AUR#812 Feb 5 U.S. Amb Calls For Cancellation of Grain Export Quotas; Council Of Investors; Millennium Challenge Corp;

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

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         Sports, Government, and Politics, in Ukraine and Around the World       

                  U.S. Ambassador to Ukraine William Taylor (Articles 1-5)
                       GRAIN MARKET MUST BE ALTERED
            STATEMENT: Ukrainian Grain Association (UGA) (Article Ten)
Mr. E. Morgan Williams, Publisher and Editor, SigmaBleyzer

              –——-  INDEX OF ARTICLES  ——–
            Clicking on the title of any article takes you directly to the article.               
   Return to the Index by clicking on Return to Index at the end of each article
                           INTRODUCTION OF EXPORT QUOTAS
        Taylor: the quotas are more harmful than beneficial to the country…..
         we would like these losses to be stopped and grain sales resumed.
Ukrainian News on-line, Ukrainian News Agency
Kyiv, Ukraine, Friday, February 2, 2007

“I, as a friend of Ukraine call upon Ukraine to cancel quotas on grain exports.”
ForUm, Kyiv, Ukraine, Thursday, February 1, 2007

Ukrayinska Pravda, Kyiv, Ukraine, Friday, February 2, 2007


Interfax Ukraine News, Kyiv, Ukraine, Saturday, February 3, 2007
Ukrainian News Agency, Kyiv, Ukraine, Saturday, February 3, 2007

Interfax Ukraine Business Express, Kyiv, Ukraine, Wed, Jan 31, 2007

UACLUB website, Kyiv, Ukraine, Sunday, Jan. 28, 2007
Action Ukraine Report (AUR) #812, Article 7, (in English)
Kyiv, Ukraine, Monday, February 5, 2007

            Due to inadequate storage conditions, grain gets overheated,
                   looses its quality, sprouts and is devoured by pests
By Maria Semenchenko, The Day (In Ukrainian)
Kyiv, Ukraine, Saturday, Jan. 27, 2007
Action Ukraine Report (AUR) #812, Article 8, (in English)
Kyiv, Ukraine, Monday, February 5, 2007

                       AND MAY NOT MEET WTO STANDARDS
By Ruslan Deinychenko, Kyiv (In Ukrainian)
Voice of America, Kyiv, Ukraine, Friday, Jan. 26, 2007

Action Ukraine Report (AUR) #812, Article 9, (in English)
Kyiv, Ukraine, Monday, February 5, 2007

                         GRAIN MARKET MUST BE ALTERED
STATEMENT: Ukrainian Grain Association (UGA) (in Ukrainian)
Kyiv, Ukraine, Monday, January 22, 2007
Action Ukraine Report (AUR) #812, Article 10, (in English)
Kyiv, Ukraine, Monday, February 5, 2007

On the Creating of the Council of Investors Affiliated with the

Cabinet of Ministers of Ukraine Cabinet of Ministers Resolution
#37 of Jan. 24, 2007 (in Ukrainian), Kyiv, Ukraine
Action Ukraine Report (AUR) #812, Article 11 (in English)
Kyiv, Ukraine, Monday, February 5, 2007

12.                     EU FUELS WESTERN UKRAINE BOOM
By Helen Fawkes, BBC News, western Ukraine
BBC, United Kingdom, Tuesday, January 30, 2007

         Paying a visit to the Skole Beskyds National Park in Lviv Oblast
By Mykola PUHOVYTSIA, Journalist, Lviv Oblast
The Day Weekly Digest #3, Kyiv, Ukraine, Tuesday, Jan 30, 2007


Ukrainian News Agency, Friday, January 19, 2007

                     Kazakhstan, Azerbaijan, Georgia and Ukraine
Interfax Central Europe, Warsaw, Poland, Thu, February 1, 2007

Interfax Ukraine Business Express, Kyiv, Ukraine, Fri, Feb 2, 2007

Ukrainian Times, Kyiv, Ukraine, Monday, February 5, 2007

Dow Jones Newswires, Athens, Greece, Wed, January 31, 2007

19.                       PROMOTING THE UKRAINIAN WAY
                 Kyiv tries to explains in Davos where Ukraine is headed
By Mykola Siruk, The Day Weekly Digest #3, Tue, 30 Jan 2007


Interfax Ukraine, Kyiv, Ukraine, Wed, January 24, 2007

    To invest around 8 million USD in Kyiv, Kryvyi Rih, Odesa and Kharkiv.
Ukrainian News Agency, Kyiv, Ukraine, Thu, February 1, 2007
                  United States Millennium Challenge Corporation (MCC)
                   threshold program grant targets corruption in Ukraine
By Vitalii KNIAZHANSKY, The Day
The Day Weekly Digest #3, Kyiv, Ukraine, Tuesday, January 30, 2007
23.                               THE KHRUSHCHOVKAS
    The khrushchovkas were designed as a jumping-off place for building
Communism but instead became a social sarcophagus for millions of people.
The Ukrainian Observer magazine, Issue 228
The Willard Group, Kyiv, Ukraine, February 2007
       Artist Mykola Syadristy, Museum of Micro Miniatures, Kyiv, Ukraine
By Arthur Bleu, The Ukrainian Observer magazine, Issue 228
The Willard Group, Kyiv, Ukraine, February 2007
                        INTRODUCTION OF EXPORT QUOTAS
        Taylor: the quotas are more harmful than beneficial to the country…..
         we would like these losses to be stopped and grain sales resumed.

Ukrainian News on-line, Ukrainian News Agency
Kyiv, Ukraine, Friday, February 2, 2007

KYIV – U.S. Ambassador William Taylor has said that Ukraine has lost its
status of a reliable grain supplier with the introduction of export quotas.

He made this statement to the press in Odesa on February 1 after a visit to
the grain terminal of Transinvestservis Ltd near the Pivdennyi Port in Odesa

‘What you can see is bad Tons of wheat are being destroyed. Ukraine was
the sixth largest grain exporter in the world. Today its regulation is

Ukraine has stopped to be a reliable partner,’ the ambassador commented.

Since the Ukrainian government restricted exports, several hundred thousand
tons of grain have gotten spoilt in Ukrainian ports before being shipped to
consumers around the world.

The quotas are more harmful than beneficial to the country, Taylor

There are other methods to protect the population from bread price hikes
while quotas affect agricultural and transportation enterprises and grain
elevators, and foreign investments in Ukraine may fall as a result, he

Export restrictions have already caused huge losses.

‘An estimate of all losses that I saw is approximately USD 200 million.
These are losses of agricultural producers, transportation companies and
companies that store grain. This is why we would like these losses to be
stopped and grain sales resumed,’ Taylor said.

In his address, he called on the government to conduct consultations with
agricultural and other experts, and stressed that on its way to a WTO
membership Ukraine must actively participate in the world trade and
impose no restrictions on export.

A Transinvestservis representative said that 230,000 tons of barley is
stored in their elevator and around 30,000 tons of wheat was taken to
other elevators in Ukraine because its quality no longer allows for sale on
external markets.

Odesa Merchant Seaport stores around 220,000 tons of grain intended
for export under quotas.

As Ukrainian News earlier reported, on December 8, 2006, the Cabinet of
Ministers approved a quota of 1.106 million tons for grain exports in the
2006/2007 marketing year (from July 2006 to June 2007).    -30-

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
 I, as a friend of Ukraine call upon Ukraine to cancel quotas on grain exports

ForUm, Kyiv, Ukraine, Thursday, February 1, 2007

KYIV – Because of grain export quotas, introduced by the Government,
Ukraine is not considered to be a reliable supplier. Its reputation as
exporter of this production is compromised. The American Ambassador
to Ukraine William Taylor told today in Odessa.

He visited grain terminal of “Transinvestservice” company. The USA
representative noted that landowners, transport enterprises, grain elevators
suffer from these quotas. There are another ways to protect population
from price rise on bread, the ambassador considers.

He added: “I, as a friend of Ukraine call upon [Ukraine] to cancel quotas

on grain exports.” One of the probable consequences of this situation the
diplomat called decrease of foreign investment volumes in economy of
the country.

According to Taylor, Ukraine has already incurred losses in amount of
USD 200 million.

According to officials of the terminal, grain was taken out last 25 thousand
ton wheat from South to inner elevators. Its quality was not proper to
export in abroad. Moreover, In Odessa port 220 thousand ton of grain is
kept without possibility to be exported.               -30-

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

Ukrayinska Pravda, Kyiv, Ukraine, Friday, February 2, 2007

KYIV – U.S. Ambassador to Ukraine William Taylor has urged the Ukrainian
government to cancel grain export quotas, saying the quotas may endanger the
country’s reputation, Komersant-Ukrayina quotes Taylor as saying during his
trip to the Transinvestservice grain terminal in port Pivdenny near Odesa.

“I’m urging the government of Ukraine to cancel grain export quotas. The
good news is that the government has realized that the problem exists and
that the grain stored here must somehow get on the market,” the ambassador

He stresses that the cabinet of ministers of Ukraine is losing its
reputation of a reliable partner among foreign businessmen.

W. Taylor predicted that the fallout from the imposition of quotas would be
shrinking foreign investments in the Ukrainian economy. “If Ukraine is a
good place for conducting business, investors will be coming. But if the
government says to traders they cannot export grain now, it is losing the
reputation of a reliable partner,” the ambassador stressed.

In the course of his visit to Odesa, the US diplomat met with Odesa Mayor
Eduard Hurvyts. W. Taylor told the mayor he did not understand why the grain
was going bad in storage and losing its quality instead of being delivered
to buyers to earn a profit.

W. Taylor also asked Mayor Hurvyts if the grain crisis affected the quality
of life of Odesa residents. E. Hurvyts responded that the crisis had no
negative impact whatever on the standards of living of Odesa residents and
economic situation in the city.

Commenting on the grain crisis, Mayor Hurvyts stressed, “the stupidity
remains the stupidity, and it certainly affects the life of the country.”

W. Taylor said his wish to see rottening grain with his own eyes was the
main reason for his trip to Odesa.                   -30-

NOTE:  Article translated from Ukrainian to English by Volodymyr
Hrytsutenko exclusively for the Action Ukraine Report (AUR).
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
Interfax Ukraine News, Kyiv, Ukraine, Saturday, February 3, 2007

ODESA – Ukrainian Deputy Agrarian Policy Minister Petro Verbytsky has

said he was perplexed by a remark by U.S. Ambassador to Ukraine
William Taylor regarding the condition of grain stored at seaports in the
Odesa region.

“Why he traveled there is for our Foreign Ministry to comment on. I would
like to say one thing: if a Ukrainian diplomatic representative in the U.S.
wanted to visit some enterprise in the U.S., he would have to go through
quite an elaborate clearance procedure,” Verbytsky said at a press
conference in Odesa on Friday.

It is traders buying grain from its producers who should pay attention to
how grain is stored, Verbytsky said.

“We have had a sad record of 2003, when a larger part of the harvest reaped
was sold for cheap, and next spring the country had to buy the same harvest
from foreign speculators at a price several times higher,” he said
rationalizing the imposition of grain export quotas.

The U.S. ambassador to Ukraine was reported to say while visiting the
Transinvestservice grain storage terminal at the Pivdenny port in the Odesa
region that grain stored there was in unsatisfactory condition.

Taylor also said reportedly that the imposition of grain export quotas could
lead to a decline in foreign investment in Ukraine.

