
trends in global energy, our role as a reliable energy partner is important
to everyone.

Consider these facts:
     [1] Global energy demand is growing, and it is expected to increase by
60% by 2030, partly due to the emerging economies, especially China and
     [2] Hydrocarbon reserves are declining in Europe, which is the largest
importer and second largest consumer of energy in the world. Today the EU
imports about 50% of its energy. Without policy reform, this will rise to
70%. The percentage for natural gas will be even higher.
     [3] The price of hydrocarbons are rising. As we all know, oil prices
have increased more than six times over the past seven years.

This is why building a strong, reliable energy economy that brings supplies
from the East to consumers in the West is a cornerstone of the broader
strategic agenda for our country and for our relations with our partners.

In order to achieve this goal, Ukraine is reforming its economy to be more
compatible with the European Union.  We are modernizing our industry to
consume less fuel even as we grow our GDP.  And we are strengthening
long-term, strategic partnerships with Russia, and Black Sea and Caspian
states whose energy supplies are crucial to the global energy balance.

Building a transparent, vibrant and effective environment for investment and
business expansion is key to our strategy.  And for that reason, I’m
especially pleased to have the chance to be with you today and exchange

One of my jobs as Minister is to help ensure that our energy reforms are
moving in a direction that promotes business expansion and adds to the
welfare of our people while at the same time maximizing our common energy

You can play a part in that process.  Working together, we can ensure:

     [1] That Ukraine really is “open for business”;
     [2] That all of our investments are protected by the rule of law and an
independent, fair judicial system;
     [3] That our government policies support investment and encourage
economic growth; and
     [4] That we maximize Ukraine’s potential as a strategic and reliable
energy partner.

Let me outline briefly the 4 key pillars that create the framework of our
Energy Strategy and share a few ideas about how we can work together to
fulfill its potential-to all our benefit.

[1 – EUROPEAN UNION] The first pillar of our strategy is a commitment to
deepen our overall collaboration with the European Union, including in the
energy sphere.

We all face the same overarching energy challenges in the 21st Century,
namely increasing the diversification of energy suppliers, ensuring energy
transit security, and finding and developing alternative energy sources.

In this context, we are working at senior levels with our EU colleagues to
develop the enormous potential of our country to improve the reliability of
supplies to energy consumers in Europe by uniting more effectively the
energy resources and transport infrastructures of Central Asia, Russia,
Ukraine and the European Union.

As you know, Ukraine’s relations with the European Union are expanding.  Our
energy relationship is governed by the Memorandum of Understanding in the
Field of Energy which provides a comprehensive framework for collaboration
and which we updated on September 14 to add financial support for energy
sector priority projects transport projects from the EBRD and the European
Investment Bank.

Ukraine also aspires to join Energy Community Treaty and has already been
granted observer status during the ministerial meeting in Skopje November

Diversifying supplies of hydrocarbons and their supply routes into Ukraine
is a priority issue, as is the creation of transit routes to the EU through
Ukrainian territory.

In this context, the development of the Odessa-Brody-Plock oil pipeline is
most important.  We must also synchronize our electricity system with Europe’s
and develop alternative energy resources.

I am glad to report that our relationship with the EU foresees further
political and financial support to Ukraine’ for the multibillion
infrastructure energy projects, a number of which are presented to you here

[2 – UKRAINE] The second pillar of our strategy focuses on creating a modern
energy sector at home, in the context of a market economy that encourages
investment and ensures financial stability as well as energy conservation
and efficiency.

These principles are laid out in Ukraine’s Energy Strategy through 2030
which was approved by the government in March of this year.

The Strategy forecasts cutting energy consumption by 50% by 2030 while
tripling the GDP. This target will be met thanks to technological and
structural cutbacks, as well as legislative stimuli.

Within the next few years we want to cut gas consumption by 30% in
metallurgy and 20% – in the chemical industry.

Also, Ukraine also aims at reducing of consumption of the imported energy,
in particular gas. In this area, we plan to accelerate development of coal
mining and nuclear power sector.

By doing so, we expect to ease Ukraine’s dependency from imported energy to
about 12% in 2030.  National gas consumption is supposed to drop from today’s
56.4bn m3 to 9.4bn m3.

Ukraine is setting the stage for development of the nuclear power
generation. Today, 15 nuclear power blocks are capable of generating 13.8mn

The Government plans to extend exploitation terms of the existing blocks, as
well as to build new ones. Supposedly, Ukraine will have domestically
produced uranium and zircon.

By 2010, Ukraine also intends to construct a centralized Spent Nuclear Waste

Coal consumption will rise dramatically in power generation. Its share in
energy balance of the power plants will reach 80%.

Domestic oil and gas production will increase. Our 2016 target for oil is
2.4 million tones of domestically drilled oil per year, and by 2030 we
expect to produce 28.5 billion m3 of gas. Plus, the strategy provides for
modernization of oil refineries, with the aim to improve the depth of
refinement to 90%.

Obviously, large-scale modernization will require multibillion investments
in the sector.  Our plans envision that we will attract capital from private
investors, both domestic and foreign, profits of the energy companies
themselves, state investments and from partners such as the World Bank,
European Investment Bank and others.

[3 – RUSSIA] The third pillar of our strategy for success is based on
maintaining strong relations with Russia.  Russia needs predictability from
Ukraine, just as Ukraine and Europe need predictability from Russia.

We acknowledge this interdependency and intend to use it to our mutual
benefit. I’m happy to report to you that today Ukrainian-Russian energy
relations have been put on a sound footing.

In October of this year, our governments reached important and mutually
acceptable agreements on cooperation in the areas of oil and gas, nuclear
energy and electric power. We have recently signed contracts which provide
terms of gas supplies in 2007, as well as the increase of Russian oil
transit through Ukraine.

We will continue to work with our colleagues in Moscow to ensure that both
sides are meeting their commitments and are doing so in a transparent way
that contributes to increased regional energy security for exporters,
transporters and consumers of that energy.  Doing so is in everyone’s

[4 – UNITED STATES] Let me conclude by saying a few words about the

fourth pillar of our Energy Strategy, building a real strategic energy partnership
with the United States that brings tangible benefits to both sides.

In this respect, we are interested in involving the American partners into
the Eurasian Oil Transportation Project. This strategic corridor rests on
the idea of transporting Kazakh oil to Europe through the Odessa-Brody-Plock
pipeline. We look forward to collaboration with our US partners in a way
that brings the maximum results.

Several weeks ago, the Ukraine-Poland Working Group has been created which
will soon deliver a draft Agreement to be signed by two governments. This
document aims at sending a clear message to private investors about the
high-level support of the project.

We anticipate and hope that the American oil companies operating in the
Caspian region will become interested in the Odessa-Brody project.  In
addition, we invite the American companies to develop oil deposits on the
Black Sea shelf.

I am happy to announce that Ukraine is making solid progress on concluding
its first Production Sharing Agreement in the energy field with our partners
at Vanco.

This agreement will speak to the interests of both Ukrainian and American
partners, will be commercially successful and address Ukrainian and regional
energy security requirements.  It is my hope that this agreement becomes a
model that we can replicate and build on with other partners in the future.

I want to end my comments with thanking you and thanking the American

people for all the support you have given us during our early years of

You have shared your expertise, promoted our security and given generously
through programs run by USAID, the Department of Agriculture and other

Your generosity and friendship are wise investments.  They are also most
appreciated, and on behalf of all of us I thank you very much.    -30-

FOOTNOTE:  Our thanks to Walter Zaryckyj, Executive Director,
Center for US-Ukrainian Relations, Adj Associate Professor of Social
Sciences/New York University and UA Quest Roundtable Series Program
Coordinator for sending the AUR a copy of the presentation by Yuriy
Boiko, Minister of Fuel and Energy of Ukraine.   AUR EDITOR
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
    Power sector is the twelfth-largest in the world in terms of installed capacity.
Kateryna Illyashenko, Ukraine analyst, IntelliNews-Ukraine This Week
Kyiv, Ukraine, Monday, November 27, 2006

The energy sector is of key importance for national economy, as electricity
is needed by both industrial and individual consumers.

A peculiar thing in the energy sector is that the technological equipment
and primary generators of electric energy are separated by significant
distance from the consumers. As a result, power generation, transmission

and distribution became separate industries.
Three types of generation facilities are present in the country, including
thermal power plants (steam turbine and diesel types), hydropower plants
(hydroelectric generating and hydroelectric accumulating plants) and nuclear
power plants. The role of wind and helium power plants is growing, but it is
still insignificant.

Ukraine’s power sector is the twelfth-largest in the world in terms of
installed capacity. As of end-2006 the energy sector had the following

parameters: the total capacity of all power plants exceeds 53mn kW,
including 34.8mn kW (65.3%) of thermal plants, 13.8mn kW (25.9%) of
nuclear plants and 4.7mn kW (8.8%) of hydroelectric plants.

   Domestic generation capacities almost fully satisfy local demand
The main areas of power plants location are Dnipropetrovsk, Zaporizhzhya,
Donetsk, Kharkiv and Luhansk regions in the east, the Lviv and
Ivano-Frankivsk regions in the west, and the Kyiv and Vinnytsya regions in
the central part of the country. The major producers and consumers of power
are in Dnipropetrovsk, Zaporizhzhya, Donetsk and Luhansk regions.

The electricity needs are mainly satisfied by domestic generation capacities
(nearly 98%), while the share of imports is insignificant (2%). Locally
produced electricity is largely consumed inside the country (97%), with a
small part exported (3%).

