AUR#815 Feb 14 Ukraine Wants $4 Billion From Int Banks; SigmaBleyzer Fund IV; Cargill; Boeing; Cardinal; Bunge; Weapons; Putin; Doctor Zhivago

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

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

                 The Ukrainian government hopes to raise over $4 billion in

             loans annually from international financial institutions, including
                the World Bank and the European Bank for Reconstruction
                        and Development, to realize infrastructure projects.
                                                 [Articles 1-3]
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
Interfax Ukraine, Kyiv, Ukraine, Monday, February 12, 2007

                    BILLION AND 1 BILLION IN UKRAINE IN 2007 
Ukrainian News Agency, Kyiv, Ukraine, Tue, February 12, 2007


RossBusinessConsulting NewsOnline
Moscow, Russia, Tuesday, February 13, 2007

                           TO SIGMABLEYZER’S NEW FUND
Business Wire, San Francisco, CA, Friday, February 9, 2007

Official Website of President of Ukraine, Kyiv, Ukraine, Tue, Feb 13, 2007


Ukrainian News Agency, Kyiv, Ukraine, Monday, February 12, 2007

RNS Number: 9381Q Cardinal Resources plc 08 February 2007
RNS, The company news service from the London Stock Exchange
LONDON, United Kingdom, Thursday, 8 February 2007


AFX UK (Focus), London, UK, Tuesday, Feb 13, 2007


     “Our oilseed processing facilities in Ukraine, Russia and Spain and
   our new grain and fertilizer terminals in the port of Santos, Brazil will
   come fully online during 2007, supplying real benefits to our business.”
UkrAgroConsult news on-line, Kyiv, Ukraine, Fri, February 9, 2007

Ed Holt, Lloyds List, London, UK, Feb 13, 2007

            Ukraine develops new infantry combat vehicle with big potential
Defense-Express website, Kiev, in Russian 12 Feb 07
BBC Monitoring Service, United Kingdom, Tue Feb 13, 2007

12.                        “UKRAINE ARMING THE EAST”
         Writer examines dangers to Ukraine’s burgeoning arms industry
ANALYSIS & COMMENTARY: By Dmytro Krapyvenko
Glavred, Kiev, in Russian 0000 gmt 8 Feb 07
BBC Monitoring Service, United Kingdom, Sat Feb 10, 2007

                           SET TO COMPLETE PROJECT
Interfax-Ukraine news agency, Kiev, in Russian 0952 gmt 13 Feb 07
BBC Monitoring Service, United Kingdom, Tue, Feb 13, 2007


UNIAN News, Kyiv, Ukraine, Tue, February 13, 2007

Interfax, Warsaw, Poland, Tue, February 13, 2007


Steel Business Briefing (SBB), London, UK, Tue, February 13, 2007


Ukrayinska Pravda On-line, Kyiv, Ukraine, Monday, February 12, 2007


Ukrainian News Agency, Kyiv, Ukraine, Tue, February 13, 2007


Ukrinform, Kyiv, Ukraine, Monday, February 12, 2007

Moscow Times, Moscow, Russia, Wednesday, Feb 14, 2007
21.                           RUSSIAN FOR CHUTZPAH
GLOBAL VIEW: By Bret Stephens 
The Wall Street Journal, NY, NY, Tue, February 13, 2007; Page A24
22.                              “CRIMEAN ANTALYA”
 Ukraine’s ruling coalition trying to squeeze presidential powers in Crimea
Zerkalo Nedeli, Kiev, in Russian 10 Feb 07, p 4
BBC Monitoring Service, UK, Saturday, February 10, 2007
23.                      “GAZPROM BELIEVED IN TEARS”
  Ukraine obliged to use middlemen in gas purchases says energy minister
INTERVIEW: With Ukrainian Fuel & Energy Minister Yuriy Boyko
BY: Mariya Bondar and Roman Kulchynskyy
Kontrakty weekly newspaper, Kiev, in Ukrainian 5 Feb 07, pp 8-12
BBC Monitoring Service, United Kingdom, Wed, Feb 07, 2007
24.                         IN SEARCH OF THE VANISHED
 His mother’s relatives hailed from the town of Bolechow, now in Ukraine.
BOOK REVIEW: By Sara Dowse
Canberra Times, Canberra, Australia, Feb 10, 2007
25.                                THE PLOT THICKENS
    New Book Promises Intriguing Twist to Epic Tale of ‘Doctor Zhivago’
By Peter Finn, Washington Post Foreign Service
The Washington Post, Washington, D.C.
Saturday, January 27, 2007; Page C01

Interfax Ukraine, Kyiv, Ukraine, Monday, February 12, 2007

KYIV – The Ukrainian government hopes to raise over $4 billion in

loans annually from international financial institutions, including the
World Bank and the European Bank for Reconstruction and
Development, to realize infrastructure projects.