It was reported earlier that the Ukrainian government imposed grain export
quotas last fall, which were first to be in effect until January 1, 2007 and
which the Cabinet later extended until July 1, 2007.         -30-

FOOTNOTE: Ukraine’s Ambassador to the United States would
not have a problem if he wanted to visit U.S. grain export facilities. 
The Ukrainian Ambassador would not have, “to go through quite an
elaborate clearance procedure,” as Ukrainian Deputy Agrarian Policy
Minister Petro Verbytsky is reported to have said at a press
conference in Odesa on Friday. 
Grain traders in Ukraine were paying attention to how the grain is
stored.  They put the grain into short term storage not knowing the
government was going to suddenly change the rules of the game and
cause the grain to be stored several months instead of several weeks.
Ukrainian Deputy Agrarian Policy Minister Petro Verbytsky is
obviously trying to shift the responsibility and the blame for what
is happening from the government to the grain industry. AUR EDITOR.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
    Send in names and e-mail addresses for the AUR distribution list.
Ukrainian News Agency, Kyiv, Ukraine, Saturday, February 3, 2007

KYIV – Deputy Minister of Agricultural Policy Petro Verbytskyi thinks the
reason for grain spoiling in ports is not the introduction of quotas for its
export but the absence of conditions for its long-term storage. Verbytskyi
announced this to the press in Odesa on February 2.

As to him, amount of spoiled grain, for instance, in grain-storage
facilities of the Pivdennyi seaport (Odesa region) is not more than 0.5%.

At the same time Verbytskyi recognizes absence of conditions for long-term
storage of grain: the temperature in storing bunkers and the top level of
grain is spoiling (spires, etc.). Verbytskyi said the grain owners should
take measures for it to pass the standards as in the nearest time the grain
will be exported.

In his words, there is now catastrophe with delaying the grain export though
added, that the situation in the Illichivskyi commercial seaport is the same
as in the Pivdennyi.

“The grain is still reloaded with a bucket loader there, it has no necessary
equipment,” said Verbytskyi. The deputy minister told the Cabinet of
Ministers protected consumers by introduction of the grain quotas.

Verbytskyi said he did not know why had the U.S. Ambassador in Ukraine
William Taylor visited the Pivdennyi seaport on February 1. “This is the
matter of the Foreign Affairs Ministry,” told Verbytskyi.

As Ukrainian News earlier reported, on February 1 after a visit to the grain
terminal of Transinvestservis Ltd near the Pivdennyi Port in Odesa region,
the U.S. Ambassador William Taylor said that Ukraine had lost its status of
reliable grain supplier with introduction of export quotas.

He said Ukraine was the sixth largest grain exporter in the world though
today it lost its image of a reliable partner and the quotas, introduced by
the Cabinet making only damage.

In October 2006 the Cabinet limited export of food grain from Ukraine,
introducing licenses for this activity. In December 2006 the Cabinet
approved quota of 1.1 million tons for grain export in 2006-2007 marketing

It allowed to export 3,000 tons of wheat and rye, 600,000 tons of barley

and 500,000 tons of corn by July 2007.                    -30-
FOOTNOTE:  The reason for the grain spoiling relates directly to
the sudden actions by the Ukrainian government to introduce very low
quotas for the export of grain. 
Grain was stored in short-term storage facilities, not long-term facilities,
because the grain was to be loaded onto ships in a very short period of
time.  The grain could not be loaded onto ships because of the sudden,
unexpected and severe actions by the Ukrainian government several
months ago to limit grain exports.
Very reliable sources say the situation in the Illichivskyi commercial
seaport are not the same as in the Pivdennyi seaport.  Illichivskyi is
equipped to handle the long term storage of grain.
Again, Ukrainian Deputy Agrarian Policy Minister Petro Verbytsky is
obviously trying to shift the responsibility and the blame for what
is happening from the government to the grain industry. AUR EDITOR.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

Interfax Ukraine Business Express, Kyiv, Ukraine, Wed, Jan 31, 2007

KYIV – The Ukrainian government still sees no possibility to resume wheat
exports or review other grain exports quotas, although it will examine the
issue again by late February again, according to Economy Minister

Volodymyr Makukha.

“At present, it’s impossible to resume the export of wheat,” he said at a
press conference in Kyiv on Tuesday. The minister said that the domestic
grain supply should be analyzed, taking into account the weather and its
impact on the future yield.

“I think that by late February we will decide [on the issue] and do
everything possible to liberalize the market,” he said. Makukha said that

maize and barley quotas have almost been used up.

He said that the Economy Ministry has issued 46 licenses for the export of
390,000 tonnes of maize out of the 500,000 tonnes of the total quota, and

31 licenses for the export of 516,000 tonnes of barley out of the 600,000
tonnes of the total quota.

The minister said that the restrictions were imposed in line with the
domestic grain supply, and the government did not intend to artificially

cut prices on the market.                              -30- 
FOOTNOTE: The Ukrainian government has been saying now for at
least three months the domestic grain supply should be analyzed. How
long does this take?  It should not take over a week to do this for sure. 
Experts say domestic prices for grain in Ukraine have been cut
artificially whether the government intended to do this or not.  The
government had to know when they imposed export quotas the price
of grain in Ukraine would drop compared to world prices.  AUR EDITOR
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

UACLUB website, Kyiv, Ukraine, Sunday, Jan. 28, 2007

Action Ukraine Report #812, Article 7, (in English)
Kyiv, Ukraine, Monday, February 5, 2007
The Economy Ministry has resumed to issue grain export licenses.
According to grain traders, while the government had been knocking the
issue around, thousands of tons of barley had rotten in port
elevators. Traders report losses of $100 million.

What we can see in the port is not a green meadow or lawn, it is germinated
barley, all the 150,000 tons. This amount would suffice to keep all the
country’s feed mills working for a whole month.

Baffled barley owners come to the port only to see how their stock is going
bad. None of them would comment on the $100 worth of grain rotting in
storage there.

The head of the Ukrainian Grain Association, Volodymyr Klymenko, points

the finger at the government. Officials imposed the ban on grain exports when
traders were ready to ship grain to buyers.

Says Volodymyr Klymenko, UGA president, “When vessels are chartered,

80 percent of grain typically awaits shipment in the port. It is a well-oiled
mechanism and grain shipments go as planned. That is why so much grain
was piled up in the port – no one would expect that grain export will be

Grain terminal manager Andry Pomelnykov takes us to an elevation to see

the sea of germinated grain. “The grain is fermenting. Unlike steel ingots,
grain is a vegetable product.

Various biochemical processes start to take place in grain under storage –
discharge of carbonic acid, sprouting, massive propagation of pests and
insects,” he notes.

Experts were hired by grain owners to establish its condition. They said the
grain will not survive under such storage conditions. There is no knowing
what processes are going on deep inside grain heaps. Unfortunately, due to
the design of port storage depots, the stored barley can be loaded only onto

Says Oleksandr Filonov, SGS server company coordinator, “There are two
options. The first one is to deliver healthy grain for exports fast.
Perishing grain must be urgently processed and dried and, if possible,
shipped to foreign buyers. If more time is wasted, the grain will simply go

The government is aware of heavy grain losses, but it is not going to cancel
export restriction. Although the economy ministry continued to issue export
licenses long past sandman’s time yesterday, it kept within the export
quotas assigned by the government.

Says Viktor Bohdanov, deputy director of the economy ministry department

for foreign trade, “There are no grounds to believe that the grain stored in
port elevators and certified elevators will not be delivered to foreign
buyers. It will take another day or two to issue the remaining licenses, and
then traders can start customs clearing procedures and export grain.”

Meanwhile, according to UGA, the ban on grain export from Ukraine has
triggered off price hikes on world markets for barley and maize. In spring,
the situation will backfire on Ukrainian farmers who have large supplies of
grain left in their barns as grain prices may decline.           -30-


NOTE:  Article translated from Ukrainian to English by Volodymyr
Hrytsutenko exclusively for the Action Ukraine Report (AUR).
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
    NOTE: Send in a letter-to-the-editor today. Let us hear from you.
            Due to inadequate storage conditions, grain gets overheated,
                   looses its quality, sprouts and is devoured by pests

By Maria Semenchenko, The Day (In Ukrainian)
Kyiv, Ukraine, Saturday, Jan. 27, 2007
Action Ukraine Report #812, Article 8, (in English)
Kyiv, Ukraine, Monday, February 5, 2007

Within a month, about 1.5 mn tons of grain may perish in Ukrainian sea
ports. According to the head of the Ukrainian Grain Association, Volodymyr
Klymenko, to prevent this, the government should cancel the current export
quotas on feed grain, barley and maize, as well as to raise milling wheat
export quotas.

 “UGA believes that the government must intervene urgently and issue the
additional quota for milling wheat to speed up its shipments to clear the
ports and cancel quotas on barley and maize,”Klymenko says, warning that
otherwise wheat will go bad and grain market players will run up hefty
losses which seem to be just round the corner. Exporters have already lost
one hundred million dollars due to vessels dead time alone.

Now, due to grain waste in loading/reloading terminals that are badly
equipped for lengthy storage and loading of grain onto trucks, another

$100 loss is on track.

Because grain had to be stored for a long period in such bad conditions, it
sprouts, rots and is destroyed by pests. It leads to another big headache –
how to dispose of bad grain.

According to Klymenko, tons of bad grain are trucked out of ports to be

used as fertilizer in the fields – because this grain cannot be used even for
alcohol production.

“What kind of food security goal have we cleared by rotting grain in ports?”
Klymenko asks a rhetorical question, recalling that the imposition of wheat
quotas was accompanied by the official drumbeat for a higher food security
to prevent grain price hikes.

Ironically, Klymenko notes, the prices continue to grow and wheat has
nothing to do with it. Using simple calculations, the UGA president
demonstrates how erroneous the forecasts and promises of quotas initiators
were, with all their warnings of 3-fold bread price increases if the quotas
were not introduces.

“The cost of flour accounts for 50% of the bread self-cost,” Klymenko says.
“Given one ton of wheat costs 800 hryvnias today, to raise bread prices
3-fold the price for a ton of wheat must be raised 6-fold!” he stresses.

“In this case, a ton of wheat would cost about a thousand dollars. Where in
the world can you find such price?” he adds. Meanwhile, the imposition of
grain quotas has seriously dented the incomes of Ukrainian farmers.

Based on the same logic, the UGA president continues, the government should
ban the export of sunflower oil and eggs as they, same as flour, are used in
bread production. The export of meat can also be banned to bring prices for
sausage down – to please the populace, Klymenko says.

According to calculations, Ukraine is capable of exporting 5 mn tons of
barley, 3.5 mn tons of wheat and 1.5 mn tons of maize in the 2006/2007
marketing year. Klymenko believes grain exporters can now sell additionally
2 mn tons of barley, 1.1 mn tons of wheat and 1.3 mn tons of maize.

If implemented, this measure will meet the interests of farmers since, given
the divergence in domestic and world process, every unsold ton of grain will
make a dent of several hundreds of hryvnias in the farmers incomes.

Klymenko insists that the government lift the ban on grain quotas in
mid-March following the appraisal of 2007 winter crop forecast.

In the meantime, UGA is on the lookout for partners to cooperate in boosting
the efficiency of grain market operators and ensuring adequate levels of
competitiveness. UGA has already signed a memorandum on cooperation

in the grain sector with the Association of Farmers and Private Landowners
of Ukraine.

In line with the memorandum, both parties have agreed to join forces to
raise export potential of the Ukrainian grain – by stimulating high-quality
grain production and removing barriers in foreign trade.

Striking a warning note, Klymenko says grain export quotas have caused a
number of negative consequences: Ukraine’s grain sector is loosing its
investment attractiveness (while it is grain exporters who are major
investors in Ukraine’s agriculture), domestic exporters credibility on
foreign markets is shrinking, and Ukraine’s reputation is damaged.

The UGA president also stresses the goals of introducing quotas have not
been met as bread prices continue to grow and the Agrarian Fund and State
Reserves Fund have failed to stock up adequate supplies of grain. “The
policy for grain market regulation must be revised,” Klymenko is convinced.