                  Generating capacity exceeds its electricity needs
Country has sufficient generating capacity to supply more than twice of its
electricity needs. However, the country’s transmission and distribution
systems are in need of investment and maintenance. As a result significant
amounts of electricity are lost in transmission. Also, several of the
country’s nuclear facilities are intermittently shut down throughout the
year due to technical problems.
  Country exports electricity to Moldova, Slovakia, Poland, Hungary
State-owned UkrInterEnergo exports Ukrainian electricity to other markets.
Ukraine signed a contract to supply 2.5bn kWh to Belarus during 2006 and
will receive USD 50mn revenues under this contract. The country also exports
electricity from the Burshtyn thermal power plant to Moldova, Slovakia,
Poland, and Hungary.

It started exporting electricity to Romania in Mar 2005. The Burshtyn power
plant and a part of Ukraine’s western energy system is connected to European
UCTE energy system since Jul 2002. EU officials met with Ukrainian energy
officials in Kiev in early 2006 to discuss plans to fully integrate the
country’s electricity grid into the UCTE by 2008.

In Jan-Oct 2006 the country boosted its exports of electricity by 13.6% y/y
to reach 8.272bn kWh. In October, the exports of electricity almost doubled
over last year and amounted to 929mn kWh. Notably, electricity exports to
Russia were resumed in November.
      State owned Energoatom operates four nuclear power plants

Currently there are four operating nuclear power plants, Zaporizhzhya, Rivne,
Khmelnytsky, South Ukrainian. In total they have 15 nuclear power units
operated by Energoatom.

On Dec 15, 2000, Ukraine permanently shut down the 925-MW, unit 3 of the
Chernobyl power plant, disabling the last remaining working reactor at the
ill-fated facility. Ukraine resumed construction of two 1-GW reactors at the
Khmelnitsky and Rivne power plants to replace the power generated by
Chernobyl, which officials say accounted for approximately 5% of the
country’s total.

In 2007 the country plans to attract UAH 3.5bn to invest into improvement

of energy sector. A part of these funds will be attracted from foreign
financial institutions.
         27 power distribution companies operate in the country
Donbasenergo, Dniproenergo, Kharkivenergo, Vinnytsyaenergo, Lvivenergo,
Odesaenergo and Crimeaenergo together with other regional companies they
make up the power grid of Ukraine, which is connected with power systems
of Western and Central European countries, as well as the CIS countries,
including Russia, Moldova and Belarus.

At the moment, 27  power distribution companies operate in the country.
There are 25 regional oblenergos (one in each region of Ukraine) as well as
two oblenergos serving Kyiv and Sevastopil cities. The main functions of
oblenergos distribution of electricity, supply of electricity at regulated
tariffs, and provision of related services to the customers.

Tariffs at which oblenergos distribute and supply electricity, are subject
to a regulation by the NERC (national energy committee). Oblenergos’ assets
comprise power transmission lines, transformer substations, electricity
consumption meters and systems and other equipment.

Oblenergos and so-called independent electricity suppliers supply
electricity in the country. They are obliged to supply electricity to all
the consumers located in the service territory specified in their license.
Independent suppliers hold the licenses for electricity supply at
non-regulated tariffs and can use oblenergos’ networks for distribution.

Most powerplants controlled by  state-owned Enerhetychna Companiya

Ukrayni State-owned Enegetychna Companiya Ukrayni controls most of
the country’s thermal and hydropower plants.

Enerhetychna Companiya Ukrayni owns 100% in the following companies:
Dunuzlavska Vitrova Elektrostation, Kryvorizka Teplocentral, Lysychanska
Teploelktrosentral, Sieverodentska Teploelektrosentral, Dniprodzherzhynska
Teploelektrosentral and Khersonska Teploelektrosentral. In other powerplants
the company has the controlling stakes.

Ukraine intends to cooperate with EU in development of its energy sector

Ukraine is a key link of hydrocarbon transit from Russia to Europe.
40% of European natural gas imports come through its gas transportation

Today Ukraine-EU co-operation in energy sector is shaped by the Joint Action
Plan and the Memorandum of Understanding in Energy Sector. Joint Report
signed  November 18th confirms  progress made in bilateral relations.The
country plans to develop energy supply infrastructure including building up
new pipelines and terminals for liquefied gas.

It is also interested in support of our Odesa-Brody-Plock oil pipeline
extension project, as well as Ukraine’s integration into UCTE.     -30-
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Associated Press, Kiev, Ukraine, Friday, December 8, 2006

KIEV – RosUkrEnergo, the intermediary company that supplies Ukraine with

gas imports, is trying to seize control over Ukrainian regional gas companies,
officials from the regional companies warned Thursday.

The heads of six regional gas companies said that after their shareholders
refused to sell shares to RosUkrEnergo in October, law enforcement bodies
began harassing the businesses with constant checks, the Interfax news
agency reported, citing the regional heads of Zakarpatgaz, Volyngaz,
Lvivgaz, Ivano-Frankivskgaz, Chernovtsygas and Chernihivgas.

Lyubomyr Shershun, head of the advisory council of Zakarpatgaz, said that
the pressure appeared aimed at forcing a hostile takeover, Interfax
reported.  Spokesmen for the regional gas companies refused to comment.

Ukraine’s state gas monopoly, Naftogaz, later said the companies were facing
criminal investigations into the alleged misappropriation of 70 million
hryvna ($13.7 million), and called their allegations against RosUkrEnergo an
attempt to divert attention.

RosUkrEnergo, which has offices in Switzerland, also refused to comment,
saying its spokesman wasn’t immediately available due to a national holiday.

RosUkrEnergo, which supplies Ukraine with all of its gas imports, was
created in 2004 with the aim of acting as an intermediary between Russia’s
gas monopoly, OAO Gazprom (GSPBEX.RS), and Naftogaz; the company is
half-owned by Gazprom and two little-known Ukrainians.

Opposition politicians criticized Ukraine’s dependence on RosUkrEnergo,
calling it a murky company, and have called for Ukraine to negotiate a
direct deal with Russia.                              -30-

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5.                           WTO MEMBERSHIP IN SIGHT
INFORM, Yuliya Tymoshenko Bloc (BYUT) Newsletter, Issue 24,
Kyiv, Ukraine, Tuesday, 19 December 2006

Last Wednesday, Ukraine overcame the final major hurdle in it efforts to
join the World Trade Organisation (WTO), when its parliament approved

the last bit of legislation required for membership.

The final piece in the legal jig-saw saw 363 out of 442 registered deputies
vote to pass a law that sets duties for scrap and semi-finished metal
exports. The legislation will see a reducing scale of duties during the next
6 years, from 30% in the first year of membership down to 15% by year-six.
The law will come into effect from January 1 in the year following Ukraine’s
accession to the WTO.

A bi-lateral agreement with WTO-member Kyrgyzstan is still needed but

even if talks fail it is expected that WTO officials will approve Ukraine’s
entry.  So following this year’s eleventh-hour scramble to pass legislation,
it now looks like Ukraine will join the exclusive club of 149-trading
nations as early as February, 2007.

Petro Poroshenko, head of the budget committee and staunch ally of President
Viktor Yushchenko said that he hoped “effective negotiations” by officials
would lead quickly to a WTO decision on membership.

Oleksandr Shlapak, the head of the presidential secretariat’s service for
social and economic development was pleased with the progress.  “I hope that
we will receive in February a specific invitation from the WTO,” he said.
Mr Shlapak revealed that a Ukrainian delegation was about to travel to
Geneva to ensure that everything was in order.

“This is excellent news,” said Hryhoriy Nemyria, BYUT deputy and Yulia
Tymoshenko’s top foreign affairs adviser, “As prime minister, Mrs Tymoshenko
passed the bulk of the complex legislation needed for accession.  Since then
we’ve maintained pressure on the government to push forward all necessary
legislation so that Ukraine can benefit from being a member of this vital
organisation whose rules govern over 90% of international trade.”

“We trust the issue of synchronising Ukraine’s membership with Russia is off
the table,” added Mr Nemyria.

Russian Prime Minister Mikhail Fradkov has repeatedly appealed to Ukraine to
coordinate the two membership bids. The parliamentary opposition has
campaigned that Ukraine’s membership should not be tied to that of any

Notwithstanding calls rejecting synchronisation, an opinion piece in last
week’s Kyiv Post claimed that “evidence is piling up” to suggest that Prime
Minister Viktor Yanukovych may bow to Russian pressure to delay accession
and synchronise it with Russia.  It is speculated that in return Mr
Yanukovych might receive concessions such as reduced natural gas prices for
big businesses.

According to the Kyiv Post, “Yanukovych has, of course, denied this, but
government officials under him seem to find increasingly more technicalities
to blame for putting the WTO off. This is disturbing to say the least.”

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Kabar news agency, Bishkek, in Russian 0406 gmt 19 Dec 06
BBC Monitoring Service, UK, Tuesday, December 19, 2006

BISHKEK – Kyrgyzstan agrees to sign a bilateral protocol with Ukraine on
this country’s accession to the WTO. In exchange for this, Bishkek has
demanded the abolition of an anti-dumping tax on [Kyrgyz] electric lamp

Earlier, Kyrgyzstan demanded that Ukraine repay its former Soviet debt of
more than 27m dollars, and then put forward new demands calling on it to
fully abolish import taxes on a very long list of agricultural produce,
including sugar and meat products, the Ukrainian media have quoted Deputy
Economy Minister Valeriy Pyatnytskyy as saying.