“We estimate that the annual credit portfolio from all these credit
institutions will top $4 billion,” First Vice Premier and Finance Minister
Mykola Azarov said at a press conference on Friday. He said the
government intended to re-direct the raised assets from institutional to
infrastructure projects.

“We have agreed with the World Bank to re-direct our credits from the
institutional projects – the development of the state institutions – to the
development of infrastructure,” Azarov said.

He said Ukraine and the European Investment Bank started official
cooperation in 2007. The formation of the credit portfolio of the

European Investment Bank for Ukraine will start in 2008, Azarov said.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
Ukrainian News Agency, Kyiv, Ukraine, Tue, February 12, 2007

KYIV – The World Bank is ready to invest between USD 0.5 billion and

USD 1 billion in the projects in Ukraine in 2007. Paul Bermingham, the
World Bank’s country director for Ukraine, Belarus, and Moldova
announced the plans of the World Bank to the press. “Not less than in
2006, up to USD 1 billion,” he said.

The funds will be directed to development and modernization of municipal
infrastructure in regions, and to electric energy.
A total of 3-4 large-scale projects will be implemented by June. In
particular it is planned to invest about USD 500 million into development
and modernization of roads.

Besides, about USD 450 million will be invested into reformation of energy
sector, of which USD 200 million will be sent to construction of electricity
line and also about USD 150 million to development and reconstruction of
Dnistrovska pump and storage plant.

Another project allocates USD 40 million to Kyivenerho: for energy saving
and improvement of heat supplies to some Kyiv city districts.

According to Bermingham, the World Bank is ready to regularly allocate
funds, however Ukraine’s problem is lack of interesting and fundamental

On the whole, investments into Ukraine’s economy have to amount to at least
28-30% of the GDP a year, of which 3-4% of GDP is governmental stake.

In 2006, the World Bank invested in the projects in Ukraine around USD 500
million. As Ukrainian News earlier reported, after joining the World Bank in
1992, Ukraine received over USD 4.5 billion of credits for implementation of
over 30 projects.                                      -30-

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
RossBusinessConsulting NewsOnline
Moscow, Russia, Tuesday, February 13, 2007

KYIV – The European Bank for Reconstruction and Development

(EBRD) plans to invest at least $1.95 billion in Ukraine’s economy
over the next two years, EBRD Business Group Director for Southern
and Eastern Europe, Olivier Descamps, stated.

EBRD and the government of Ukraine are now developing a new
two-year agreement, Descamps added.

EBRD’s program well focus investments in five Ukrainian sectors.

The bank will provide loans funds for:  
     [1] country infrastructure development, 
     [2] new transport equipment. 
     [3] energy sector development
     [4] industrial companies for modernizing facilities
     [5] financial sector client services improvement and
          the launching of new products.                      -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
                           TO SIGMABLEYZER’S NEW FUND

Business Wire, San Francisco, CA, Friday, February 9, 2007

HOUSTON, TX – SigmaBleyzer, a leading private equity firm focused on
Ukraine and Southeastern Europe, has closed its fourth fund, SigmaBleyzer
Southeast European Fund IV (SBF IV).

The Fund closed at Euro250 million ($326 million), the maximum amount
allowed by the partnership agreement, and 25% above its target, making it
the largest private equity fund in Ukraine and one of the largest funds in
Southeastern Europe. At its launch in August 2005, the target amount for
SBF IV was Euro200 million.

SBF IV will execute the same operational level value creation strategy
successfully employed by SigmaBleyzer’s previous fund, UGF III, making
controlling investments in high growth potential companies in the consumer

The Fund will seek to invest in companies where SigmaBleyzer, in partnership
with management, can create a specific competitive advantage and utilize its
unique twelve-year experience in the region to accelerate growth and create
value in portfolio companies.