NOTE:  Article translated from Ukrainian to English by Volodymyr
Hrytsutenko exclusively for the Action Ukraine Report (AUR).
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
                    AND MAY NOT MEET WTO STANDARDS

By Ruslan Deinychenko, Kyiv (In Ukrainian)
Voice of America, Kyiv, Ukraine, Friday, Jan. 26, 2007

Action Ukraine Report #812, Article 9, (in English)
Kyiv, Ukraine, Monday, February 5, 2007

The United States is eager to know whether grain export quotas imposed by
the Ukrainian government meet WTO standards, US Ambassador to Ukraine
William Taylor says.

The diplomat believes the quotas have damaged the reputation of Ukraine as

a reliable supplier of grain to world markets. Despite the Yanukovych
government assurances to rectify the situation, thousands of tons of grain
continue to rot in Ukrainian ports awaiting shipments.

Almost 300,000 tons of grain is stored at one of the reloading terminals in
the Odesa oblast alone. This grain had to be shipped to foreign buyers a
long time ago, but due to the government-imposed restrictions the
consignment is stuck in Odesa.

Grain terminal manager Andry Pomelnykov says, “The grain has been in

storage here since October, that is over four months now. It has started to
overheat, ferment, sprout, creating good conditions for propagation of

As a result, this grain has gone bad and cannot be exported. No one will
need such a big amount of barley on the domestic market. According to the
rules, it must be disposed of, and exporters will have to foot the disposal

Grain inspection coordinator Oleksandr Filonov is equally worried, saying,
“It’s clear now that some 60% of the grain perished. I hope the remainder of
the grain can be saved.”

One of the grain-exporting companis has set its losses at about $10 mn.
Other grain traders, including many US companies, have it the same way.

Nor have Ukrainian grain producers benefited from the quotas. For them it is
very difficult to sell grain as it cannot be shipped out of the country.

Farmer Oleksandr Kravchenko regrets his losses, “We had to sell the crop
about 30% cheaper than we could. Currently, grain supply exceeds the demand
on domestic markets. Therefore, domestic prices are way below the real price
for grain.”

According to some estimates, Ukrainian grain producers have lost about 3

bn hryvnias. Such is the pitiful fallout from the government-imposed grain
quotas. Ironically, by doing so, the officials wanted to protect the
domestic market.

In the opinion of some experts, the present quota stalemate may become a
difficult hurdle for Ukraine to clear on its way to WTO.

US Ambassador Taylor has tried to talk Ukrainian officials into canceling
the quotas, “In line with WTO rules, in some cases countries can protect
domestic companies. We’re trying to figure out whether this is the case.
Ukraine is the world’s six largest grain exporter. A good reputation is this
business is an asset. But Ukraine’s profile has been damaged by the
imposition of quotas.”

Ukrainian officials have agreed to revise the size of the quotas. However,
exporters urge to cancel restrictions on the export of maize and barley,
plentiful goods on the domestic market.                     -30-


NOTE:  Article translated from Ukrainian to English by Volodymyr
Hrytsutenko exclusively for the Action Ukraine Report (AUR).
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
                      GRAIN MARKET MUST BE ALTERED

STATEMENT: Ukrainian Grain Association (UGA) (in Ukrainian)
Kyiv, Ukraine, Monday, January 22, 2007
Action Ukraine Report #812, Article 10, (in English)
Kyiv, Ukraine, Monday, February 5, 2007

The 2006/2007 marketing year was by no means easy for grain market players.
Due to fears caused by the failure to meet winter wheat sowing targets and
the loss of a part of the winter wheat crop, the government imposed
licensing of wheat exports to ensure the country’s food safety.

On Oct. 11, 2006, the government imposed quotas not only for the export of
food wheat and rye, but also for fodder wheat, corn and barley. Grain export
quotas were extended till June 30, 2007.

However, time has shown that the implementation of grain export quotas
in Ukraine has led to the following negative results:

[1] a significant drop in revenues for agricultural producers;

[According to the estimates, Ukraine is able and must export in the
2006/2007 marketing year: 5 mn tons of barley, 3.5 mn tons of wheat, 1.5 mn
tons of corn. Meanwhile, 3 mn tons of barley, 2.4 mn tons of wheat and 0.2
mn tons of corn have been exported since the start of the marketing year.

Consequently, Ukraine can export additionally 2 mn tons of barley, 1.1 mn
tons of wheat and 1.3 mn tons of corn.  Taking into account the difference
in world and domestic Ukrainian prices, every ton of grain, unless sold to
foreign buyers, will dent Ukrainian farmers’ incomes by hundreds of

[2] reduction of purchasing grain prices by domestic and foreign buyers

due to extra risks in the future marketing years;

[3] a likely drop in spring 2007 sowing of barley and corn – basic products
for the production of biofuel;

[4] lack of funding for agricultural producers ahead of spring sowing;

[Due to uncommon weather conditions in Ukraine, specifically, a very warn
winter, grain producers are badly in need of additional funding to carry out
early spring sowing, adding fertilizer to winter crops and dealing with

[5]perishing of grain due to bad storage conditions (storage in port
terminals, vessels, railway cars);

[Due to dead time of sea vessels alone, grain exporters have run up losses
of $100 mn. Another $100 mn will be lost due to grain perishing in reloading
centers which are badly equipped not only for long grain storage, but also
for effective loading of grain onto automotive transport. The grain in
storage sprouts, gets eaten by pests. Already tens of thousands of tons of
perished grain are to be destroyed.]

[6] defaults on export contracts and sanctions for Ukrainian exporters for
vessels dead time in sea ports;

[7] increased fire and explosion risks in port terminals;

[8] stoppages in the operation of grain market infrastructure which affects
deliveries of other cargo, including  goods in transit.

[9] losses from undelivered services of carriers, ports, surveyors, state

[10] shrinking number of grain exporters, mainly of Ukrainian small-sized

[11] dwindling investment attractiveness of Ukraine’s grain sector
(incidentally, grain exporters are major investors in Ukraine’s

[12] loss of credibility for Ukrainian exporters among world traders;

[13] negative impact on hard currency revenues, country’s trade balance and
the hryvnia exchange rate – all this has been confirmed by the Central bank
of Ukraine;

[14] critical statements by the World Bank, IMF, EBRD, ambassadors of

the U.S.A., Netherlands, Germany, a large number of national and foreign
agrarian organizations which have a negative impact on the image of the
Ukrainian government;

[15] potential law suits against the government of Ukraine which may be
filed by numerous foreign companies (importers, insurers, etc.) when they
count up all their losses;

[16] negative impact on Ukraine’s WTO accession talks.

Besides, the imposition of quotas and licensing of grain trade made it
impossible to attain the goals declared by the government:

[1]bread prices continue to rise, with meat not becoming any cheaper;

[2] the Agrarian Fund and the State Reserves Fund failed to meet their

grain procurement targets.

The abovementioned facts are evidence that, in order to ensure stable
operation and development of the grain sector and given the detailed
analysis of the current situation, balanced decisions must be taken.

Given the current situation on the grain market of Ukraine, the

UGA would recommend to take the following steps:

1. Urgently unblock port terminals by issuing additional food wheat export
quotas to the amount needed to restore normal operation of loading/unloading
facilities, to prevent grain perishing and cancel fodder grain export quotas
for wheat, barley and corn.

There is no deficit of fodder grain in Ukraine, and its export will not
endanger the country’s food safety.

2. Cancel food wheat export quotas (grade 3 and 4 wheat) in March 2007

after the condition of winter crops is clear.

Provided the Ukrainian government insists of the preservation of export
quotas till the end of 2006/2007 marketing year, export quotas must be
enlarged to the UGA-proposed levels.

3. Ensure the implementation of the Memorandum on partnership between

the Ministry for Agricultural Policy and public professional associations
operating on the grain market.

4. Ensure VAT rebates to agricultural exporters. In fact, such rebates

have been suspended for a number of months.

5. Launch effective cooperation with the International Grains Council,
London and repay to IGC membership fees arrears.

6. Revise the existing grain standards to meet international requirements.

7. Ensure stable rail grain shipments tariffs as an important factor for
forming revenue targets by agricultural producers and food pricing for

In order to ensure effective and systemic decisions on the functioning of
the grain market in Ukraine, UGA has urged to renew the activities of
consulting bodies affiliated to the Cabinet of Ministers and the Ministry
for Agrarian Policy of Ukraine, such as:

[1] the Coordinating council for agrarian policy issues under the Cabinet

of Ministers,
[2] the Work group on coordinating the grain market under the Cabinet
of Ministers,
[3] the Public council under the Ministry for Agrarian Policy of Ukraine.

The implementation of UGA proposals will secure Ukraine’s food safety;
cushion the negative impact of grain export quotas; stabilize the grain
market; meet the expectations of all grain producers in Ukraine and enhance
the country’s image as an influential grain trader.

The regulation of the grain market should be balanced and meet the interests
of all grain market players (agricultural producers, processors and
exporters) as well as the interests of other Ukrainians.           -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]


On the Creating of the Council of Investors Affiliated with the

Cabinet of Ministers of Ukraine Cabinet of Ministers Resolution
#37 of Jan. 24, 2007 (in Ukrainian), Kyiv, Ukraine
Action Ukraine Report (AUR) #812, Article 11 (in English)
Kyiv, Ukraine, Monday, February 5, 2007


Jan. 24, 2007 #37, Kyiv

On the creation of the Council of Investors Affiliated with the Cabinet
of Ministers of Ukraine

The Cabinet of Ministers orders:

1. To create the COI affiliated to the Cabinet of Ministers of Ukraine.
The head of COI is the prime minister of Ukraine who approves the list
of COI members and, if need be, makes changes in the list.

2. To approve the Statute of COI affiliated to the Cabinet of Ministers.

Prime Minister of Ukraine
By Cabinet of Ministers resolution
of Jan. 24, 2007 #37

1. The Council of Investors (COI) is a permanent consulting and advisory
body affiliated to the Cabinet of Ministers (CM).

2. COI is guided in its activities by the constitution, the laws of
Ukraine, presidential decrees, Verkhovna Rada (VR) resolutions, decrees
by the CM and by this Resolution.

3. The main goals of the COI are:

     – to prepare proposals on mapping out the state investment policy,
especially in the area of cooperation between the state, on the one
hand, and private businesses, on the other;

     – to participate in developing and examining legislation related to
the investment policy;

     – to offer well-balanced proposals on the implementation of
investment projects aimed at boosting priority sectors of the Ukrainian
economy and regions of the country;

     – to render analytical and information support to state bodies,
institutions and organizations on issues related to COI activities;

     – to promote effective cooperation among the executive, local
governments and business entities in the investment area.;

4. In accordance with its authority, COI is entitled:

     – to enroll in its work experts representing central and local
executive, local governments, business entities, institutions and
organizations (given the consent of their heads) as well as independent

     – to receive information needed for the implementation of COI goals
from central and local executive, local governments, business entities,
institutions and organizations of all forms of ownership;

     – to set up permanent and ad hoc work groups and commissions.

 5. COI is run by its head, two of his/her deputies, head of COI
secretariat and council members.

6. COI work is conducted at its sessions to be held as may be necessary
or obligatorily once in a quarter.

The decision to hold a session is to be taken by COI head or, if the
head is not available and at his/her request, by one of the head’s
deputies. COI sessions are chaired by its head or, at the head’s
request, by one of his/her deputies.

COI decisions are legal if no less than a half of its members are
present at the session.

COI may invite executive and local government officials, representatives
of businesses, institutions and organizations of all forms of ownership,
including foreign representatives, journalists, scholars and independent
experts to sit on its sessions.

7. COI sets up its agenda and order of procedure, takes decisions within
the framework of its authority and implements these decisions. A
decision is taken when it is supported by more than half of the members
present at the session.

Given equal distribution of votes, the vote of the session chairman is
decisive. COI decisions are to be entered in its minutes to be signed by
the session chairman. Signed minutes must be sent to all COI members.