The minister said that the Kyrgyz-Ukrainian protocol would be signed at a
meeting of the two country’s economy ministers in early January 2007.
[Passage omitted: The agency says Ukraine launched an anti-dumping

campaign against Kyrgyz lamp imports in 2002]

The Kyrgyz Mayli-Say electric bulb plant is the main supplier of electric
lamps to the Ukrainian market. The plant’s owner is Russia’s BABC
limited-liability company. [Passage omitted: Prime Minister Feliks Kulov
said in December 2006 that he would provide support to the plant if its
owner, the BABC, did not resell it to a different company]     -30-
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UkrAgroConsult, Kyiv, Ukraine, Tuesday, December 19, 2006

KYIV – The Ukrainian Minister of Economics has said it is quite possible
that the grain export quotas which were recommended could become obstacles
for Ukraine on the path of its proposed entry into the WTO.

This is going to be a problem if there is not enough evidence that such
measures were of an extreme necessity, and the Government had to take them
due to the harsh situation in the domestic provisional market the Minister
stated.                                               -30-  

FOOTNOTE: More and more questions are being raised in Washington
and European circles about whether the extremely low grain export quotas
imposed by the Yanukovych government meet WTO rules and regulations.
Many observers do not believe Ukraine will be allowed to enter the WTO 
unless the present grain export quota system is drastically modified.  
Business organizations are in contact with various governments urging them
to make sure Ukraine is not allowed to join the WTO until any grain export
quota system in place fully meets WTO rules and regulations. AUR EDITOR
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8.                             PROMISES FORGOTTEN?
          Grain export quotas may have adverse consequences for Ukraine

By Vitalii Kniazhansky, The Day Weekly Digest #41
Kyiv, Ukraine, Tuesday, December 19, 2006

Ukraine’s prime minister said recently that grain export quotas may be
lifted after the Ministry of Agricultural Policy reports to the cabinet
about fulfilling the grain procurement plan for the country. Evidently the
ministry has still not completed this assignment.

In any case, Ukraine has finally set new grain export quotas. Until the end
of 2006 grain traders will be allowed to sell 1,106,000 tons of grain,
including 3,000 tons of wheat, 3,000 tons of rye, 600,000 tons of barley,
and 500,000 tons of corn.

In the same breath the government scrapped the previous quotas introduced by
a decree of Oct. 17, 2006, for a total of 1,603,000 tons of grain, including
400,000 tons of wheat, 600,000 tons of barley, 600,000 tons of corn, and
3,000 tons of rye.

According to an earlier statement by the Ministry of Agricultural Policy,
the new quotas disregard the previous ones unless the latter were utilized.
The government has also set up an eight-member commission headed by Serhii
Romaniuk, Deputy Minister of Economics, to review applications for grain
export licenses and to distribute quotas.

His deputy on the commission is Ivan Demchak, Deputy Minister of
Agricultural Policy. Other members are representatives of the Ministry of
Justice, Chief Control and Auditing Administration, State Customs Service,
Ministry of Finance, MP Serhii Ryzhuk, and Volodymyr Klymenko, president
of the Ukrainian Grain Association.

The same decree prescribes the order of licensing and quota distribution:
companies that exported grain during the past three years will receive 80
percent of the quotas, their size being proportional to the companies’
actual exports over this period as confirmed by a statement from the State
Customs Service.

The remaining 20 percent are proportionally distributed among the other
applicants based on the amount of grain declared for export. For companies
that have already obtained licenses, the new quotas will be reduced by the
volume of the previously received ones.

Within 15 days after the launch of the application procedure at the Ministry
of Economics’ Web site, the commission has to make a decision on quotas
and publish it on the same site.

It is noteworthy that the commission’s resolution has a recommendatory
character for the Ministry of Economics, which makes the final decision.
However, if the ministry chooses to ignore the commission’s opinion, it has
to present to the applicant a justification its refusal.

The exporters think quota volumes are deliberately understated. The
government’s decision has also drawn criticism from the president of Ukraine
and international financial organizations. A day before the decision was
adopted, the World Bank published its report on export grain quotas in

Prepared in collaboration with the German Advisory Group to the Ukrainian
government, the report studies how quotas affect domestic prices for grain,
consumer rights protection, revenue from exports, and investments in the
grain sector.

The World Bank contends that quotas are ineffective in protecting the
Ukrainian consumer from surges in world grain prices. They lead to
significant drops in grain export revenue and are especially vulnerable to
corruption, which will have an adverse impact on Ukraine’s investment

According to the World Bank, the introduction of quotas is unjustified
because the domestic supply fully meets all domestic needs and is sufficient
for much higher export volumes than those estimated by the government.

This year’s grain production has greatly exceeded the average in the last 10
years. Furthermore, large initial reserves are stimulating efficient grain
supply in 2006-07.

Experts at the World Bank believe quotas will not bring great benefits to
Ukrainian food consumers. Even though wheat prices remain stable, prices
for flour and bread have actually increased since the introduction of

In practice the wheat price is only one part of the final price for bread.
At the same time, forage prices, according to experts’ forecast, will not
affect prices for meat and dairy products.

The report also emphasizes that the quota system entails great losses for
grain producers and significantly affects export revenue.

By the end of 2006 total losses in grain export revenue will reach $300
million, whereas the expected $25 reduction in producer prices may lead to
hundreds of millions of dollars in cumulative losses. The proportion of
low-income workers employed in the agricultural sector exceeds the average
figure for Ukraine.

This leads the World Bank to conclude that a reduction in grain producers’
revenue may actually raise the poverty line, rather than lower it.

The bank’s experts believe that management of the quota system lacks
transparency, which leaves room for corruption. Companies that are now able
to meet the export quota can make $25 on each ton, which is the amount the
producer loses.

Possible additional losses are connected with existing incentives for
smuggling grain out of the country. The adverse effect of the quota system
on grain producers and traders, as well as the risk of corruption, diminish
Ukraine’s investment image.

“Our recommendation is to cancel the quota system as soon as possible,” said
Paul Bermingham, World Country Director for Ukraine, Belarus, and Moldova.
“Even though these market interventions were implemented with the good
intention of guaranteeing food safety and protecting domestic consumers from
increases in world grain prices, they will misfire.

In contrast to this, we would recommend using alternative measures,
including money transfers to underprivileged citizens, which would protect
the low-income population from food price increases.”           -30-
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Ukrainian News Agency, Kyiv, Ukraine, Tuesday, December 19, 2006

KYIV – The Finnish Ambassador in Ukraine, Laura Reinila, is forecasting
Ukraine’s entering the World Trade Organization in February 2007. She
announced this at a press conference.

In her words, the European Union, now chaired by Finland, noted Ukraine last
week completed adopting laws necessary for entering the WTO.  “Your
government kept its promises and it is a good news for further development
of the Ukraine-EU relations,” said Reinila.

She stressed Ukraine’s entering the WTO depends on forthcoming meetings
between representatives of Ukraine and the WTO and Ukraine may formally
access this organization next February.

“Evidently, this happens very soon and it means for the European Union that
we will be able to start negotiations with Ukraine (on creating free trade
zone) and the EU is pleasantly surprised that it happened this quick,” said

As Ukrainian News has reported, up to now the Verkhovna Rada adopted

all the laws required for entering the WTO.                  -30-
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                       SALES, ONCE AGAIN, TO JANUARY 1, 2008

Interfax Ukraine Business Express, Kyiv, Ukraine, Tue, December 19, 2006

KYIV – The Verkhovna Rada, Ukraine’s parliament, has passed a bill

extending the ban on the sale of farmland until January 1, 2008.

A total of 354 MPs out of 436 registered for the vote supported the bill
amending the Land Code of Ukraine, including 180 MPs of the Regions Party,
109 from the BYT faction, eight from the Our Ukraine faction, and 30 and 21
MPs from the Socialist and Communist parties respectively.

Until January 1, 2008, the bill bans land property rights from being
included in the statutory funds of economic entities. The bill also bans the
purchase and sale of state-owned farmland and farmland under communal
ownership, except when it must be purchased for public needs.

The bill also bans until January 1, 2008, the purchase and sale or any
possible alienation of farmland owned by Ukrainian citizens or legal
entities other than through the transfer of farmland as inheritance or the
legal exchange of one farmland plot for another.          -30-
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              Six countries pledge to protect and develop the Carpathians

The Day Weekly Digest, Kyiv, Ukraine, Tuesday, December 19, 2006

Last week Ukraine, Poland, Romania, Serbia, Slovakia, Hungary, and the
Czech Republic signed the Carpathian Declaration.

“The Carpathian Convention establishes the fundamental principles for
international cooperation on the protection and sustainable development of
mountainous areas in general and the Carpathian mountains in particular,”
said Minister of the Environment Vasyl Dzharty at a press conference after
the two-day meeting of the parties to the Carpathian Convention ended in
Kyiv on Dec. 13.

“We will formulate mechanisms for utilizing all possible resources in the
framework of the Carpathian Convention,” the Ukrainian minister said and
added that the document also makes provisions for working groups in Ukraine,
Poland, Romania, Serbia, Slovakia, Hungary, and the Czech Republic at the
environmental ministry level, which will develop concrete projects aimed at
resolving the problems of the Carpathian region.

According to Interfax-Ukraine, the document also specifies sources for
financing future projects. “As of today we have agreed that each
participating country will contribute financially towards existing
mechanisms that involve specialists from the countries in the Carpathian

region,” said the Ukrainian minister.

Answering a journalist’s question about possible ways to resolve the
problems of Zakarpattia oblast, one of Ukraine’s poorest regions, Dzharty
said that the Framework Convention proposes new environmentally-sound
production facilities for this region.

The minister also said that Ukraine will be drawing on the experience of its
neighbors to create a modern infrastructure and additional jobs in
mountainous areas. Dzharty voiced his support for alternative types of
businesses “that can be created specifically in the Carpathian region.”