In 1996, SigmaBleyzer created the first Ukrainian Growth Fund (UGF).
Since that time, UGF has grown into a family of three funds consisting
of UGF I, UGF II, and UGF III.

The new fund builds on SigmaBleyzer’s significant experience in Ukraine
and expands the company’s operations to other countries in Southeastern

Michael Bleyzer, President and CEO of SigmaBleyzer, said: “We are very
pleased with the level of interest in the region demonstrated by our
investors and excited about the opportunities we see in Ukraine, Romania,
Bulgaria and the very strong deal flow our deal teams have been able to

SBF IV includes a significant number of Limited Partners from the
company’s previous funds, as well as new investors. A total of 40 LPs
invested in the new fund, with investments ranging from a few million
euros to 20% of the fund, provided by the largest LP in SBF IV, the
European Bank for Reconstruction and Development [EBRD].

Other investors in the fund include Goldman Sachs, UBS, LVMH, Bank
Austria, InvestKredit and other large financial institutions and family

SBF IV will make investments between 10 million and 70 million euros,
with larger investments possible through a series of co-investment
agreements with its LPs.
                             ABOUT SIGMABLEYZER
Since 1994, SigmaBleyzer has been one of the largest, most experienced
private equity investors in Eastern Europe.

With the strength of the company’s local infrastructure, knowledge of
local market conditions and western-style management, SigmaBleyzer is
well positioned to invest successfully in the transition economies of
Southeastern Europe.

SigmaBleyzer has offices in Bulgaria, Romania, Ukraine, the Netherlands,
and the United States.                              -30-
NOTE This press release is not an offer of securities for sale in the

United States or any other jurisdiction and interests in the Fund may
not be offered or sold in the United States or any other jurisdictions
save in accordance with applicable law.

NOTE:  SigmaBleyzer is a member of the Ukraine-U.S. Business
Council in Washington, D.C.
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Official Website of President of Ukraine, Kyiv, Ukraine, Tue, Feb 13, 2007

KYIV – Ukrainian President Victor Yushchenko has met with Cargill

Europe Executive Director Dave Rogers, who is also a member of
Ukraine’s Foreign Investment Consultative Council.

They spoke about the country’s agricultural market, especially grain
exports, prices and VAT rebates, as well as how to improve the
investment climate and develop ties between government and business.

“Ukraine must become one of the leading players on the global agricultural
market, particularly the grain market,” he said.

The President said the government must find alternative tools to regulate
agricultural prices so that producers and traders should be able to sell
their products abroad, where prices are considerably higher.

He described administrative measures as ineffective, adding that the
government did not see “the complex picture of how to manage the grain
market” and so failed to liberalize prices.

Mr. Rogers said Cargill Europe, as well as many other companies operating
in Ukraine, was worried about government interference. Grain export quotas
imposed by the cabinet have a negative impact on producers, processors
and traders, he complained.

“We would like to know the rules of the game and be informed of agricultural
policies the government is going to carry out,” he said, adding that his
company had sent proposals to the cabinet. He said Ukraine had enough
grain to satisfy domestic demand.

The President promised to discuss the issue with Prime Minister Viktor
Yanukovych and expressed hopes the problem would be resolved.

He then asked Tax Administration Head Anatoly Brezvin to pay back USD
18 mln to Cargill and resolve the VAT rebates issue. He said the problem
disrupted our efforts to build effective cooperation with business and
attract foreign investment.

Mr. Rogers said his company planned to develop the local food

processing industry.

First Deputy Secretariat Chief of Staff Arseniy Yatsenyuk and Deputy
President of the Grain Association Ivan Miroshnichenko attended the

Cargill, Incorporated is a privately held, multinational corporation, and is
based in the state of Minnesota in the United States. It was founded in
1865, and has grown into the world’s second largest privately held

Its business activities include purchasing, processing, and distributing
grain and other agricultural commodities, and the manufacture and sale of
livestock feed and ingredients for processed foods and pharmaceuticals. It
also operates a large financial services arm, which manages financial risks
in the commodity markets for the company.                  -30-
LINK:, there
is a photo of the meeting on the presidential website.