8. COI decisions are advisory and not binding for executive and local
governments, businesses, institutions and organizations.

9. Organizational and information support for COI activities is provided
by its secretariat. The secretariat is to be headed by the Economy

The secretariat staff must be approved by COI head who acts on the
proposals by the head of the secretariat.

10. Material support and financial funding for the COI activities is
provided by the Cabinet of Ministers of Ukraine.          -30-
NOTE: Government resolution #37 of January 24, 2007 translated from
Ukrainian to English exclusively for the Ukraine- U.S. Business Council

and the Action Ukraine Report (AUR), Washington, D.C. by Volodymyr
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
If you are receiving more than one copy of the AUR please contact us.
12.                   EU FUELS WESTERN UKRAINE BOOM

By Helen Fawkes, BBC News, western Ukraine
BBC, United Kingdom, Tuesday, January 30, 2007

Dominated by the Carpathian Mountains, the region of Transcarpathia in
western Ukraine looks stunning, but for years this was one of the poorest
parts of Europe.

Now it is being transformed.

The European Union has expanded again by taking another two countries –
Bulgaria and Romania – which were once behind the Iron Curtain. It means
that Transcarpathia now borders four EU states – and business is booming.

Increased investor interest also followed the mass protests of the Orange
Revolution in 2004 which brought Ukraine’s pro-Western President, Viktor
Yushchenko, to power.

An estimated 200m euros (£131.4m; $258.6m) has been invested in
Transcarpathia, at the western tip of Ukraine.
                                          NEW JOBS
More than 4,000 new jobs have been created, with many more on the way.

One source is the Eurocar factory, just a 10-minute drive from the
mountains. It turns out Volkswagens and Seats, but today Sergey Zhuravel
is working on the Skoda production line.

“This kind of place provides lots of permanent jobs,” Mr Zhuravel said.
“It gives people prospects. They can earn their living, support their
families and plan their future.”

This factory will soon produce almost 30,000 vehicles destined for Europe
every year. Transcarpathia has special tax incentives and, compared to
western Europe, wages are very low. But the biggest selling-point is its

Hungary is just a few metres away from the Eurocar factory and the region
shares a border with Poland, Romania and Slovakia. All four EU countries
are within just a few hours drive.

Around 700 international businesses are now working in the region.
                                   STUDENTS HOPEFUL
Since the collapse of the Soviet Union, life here has been hard. Many
people from Transcarpathia were tempted to work abroad, often

At Uzhhorod University, a class of students are improving their English
skills at a discussion club. Most of them though are not planning to leave
Ukraine; instead they hope to work for international companies.

“It makes a real big difference if you have a good job, just like everywhere
else,” says Antonia Kanchiy, a student.

“Less people are going abroad now because more investments are coming
into our region. It makes me feel good because I can see progress; I would
like to work for the benefit of my country.”
                                NEW ‘SILICON VALLEY’
With a huge consumer market on its doorstep, Transcarpathia is attracting
hi-tech firms.

The US-based company Jabil makes mobile phones and computer
components here. It employs more than 1,000 people and has plans to
hire 5,000 more, bringing its production capacity to one million handsets
a week.

“We strongly believe that this region can become a kind of Silicon Valley of
electronic manufacturing in Europe,” says Philippe Costemalethe, General
Director of Jabil Ukraine. “It could be the powerhouse of electronic
manufacturing serving the European market.”

International businesses would like to see improvements – less red tape and
a more stable political climate. Compared to its neighbours, the level of
foreign capital coming to Ukraine is still very low.

But already there are signs of the increased prosperity in Transcarpathia.
In the main town, rows of new houses are being built alongside the dingy
Soviet-era tower blocks.                                  -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
         Send in a letter-to-the-editor today. Let us hear from you.
        Paying a visit to the Skole Beskyds National Park in Lviv Oblast

By Mykola PUHOVYTSIA, Journalist, Lviv Oblast
The Day Weekly Digest #3, Kyiv, Ukraine, Tuesday, Jan 30, 2007

One of the best ways to preserve and rejuvenate the potential forces of
nature and wisely combine tourism with the needs of nature preserves is the
creation of national parks.

Convincing proof of this strategy is found in the wealth of both
international and domestic experience. It is well worth paying a visit to
the Skole Beskyds National Park in Lviv oblast.
Twenty-five million years ago on the site of today’s Carpathian Mountains
was the Tethys Ocean with large strata of sand forming on the bottom of this
body of water.

During the Cenozoic period mountain ranges formed together with sandstones.
Some of them broke through the earth’s surface and are preserved to this
day: Mala Skelia, Zholob, Kamin, and Ostry Kamin (the latter is 112 meters

In 3 B.C. there was a sanctuary in the mountains; in the 9th-13th centuries
A.D., in the times of Rus’-Ukraine and the Galician-Volhynian Principality,
there was a mighty fortress called Tustan. The name means “stop here.”
Indeed, everyone had to stop there because there were no roads beyond this

“This was the name of an ancient fortress,” I was told by specialists of the
Tustan Cultural Preserve. “When the sanctuary existed, there were 270 holy
symbols, known as petroglyphs, carved on the cliffs. Our linear ancestors
made 4,000 grooves and frameworks.

Yew beams were squeezed into those grooves, forming an important
architectural and cultural monument; man combined wood and rock to form a
single whole, a fortress that proved unassailable to the enemy.”

Scientists have made a graphic reconstruction of the fortress, and Ukraine’s
Cabinet of Ministers has added it to a list of historical and cultural
monuments that require restoration on a priority basis. Every year thousands
of tourists visit this place, so one can imagine the influx of visitors once
the fortress is reconstructed.

Even now there is enough to feel proud of in the Beskyds, an area occupying
one-quarter of the territory of the Ukrainian Carpathians.

There are astonishing nature sites, like the waterfalls in the Kamianka
River, where the water drops from a height of six meters onto boulders
scattered below, forming a broad curtain. From the top of Mt. Parashka
visitors have a clear view of the surrounding vista.

The name of the hill is linked to the name of Prince Sviatoslav’s daughter.
There are hydrogen sulfite and soda springs here, game reserves, protected
natural landmarks, and geological and hydrological monuments. The area is
also home to unique, centuries-old Bukovynian forests, the magnificent
Rosokhach high plains, and ethnographic features.

All this is the Beskyds, the hospitable land of the Boikos. How can these
priceless landscapes be preserved while rationally exploiting local
recreational resources?

These questions have long troubled the local highlanders, who saw a way to
solve this problem by establishing a national park that is the equal of many
world parks. The process was long and difficult, but in the end the problem
was resolved.
“It is no secret that the structure of natural landscapes is rapidly
changing due to technogenic factors; the biosphere’s gene pool is being
disastrously depleted,” says Vasyl Pryndak, the scientific supervisor of
Skole Beskyds National Park. “This process is also accelerating in densely
populated and industrial regions, including the Carpathian Mountains.

Botanical studies show that some 10 percent of the local flora requires
individual protection, and some rare plant species have been lost for good.
The wildlife situation is even worse.

“Long ago ecologists established that nature preserves are the most reliable
way to conserve genetic resources, thus preserving the planet’s
biogeographic diversity. New potential environmental protection
opportunities have appeared along with the drafting of a constructive
national program aimed at preserving the Carpathian region.

“This program embraces a broad range of tasks relating to the stabilization
of the ecological balance that was disturbed in the past, restoration of
revitalizing natural resources, rational use of nature, upgrading of
mountain systems’ protective and socially useful functions, and exploitation
of their recreational potential.

In order to preserve and professionally use these natural landscapes, which
are of considerable environmental, scientific, educational, tourism, and
recreational importance, the Skole Beskyds National Park was established in
February 1999. It covers an area of 35,684 hectares, spanning Skole,
Drohobych, and Turka raions.”

Park director Vasyl Banderych joined our conversation. “Before this park was
organized, others were functioning in this region: Carpathian Park in
Ivano-Frankivsk oblast, Vyzhnytsia in Bukovyna, and Synevyr in Zakarpattia.
Those parks could not meet the Ukrainian population’s increasing health and
recreation demands.

“Neighboring countries close to Lviv oblast have shown us a good example.
There are extremely important national and landscape parks in the vicinity
of the Beskyds, known as Beskydy, Tsisniansko-Vetlinsky and San (Sian)
Valley in Poland, and the Eastern Carpathians in Slovakia.

They are taking proper care of the Beskyds’ natural diversity. Not here in
Ukraine. In fact, favorable recreational and tourism conditions have been
used extremely inadequately.

With similar natural and climatic features, the countries of the
Alpine-Carpathian region have developed a powerful tourist industry. The
resort capacities in the Czech part of the Tatra Mountains feature 20 beds
per square kilometer, and 30 in the Austrian Alps.

This dense infrastructure secures a recreational payload of up to 200-220
persons per km a year. In the Ukrainian Carpathians it does not exceed 25
persons. You see the difference? Only 10 percent of the landscape
recreational potential of our mountains is being utilized.”

Scientific studies were done in the mid-1970s, but the problem could not be
solved in a practical fashion. Clearcutting reached 350,000 m a year. In
other words, two hectares of forest were cut down every single day. In order
to preserve the most precious spots the authorities began setting up game
reserves and nature preserves while trying to implement the national park
The territory is divided into three zones. The first one (15 percent) is a
nature preserve where full-fledged nature protection procedures are
enforced. In the regulated recreational zone its resources are not used for
economic purposes, but it is open for ecological tourism.

Stationary recreation envisages the construction of camp grounds, tents, and
other sites where people can spend their vacation. Populated areas function
here according to established land use, which is not harmful to the
surrounding landscape.

The nature in a significant part of this area is pristine. The park’s
scientific staff carefully monitors the conditions of the flora and fauna,
so that they can evolve in accordance with their own laws.

Over the past couple of years the national park’s scientific expeditions
have taken place in collaboration with colleagues from Kyiv, Lviv,
Ivano-Frankivsk, and neighboring countries.

There is a lot to be studied and investigated here. For example, fir
plantations remain stable and well preserved, unlike their counterparts
elsewhere in Europe. Tracts of highly productive 170 to 180-year-old mixed
beech also remain.

There are some 600 varieties of vascular plants; over 50 varieties included
in the Red Book of Ukraine are maturing. Here one can still come across
Leucorchis albida, Scopolia carniolica, and Crocus heuffelianus.

Wildlife is also diversified. Scientific findings are summed up in the
Chornicle of Nature, and scientists are working on the seventh volume. This
data is used for assessing the state of the environment.

Every effort is being aimed at preserving nature and its biological and
landscape diversity in order to combine the efforts of professionals and
nature lovers, and secure broad public support. Local residents and visitors
must be made aware of the importance of this national park for every person
and for the planet as a whole.

Man’s behavior in regard to nature is largely determined by his level of
ecological consciousness, so ecological educational work among the young
residents of Skole starts at an early age.

Children are taken on ecological excursions and taught “green” lessons. In
order to acquaint them with the environs, a number of ecological educational
nature trails are being created, linking the most interesting sites from the
scientific-ecological and aesthetic points of view.

There are well-designed stands and billboards along these routes, which
graphically demonstrate the minimum of knowledge with which every young
traveler must arm himself.

Thus, the 1.5-kilometer nature trail called Buchyna is designed for brief
children’s excursions and recreation. Here they are familiarized with rare
plant species. The Crocus nature trail acquaints young trekkers with spring
flower varieties, while Following the Deer Track nature trail shows children
the local wildlife.

I followed the longest nature trail from Skole to the village of Maidan
across the 1,268-meter-high Mt. Parashka, the park’s highest point. Several
pages are not enough to describe my impressions.