“If it is a forest, there must only be a sanitary zone there…If we are
talking about natural resources, there should not be any mining there at
all,” the minister added.

Participating in the work of the conference on the Carpathian Convention
were the delegations of the seven Carpathian countries as well as
delegations from Italy, Austria, the Netherlands, France, Belgium, Bulgaria,
Macedonia, Greece, the UK, Germany, Georgia, and Switzerland.

There were also representatives of the Alps Convention, UN Environment
Program, environmental NGOs, and Ukrainian and international movements
concerned with environmental problems and nature conservation.

A total of 150 participants attended the conference, during which procedural
rules and financial procedures for the Carpathian Convention were adopted,
and two final documents were signed: the Memorandum of Understanding
between the Carpathian and Alps Conventions, and the Carpathian Declaration.
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                 Program of the Ukraine 3000 International Charitable Fund

Ukraine 3000 International Charitable Fund
Action Ukraine Report (AUR) #799, Article 12
Kyiv, Ukraine, Wednesday, December 20, 2006

KYIV – Over 48 million dollars (242,954,000 hryvnias, UAH) was raised for
the new Children’s Hospital of the Future to be built in Kyiv during a
unique four-hour All-Ukrainian Telethon hosted by the National Television
Company of Ukraine on Sunday, December 17, 2006.

The telethon was broadcast by most of the national Ukrainian TV channels,
such as ICTV, Tonis, 24, K1, Fifth Channel, and NTN television channels.
Ukrayina Television and Radio Company, New Channel, TET, and 1+1
carried portions of the Telethon.

The telethon presented information to the public about the project to build
a new modern, world-class Children’s Hospital of the Future. Many well-
known medical experts, politicians, government leaders, civil activists,
athletes, and artists participated in the telethon.

The Ukrainian artists who voiced their support and performed on the
broadcast included the National Radio Company of Ukraine’s State
Symphony Orchestra, INSO Orchestra, Mariya Burmaka, Taras Chubay,
Nina Matviyenko, Hanna Koropnychenko, Taras Petrynenko, Tetiana
Horobets, Olha Bohomolets, Okean Elzy, Mandry, Druha rika, Haydamaky,
Krykhitka Tsakhes, Tartak, Esthetic Education, VV, Ray horodok groups.

The telethon included live broadcasts from six of Ukraine’s oblast centers
and featured discussions on the Children’s Hospital of the Future charitable
project with representatives from the cities of Uzhhorod, Donetsk,
Dnipropetrovsk, Lviv, Odesa, and Mykolayiv.

A summary of a major promotional tour held in Ukraine’s 24 oblast centers,
from September 29 through December 15, 2006 was also presented.

The Children’s Hospital of the Future project has been supported by all
Ukraine’s mobile telephone companies. Starting in October subscribers of
UMC, KyivStar, Golden Telecom, Life:), and Beeline mobile telephone
companies could make  donations by sending an SMS or by dialing 353.
Subscribers could transfer UAH 5 ($1) to the Children’s Hospital of the
Future account through this program.

From October 1 to December 16, 2006, 300,000 USD (1.5 million hryvnias)
was donated by Ukrainians towards the creation and construction of the
Children’s Hospital of the Future using the 353 telephone number.

During the four-hour telethon, another 180,000 USA (UAH 900,000) was
transferred to the Children’s Hospital of the Future account through this
number. By the end of the telethon, the total of $480,000 (UAH 2,400,000)
had been collected through SMS and calls to the 353 mobile number.

                      LARGE DONORS PARTICIPATED
During the telethon, philanthropists and businesses had an opportunity to
make public their participation in the creation and construction of the
Children’s Hospital of the Future. The following organizations and
individuals pledged their financial support for the project’s

     Industrial Alliance of the Donbas Corporation – UAH 75,750,000
     (15 million USD);
     Development of Ukraine Charitable Fund – UAH 64,640,000
     (12,8 million USD);
     Interpipe Corporation – UAH 50,500,000 (10 million USD);
     Finance and Credit Bank, AvtoKrAZ Company, and Arterium
     Pharmaceuticals – UAH 10,100,000 (2 million USD);
     Anonymous Donor – UAH 15,150,000 (3 million USD);
     Borys Kolesnikov – UAH 7,575,000 (1,5 million USD);
     Anonymous Donor – UAH 5,050,000 (1 million USD);
     Transbank Joint Stock Commercial Bank – UAH 5,050,000
     (1 million USD);
     James Temerty – 5,050,000 (1 million USD);
     Donetskstal-Metalurh Corporation – UAH 750,000 (148 000 USD).

Mrs. Kateryna Yushchenko, Head of the Supervisory Board of the Ukraine
3000 International Charitable Fund and First Lady of Ukraine, participated
in the Children’s Hospital of the Future Telethon.

Mrs. Yushchenko thanked all the television channels who supported this
action and who took part in the Children’s Hospital of the Future project.
“This is an unprecedented action uniting the whole country,” she said.

“I know there are many outstanding  medical specialists in our country who
have to work under difficult conditions, using outdated equipment. We have
to create decent conditions for their work,” Mrs. Yushchenko said.

Mrs. Yushchenko emphasized that the creation of the Children’s Hospital
of the Future was planned as a nationwide action. “The amount of each
donation doesn’t matter. Some will send five hryvnias through an SMS,
others will donate thousands and millions. But we have to do this together,”
she said.

Kateryna Yushchenko highlighted that treatment at the Children’s Hospital
of the Future will be free of charge.

“As an old adage goes, it is easier to light a small candle than keep
cursing the dark for the rest of your life. Today we are to light this
candle,” Mrs. Yushchenko said.

The Children’s Hospital of the Future All-Ukrainian Telethon’s was
directed by Taras Hrymaliuk.

Information about donations for Children’s Hospital of the Future will be
soon published on the Children’s Hospital of the Future web site, (information is available in Ukrainian and Russian).

Information about the implementation of the project can also be found on
the Ukraine 3000 Fund web site, (information is
available in Ukrainian, Russian and English
(             -30-
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13.                        HURRY TO DO GOOD DEEDS
           Fund-raising for children’s hospital became nation-wide action

Olha POKOTYLO, The Day Weekly Digest #41
Kyiv, Ukraine, Tuesday, December 19, 2006

This year St. Nicholas will not forget about children denied parental care:
cuddly toys, copybooks, sweets, and Christmas cards have been prepared by
senior graders and college students in Lviv.

Nor has St. Nicholas forgot to visit Ukrainian children who have to spend
the holiday in hospital beds. Sweets and toys are not the only way to
gladden Ukrainian children’s hearts.

All Ukrainians are collecting money to help ailing children on Ukraine 3000
International Benevolent Foundation’s initiative.

The foundation of the All-Ukraine Mother and Child’s Health Center
“Children’s Hospital of the Future” was laid in Kyiv this spring, on the
premises of the Feofania Hospital.

In the fall Ukraine 3000, under Kateryna Yushchenko’s patronage, organized
an all-Ukraine promotional tour of the regional centers of Ukraine. For 75
days the construction project of the country’s largest hospital was
presented in the regions and money collected for its construction.

During that period over 240 million hryvnias were contributed to the
benevolent foundation (the project’s budget requires 600 million). The bulk
of the sum was transferred to the hospital’s bank account within four hours
of a fund-raising marathon broadcast live by 11 Ukrainian channels.

Some two million hryvnias was received through SMS messages (every citizen
can do so by dialing 353). Several Ukrainian charitable organizations have
donated the largest amount to date, including over 12 million dollars from
the Development of Ukraine charitable foundation, some 10 million from the
Viktor Pinchuk Foundations and Industrial Union of the Donbas.

The Hospital of the Future will have several wards for children afflicted
with pathologies that are still incurable in Ukraine.

It will have 250 beds, equipment, and personnel for marrow transplants from
unrelated donors, several types of plastic surgeries, reconstructive
orthopedics, operations on great and peripheral vessels, perinatal
diagnosing, and so on.

Ukraine 3000 feels confident that ailing children will receive quality and
modern medical help and that their parents will not have to pay anything for
the treatment.

This will be guaranteed by the hospital’s charitable fund and an insurance
medicine program that will have been introduced all over the country by the

What has made Ukrainians join efforts in supporting this charitable project?

The First Lady, Chairperson of Ukraine 3000’s Supervisory Board Kateryna
Yushchenko said during the televised marathon that this project has united
the entire country: “I know that there are many top-notch physicians in our
country who have to work in difficult conditions and with obsolete
equipment. Therefore, we must provide adequate conditions for their work.”

Mrs. Yushchenko also stressed that the construction of the children’s
hospital must become a nationwide project: “No matter how much people will
donate (some will be able to afford only five hryvnias through SMS, others
will part with thousands and millions), the important thing is that we will
do this together.”

The main issue for those taking part in the project is to use the money thus
raised for the stated purpose. Ukraine 3000 is sure that this money will be
used the right way.

“All members of the hospital’s board of trustees will be able to monitor the
distribution of funds,” says Natalia Butenko, deputy head of the
foundation’s press service. “All who contribute considerable sums to the

charitable fund are invited to become members of the board of trustees.

This fund will also partially provide for the payroll of physicians who will
treat children with grave diseases. By the way, even now Ukrainian
physicians from various regions are undergoing on-the-job training abroad,
so they will be able to start working as soon as the hospitable opens.”

Financing of the hospital will be done in two ways: from the central budget
and through charitable contributions to the special hospital’s fund.

In addition, the organizers envisage accommodation and treatment of children
from abroad; their treatment will cost less than anywhere in Eastern Europe
and this money will be added to the hospital’s fund.