NOTE:  Cargill is a member of the Ukraine-U.S. Business Council
in Washington, D.C.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

Ukrainian News Agency, Kyiv, Ukraine, Monday, February 12, 2007

KIEV – First Deputy Prime Minister/Finance Minister Mykola Azarov
has discussed the possibility of cooperation in promoting the project for
production of An-148 airplanes with the leadership of the Boeing aircraft
company. Azarov announced this to journalists.

‘We discussed cooperation on marketing the 148 with the vice president of
Boeing,’ he said. He stressed that the government plans to buy 10 An-148
airplanes in 2008. ‘We have made an excellent airplane,’ he said.

The Antonov scientific and technical complex for aircraft design (Kyiv)
recently said that it intended to complete the certification of the An-148
regional passenger airplane in February 2007.

As Ukrainian News earlier reported, the Antonov scientific and technical
complex for aircraft design produced the first prototype of the An-148
regional passenger airplane in October 2004.

Airplanes in the An-148 family, which are equipped with dual jet engines,
are designed to carry passengers and cargoes on regional and near-long-
haul routes.

The An-148 airplane has a cruising speed of 820-870 kilometers per hour.
The airplane costs about USD 20 million.                -30-

NOTE:  Boeing is a member of the Ukraine-U.S. Business Council
in Washington, D.C.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

RNS Number: 9381Q Cardinal Resources plc 08 February 2007
RNS, The company news service from the London Stock Exchange
LONDON, United Kingdom, Thursday, 8 February 2007

LONDON – Cardinal Resources plc (AIM:CDL) (“Cardinal” or “the
Company”), an independent oil and gas production and exploration company
operating in Ukraine, was recently ranked as the top oil and gas company and
within the top three overall among 118 companies operating in Ukraine in
terms of Corporate Governance.

Concord Capital has published the first exclusive survey to rank companies
operating in Ukraine by Corporate Governance standards. The survey

reviewed 118 companies across all sectors of the Ukrainian economy.

Cardinal Resources was ranked third overall and consistently rated in the
top tier in rankings in the categories of Reporting & Disclosure, Investor
Relations, Minority Concerns and Strategic Risk. The Company was the
highest ranking oil and gas company operating in Ukraine

Robert J Bensh Chairman and CEO of Cardinal Resources comments on the
survey were; “We are very proud of our ranking in the survey and pleased
that we are being recognized for our high standards of transparency and

corporate governance.”
Concorde Capital is the leading brokerage on the Ukrainian market, and
issues a large amount of research on Ukrainian companies. The full
survey can be downloaded from the Concorde Capital website:                        -30-
NOTE:  Cardinal Resources is in the process of becoming a member
of the Ukraine-U.S. Business Council in Washington, D.C.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
    NOTE: Send in a letter-to-the-editor today. Let us hear from you.
                 Sees production up at 3,000 boepd by end-2007

AFX UK (Focus), London, UK, Tuesday, Feb 13, 2007

LONDON – Cardinal Resources ticked up 1/4 to 17-3/4 after the
independent oil and gas production and exploration company, operating
in Ukraine, provided an upbeat update on development drilling operations
and production.

Cardinal Resources PLC said it expects net production to increase from
approximately 800 boepd in Dec 2006 to a run rate of approximately 3,000
boepd by the end of 2007.

The independent oil and gas production and exploration company operating
in Ukraine said this is based upon expected production rates from wells
ready to tie-in and that the current drilling programme is progressing
according to plan.  ( nma/slm)      -30-

NOTE:  Cardinal Resources is in the process of becoming a member
of the Ukraine-U.S. Business Council in Washington, D.C.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

      “Our oilseed processing facilities in Ukraine, Russia and Spain and
    our new grain and fertilizer terminals in the port of Santos, Brazil will
    come fully online during 2007, supplying real benefits to our business.”
UkrAgroConsult news on-line, Kyiv, Ukraine, Fri, February 9, 2007

Alberto Weisser, Bunge’s Chairman and Chief Executive Officer stated,

“Bunge finished 2006 on a promising note. Our team did an excellent job of
delivering results and produced strong second half performances in all of
our operating segments.

We expect 2007 to be a year of improved earnings.”  The company

announced its fourth quarter 2006 earnings on Feb. 8.

For the quarter ended December 31, 2006, the net gains totaled $74 million,
or $0.60 per share. For the year ended December 31, 2006, the net gains
totaled $42 million, or $0.35 per share.