This route is designed for a one- or two-day hike and includes
familiarization with a large number of highland plant and animal species,
memorable natural and cultural sites, workshop seminars during stopovers,
and specific environmental protection work. This route was mapped out and
designed by students and lecturers from the University of Basel

“Some 12 ecologically educational trails and itineraries were developed and
equipped, covering the most original and interesting localities, and a
series of illustrated sketches and booklets were published,” says Pryndak.

“Information acquired during such treks is aimed at broadening the visitor’s
world outlook and raising his ecological educational and general cultural
level. We emphasize this aspect: everything being created on the park
grounds has the sole objective of preserving nature.”
Graphic proof of this statement is found in the dedicated efforts of the
park scientists and rangers to restore the European bison population. There
are two herds in the Skole Beskyds. Their number varies between 6-8 and
9-15. The park workers’ initiative was supported by the regional forestry
department and Lviv oblast’s State Ecology and Natural Resources

In 2003 they combined their efforts to find a solution to the problem.
Assisted by the National Academy’s Institute for Carpathian Ecology and the
Polish Academy of Sciences’ Museum and Institute of Zoology, they contacted
the Large Herbivore Foundation in the Netherlands, set up to finance
projects aimed at restoring such populations in Eurasia. Their initiative
met with complete understanding.

“The project to restore the bison population in Skole Beskyds is the first
grant this foundation has given to Ukraine,” explains the park’s director.
“Its experts visited the park last year and decided the site we had chosen
for the project answers the project’s requirements.

Fodder supplies were adequate because there are varieties of trees, shrubs,
and grasses in the area, which are part of the giant mammals’ daily ration.

Of course, during winters with heavy snowfalls we will have to provide extra
supplies of hay and tree branches. The project will be scientifically
supported by the Ukrainian National Academy’s Institute for Carpathian
Ecology and the Polish Academy’s Museum and Institute of Zoology.

“The project envisages the construction of a fence separating the territory
of the Maidan forestry, importation of five bison from Scandinavia, their
temporary housing, scientific monitoring, and their eventual release into
the lap of nature.

We hope the bison reintroduction project will prove as effective in Skole
Beskyds as it did in our neighbors’ countries in the Carpathian region. At
one time the foundation helped supply these animals to Poland, Slovakia, and
Romania from Germany, Holland, and the Scandinavian countries.

Now they are freely moving across the territories of biospheric preserves,
crossing the boundaries of the Nadsianky Landscape Park in Turka raion, Lviv
oblast, from Bieszczady National Park and the regional landscape park “San
River Valley” (Poland).

Unfortunately, they invariably return to Poland without leaving offspring
among the Ukrainian bison families.
The national park’s personnel is meeting with increasing understanding from
local residents.

Recreations areas are equipped with “forest furniture” – sites specially
made for building campfires and holding sports games, and these are
carefully preserved by local highlanders, probably because both sides see
their future in actively developing the tourism-recreational industry and
providing adequate services to vacationers.

If motels, camp grounds, and ski lifts are built, skiers will be able to
reach the snow-covered slopes, there will be new jobs for locals, and we
will see the development of green tourism, which is in its infancy in Skole
and nearby villages, compared to Slavsk and Tysovets.
                                     AS FOR FINANCING
As for financing, there are only enough budget appropriations for rangers
and workers. Acquiring modern means of communication, and laboratory base
and field lab equipment remains a big problem. No capital investments are
allocated from the state budget; only 100,000 hryvnias for yearly major

Still, the park personnel has managed to rebuild the Skole forestry’s
central office into a showpiece headed by Yurii Volos, a young and
enthusiastic ranger, and to renovate three out of five offices.

Since the inception of the national park, the personnel has been dreaming of
modern premises, like the ones their colleagues at the Bieszczady National
Park have, including a visitors’ center and a museum.

They have amassed a considerable number of unique expositions, so they

could open their own nature and ethnography museum, but they don’t have
the right kind of premises.

It would be desirable if Lviv’s forestry workers, who have been providing
substantial sponsorship assistance to local educational, cultural, and
religious institutions, could channel some of this money into developing the
national park. After all, there is no future for this museum without
adequate accommodations.

Another problem has to be resolved: nearly 10,900 out of a total of 24,700
hectares are owned by the military forestry of Skole. This area (without
land tenure withdrawals) is actually part of the national park.

It is located in the very center of the park and is the military forestry’s
economic zone, whereas it would be logical to award it the status of a
nature preserve, since it includes the scientifically interesting highest
peak of Mt. Parashka, where the most valuable forests tracts grow. However,
the military is against this. The issue has been discussed for many years,
but everything is at a stalemate.

Without a doubt all these problems will eventually be solved. Meanwhile,
Skole Beskyds National Park has turned into an ecological educational center
in the land of the Boikos, offering the finest training and maintaining a
firm stand on protecting the untamed nature of the Carpathian Mountains.

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

Ukrainian News Agency, Friday, January 19, 2007

KYIV – The Chornohora Company (the village of Bystrets of Verkhovynsky
district) has plans to invest UAH 300 million [$60 million] in the
construction of the Alpine skiing tourist complex in the Carpathians near
the village of Bystrets of Verkhovynsky district in Ivano-Frankivsk region.

Ukrainian News learned this from Yurii Romaniuk, the deputy chairman of
Ivano-Frankivsk regional council. “Investor intend to invest between UAH 200
million and UAH 300 million in the construction of the tourist complex
alone,” he said.

He said the company had plans to build six kilometers of access road from
Verkhovyna to the village of Bystrets. The cost of the project is assessed
at UAH 60 million.

He said the investors were also planning to erect a high-voltage power line
from Chernivtsi region, which is not far from the village of Bystrets.

“The cost of the project is UAH 170 million, plus another several millions
for the construction of a waste disposal plant,” he said.
According to Romaniuk, Chernohora has purchased 65 hectares of land from

The company has also applied to the regional council with a request to allot
another 200 hectares on the flank of a hill. Romaniuk said the tourist
complex, according to the plans of the investors, was to host first tourists
in two years.

“They plan to complete the whole complex in four years,” he said. Romaniuk
specified that the investors would start construction works this year.

According to Romaniuk, Chornohora Ltd. was registered in the village of
Bystrets in July 2005. A married couple from Kyiv is a co-founder, who
totally own 50% of the company. Another 50% of the company is owned by an
offshore company, which was registered in the city of Nicosia on Cyprus.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
                     Kazakhstan, Azerbaijan, Georgia and Ukraine

Interfax Central Europe, Warsaw, Poland, Thu, February 1, 2007

WARSAW – Poland’s involvement in extending the Odesa-Brody oil pipeline

to the Polish cities of Plock and Gdansk will depend on cooperation between
five states including Kazakhstan, Azerbaijan, Georgia and Ukraine, Polish
Deputy Economy Minister Piotr Naimski said in a Thursday interview for the
daily Rzeczpospolita.

“The Odesa-Brody Pipeline is an investment in our interests but difficult,
as several states must be involved,” Naimski said. “Significant amounts of
oil will come from Kazakhstan, but as well as Kazakhstan we also want
cooperation with Azerbaijan and Georgia as transit countries. Agreement

with Ukraine is also necessary.”

Naimski said that before the investment can be launched it is necessary to
determine the source of oil to be transported along the pipeline.

“This is a question of agreement with the Kazakhstani and Azerbaijani
sides,” Naimski said. “It cannot happen that we will build a pipeline that
will remain empty. As long as this five-side agreement is not reached,
Poland will not do any investment.”

Recently Ukrainian Prime Minister Viktor Yanukovych said that Ukraine is
interested in using the Odesa-Brody pipeline for Caspian oil supplies to the
west and in refining some of that oil at Ukrainian refineries.

Work is currently progressing to unite the interests of Azerbaijan,
Kazakhstan, Anglo-Dutch oil firm Shell and Russia, which extract oil in the
Caspian basin, and which after fulfilling the Baku-Tbilisi-Ceyhan pipeline
will see oil surpluses.

Yanukovych said that the question of how to further transport the oil will
arise in the second half of 2008. He pointed out two possibilities to extend
the pipeline to the Czech Republic or Poland but added that there is a
little activity among investors from those countries.          -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

Interfax Ukraine Business Express, Kyiv, Ukraine, Fri, Feb 2, 2007

KYIV – Poland’s Indykpol Company intends to invest $50 million in the
construction of a poultry processing plant in the village of Hnival,
Tivrovsky district, Vinnytsia region.

Representatives of the company announced the plans at a meeting with
Vinnytsia First Deputy Governor Valeriy Koroviev on Thursday.

The representatives of the company and the first deputy governor discussed
the allocation of land for the construction and other issues related to the
realization of the project.

Following the meeting, a representative of the company voiced hope that the
investment project would be realized without delays and red tape.

Vinnytsia regional council chairman Hryhoriy Zabolotny said construction
work has begun in the village. He said the poultry processing plant would be
erected on the site of an inoperative plant. The capacity of the poultry
processing plant has not been announced.

Indykpol is a large Polish company producing turkey meat.     -30-

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

Ukrainian Times, Kyiv, Ukraine, Monday, February 5, 2007

KYIV Specialists from the Czech Republic are supposed to help reconstruct
one of the largest boiler houses in Poltava. This will enable a substantial
reduction in consumption of power resources. After reconstruction the boiler
house will operate not only by natural gas but also other fuels.

Recently, city authorities and the director of a Czech company have signed

a bilateral agreement in Poltava. According to city authorities, housing
facilities and public utilities are faced with the acute problem of energy

Regrettably, little attention was paid to this problem in Soviet times that
entailed construction of giant boiler houses, like the one in Poltava. It
renders services to the whole microdistrict and consumes the volume of gas,
which is enough to heat several villages.

The Czechs take an interest in reconstruction of this boiler house as their
company has been making and assembling boiler plants not only in the Czech
Republic but also in Serbia, Poland and other countries for more than 15
years.                                                 -30-
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Dow Jones Newswires, Athens, Greece, Wed, January 31, 2007

ATHENS – Piraeus Bank SA (TPEIR.SA) is considering acquiring a small

lender in Ukraine as part of its plans to expand operations abroad, Vice
Chairman Michaelis Colakides said Wednesday.

“The market we are looking at for potential entry is Ukraine, which we have
visited a number of times over the past 12 months,” Colakides said in a
conference call with analysts.

He said the bank’s objective is to follow the same pattern as it has in
other countries in which it has a presence, namely through small
acquisitions and organic growth.

However, Colakides ruled out expansion into Turkey, citing, in part, the
country’s well-developed and crowded banking market.

“The fundamental reason is that Turkey is not meeting our criteria of not
only high (economic) growth, but also an underdeveloped banking system,”
he said.

“It has a banking system that is highly developed with large international
players present in the market,” he added. “We don’t want to stand up and
kill ourselves.”

Pireaus’ interest in Ukraine follows on the heels of its larger Greek rivals
Alpha Bank SA (ALPHA.AT), National Bank of Greece SA (NBG) and EFG

Eurobank Ergasias SA (EUROB.AT), all of which are also looking to
expand in Ukraine.

NBG said earlier this month that it has made a binding bid to acquire a
majority stake in a bank in the Ukraine, without giving details regarding
the specific bank.

Last November, Alpha Bank’s Chief Financial Officer Marinos Yannopoulos

said his bank is looking to acquire a majority stake in a mid-sized Ukrainian

And Greek press reports in December said EFG Eurobank Ergasias SA

(EUROB.AT) is also looking to expand there.
Company Web Site:
By Ayse Ferliel, Dow Jones Newswires;
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
19.                   PROMOTING THE UKRAINIAN WAY
                 Kyiv tries to explains in Davos where Ukraine is headed

By Mykola Siruk, The Day Weekly Digest #3, Tue, 30 Jan 2007

Last Friday Ukraine held the luncheon-conference “Where Ukraine is Heading”
in Davos, within the World Economic Forum’s framework.