The organizers of the Hospital of the Future project expect to complete its
construction in 2009. Meanwhile Ukrainians have to remain active to help
carry out this project, for it still needs more than 300 million hryvnias. -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

          Vaccines were packaged locally into Ukrainian language outer boxes

GlaxoSmithKline (GSK), Kyiv/Lviv, Monday, 18 December 2006

KYIV/LVIV – GlaxoSmithKline (GSK), one of the world’s leading research-

based pharmaceutical and healthcare companies, today announced that it has
supplied 800,000 doses of the MMR vaccine to the Ukrainian Ministry of
Health for 2007.

All children in Ukraine will be immunised with the combination vaccine
against measles, mumps and rubella in two doses at the age of 12 months and
6 years.

Measles, mumps and rubella are severe childhood diseases, highly infectious
diseases and their complications are responsible for considerable morbidity
and mortality throughout the world. GSK has supplied MMR vaccines in

Ukraine since 2003 through the distribution company “TRY”.

A two-dose strategy using an MMR vaccine is now widely accepted in most
developed countries and, where successfully implemented, has led to dramatic
reductions in the incidence of measles, mumps and rubella.

The announcement of the supply was made at the Ukrainian Pharmaceutical
plant TRY where the vaccines were packaged into Ukrainian language outer
boxes. This was the first partially localised production that GSK has
carried out in Ukraine, with the last stage of packaging.

“We are delighted that all children in Ukraine will be protected against
measles, mumps and rubella, all serious and highly infectious diseases.

GSK is the largest vaccine manufacturer in the world and we are pleased to
continue the supply our modern combination vaccines to Ukraine. It is a
pleasure for us to carry out our first packaging project here in Ukraine”,
commented David Pritchard, GSK Area Manager.

“It is a great pleasure for us to provide our manufacturing services to GSK.
This is the first project of repackaging and we hope to continue this in the
future”, said Yevhen Shiyanenko, General Director of the TRY plant.

The World Health Organisation (WHO) aims to eliminate indigenous measles
transmission by the year 2007 in the European region and to half the number
of measles deaths by 2005 worldwide (compared to the situation in 1999).

Global eradication is planned by 2010. In Europe the targets have been set
to bring mumps under control by reducing the incidence to 1 per 100,000
population by the year 2010.
The measles virus causes an illness that ranks as one of the leading causes
of childhood deaths worldwide. In 1995 the World Health Organisation (WHO)
estimated that measles accounted for 1 million deaths. Measles can cause
significant, often fatal complications including pneumonia, diarrhoea and

In developing countries the disease occurs against a backdrop of
malnutrition, other infections and poor healthcare. In such circumstances if
the disease does not kill, it leaves sufferers deaf and/or blind.
In developed countries mumps now occurs most often in adolescents and

adults rather than children – in this older group its effects and sequelae can be
devastating and even fatal. The complications of mumps include orchitis,
mastitis, meningitis, encephalitis and arthropathy.

In the pre-vaccine era, mumps was the leading cause of viral meningitis. The
frequency of encephalitis increases with age and is the main cause of death
in adults affected by mumps.
While sometimes causing an illness so mild in children that it is not even
recognised, rubella infection in adolescents and adults can cause
significant complications, such as arthropathy, central nervous system
disorders and congenital rubella syndrome (CRS).

CRS is caused by rubella infection in early pregnancy and results in
miscarriages, stillbirths or multiple birth defects. As with mumps, in the
developed countries rubella now occurs most often in adolescents and

adults, thus increasing the risk of CRS.

These childhood diseases are still widespread in many parts of both the
developed and developing world. Even in countries where virus transmission
has been interrupted, there is a constant threat from imported disease.
These diseases can, however, be prevented.
                                           ABOUT GSK
GlaxoSmithKline, one of the world’s leading research-based pharmaceutical
and healthcare companies, is committed to improving the quality of human
life by enabling people to do more, feel better and live longer. The company
employs more than 100,000 people worldwide.

GlaxoSmithKline Biologicals, the world’s leading vaccine manufacturer is
located in Rixensart (Belgium).  It is the centre of all GlaxoSmithKline’s
activities in the field of vaccine research, development and production.

GSK Biologicals employs over 4000 employees in Belgium (approximately 6200
worldwide), of whom 1600 scientists who are devoted to discovering new
vaccines and developing more cost-effective and convenient combination
products to prevent infections that cause serious medical problems

In 2005, GSK Bio distributed more than 1,25 billion doses of vaccines to 165
countries in both the developed and the developing world – an average of 3
million doses a day.

Of those vaccine doses, approximately 159 million were doses of combination
pediatric vaccines, which protect the world’s children against a minimum of
three – and as many as six – diseases in one vaccine.

GSK has been operating in Ukraine for over a decade and currently has over
140 employees nationwide.                            -30-
For more details please contact: Andriy Hunder, Area External Affairs
and Communications Manager, Developing Markets EurAsia (Ukraine,
Central Asia & Caucasus), GlaxoSmithKline,
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
15.                           ESCAPING FROM EMPIRE
                  Postscript to 15th anniversary of referendum affirming
                            Act proclaiming Ukraine’s independence

Ambassador Extraordinary and Plenipotentiary of Ukraine and
Director, Center for Global and Regional Studies, Kyiv-Mohyla Academy
The Day Weekly Digest #41, Kyiv, Ukraine, Tuesday, Dec 19, 2006

On Dec. 1, 2006, Ukraine marked an important date in its modern history: the
15 th anniversary of the national referendum that convincingly affirmed the
Ukrainians’ will to live in an independent state and the election of
Ukraine’s first president Leonid Kravchuk.

It would be a great exaggeration to say that Ukraine marked this event. Our
country practically did not celebrate this date, except for a few
perfunctory notes in the newspapers and some brief reports on television.

People were more interested in the new rental and utility fees and the power
struggle that has erupted between the blue-white-red coalition and the
Orange people than in an event of worldwide historical importance that
finally brought down the Soviet empire.

Of course, it is much pleasanter to mark Aug. 24: that’s a public holiday,
the weather is nice, there’s lots of entertainment, like parades and
pageants. You can knock back a beer on Independence Square, listen to

pop music, and see some fireworks – a real celebration, is it not?

Meanwhile, Dec. 1 is a far more significant date, and the national
leadership as well as “small Ukrainians” should have a much more reverent
attitude to it.

Unfortunately, Ukrainians, who are in the state of a cold civil war,
dreaming of an alchemical formula called the “national idea” and stuck in
the mire of everyday problems, apathy, mistrust, and disillusion, are
beginning to forget about the exalted lesson of national unity that the Dec.
1, 1991, referendum taught us.
That day all divisions and all the political, geographic, religious, ethnic
and linguistic barriers that had existed in Soviet Ukraine, for decades
insistently imposed by the communist regime, were pushed aside.

It was a true peaceful mass revolution, the free expression of a people’s
will without any financial or administrative leverage applied. The Maidan of
2004 was a logical, if somewhat less unanimous, continuation of the 1991

Eight months later the people, who as recently as March 1991 had supported
Anatolii Lukianov’s Jesuitical formula of living in an “updated Union,”
turned against a regime that was in the throes of agony and a system that
was disintegrating with unpredictable consequences for Soviet citizens and
the rest of the world.

It was an escape from empire, an attempt at national salvation on everyone’
part without exception: Soviet Ukrainian citizens, irrespective of their
ethnic origins or party affiliation.

I think what mattered here was not just sober reasoning but also
subconscious impulses, such as genetic memory of the red empire’s bloody
crimes, the fear of nuclear and non- nuclear conflicts, and the desire to
wait out the historical storm in one’s own home, not in the outlandish
structure constructed by utopian fanatics, which extended from Afghanistan
to Finland.

When I was working in the US, I asked many people, including a Harvard
professor – a Sovietologist – a former defense secretary, a well- known
Washington journalist, a former ambassador to the USSR, and influential
members of the US Congress and administration whether they had ever

thought the Soviet Union might collapse and Ukraine gain independence.

No, they had not. They did not take this into account in their plans and

In his famous and thought-provoking book “The Rise and Fall of the Great
Powers,” published four years before the collapse of the USSR, Paul Kennedy
analyzed world history from 1500 to 2000 and came to the completely
erroneous conclusion that a bipolar world divided between the two
superpowers, the US and the USSR, would survive for an indefinite period of

Moreover, no one could foresee Ukraine’s role in this geopolitical drama.
Both Western theoretical analysts and local communist practitioners looked
upon Ukraine as a totally tamed, weak-willed, and “reeducated” province of
the empire, only capable of setting records in the production of grain,
sugar beets, meat, and coal.

What is more, a number of progressive intellectuals in Moscow considered
Ukraine “more Soviet” and “reactionary and orthodox” than the imperial
center or its Baltic environs.

So much for the West or Moscow! I know dozens of outstanding figures of the
Ukrainian Renaissance, who had passionate dreams of national independence
but at the same time did not believe that history’s verdict of the Soviet
Union’s viability would be carried out so unexpectedly quickly, in our
lifetime, on Aug. 24, 1991, and confirmed on Dec. 1 as one that is not
subject to appeal.

Each person who voted “yes” in the referendum had his own, deeply personal,
reasons for doing so – ranging from ideological hatred of communism to a
utopian desire to see Kyiv at the head of a new Slavic empire that would
resemble Kyivan Rus’. But these historical and philosophical motives were
alien to the vast majority of those who came to the polling stations.

About 70 percent of those who voted for independence believed that when
Ukraine, with its rich resources and superior economic and human potential,
formed an independent state ruled by their “own” freedom-loving Kyiv, not by
imperial Moscow, it would quickly, if not instantaneously and almost
automatically, turn into a prosperous state and fill the ranks of Europe’s
advanced democracies.