In the quarter ended December 31, 2005, the net gains totaled $52 million,
or $0.44 per share, and for the year ended December 31, 2005, the net gains
totaled $141 million, or $1.17 per share.

“Over the past several months we have seen clear signs of improvement in

the Brazilian agribusiness and fertilizer markets,” said Weisser.

“There are still some challenges, such as the strong real, but higher
commodity prices, large new corn and soybean crops and continued

government support have improved farm economics in the country and
should translate into more crop sales and larger fertilizer purchases in 2007.”

“Steps taken in late 2005 and early 2006 to restructure our Brazilian
businesses, lower costs and enhance our foreign currency risk management
should position Bunge to benefit from improving Brazilian market
conditions,” he added.

The emerging biofuels industry is creating higher demand for our core
products and is materially influencing global supply and demand. Bunge is
taking a focused approach to the biodiesel and corn ethanol industries.
Weisser said, “We are making minority investments in well-positioned assets
and acting as a raw material and service supplier to biofuels producers.”

“Our overall strategic focus remains on the agribusiness and food
industries, where we see great opportunity driven by strong demand for our
core products.”

He added, “To capitalize on this growth, we will continue to enhance the
balance, integration and efficiency of our global network of assets.”

“In 2007, we will expand capacity at our sunseed crushing plant in Martfu,
Hungary to grow our presence in Eastern Europe, build a new wheat mill in
northeastern Brazil to improve production efficiency and continue increasing
our fertilizer mining and production operations to meet future growth in
Brazilian agriculture.”

“We will complete our two Canadian crushing and refining capacity expansion
projects and increase our presence in the global sugar and sugar-based
ethanol markets,” continued Weisser.

“Also, our oilseed processing facilities in Ukraine, Russia and Spain and
our new grain and fertilizer terminals in the port of Santos, Brazil will
come fully online during 2007, supplying real benefits to our business.”

“Ours is a growth industry with compelling opportunities. We will invest to
capitalize on them, while building a balanced, global business that enables
us to weather challenging periods as they occur.” 

NOTE:  Bunge is in the process of becoming a member of the
Ukraine-U.S. Business Council in Washington, D.C.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

Ed Holt, Lloyds List, London, UK, Feb 13, 2007

LONDON – A SERBIAN entrepreneur who recently bought the Danube

shipping company DDSG Cargo from Vienna has revealed he wants to
expand his fleet on the Danube river and connect ports in the Black Sea,
writes Ed Holt.

East Point company owner Zoran Drakulic said: ‘We intend to expand

our fleet by four or five more ships and they would connect ports in the
Black Sea, in Russia and Ukraine with port of Constantza in Romania.’

East Point has not given out any details on the Ukrainian or Russian ports
where it would operate links.

But Mr Drakulic has said East Point is interested in acquiring Serbian
shipping company Jugoslavensko Recno Brod- arstvo, which would see

it take on more ships.

He said: ‘A tender for the sale of JRB will be announced in the next 90 days
at the latest. The purchase would be of a great importance for us.’ He added
that the purchase would give East Point more barges which it desperately
needed to fulfil all its orders.

East Point became a leader in cargo transport on the Danube last month by
announcing it had bought Austrian company DDSG Cargo.

The deal was reported to have seen East Point pay Euro100m ($129m) to buy
DDSG Cargo and its 257 vessels in Austria and Hungary. Total capacity of the
ships, which are used to transport goods from the North Sea to the Black
Sea, is 230,000 tons.

The rapid expansion of the company has left some local media comparing Mr
Drakulic with Greek shipping magnate Aristotle Onassis. But he has dismissed
them, telling one newspaper: ‘My ships are not as big.’          -30-

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
            Ukraine develops new infantry combat vehicle with big potential

Defense-Express website, Kiev, in Russian 12 Feb 07
BBC Monitoring Service, United Kingdom, Tue Feb 13, 2007

KIEV – The Kharkiv repair plant for armoured equipment has developed a
new armoured infantry combat vehicle, the BMPT-55, as specialist defence
web site has reported. It is based on the T-55 tank, cannibalizing key
elements of the T-64 tank.

There is already considerable interest from foreign clients. The new combat
vehicle’s technical features and low cost mean that it is bound to become a
success, the report concludes.