It was the third such conference organized by Viktor Pinchuk’s Foundation
and Interpipe Corporation. The Ukrainian luncheon was aimed at promoting
Ukraine and help a dialogue, exchanges, and understanding between Ukraine
and the world leaders.

After three years this luncheon has become traditional and is getting
increasingly topical. Whereas the first luncheon gathered 35 guests, this
time the number was ten times that.

Viktor Pinchuk, as a host, saw to it that the guests could treat themselves
to traditional Ukrainian dishes like borsch and cherry dumplings.

Ukraine was represented by Prime Minister Viktor Yanukovych and Arsenii
Yatseniuk, First Deputy Chairman of the Presidential Secretariat.

Among the EU guests were Latvian President Vaira Vike-Freiberga, European
Union’s Enlargement Commissioner Oli Rehn, Polish ex-President Alexander
Kwasniewski, who is also a member of the Yalta European Strategy Board,
former French Economy and Finance Minister Dominique Toscana.

Russia was represented by Vneshtorgbank CEO Andrei Kostin; the United
States, by George Soros, and ex-President Bill Clinton was present on the

The luncheon also presented the Yalta European Strategy survey “Europeans &
Ukraine’s Membership of the European Union” done by TNS at the end of

How do Ukrainian and world leaders see Ukraine’s future? What tasks the
Ukrainian leadership is setting itself?

[1] Viktor YANUKOVYCH, the prime minister of Ukraine:
“Informal meetings in Davos, in an informal atmosphere, induce to an open
communication and, indisputably, bring benefit. I would like to thank for
the interest, shown to Ukraine.

I hope that it grows after our meeting. I want that when our activity being
assessed, the progress be fixed in such spheres as: democratic development,
economic reforms, European choice, and people’s welfare.

Our absolute priority is the strengthening of Ukrainian people’s democratic
achievements. Today Ukraine is one of the best developed democracies within
the region, and we appreciate this very much. Without open discussions of
the most vital questions of the state’s political and economic agenda, its
healthy development is impossible.

As the head of the government, I am in favor of the dialogue in most
important problems, the ideas’ competition, openness and transparency while
the approval of the state decisions.

I always welcome the fair criticism on the part of the mass media, healthy
competitiveness between the power and opposition, the presence of a rational
and effective system of restrain and counterbalance, which makes impossible
the usurpation and abuse of power.

Another thing is that Ukraine is on a transition stage – from a presidential
to a parliamentary-presidential republic, and the existing legal vagueness,
unfortunately, leads to the appearing of certain misunderstandings.

But I am convinced that this is a temporary phenomenon and in the nearest
future we will be able to dot finally the i’s and cross the t’s by means of
the joint efforts of all the branches of power, with full accordance to the

This is namely the reason why I give so much significance to the approval of
the main law on the Cabinet of Ministers, which is finally giving an answer
to the key questions – who is responsible before the people and millions of
voters for the state of affairs in economy.

The law, supported too by the opposition, inclines this role and this
responsibility on the coalition forces, which win the elections, form the
government and appoint its head. The approval of this law does not divide
the power branches in Ukraine into the winners and losers.

As the head of the government, I would like to assert with all the
responsibility that the executive power is ready to do everything in order
that the institute of presidency had a worthy and honored place in the
society. Neither government, nor prime minister will ever have any
possibility to substitute the president or infringe upon his commissions.

What a meaning may these changes on the political landscape have? I will
answer, using the words of one of the most successful investors Warren
Buffet – “We have not learned to solve difficult questions, but we have
learned to avoid them.”

Finally, Ukraine’s government has obtained the possibility to avoid
difficult problems, which have been accelerated because the inefficiency of
the political system.

The strengthening of the democratic principles in the society, the final
separation of the commissions between the power branches will significantly
facilitate our fulfilling of other important tasks – the struggle with
corruption and “shade schemes” in the economy.

The implementation of clearly transparent and understandable game rules, the
strengthening of the position of small and middle business, any favoring to
business is an important priority of my government. We will pass all
necessary draft laws to the Verkhovna Rada, which will essentially simplify
running of business in Ukraine.

Today, in the industrial sector of economy of Ukraine, first of all in
metallurgy, there is a transition to the modern technologies. And it demands
huge investments from the large business. The owners already make and will
continue to make $100 million investments.

At the same time, Ukrainian government understands that the realization of
modern industrial projects is impossible without an infrastructure support
on the state’s part. Electric networks, roads, pipelines belong to the state
property, and the state will develop them.

This is namely the way we will create synergy for Ukraine’s development,
state’s synergy for the large business. Modern infrastructure, along with
the modern technologies, I am sure, will create the conditions for a
qualitative leap of Ukrainian economy and its strategic development.

The modernization of Ukraine’s economy is impossible without its integration
into the world’s economic system. That is way we have put maximum efforts
for the realization of a long-brewing task – Ukraine’s entry into the WTO.
My government namely practically completed this long-lasting process, but we
have not finished yet.

I hope that we will make this finish successful up to the middle of this
year. This important achievement confirms that my government will be a
reliable and predictable partner for the world community.

[2] Alexander KWASNIEWSKI, ex-President of Poland:
This meeting is a real success. I see a large and respectable audience; I
think it is a positive sign that we can effectively cooperate on this level.

We must keep up the good job. I address these words to you [i.e., Viktor
Pinchuk – Ed.] as Chairman of the Foundation and organizer of these meetings
and discussions, as an expression of my great respect.

What we have heard today is extremely important. In fact, we have needed
some concrete information from Ukraine over the past couple of months,
maybe the past year.
Let me tell you as a friend: you know that I have been genuinely concerned
about problems in Ukraine and sometimes even found myself in the midst of
certain strained situations. I am trying to be the world’s most active
supporter of Ukraine, but sometimes it is difficult to explain certain
problems in Ukrainian politics.

Today’s speech by Mr. Viktor Yanukovych and the main objectives Ukraine
must reach next year are good signs. Indeed, we need this kind of concrete
and accurate information about Ukraine’s intentions; we can help you, but

we can’t act instead of you and Ukraine in this international policy.

Something you have mentioned should be noted: Ukraine is independent.
Ukraine’s independence, sovereignty, and democracy are irreversible. They
are the Ukrainian choice.

Today the point in question is not whom Ukraine will have stronger ties
with, but how this will look in our eyes, I mean Poland, the European Union
or Russia.

We must respect Ukrainian independence, the sovereign Ukrainian people,
because this sovereign country is a fact, something that was demonstrated to
us before and during the Orange revolution.

It is a very strong awareness of the Ukrainian identity, culture, language,
and so on. We in Poland can say the same thing about Ukrainians: they are
our brothers. We have excellent and very dramatic pages in our joint

Yet the first thing we must say is that we respect Ukrainian independence,
sovereignty, and every decision made by the Ukrainian people. Your people
has made its decision on the political system and on being closer to the
European Union.
Addressing my friends in the EU, I would like to say that the time has
probably come to announce that the EU doors are open for Ukraine.

Indeed, there can be many technical, political, and other problems, along
with discussions and debates, but I think it is very important to send this
signal and make a statement to the effect that we see Ukraine as a full-
fledged EU member at the end of this long process.

Of course, this takes political courage and political vision, but, in view
of the arguments provided by Mr. Oli Ren, I think that there is every reason
to greet Ukraine among the EU members. It is as important to say when this
will happen: in several or ten years. Yet the statement I’m referring to is
extremely important for Ukraine.

[1] first, our respect for Ukrainian independence, [national] identity, and
[2] second, to tell them that the EU doors are open. Mind you that such a
statement would in no way upset Russia’s interests.

Ukraine is obviously not only a neighboring country, sister of Russia, but
also one that must and can play a very important role in Europe, in
strengthening ties with Russia.

We, the EU, need Russia, we need the best kind of contacts with Russia. Yes,
problems surface now and then. For example, we are surprised by [Moscow’s]
decisions concerning Belarus, gas, and oil, but this is a different subject.
We need the best kind of relations with Russia and the EU must wage a
consistent policy in this direction.

How Russia will respond to our aspirations is another matter. Whether Russia
wants to get closer to the EU or play its own geostrategic role is a subject
of further discussions.

[3] Dr. Vaira VIKE-FREIBERGA, President of the Republic of Latvia:
Ukraine has been losing a number of opportunities. I think that the pace of
reforms was not the kind the Ukrainians wanted. Mr. Prime Minister, do
please make up for this; it is never too late and the political leadership
of a country can set a course and carefully follow it.

Various branches of power cannot be allowed to fight each other. Do please
continue a dialogue between various parties, various trends of political
thought. It is perfectly natural for a newly independent democratic country
to show various views, priorities, and ways of reaching set goals.

There can be no doubt about what will serve the good of Ukraine and its
people, and the probable cost of this. There must be a national consensus
of sorts.

Some goals must be proclaimed on a level placing them above all political
differences, so everyone can show a dedicated attitude and say, “This is the
road Ukraine must follow. We will move in precisely this direction.”

We moved in a certain direction in Latvia because such was the people’s
will. We regard Ukraine as one of our foreign political priorities and we
are prepared to share our experience. We are a smaller country and have
fewer natural resources than Ukraine, but we have an experience of quick
reforms. I wish you all the best.

I see that you have many friends here and that many people across the world
are wishing you everything the best.

Therefore, please make up your mind and get to work. We are with you. We
wish you well. Ukrainians deserve better than they have.           -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

Interfax Ukraine, Kyiv, Ukraine, Wed, January 24, 2007

KYIV – U.S. companies Boeing and Orbital Launch System Group are
considering joining a project to develop Ukraine’s first telecommunications

The leadership of the Ukrainian National Space Agency met with senior
officials of the U.S. firms during a recent visit of the Ukrainian agency’s
delegation to the United States to discuss the prospects for cooperation
as part of the project, an agency spokesman told Interfax.

The role of Ukrainian firms in developing a U.S. launch vehicle was also
high on the agenda of the talks in the United States.

Ukraine and the U.S. are close to the signing of a new framework agreement
on cooperation in space exploration and the use of space in civilian

The new accord is needed because a similar document signed in November
1994 is due to expire soon. In addition, the new agreement creates broader
opportunities for the two nations’ partnership.

Ukraine and the United States have been successfully cooperating as part of
the Sea Launch international project. Ukraine has also been officially
invited to join a NASA-proposed program to explore the Moon, Mars and
other planets of the Solar System.                       -30-

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
       Please contact us if you no longer wish to receive the AUR    
    To invest around 8 million USD in Kyiv, Kryvyi Rih, Odesa and Kharkiv.

Ukrainian News Agency, Kyiv, Ukraine, Thu, February 1, 2007

KYIV – In 2007, McDonald’s Ukraine intends to invest about UAH 38 million
into development of its network. The head of company state and public
relations department Mykhailo Shuranov has disclosed this to Ukrainian News.

‘Investments into the development will amount to UAH 38 million,’ he said.
He said that in 2007, the company plans to open four restaurants in Kyiv,
Kryvyi Rih, Odesa and Kharkiv.

In 2006, McDonald’s Ukraine opened three restaurants in Kyiv, Lviv and
Dnipropetrovsk. Currently, McDonald’s Ukraine network consists of 57
restaurants in 16 largest cities of Ukraine.

As Ukrainian News earlier reported, McDonald’s has worked in Ukraine since
1997. It is one of the world leaders in the sector of fast-food services
(over 30,000 restaurants in over than 100 countries.           -30-

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
                  United States Millennium Challenge Corporation (MCC)
                   threshold program grant targets corruption in Ukraine

By Vitalii KNIAZHANSKY, The Day
The Day Weekly Digest #3, Kyiv, Ukraine, Tuesday, January 30, 2007

Early in December 2006, during Viktor Yanukovych’s visit to the United
States, Ukraine and the US signed an agreement on Ukraine’s participation
in the so-called threshold program directed by the Millennium Challenge
Corporation (MCC). According to the terms of this agreement, Ukraine
will receive $45 million to fight corruption.