This dream, phantasmagoria, utopia, and all-pervading illusion became, in
spite of its naivete, a purely Ukrainian national idea. Those who are now
seeking new intricate formulas tend to forget what 92 percent of the
Ukrainian electorate voted for: independence, well-being, democracy,
justice, and European choice.

And whatever the remaining Bolsheviks and heirs of Stalin may say, taunting
these naive Ukrainians (“Look at what your independence has brought us!”)
who believed in their dream, we, Ukrainian democrats, are convinced that the
people were not mistaken or deceived by the basic instinct for freedom.

Neither the sufferings of the millions of poverty- stricken Ukrainians in
the first years after the proclamation of independence, nor the collapse of
an ineffective and absurd centralized economy and semi-feudal collective
farming, nor energy problems, could kill the Ukrainian dream: on the
contrary, they made it even more pressing and indispensable.
The trouble is how the ruling elite has used the people’s mandate to
implement the Ukrainian dream.

For 15 years Ukraine has been running away from the empire, feeling the
hoarse breathing of its prisoner-convoy German shepherds and watching with
trepidation the hell that the empire’s Praetorian Guard is raising ever more
aggressively and openly in the political circuses and on the streets and
squares of Ukrainian cities.

The empire is now acting in a new guise of Eurasian oil and gas, where the
red star has an autocratic eagle, an Orthodox cross, and a Gazprom shut
valve inscribed in it.

But the organizational principles of the imperial space remain the same: a
single white tsar, omnipotent secret services, a single state-run radio and
television that can air pornographic programs but eschews free debate, and a
single imperial language that drives local “dialects” underground.

For 15 years a shameful act has been taking place before our eyes: the
government’s imitation of care for the people – a government that
deliberately robs people of fair wages, i.e., a considerable part of the
gross national product that belongs to them, a government that deliberately
hinders fair competition, stifles small and medium businesses, and carefully
raises and cherishes a clan of oligarchs, who transship the nation’s
hard-earned wealth offshore, thus strengthening foreign economies.

Look attentively at the past 15 years, and you will feel yourselves
witnesses of Ukraine’s centuries-old history, that sad national story in
which exalted spirit and sacrificial heroism fight against and most often
lose to a loutish bunch of venal bosses, atamans, and large and small
hetmans bent on grabbing a luscious morsel from the people’s table.

If you recall the political actors of the past 15 years, you will understand
why Kyivan Rus’ disintegrated, why Bohdan Khmelnytsky’s Cossack state did
not materialize, and why the Ukrainian National Republic ceased to exist.

Just remember the personal relationships among Mykhailo Hrushevsky,
Volodymyr Vynnychenko, and Symon Petliura, or the vaudeville-style entourage
of Pavlo Skoropadsky. What an immortal algorithm of self-depreciation and
vanity is instilled in our history and its characters!

The only reason why the gloomy predictions of the CIA and Moscow analysts
concerning the inevitable demise of the independent Ukrainian state (one,
two, or five years after the proclamation) did not come true was that the
Ukrainian people proved to have a very strong and flexible inner structure,
and they showed great reluctance to be part of the empire again.

A nation that has never liked or trusted any bosses, either the old
communist or the new pseudo- democratic ones, has preserved a powerful
potential for self-preservation: no matter how bad the Ukrainian government
may be, it is not as dangerous as the far-away, repressive, cold, and
merciless imperialist government that despises those khokhly with their
fatback and fertile soil.

Even the most kindhearted nation does not forgive scorn and contempt.
Casting their ballot papers, voters remembered very clearly who had
organized the Holodomor, the Siberian prison camps, nuclear saber-rattling,
and the occupation of other “friendly” countries.

As long as this genetic memory survives, Ukraine will never voluntarily
return to the empire.
The referendum anniversary was nevertheless marked: Ukraine House extolled
the first president of Ukraine, Leonid Kravchuk, on Dec. 1, 2006. In the
audience were people who are truly aware of what Kravchuk did for Ukrainian

Among the speakers were his comrades-in-arms, former prime ministers Vitold
Fokin and Yevhen Marchuk, and former members of parliament and ministers,
diplomats, and public figures.

But for some reason Kravchuk did not receive any greetings from the second
and third presidents of Ukraine. They must have forgotten. I wish they had
not because, in comparison with those who came to power after him, Leonid
Kravchuk will always remain a true democrat, a wise, tolerant, cautious, and
far-seeing politician – a genuine Ukrainian patriot.

He was the first to hear the subterranean roaring of the earthquake that was
brewing in the bowels of the USSR and which could destroy his people. The
Belovezhskaia pushcha agreement was the pinnacle of his life because Russia
alone, in the person of Boris Yeltsin, could not have – and what is more –
would not have wanted to destroy the rotten imperial building.

Fifteen years ago Kravchuk executed a true feat: he risked his own life,
raising his fist against the seemingly indestructible foundation of an

Accordingly, he incurred the deep hatred of his recent communist friends,
those who had lived by the laws of a criminal gang that never forgives the
one who has embarked on the path of truth.

Kravchuk’s next feat was his decision to call early elections without
resorting to the administrative resource during the election campaign,
renounce any dubious strong-arm tactics, and democratically transfer power
to Leonid Kuchma.

I remember how Kuchma’s entourage was baffled in 1995 when visiting US
President Bill Clinton asked them to arrange a brief meeting with Kravchuk:
he wanted to shake hands with the person who for the first (and perhaps the
last) time in the history of the CIS voluntarily transferred power to his
democratically elected successor.

After coming to power, Kuchma’s team immediately started showing signs of
the typically Soviet syndrome: to destroy the predecessor (morally, if not

At first accusing Kravchuk of every sin, Kuchma later saw that he was beset
by the same problems; that he, like the first president, was in the grip of
the same objective circumstances – so he changed wrath into grace.

Neither could Viktor Yushchenko and his “dear friends” escape this syndrome
of looking for enemies in the ranks of his predecessors. These weeds are
running riot today, as Viktor Yanukovych’s team bulldozes representatives of
the “alien” team out of its way.

The Democrat Clinton was not afraid to appoint Republican Senator William
Cohen as US defense secretary. Meanwhile, today’s Ukrainian politicians
uphold the opposite principle: discord, revenge, and a search for “public
enemies,” who must be made short work of and humiliated in every conceivable

Can you imagine a minister of foreign affairs (the No. 2 or 3 man in the
governmental hierarchy of Western countries), still officially in office,
being stopped – in a rude, boorish, and tough-guy manner – from attending a
cabinet session? Can you believe that these people want to go to Europe? Who
will let them in?

The principle of the total political elimination of predecessors, now
sinking its roots in Ukraine, is setting a very dangerous precedent and is
extremely harmful to a state that suffers from an acute shortage of skilled

The referendum’s 15th anniversary was also the subject of the international
roundtable debate “Moving Forward, Looking Back,” which was organized by the
embassies of Canada and Poland as well as the Diplomatic Academy of Ukraine:
it was the referendum that opened the doors of the international community
to Ukraine.

The participants of the roundtable recalled that Poland and Canada were the
first to give diplomatic recognition to independent Ukraine – on the second
day after the referendum and a few hours later, respectively. As a witness
and participant of those events, I can say that these first acts of
international recognition were of paramount importance to Ukraine.

It is difficult to overestimate the significance of these gestures: Poland
and Canada – in 1991 and today – are doing their utmost to lead us out of
the imperial space and help us join global processes.

Yevhen Marchuk, the former prime minister and defense minister of Ukraine,
delivered a brilliant and bitter speech at the conference, focusing on the
lessons of the past.

Asked why the Soviet Union, a mighty empire that had a powerful ruling party
and a strong repressive apparatus, collapsed, Marchuk said that the national
idea had come to the fore and suppressed proletarian internationalism.

In Marchuk’s view, Kravchuk, an experienced statesman, did a very wise thing
by refusing to follow in the wake of radicals, both leftists and rightists.

Kravchuk’s principle of “walking in between raindrops” worked far more
effectively in extreme conditions than any abrupt, provocative gestures.
Neither the communist fundamentalists nor the national radicals stood any
chance of state-building success in the conditions that emerged in 1991-92.

The 15 th anniversary of the referendum provokes deep reflections on the
role and destiny of Ukraine in the world as well as on the system within the

The people who breathed the air of freedom in the 2004 Orange Revolution and
who have again fallen, like in 1991, under a spell of their own illusions
and hopes, will never forgive the “Orange ones” and their chief Maidan
showmen for their betrayal.

They will long remember that these politicians defiled their most exalted
dreams and hopes for justice.

The public is aware that political impotence, absence of strong governmental
willpower, and the petty struggle for power and money rather than for
Ukraine led the Orange team to open up a Pandora’s Box with their own hands
when they ignominiously lost to the “blue- white-reds” because of the
helplessness and inefficiency of the Maidan leaders.

Ukraine has again been swept by a murky wave of counterrevolution
brandishing the slogan of all-out revenge and witch hunting. They are trying
again to impose old imperial myths and an inferiority complex on society.

Back in fashion is provincial kowtowing to the Kremlin, where the winners
regularly go for reports and instructions, like their predecessors used to
visit the Communist Party’s Central Committee and the Council of Ministers
to obtain funds and coordinate ministerial appointments.

In the air hangs the pre-storm atmosphere of a creeping coup d’etat,
slippage toward authoritarianism, a radical change of domestic and foreign
policy, and departure from democratic gains.

Like all temporary and uncertain political upstarts, the “winners” are
trying to persuade society that they have come to power for a long time, if
not forever.