The following is the text of the article by Volodymyr Kopchak of the Centre
for Army, Conversion and Disarmament Studies entitled “Ukrainian ‘modular’
armoured hardware. T-55 next” published on the specialist defence web site
Defense Express on 9 February. Subheadings are as published:

The state enterprise Kharkiv Armoured Equipment Repair Plant [AERP] has
developed a project for a heavy infantry combat vehicle, the BMPT-55, based
on the T-55 tank.

This programme is the latest step by specialists at the Kharkiv plant to
create base modules on the basis of tank bodies – following the creation of
a working model of a combat vehicle based on the T-64 tank, it is now the
turn of the 55.

Israel has rich practical experience of creating and using Achzarit heavy
infantry combat vehicles, created on the basis of T-55 tanks, in real combat

What prompted the initiative of the Kharkiv designers and what are the
technical specifications and prospects on the external market for the
Ukrainian version?

According to the director of the Kharkiv plant, Vadym Fedosov, a number of
foreign countries are showing considerable interest in the creation of heavy
infantry combat vehicles based on the T-55 tank. There are several elements
influencing such a state of affairs. First, at one time the Soviet Union
sold about 70,000 T-55 tanks abroad, and now they need in-depth

The second, and most important element is the fact that the experience of
recent military conflicts, primarily the recent Israeli-Lebanese
confrontation, shows that combat vehicles with powerful armour are the most

Given the nature of combat actions with a high saturation of the battlefield
with small arms weapons, including 12.7mm, 14.5mm calibre, and hand-held
grenade launchers, light armoured equipment has a low life expectancy, which
leads to considerable losses of personnel.

Considering the conclusions quoted, Israel successfully mastered serial
production of the Achzarit heavy infantry combat vehicle based on Soviet
T-54 and T-55 tanks captured from Arab countries during armed conflicts.
Israeli specialists intend the Achzarit to be used for joint combat
operations with (?Merkava) tanks and also for conducting special operations.
                        BMPT-55. UKRAINIAN APPROACH
In general the concept of the Kharkiv designers in creating the BMPT-55
consists of installing a 5TDF engine from a T-64 tank into the body of a
T-55 tank (base module).

This type of engine was designed and is produced in Ukraine (the Kharkiv
Morozov Machine-building Design Bureau and the Malyshev Plant respectively).
Capital repairs and modernization are provided by the Kharkiv AERP – the
designer of the BMPT-55 concept.

We should dwell in more detail on the power installation of the new heavy
infantry combat vehicle. The 5TDF engine with essential control elements is
located in the front section of the vehicle and has a 700 HP capacity, which
corresponds to the demands of foreign clients who are displaying interest
today in the Ukrainian version of the reconfiguration of the T-55.

A fundamental aspect is the fact that it is planned to install the set
longitudinally in relation to the vehicle’s axis with the aim of unifying
the cooling system. With a perpendicular installation of the engine, the
exhaust goes backwards, but when it is turned round 90 degrees, the exhaust
goes sideways, similar to the Merkava tank.

It is not possible to place the 5TDF engine perpendicularly (transversely)
with a T-64 gear box in the body of a T-55 tank, since it (the body) is 180
mm narrower.

It is planned to install precisely the T-64 tank gear box and the engine. By
means of displacing the set, there is enough room for installation, and the
interchange goes via hypoid transmission.

It should be noted that apart from the technical advisability, installing a
5TDF engine on the BMPT-55 should facilitate progress of the Ukrainian tank
engine on the external market.

The 5TDF engine from the T-64 tank is virtually unknown abroad, since 64s
were tanks of a strategic breakthrough and were not exported by the Soviet

It is also planned to replace the T-55 tank’s motor transmission mechanism
and remove the forward and sub-turret metallic plates. It is planned to
place new side, rear and forward armoured plates on the tank body, which,
according to the designers’ decision, will increase the overall height of
the vehicle to 1,950 mm.

Development of the side plates envisages the installation of elements of
dynamic protection of the latest generation of Ukrainian design. The door
for assault landing will be positioned at the rear.

On the base version it is planned to mount a turret on the roof of the body
with a 12.7 mm calibre machine-gun. Apart from that, depending on the
client’s demands, various weapon systems can be installed.

For additional equipment, it is intended to install a mobile system of
electronic neutralization in the frequency range 20-2000 MHz for protection
against radio controlled explosive devices and also other equipment.