New financial vistas are opening up for us, as John Hewko, the
vice-president of this US corporation, told The Day . Presenting his
business card, he explained that his name is really Ivan Hewko. Although
he was born in the US, his parents came from Ternopil oblast.

“The Millennium Challenge Corporation is an American state institution
that was created in 2004. We are financed by the US Congress, which
means that the money we have is provided by the American people.

It is a financial aid program offered to the Ukrainian people by the
American people. We provide financial aid to developing countries in
the form of grants, so these funds do not have to be repaid.

Our goal is to reduce poverty and destitution through sustained economic
growth and to stimulate and encourage this growth.

In November 2006 Ukraine was admitted to the Millennium Challenge
Corporation as a full member, joining a group of 25 countries that have
the right to submit proposals for financing development needs. Ukraine
now has this right.

The purpose of my visit is to meet with Ukraine’s political leaders in Kyiv,
the heads of some oblasts, members of the press, nonprofit organizations,
and the private sector in order to explain what it means to be a full member
of the corporation, what it means to Ukraine, and to tell them about the
grant application process.

We have two programs for financial aid. The first, so-called threshold aid,
is given to fight corruption, and Ukraine has already received it. We
allocated $45 million to your country for this purpose.”

[The Day] Has the money already arrived?
[John Hewko] “It’s coming. That is, this program is already starting to
work. In Ukraine it is administered on our behalf by the United States
Agency for International Development (USAID).

I am in charge of the main anticorruption program, and I’m responsible for
the 25 countries that now have access to the big funds from our main

[The Day] How does it work?
[John Hewko] “Ukraine joined the program as a full member, which means
that the country and its people, rather than the government, president, or
parliament, have the right to apply to the corporation for funding.

We are ready to finance any health, education, transport, energy,
agriculture, or anticorruption program. It is up to Ukraine to decide what
is needed.

It is a very interesting program because we don’t come to Ukraine and say,
“We have $100 million for such and such a purpose.” As a full member of
the corporation, Ukraine has the right to submit a proposal for funding and
choose what should be financed.”

[The Day] Can these wishes apply simultaneously to various spheres or are
they restricted to one, say, education?

[John Hewko] “There may be various directions but we would like the
application to be focused rather than disjointed – a hospital here, a school
there, and a road somewhere else. An application can have various
components, but we want them to comprise one coherent package that
we will finance.”

“People should know in Ukraine that we will discuss Ukraine’s application
only with one person. It will not be good or efficient if different groups
have some influence on this. We are asking Ukraine to appoint one person
to represent the president, government, and parliament in dealing with us at
the political level.

We are not ready to hold separate negotiations with them. Furthermore,
we ask Ukraine to appoint one more person who will be in charge of the
technical aspect of our cooperation. I think this will be an extremely
difficult task.

Not a political player, this person will have to be a good executive and
manager, know how to develop the program at the technical level, and be
able to maintain relationships with the political elite of the country, all
the branches of power, and to direct all dealings at the horizontal level.

Perhaps this will be a representative of the private sector. Or it may be a
foreigner who is known and trusted in Ukraine.

“The main thing is that this person (his or her main work place will be
Ukraine, more specifically-an organization in charge of this program) will
have the right to speak on behalf of Ukraine, and this at the political

“At the same time a group of Ukrainian technical experts will have to be set
up. We will provide Ukraine with a list of their qualifications. For them,
too, this will have to be the main job, and Ukraine will need to finance
this group.

The experience of other countries that have successfully cooperated with us
shows that half a million to two million dollars are needed to finance this
team. These are the first three steps.”

“Once this is done, we will have to meet with our economists to conduct a
broad analysis of the obstacles that are hindering economic growth in
Ukraine. Based on this we will hold a broad consultation with the Ukrainian
people, i.e., with the regions, oblasts, the private sector, and nonprofit

We will need to have a preliminary plan determining the extent and
geographical distribution of consultations because we want this funding
proposal that Ukraine has to prepare to really come from the people and on
the basis of the broadest consultations with the people.

I would like to emphasize that we are going to talk not only with ministers
and regional authorities. We would like this proposal to reflect the
thinking, needs, and priorities of the people.”

[The Day] So you are building a democratic procedure into the foundation
of this aid.

[John Hewko] “That’s right. People will be able to come to us with their
ideas, and on the basis of this the workgroup will make its decisions and
put together specific projects. Let me repeat that this is not going to be
the case of several ministers getting together and dividing the cake. This
approach will not work with us.

To summarize, the first step is to set up the technical team, and the
second, most important, step is to conduct the broadest consultations.
On the basis of this, Ukraine’s proposal to us will be formulated.

Then we will flesh it out and our experts will analyze whether it will lead
to economic growth and whether the requested funds are adequate, or
whether less money or perhaps more is needed.”

[The Day] So Ukraine’s proposal will be audited?
[John Hewko] “Let us call this technical checking or technical expertise.
Then on the basis of the proposal, if it has been approved at all levels, an
agreement will be signed with Ukraine and the corporation will start
transferring the necessary funds.”

[The Day] What amount may be allocated to Ukraine?
[John Hewko] “We do not set a minimum or maximum amount for a country.
To date the largest amount was allocated to Ghana-over $550 million. In my
opinion, this is also an approximate minimum amount for Ukraine. But I
would like to emphasize that there is no minimum or maximum.

It all depends on the quality of the proposal, i.e., it may be $500 million;
it can be more, or less. We also take into consideration a country’s ability
to effectively utilize these financial resources.

This is a very attractive program because you know better what your country
needs for its development. And we seek to provide funding for the things
that you consider necessary and important.”

[The Day] It seems to me that at this stage, when Ukraine has been allocated
$45 million according to the threshold program, the US thinks corruption is
the sole factor hindering Ukraine’s progress and the development of its
economy. Is this correct?
                                    CORRUPTION INDEX
[John Hewko] “I would say that this is not the only factor, but you know, we
choose countries on the basis of 16 indices that show whether the country is
democratic, encourages market economy, and invests in its population.

The most important one of these indices is the corruption index. So far
Ukraine has rated poorly on this one. This year it became more positive and
that is why Ukraine was chosen a full member of our corporation.

The $45 million program is targeting specifically corruption, which is a big
problem not only in Ukraine but in many other countries. Perhaps there are
also other problems.

Therefore, we have given Ukraine $45 million to fight corruption and are now
ready to provide a much larger amount, this time for specific projects and

[The Day] They’re supposed to target the struggle against poverty?
[John Hewko] “Yes, they have to target poverty and be aimed at fostering
sustained economic growth. That is, these two programs – the threshold
program and the main, so-called pact, program – work together. Corruption
has to be combated.

This is very important and the people demand it, but at the same time money
also needs to be invested in projects that will foster economic growth and
reduce poverty and destitution. So the two programs complement each other.”

[The Day] Are there predictions or fears in the US that the money channeled
through the threshold program will end up in corrupt hands?

[John Hewko] “We will be watching this closely and are setting up a
mechanism for the threshold program that will guarantee that the money will
get to the people who are supposed to receive it.

I have already mentioned that the threshold program is administered by
USAID and this organization holds all tenders and makes sure that the
money is used properly.”

[The Day] They are responsible for this?
[John Hewko] “Yes, together with Ukraine they are responsible for the
money being put to effective use and not ending up in the wrong hands.

Together with Ukraine we will also create mechanisms for the pact program
that will definitely ensure that the money is distributed properly- during
transparent, open, and honest tenders.

We will not sign the agreement or disburse the money until these mechanisms
have been created and tested, which will guarantee that the money will not
be stolen.”

[The Day] Are these corruption-related requirements for Ukraine connected
with the so-called Istanbul plan on monitoring anticorruption activity in
our country? This is a European anticorruption plan.

[John Hewko] “Our aid is not connected with this directly, but through our
indices we are gauging corruption, and if Ukraine is cooperating with Europe
in a serious anticorruption program, we will, of course, support these

[The Day] A double-standard approach to cases of corruption is commonplace
in Ukraine. Some get away with it, while others, mostly little people, are
taken to court. Does this program somehow direct its efforts at raising the
level of fighting corruption?

[John Hewko] “The purpose of my visit is to describe how the pact program
is going to work and how money can be obtained for its implementation.
As far as the threshold program is concerned, it has five components.

     [1] The first component is monitoring anticorruption activity and
           getting the public and the press involved.
     [2] The second one is increasing transparency in the judicial sector to
           help create an effective judicial system for fighting corruption.
     [3] The third one is setting standards for the ethics of administrative
           procedures to make them clean and transparent.
     [4] The fourth one is simplifying decision-making procedures and
           making them more transparent.
     [5] The fifth component is battling corruption in higher educational

[The Day] You are a lawyer by profession, so I have a specific question
about fighting corruption. A bill dealing with this issue is being prepared
now. It contains a proposal to introduce legal responsibility for corrupt
activities of legal entities.

In your opinion, will this enable specific people who are guilty of
committing crimes to evade responsibility, since it will be the corporation
that will be held responsible and an individual will be able to hide behind
its back?

[John Hewko] “I will express my personal opinion. In the US, for example,
there are three corresponding concepts. When a legal entity is involved in
illegal activity, it can be held criminally responsible, but naturally it
cannot be put behind bars.

However, heavy fines and other administrative punishments may be applied.
On the other hand, the guilty persons also have to be held responsible.

Of course, Ukraine will make its own decision on the best procedure, but it
seems to me that there also has to be criminal responsibility on the part of
the actual perpetrators, so that individuals cannot avoid being held
responsible for what the corporation did.

Ukraine needs to fight against large-scale corruption where big money is
involved, but at the same time small-scale corruption has to be battled.

When Giuliani was the mayor of New York City, he advanced the so-called
theory of broken windows. It means that various small violations, small
defects in your house, city, or country create an atmosphere of chaos.
When they started dealing with this in New York, it helped create an
atmosphere befitting a rule-of-law state.”

[The Day] So we are talking about raising the moral level of the whole
[John Hewko] “Definitely.”

[The Day] Monitoring by European experts shows that Ukraine has
implemented 11 out of 23 anticorruption recommendations. If the same
ratio also holds for the threshold program, will we receive funding from
the pact program?

[John Hewko] “We will not, of course, sign the pact unless we see that
Ukraine is seriously working on the threshold program. This is a kind of
test.”                                                       -30-
NOTE TO MEMBERS:  John Hewko of the MCC can be contacted
at:  His office is in Washington.

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
23.                          THE KHRUSHCHOVKAS
   The khrushchovkas were designed as a jumping-off place for building
Communism but instead became a social sarcophagus for millions of people.

The Ukrainian Observer magazine #228
The Willard Group, Kyiv, Ukraine, February 2007

Housing problems and food deficits plagued average Soviet citizens for
years. They learned to live humbly with their legs half bent in a
Neanderthal manner. Officials were always superior and could decide who
would get a free apartment or a food ration by writing secret letters to
influential people.

The Soviet people experienced two great resettlements. After the 1917
October Revolution those living in basements and barracks moved to lavish
bourgeois apartments, forcing their owners to share excess square meters.

The noisy halls of such flats stank of cats and shared washtubs;
psychological conflicts roared in shared kitchens and near shared bathrooms
and toilets.

The devastating war with Hitler’s Germany deprived tens of millions of
people of their homes. Stalin seemed not to care that one third of the
population of Stalingrad was still living in huts and cabins in 1950. Unlike
Stalin, Nikita Khrushchev wished his compatriots to have better.

Massive construction lasted from the 1950s to the 1970s. Herds of four-
and five-storied paneled houses with black roofs filled my city.

These ugly boxes smelled of fresh paint and allured all of us with their
private coziness and festive gas fire stoves. The people dubbed these twin
houses the khrushchovkas to perpetuate the name of their creator.