Following the example of Brezhnev-style Kremlin leaders, they are restoring
to power the most odious and compromised figures in order to create the
illusion of stability and their irreversible domination.

Why on earth do they need this? In democratic countries, ruling parties
mercilessly discard any compromised politicians and immediately replace them
with new, “clean” ones. For what matters most is the image of a party, not
the destiny of an individual son of a bitch.

In the 16th year after the referendum we must proclaim loudly: Ukraine is in

And the sooner the mechanism of parliamentary coalition changes implemented
by the authors of the constitutional amendments starts to work, the better
it will be for the country: this will reduce administrative pressure on the
real economy, which, as experience shows, has learned to work quite well
without governmental injunctions.

This will make the successors – those who will replace the Orange and the
White-Blue – more cautious in their words and actions.

Ukraine must have not a primitive, provincial copy of the imperial model but
a system of dynamic equilibrium that will take into account the interests of
this country’s different parts rather than of one clan enraged out a common
predatory reflex.

In his book Five Years of the Ukrainian Tragedy (1999) Marchuk wrote that a
certain category of high-ranking officials is provided with total impunity.
This kind of person becomes “one of us” and is easy to manipulate and
control. The author noted that this “controllability” is typical of the

When the government is stupidly confident of its impunity, this may be fatal
for the state and society. The sooner it departs the scene, the better it
will be for Ukraine.
So are those 15 years since 1991 lost years? Are the hopes of all those who
voted for independence dashed?

No, we are different now. Ukraine and the world have changed beyond
recognition. What was once played as part of a worldwide bloody tragedy (the
history of Ukraine as part of an empire) today resembles a tragicomic farce
performed by provincial actors.

Indeed, Ukraine became an independent state, and it has managed to run quite
far away from the empire:

[1] For the first time in its centuries-long history, Ukraine has a powerful
mechanism for protecting its national interests as a state, a subject of
international law, recognized by the world community. The only problem lies
in the reasonable application of state levers;

[2] For the first time Ukraine has begun to identify its own national and
geopolitical goals instead of having to passively accept imposed
participation in the imperial games of “southwestern area” rulers;

[3] For the first time there is not only a theoretical but also a practical
opportunity to form the Ukrainian political nation in a consistent and
state-oriented way.

As Viacheslav Lypynsky once said, “Only in a separate Ukrainian state can
the Little Russian tribe be turned into the Ukrainian nation…We want a
Ukrainian State that embraces all the classes, languages, and tribes of the
Ukrainian Land;”

[4] For the first time conditions were created to form a Ukrainian political
elite that espouses the idea of statehood and Europeanness. Even today there
is a powerful state-minded intellectual potential in the person of
highly-educated young people, true Ukrainians who should be actively invited
into the government.

For the first time in hundreds of years people in Ukraine are not being
imprisoned or punished for loving their fatherland, for having an
independent opinion, or for devotion to European values – and very soon the
numbers of such individuals are going to grow into a new quality.

People may tell me that far from everything mentioned above has been
realized in Ukraine.

This is true, but we still have managed to do quite a lot in these 15 years.
Just look at old photographs and TV recordings and try to recall how we were
back in 1991 when we were isolated – in terms of borders, transportation,
information, etc. – from Europe.

Try to imagine the streets and cafes of our cities, the interiors of our
apartments, and, above all, our idea of ourselves and the world that existed
15 years ago, and you will see how far we have come since then.

Our main discovery is that we have understood that over these years the
authorities have been, with certain exceptions, worse, intellectually
poorer, and less moral than the people.

It is the authorities that slowed down our development and our movement
towards prosperity. The authorities have broken all kinds of records in a
wide-scale pilfering of the nation’s property, not in fair rule or economic

On Dec. 1, 1991, the people also voted for Purification. The Maidan gave a
new impulse to this mighty, irreversible process.

No matter who may slow down this process for some time, Purification is
looming and with it, Ukraine’s final liberation from the somber ghosts of
the empire.                                           -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

BBC Monitoring research in English 19 Dec 06
BBC Monitoring Service, UK, Tuesday, December 19, 2006

Russia’s state-run Rossiya TV channel has chastised the Ukrainian government
in a series of four special reports which portrayed the Crimean peninsula as
“a land in decay”.

Broadcast over the period 27-30 November, the reports accused the Ukrainian
authorities of neglect and incompetence as correspondent Dmitriy surveyed a
number of controversial issues which he believed to be crucial to Crimea’s
welfare and stability.

The peninsula’s ethnic Tatars and “new Ukrainians” were among the other
targets for criticism in the reports, each of which lasted more than five
minutes and featured in that day’s main primetime news bulletin.
In the first of his reports, Kaystro examined efforts by members of various
ethnic groups to seize plots of land across Crimea and settle there.

“Land grabs became a Crimean reality 10 years ago,” he reported. “To start
with, there were isolated instances, but once it had turned into a mass
phenomenon, it was already too late.”

Kaystro’s report painted a picture of a peninsula riven by disputes over
land rights. Foremost among the ethnic groups involved are the Crimean

They were deported en masse to Central Asia and Siberia in 1944, and the few
hundred Kaystro said had returned since then “are now demanding land not
only for themselves but also each member of their family”.

His report also featured clips of remarks made by various parties to the
dispute, including an imam and the leader of a local pressure group opposed
to further Tatar settlement of the peninsula.

Brief mention was made of attempts by ethnic Russians to compete for land in
Crimea. However, Kaystro paid greater attention to suggestions that the
radical Islamist group Hezb-e Tahrir has seized land as part of a wider
expansion of its activities on the peninsula.

“Its plans include seizing the peninsula’s main roads and bays,” Kaystro
said. “It’s no surprise whatsoever that they’re trying to seize them… it
would be an excellent platform for an amphibious assault.”

The report left little doubt over who Kaystro felt was to blame for the
rising tide of land grabs, or his assessment of the extent of the problem.
“Two Crimeas, two realities – the one you find in glossy travel guides, and
this one,” he observed.

“While local authorities are weak and often corrupt, while the authorities
in Kiev remain completely unwilling to change anything, the peninsula is
simply being pilfered piece by piece. And while Crimea was once known as a
powder keg, now it’s seen as a land in decay.”
Kaystro’s second report looked at holiday homes and other properties built
by rich Ukrainians in areas of historical significance and natural beauty in
Crimea. Presenter Mariya Sittel’s introduction set the tone.

“Of course, Crimea is de jure an autonomous region within Ukraine. But de
facto the peninsula is inextricably linked to Russian history and culture,”
she remarked. “Protected areas are disappearing from the face of the Crimean
land, and the earth itself is vanishing beneath piles of construction waste
and bulldozers.”

“New Ukrainians” were the main target of Kaystro’s report as he accused them
of following “an infectious Crimean fashion” by hiring developers to build
their properties in the middle of nature reserves.

In the most glaring example of this trend, Kaystro said the site of a former
concentration camp used to house Jews during the Second World War had been
fenced off and a penthouse had been built “right on their bones”.

The Ukrainian authorities also came in for criticism. Kaystro gently mocked
Ukrainian President Viktor Yushchenko’s permanent representative in Crimea,
Hennadiy Moskal, who was shown voicing indignation at the construction

The correspondent undermined Moskal’s remarks by suggesting the envoy had
spoken “as if he has nothing to do with any of this”. Moskal’s claim to know
who was responsible for all the holiday homes was also met with something
approaching ridicule.

“Both he and other senior officials say they know who did this,” Kaystro
said. “They are almost mythical officials on the take, although without
surnames or titles, over whom no authority can be exerted.”

Kaystro concluded his report by appealing to his viewers’ sense of
nostalgia. “What is happening on the peninsula is being described as the
start of a funeral for old Crimea, which all of us, regardless of national
borders, would appear to have lost,” he mused. “Judging by the pace being
set by these adventurous people from the authorities and from business, soon
there will be nothing left of Crimea to carve up.”
Ethnic Russians living in Sevastopol, home of Russia’s Black Sea Fleet, were
portrayed as a people “under siege” in the third of Kaystro’s reports.

The correspondent used the threatened closure of Trans-M, Crimea’s most
popular Russian-language radio station, as an opportunity to explore other
possible examples of alleged discrimination against ethnic Russians living
in the city and elsewhere in the peninsula.

“They’re trying to force the peninsula to talk and listen only to
Ukrainian,” said the presenter introducing the report. “Far worse, Russian
residents of Sevastopol are being threatened with physical violence.”

Clips of interviews used by Kaystro in his report reinforced the perception
that ethnic Russians were being mistreated and disenfranchised.

They included Trans-M listeners protesting against the “excesses”
perpetrated in the name of the Ukrainian language, complaints from the
chairman of Trans-M’s board of founders, claims by a leader of the ethnic
Russian community in Sevastopol that the Ukrainian authorities have launched
a concerted campaign to make the city more Ukrainian, and a local councillor
railing against suggestions that some monuments dating back to the Tsarist
period should be removed.

None of the clips featured any opposing view or any defence of Ukrainian
policy, whether at federal or local level.

Kaystro concluded his report on Sevastopol by reviving an image used in his
previous report on the construction of holiday homes in Crimea. He conjured
up the emotive picture of houses being built “by the so-called local elite”
on the bones of dead men, in this case Soviet soldiers killed during the
Second World War.

“Not just thousands but tens of thousands died here,” he said. “Their
remains were simply churned up by bulldozers, in order to build these
cheerful houses and lattice-work fences.”
The final report in the four-part series accused the Ukrainian authorities
of neglecting Crimea’s cultural heritage.