At the current state of the project, preparations are now in hand for trial
tests of a working model of the BMPT-55 vehicle. It is planned to start
these tests as early as February 2007 and, in the estimation of Kharkiv
specialists, they will take about two months.

After that, the technical specification will be formulated according to the
results of the tests of the working model and a number of additional
developments. In the estimation of the enterprise’s management, this may
take from six months to a year.

The implementation of such plans depends on funding, since at the present
stage the development is being carried out in the form of an initiative on
the part of the enterprise. It is planned to agree the developed technical
specification with the Morozov Design Bureau.

Going back to the project’s export potential, let us try to answer the
question that poses itself: What is prompting the interest of potential
buyers in the Ukrainian BMPT-55 project, given the existence of the ready
made Israeli Achzarit that has proved itself in combat conditions?

It is assumed that the BMPT-55 will have a number of advantages over its
foreign analogue as a heavy infantry combat vehicle.

First and foremost, it is considerably lower in cost. According to expert
assessments, the Israeli Achzarit with the installation of an engine and
motor transmission system of US manufacture will cost in the order of
600,000 dollars.

In today’s conditions this is disadvantageous for Israel itself. According
to the estimates of Kharkiv specialists, the cost of the BMPT-55 will not
exceed 300,000 dollars.

There are a number of advantages also connected with the vehicle’s technical
arrangement. The Achzarit, as a result of the installation of the American
engine, has a narrow passage in the landing section that makes landing

The 5TDF engine is smaller in size. Because of this, the landing section is
bigger. (The engine and motor transmission mechanism of the T-64 tank were
originally made minimized, which makes it possible to increase the volume of
the landing section).
Weight (without weapons) – 28.5 t;
Length – 6.2 m; Width – 3.21 m; Height – 1.95 m;
Speed – up to 70 kph; Range (reserve) without refuelling – 600 km;
Engine type (capacity) – 5TDF (700 HP);
Front – 270 mm plus dynamic protection;
Side – 81 mm plus dynamic protection;
Roof – 30 mm; Rear part – 40 mm;
Bottom – combined anti-mine protection.

In this way, by making use of the “module” principle in creating the
BMPT-55, Ukraine has prospects of getting into a considerable market for
modernization of T-55 tanks. The vehicle being created at the Kharkiv
AERP is in demand even now.

The presence of interest in a number of foreign countries in the BMPT-55
may attract attention in developments of unified base modules of the
Kharkiv enterprise in Ukraine as well.

In particular, it is not ruled out that developments of combat vehicles
based on the T-64 that Defense Express has already reported will get their
“start in life” and that a more rational application will be found for the
excessive number of tanks than banal recycling.             -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

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12.                   “UKRAINE ARMING THE EAST”
           Writer examines dangers to Ukraine’s burgeoning arms industry

ANALYSIS & COMMENTARY: By Dmytro Krapyvenko
Glavred, Kiev, in Russian 0000 gmt 8 Feb 07
BBC Monitoring Service, United Kingdom, Sat Feb 10, 2007

In 2006, sales of Ukrainian arms and defence-related services increased by
15 per cent. But Ukraine’s focusing on the eastern markets only can backfire
in the near future.

Instability in the Middle East and between India and Pakistan may lead to
the imposition of international sanctions, limiting Ukraine’s access to
their markets. Russia’s efforts to renovate its arms and munitions may also
translate into lesser dependence on Ukrainian-made products.

The following is the text of the article by Dmytro Krapyvenko entitled
“Ukraine arming the east” published on the Ukrainian web site Glavred on 8

Sales volumes of Ukrainian weapons grew by 15 per cent last year. This was
on account of Russia and countries of Asia, which are willingly buying
products of our domestic defence industry complex. But in future, excessive
export orientation to the East may undermine positions of our defence
industry on world markets.

One per cent of the arms market, whose annual turnover amounts to 70-80bn
dollars, and closeness in the ratings to the superpowers is a serious
achievement of the Ukrainian defence industry complex.

According to data from the Economics Ministry, export volumes of defence
goods rose by 35 per cent and amounted to about 700m dollars.

However, as Glavred was told by the head of research projects at the Centre
for Army, Conversion and Disarmament Studies, Serhiy Zhurets, according to
their data, exports grew by only 15 per cent, which in general corresponds
to the latest trends on the world market: military budgets have increased in
most countries, demand has whipped up supply and arms have become more
Military hardware “Made in Ukraine” has had not a bad reputation since the
times of the USSR. As before, an important role is played by coordination of
the Ukrainian defence industry complex with that of Russia. Almost a third
of the exports of Ukrainian weapons go to the Russian Federation.