We sincerely believed the party that promised that our generation “will soon
build communism” and thus thought the khrushchovkas with their shared
bathrooms were only temporary abodes.
                                A PRIVILEGED TENANT
In the summer of 1964, almost all the people in my house were given new
flats, so we had a merry group housewarming.

I saw men carry an oak cupboard, a big wardrobe and a leather sofa, things
that obviously belonged to a privileged member of the Communist Party.

Then I heard curses on the cramped narrow staircase of the house with no
lift: the carriers were carrying a chest of drawers and a nickel-plated bed
with a spring mattress.

We all admired a sofa with attached tables and a wardrobe with a splendid
bluish mirror. We had two bars of soap in our bags: brown laundry soap and a
pale piece of wild strawberry soap. We also brought tin cans with sunflower
oil, kettles and brass saucepans, stools and Soviet fiber suitcases.

There were three kinds of queues for those wishing to have a new flat:
ordinary, privileged and extra privileged. I was in the second group as a
young specialist.

My wife and I were standing in front of our new house, looking pretty poor:
we had only a few bundles of books, two suitcases with clothes, a table, two
chairs and two convertible armchairs.
A new Soviet lifestyle gradually penetrated these flats. We left our
pre-Revolutionary trunks, rich fur coats, samovars, leaden stewing dishes
and grandmother’s icons in the past.

The Soviet lifestyle of the khrushchovkas was about families consisting of
parents, their children and parents and living in a cramped flat with a
fabric kitchen lamp.

We covered our bookshelves and commodes with starched napkins and
decorated them with porcelain ballerinas and papier mache coin banks
shaped like cats. We kept buttons and gilded broaches in metal tea boxes.

In our corridors, there were usually fleets of Soviet footwear: women’s
shoes on the so-called Viennese heel, men’s boots with buttons, children’s
and grandmother’s felt boots with galoshes. There were also hats with
earflaps and velvet or felt hats for women, “crewcut” fur coats, and
gabardine raincoats.
The Soviet Union’s anemic production resulted in permanent deficits.
However, the State Supplies Committee distributed goods so impractically
that storehouses throughout the country were full of useless junk. The
planned economy became an invincible chaos swarming with vices.

The government authorized the Department to Prevent Thefts of State
Socialist Property (DPTSSP) to eradicate these immoral practices. The
ideological department of the Communist Party invented ten rules for
communism builders to help the DPTSSP, which proved to have been
plagiarized from Jesus Christ’s commandments.

However, the vices flourished and helped make profits, which was totally
unacceptable and taboo. Our people gave witty nicknames to those “vicious
                                        DEFICIT KING
Not only did he bring his luxurious leather sofa to our house but also his
experience of covert speculation.

Before moving to our khrushchovka, he was a big boss in the supplies
department and lived in a house whose hall was decorated with chandeliers
shaped like bears and had a red carpet on its parquet.

The DPTSSP threw him down from Olympus and forced him to move to our
poor house but did not confiscate his property. When he was still on the
top, he was stealing things enthusiastically. Later, he was only helping his

Deficit King was a very popular man. He could help buy refrigerators, tape
recorders and television sets. His former colleagues told him beforehand
where it would be possible to purchase furniture.

He knew phone numbers to dial to buy a washing machine or a carpet. He
modestly called his services a fee.
Feeder went to Moscow for work to stand in lines to buy smoked sausage and
other rare dainties. One could, of course, buy sausage in provincial shops
but it was made of some parts of animals, paper and starch because there was
not enough meat to produce food of high quality.

The government decided that at least the capital of the Soviet Union,
Moscow, should display socialist prosperity and abundance. Residents of the
Soviet republics stormed Moscow’s shops and then went back home in the
so-called sausage trains.

Feeder used all his physical strength to drag his forty-kilogram sack up to
the fifth floor of our khrushchovka. Then he immediately phoned his
customers to say he had brought “something delicious” and hear their reply,
“You are my feeder, I owe you for your service.” He also earned much money
for his hard work.
                                SELLER OF SPIDER WEBS
Shop assistants in department stores selling products of mass consumption
were referred to as sellers of spider webs. These were usually arrogant and
bold young men.

My wife wanted to buy some cotton fabric. One person could buy only five
meters. A shop assistant asked her if she wanted to buy ten meters. She

The guy asked his colleague to print a receipt for ten meters of cotton, a
cowboy hat and a knife to open oysters. My wife lied – her husband already
had a cowboy hat. So he replaced the hat with another unusable object, a
metal iron rack.
The most punishable of the vices was what the so-called kustar did. The
kustars, or handicraftsmen, worked secretly in cellars, soldering, sewing
and chiseling something.

There were two such people in our house: a father and a son.

The old man was a retired cutter. He spent all his savings to buy an old
“Zinger” (Singer) sewing machine. He called himself an independent
businessman and a rival of those working in fashion ateliers. He retailored
old coats and unfashionable suits and sewed smart skirts and jumpers from

Neighbors knocking on his door used the password “client” when asked,
“Who is this?”

No clients came to his son, who was an engineer of a utility service. He
found his clients in the black market, selling music hits by Russian
emigrant singers and American jazz bands, secretly recorded on X-ray tapes,
still bearing the forms of whitish human bones. His secret laboratory was in
a basement of some residential house.
Communism builders that stole at their factories to later make profits were
called carriers. The most exotic carriers worked in the alcohol and meat

Ivan was always saluted with applause when he appeared at family
celebrations. He opened his modest bag to produce the Soviet Union’s
assortment of vodka: a red-labeled bottle of Russian Vodka,  a green-labeled
Moscow Vodka and Stolichnaya with a gray skyscraper on the label.

“Try it, I will not get poorer if you do,” he encouraged his clients

Butcher Tikhon once got into an embarrassing situation. There were no
carcasses at his factory for a few days, so he decided to take what could be
stolen. He must have drunk too much, having nothing to do, and hid an udder
in his pants. It was in a special bag attached to his belt.

When he was in a tram, his pants got unzipped accidentally. An indecent teat
fell out of his fly, scaring the shocked passengers. When Tikhon saw his fly
unzipped, he tried to cram the nipple back but the udder was too tight to

Butchers always have a knife in their pocket. Tikhon cut the teat off and
put in his pocket. He explained idiotically to the fainting women passengers
that he had “more such things.”
The Communist Party made a huge mistake when it destroyed shared
apartments, where there was almost no way to freely exchange views. Our
khrushchovka kitchens immediately became territories of freethinking. The
KGB decided to help the party by sponsoring yard sweepers.

My neighbor, who I fully trusted, replaced some gadgets and lamps in my
old radio set. He told me my Voice of America programs could be heard
in the stairwell.

What he said meant that KGB agents could learn what I was doing and stifle
the radio signal. The neighbor helped me resolve the problem and I soon
heard no interference but clear voices.

Unlike me, my radio neighbor was born in Kyiv. His father and grandfather
grew old in one of the shared apartments in Kyiv’s downtown. The dynasties
of yard sweepers lived and grew old nearby.

Even before the October Revolution men with brooms were paid to report to
police about suspicious people in their house. In the Soviet Union, they
were also made to spy, being afraid to be expelled from their flats.

The neighbor told me our yard sweeper was a nephew of a sweeper that had
worked and lived in his father’s house.
                                   A LEAP TO NOWHERE
The Soviet lifestyle died out with its attributes: plain food, cheap but
durable clothes, ascetic but strong shoes, and badly designed and less
functional household appliances, which were heavier than their western
counterparts but made of natural metal.

Our products were only afraid of moths and time. Today’s imported mass
consumption goods make us allergic.

The Soviet Union’s deficits and the vices they caused disappeared.
Post-Soviet consumers suffer from abundance in shops and poverty in their
pockets. Banks think their compatriots are all swindlers and so rarely risk
giving big loans. But traffic jams signal great changes in the post-Soviet

Only the khrushchovkas do not change. These gloomy, rusty and dilapidated
houses cannot be restored. Having a weak economy, Ukraine has not saved
enough money to build a shelter over Chornobyl’s [burned-out fourth reactor]
unit yet.

It is an even more grandiose and impossible challenge for us to demolish the
khrushchovkas and build new houses instead.

The khrushchovkas were designed as a jumping-off place for building
Communism but instead became a social sarcophagus for millions of people.

NOTE: Serhiy Kharchenko is a retired Ukrainian journalist who writes about
his experiences during the Communist era exclusively for The Ukrainian
Observer. His journalistic style adds a touch of humor and pathos that is
unique for someone who writes about a very dark period in Ukrainian history.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
     Artist Mykola Syadristy, Museum of Micro Miniatures, Kyiv, Ukraine

By Arthur Bleu, The Ukrainian Observer magazine, Issue 228
The Willard Group, Kyiv, Ukraine, February 2007

The microscopic world – the world that usually goes unnoticed, walked over
as our giant footsteps make great indentations in it – is now keenly the
centerpiece of a wonderful permanent exhibition in Kyiv.

The Museum of Micro Miniatures is open daily and you can view it alongside
a variety of other sites inside the Kyiv Pechersk Lavra.  A list of various
galleries and museums are ahead as you enter. You’ll need time inside the
gates to wander and look around.
Who would ever dream of making miniature shoes for a flea? Only the creator,
eccentric, curious and highly skilled Mykola Syadristy. Why did he choose to
dwell on the microscopic world and to expose such amazing creations?

Was it the challenge of doing something so very different that drove him on?
The artist’s work has to be viewed through a microscope because the art is
too small to be viewed with the naked eye.

The viewer is taking part in the process of bridging art, science and
technology together.

This is one of life’s treasures in the heart of Kyiv and if you haven’t seen
it yet then you must. A short queue outside (as there has to be a
restriction on how many people enter at one time) then you are staring into
a pair of large microscopic lenses that changes your world forever.

The exhibition holds a particular interest for children who love the
unexpected and magical.
                                 SMALL IS BEAUTIFUL
Small is beautiful and the beauty of these creations is that they are works
of art in miniature, created by the artist. Syadristy set himself many
challenging feats of ingenuity such as the welding of gold shoes to his fat
house flea? Have you ever imagined just what a flea might look like in an
extreme close up?

Other works include a life-size mosquito made of gold; a girl with an
umbrella sits on its proboscis. Like a watchmaker with the meticulous
demands of his craft, Syadristy’s technique combines the use of fine
instruments with the imagination of the artist to create these masterpieces.

A gold charioteer complete with chariot inside the eye of a needle, the
parts of the image are 500 times smaller than that of a human hair, another
piece shows a chessboard placed on a pin head. The actual chess moves are
the ones made by Alexander Aliokhin represented by the black pieces on the
chess board and his opponent, Raul Capablanca.
What is the particular obsession of this man?

Syadristy has devoted many years to this microscopic art, meticulously
created as he works behind a microscope and pieces together fragments of
beauty many times smaller than the natural size of the object.

Gold and other precious metals as well as many natural materials like apple,
pear, grape seeds, rice corns and cherry and grape stones are used. These
are engraved or inlaid with a keen eye and imagination. Many depict famous
Ukrainian people in semi-relief beautifully carved, cameo-style renderings.

Mykola Syadristy was born in 1937 and educated at the Kharkiv Art College,
Ukraine. Since his formal education he has worked in many roles and gained
valuable skills along the way. Today, he holds the title of Honored Master
of Folk Arts Ukraine.

He is like all great geniuses that realized a dream and saw it through.
These works are marvels and remain unchallenged; they are awe-inspiring
and have been shown all over the world.

All images included with this article originated in the catalogue produced
by the Museum of Micro Miniatures, a permanent exhibition of the Kyiv
Pechersk Museum, Sichnevoho Povstannya 21, telephone: 290 3071.
The museum is open in the Upper Lavra area from 9.30 am- 18.00 pm daily.

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

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