It focused on the plight of a number of tourist attractions that have fallen
into disrepair, including a museum dedicated to Russian playwright Anton
Chekhov and the historic Livadiya Palace in Yalta.

Kaystro revisited two themes he had touched upon in his earlier dispatches.
Rich Ukrainians, he suggested, were damaging the island’s heritage by buying
up properties of historical significance.

“First they temporarily occupy estates once owned by the old Russian
nobility, then they skilfully establish ownership over them – and this time

He also implied that the Ukrainian authorities, including President Viktor
Yushchenko himself, were lending their backing to the Crimean Tatars as a
bulwark against other ethnic and cultural influences in the peninsula,
including ethnic Russians, Bulgarians, Greeks and Armenians.

The report’s concluding remarks confirmed the overall tenor of Kaystro’s
reporting on Crimea. He looked back over all four of his dispatches and
warned of external forces intent on disrupting the peninsula’s delicate
cultural and political balance.

“It seems that the political grandmasters in Kiev and other important global
centres really do need an unstable Crimea, affected by corruption, ethnic
issues, land sales and a dying culture,” he reflected. “It’s an ideal place
for political anglers waiting for a major catch by the Black Sea.”

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
 About the elderly survivors currently living in the Chornobyl exclusion zone

Irene Zabytko, Producer, Writer
Life In The Dead Zone: A Writer Visits Chernobyl
Action Ukraine Report (AUR) #799, Article 17
Washington, D.C., Wednesday, December 20, 2006

Dear Friends,

This is a brief hello and to let you know that we are currently in the midst
of producing LIFE IN THE DEAD ZONE, a documentary about the elderly
survivors currently living in the Chornobyl exclusion zone.

The documentary is based on my novel, The Sky Unwashed, and will feature

the real life people who returned to live in their irradiated villages within
the “dead zone” area surrounding the nuclear power plant that exploded on
April 26, 1986.

Peter Mychalcewycz, the director, and myself will travel to the “dead zone”
near Chornobyl and to one of those evacuated Ukrainian villages to film the
people who are still inhabiting their homes despite the radiation. We will
witness how they are living their lives in the most contaminated place on
the planet.

In addition, our film will also be including dramatic reenactments taken
from my book. When you scroll down, you’ll see the Synopsis for our film
which explains our project in more detail.

Once we get on the road to Chornobyl, I will share the adventures and
progress via my new blog which will be posted on our website (currently
under construction).

The hard part is getting on that road. We are soliciting funds for this film
project which will be in four categories:

[1] Our first goal for LIFE IN THE DEAD ZONE will be traveling to Kyiv and
Chornobyl for a research trip (for location shots, meeting the people who
will interviewed, going through the archival footage to use in our film
etc.). We have received some donations including a State of Florida Artists

Grant, but we are still a long way from reaching our financial target of $9,000+.
[2] Our second goal is to begin formal shooting in Chornobyl hopefully in
spring, 2007.
[3] The third goal is to travel to Canada and shoot the dramatic
reenactments taken directly from my novel and segue these scenes with the
non-fiction ones of the actual Chornobyl inhabitants.
[4] Our last goals will be post-production (film-editing) and distribution.

Movies, even low-budget documentaries are expensive. Besides travel and
accommodations (and these are not at all luxurious!), film production costs
tend to run high.

Camera, lighting and sound equipment, personnel, post-production costs,
insurance (imperative–otherwise we can’t shoot anywhere) and many other
related costs are all a necessary part of the budget before, during and
after shooting.

We are continuously fundraising and generous contributors including the
State of Florida “Artist’s Enhancement Grant” (for a pre-production research
travel trip to Kyiv) are flowing in. But we are only at the beginning…

Will you help us get us on the road to Chornobyl? Will you help us bring the
stories of the real life survivors of one of the worst environmental
disasters in the world?

The Chornobyl disaster still devastates and impacts not only the villagers
who returned, but our entire planet. By watching their lives unfold on film,
we will see not only their survival and strength and spirit, but also how
such horrific catastrophes must be avoided.

Film is the best way to remind the world that we cannot allow another
Chornobyl to ever occur again, and we believe that Life in the Dead Zone
will educate, enlighten and impact millions of viewers in movie theaters and
in classrooms throughout the world.

All donations are welcome and with your help, we will get this important
project underway and completed.

We are a non-profit 501(c)3 tax-exempt organization and your donations will
be tax-deductible with the added benefit that our thanks to you will be
eternal and you will receive good karma, blessings, and the knowledge that
you are participating in a landmark and important film project. Plus, we’ll
put your name on the film credits!

Please make out your checks to: THE UKRAINIAN ARTISTIC CENTER
2657 W. Iowa Street, First Floor, Chicago, IL 60622-4755
Please earmark it as: “CHORNOBYL FILM”


If you need more information, have questions, concerns, ideas and of course
cheering on, drop me an e-mail.

Meanwhile, all very best wishes for the holidays and beyond.
Peace out and within,

Irene Zabytko, Producer, Writer

P.S. If you have made a contribution, THANK YOU again! If you pledged but
haven’t done the deed yet, could you take a moment and send on your donation
while it’s on your mind? Much appreciated!
       “LIFE IN THE DEAD ZONE: A Writer Visits Chornobyl”
By Irene Zabytko

In 2000, I published a novel called The Sky Unwashed (Algonquin Books of
Chapel Hill) which is about a group of elderly women who returned to their
deserted and highly contaminated village in the “dead zone,” the areas
surrounding the Chornobyl (Ukrainian transliteration of “Chernobyl”) nuclear
power plant, the site of the world’s worst nuclear accident.

Those surrounding, mostly rural areas were highly irradiated after the core
of reactor number four exploded on April 26, 1986 at 1:23 a.m. causing
fires, a nuclear meltdown, and sending out a radioactive cloud that
blanketed Ukraine, Belarus, Scandinavia and Western Europe.

The official Soviet death toll was 31 people; however it is assumed that the
more truthful toll is around 25,000. The Ukrainian Health Ministry now
estimates that 2.4 million Ukrainians suffer various health problems from
exposure that is most probably linked to this disaster.

My novel is based on a newspaper article that I came across in the August 5,
1990 issue of “The Ukrainian Weekly” a few years after the explosion.

The article documented and featured how several elderly people chose to
return to Opachichi, a village near Chornobyl, to reclaim and live in their
ancestral abandoned homes despite a government ban of anyone living in the
“dead zone” the 30 kilometer radius surrounding Chornobyl which is made up
of several abandoned villages.

Since the article’s publication in 1990, more elderly have since returned
and are still living there on their pensions despite the fact that Chornobyl
is among the most radioactive area on the planet-the fallout damage being
roughly the equivalent of 400 Hiroshima nuclear bombs (The Guardian, April
26, 2006).

In 1992, a year after Ukraine declared its independence from the Soviet
Union, I was teaching English in Kyiv, Ukraine’s capitol, and situated about
60 miles from Chornobyl. All of my students were affected since someone they
knew exhibited unusual illnesses such as lymphoma, thyroid disorders, and
birth defects.

Many of the people I came to know in my daily life there were also touched
by this catastrophe–from my host family (who were nuclear physicists,
ironically enough, and who tried to warn people in Kyiv about the
catastrophe), to the old babusi i.e., the old women in the open air bazaars
I witnessed who sold their prized mushrooms and flowers without openly
admitting that they were once residents from Chornobyl and insisted that
their merchandise was “clean.”

I was eager to visit Opachichi in particular and to see for myself if there
were any inhabitants and survivors since I was writing my novel at the time.
Some of my students offered to help, and we rented a cab.

The driver was reluctant to take us to the dead zone unless we paid him a
substantial bribe. I gave him my Swatch-watch, and we almost made it to the
zone’s interior before a policeman stopped us and told us to leave “before
we got cancer.”

Soon after, I returned home to the States where I completed my novel, The
Sky Unwashed which features the elderly Chornobyl survivors returning to a
fictional village modeled after Opachichi.

Like the real life survivors, my characters were determined to return to
their homes because they had no where else to go, and they desired to die on
their land despite the contamination.

On February 17, 2005, on the National Public Radio program, “Morning
Edition,” the reporter Lawrence Sheets visited Opachichi and discovered that
many people continued living there 14 years after the accident (as was
foreshadowed in my novel). Over the years, I have also read several press
accounts about these people nicknamed samosels, who had returned to their

According to Volodymyr Kholosha, Ukraine’s Vice Minister of Emergencies in
his address on April 28, 2006 at the United Nations commemorative assembly
marking the 20th anniversary of Chornobyl, three million people were
affected, ten per cent of Ukraine’s land was irradiated, and 164,000 people
were relocated following the accident (The Ukrainian Weekly, May 7, 3006).

In this documentary, I will–at last–visit the elderly in their homes
preferably in the village of Opachichi which is a small community of these

My purpose is to meet with two, or at the most three households, and film
their daily lives, to hear their stories of what happened to them during and
after the nuclear reactor exploded at Chornobyl hear why they chose to
return, and to see how they are surviving.

I am especially interested to learn about their health concerns, how they
get their supplies, what do they do to stave off boredom, what food do they
consume and where does it come from, how are they connected to the outside
world (is there electricity at least for a television or radio), what
rituals do they celebrate, what chores or jobs do they do all day, what
community-related activities do they have?

Interspersed with the documentary footage, dramatic reenactments from my
novel The Sky Unwashed will be featured that parallels the lives of the real
inhabitants. Throughout, I will provide personal narratives comparing my
book to the real life people of Opachichi.

In my novel my fictional characters do not fare well. I want to see whether
the real life people do.                                    -30-
[return to index] Action Ukraine Report (AUR) Monitoring Service]

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