In recent years Moscow has increased spending on the army almost ten-fold,
and so, purchases of Ukrainian parts and ready to use military hardware and
equipment have also increased.

Countries of the Middle East, India, Pakistan and China are still the
traditional markets for products of the domestic defence industry complex.
Ukrainian weapons are completely competitive on the markets of those
countries. Here they need Ukrainian An-32 military transport planes,
aircraft engines and air defence systems.
The sixth place on the arms market that Ukraine occupies is extremely
honourable, if one considers that it is overtaken by such countries as the
USA, France, Germany and Great Britain.

After all, these are states that also actively participate in tenders for
supplying military hardware in the East, but have the advantage of playing
the game on their own field – sales of weapons in the NATO framework, i.e.
on territory that is difficult of access for Ukrainian and Russian

But nevertheless, the position of Ukraine’s defence industry complex is not
as stable as it may seem from the accounts of the Economics Ministry,
[Ukrainian monopoly arms exporter] Ukrspetseksport and other relevant

The orientation of the domestic defence industry complex to exports is a
fairly alarming signal. The correlation of internal arms purchases to export
is 1:13, which seriously destabilizes the work of the industry.

Enterprises of the defence sector operate from tender to tender, and the
amount of output produced is often equal to the volume of foreign orders.
Without stable and large-scale internal applications, fully fledged
development of the defence industry complex is impossible.

In Germany, for example, the correlation of exports to the internal market
is 1:3 in favour of the latter and the Russians in recent years have reached
a proportion of 1:1.

According to estimates by the Centre for Army, Conversion and Disarmament
Studies, the present programme for the development of the armed forces for
up to 2015 envisages too small a load of capacities of Ukrainian defence
enterprises (8-10 planes, 30 tanks and one frigate a year), which does not
allow the sector to have high profitability indicators.

What is more, the epoch of successful defence exports may soon come

to an end.

[1] First, 15 per cent of the sales of Ukrainian weapons abroad consists of
hardware inherited from the Soviet Army. The stocks of that hardware are
limited, and there is nothing to replace it with.

[2] Second, prospects for cooperation with Russia are not as cloudless as it
may seem from reports by the Economics Ministry.
Experts from the Centre for Army, Conversion and Disarmament Studies note
that since the beginning of the 1990s the Russian Federation has taken a
course of maximum autonomy of its defence industry.

This is noticeable from the fact that the Russians are ignoring Ukrainian
enterprises in their new projects. Thus, the leaders of Ukrainian rocket
building – Pivdenmash and the Pivdenne design bureau found themselves not
included in designing the Topol-M intercontinental ballistic missile.

The Artem state joint-stock holding company did not get access to the
project for creating weapons for the Russian air force. This is all evidence
of the fact that with the renewal of the Russian army, Russian dependence on
the Ukrainian defence industry complex will decrease with every year.

There is also every reason to doubt the stability of the arms market of
countries of the East. India and Pakistan, which order military hardware
from Ukraine, have been conducting a cold war for years, and in the event of
its “temperature” being raised, may find themselves subjected to
international sanctions.

In that case, the market of those countries for Ukrainian legal arms exports
will be closed. There are also similar risks in the Middle East.     -30-
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                           SET TO COMPLETE PROJECT

Interfax-Ukraine news agency, Kiev, in Russian 0952 gmt 13 Feb 07
BBC Monitoring Service, United Kingdom, Tue, Feb 13, 2007

KIEV – Russia’s Metalloinvest company has begun implementing a project
on completion of the Kirovohrad mining-and-processing complex of oxide-
bearing ore [known as KHOKOR] (in Kirovohrad Region), Maksim Basov,
general director of the Gazmetall company, said at the CIS Metals Summit
on 12-14 February in Moscow hosted by Adam Smith Institute.

He said he considered the choice of the investor by the Ukrainian Cabinet
of Ministers to complete building the KHOKO final. At the same time,
Basov said that some Ukrainian companies were trying to call in question
the government’s decision.

“We have won (a tender on selecting an investor – agency) and therefore, we
are beginning to implement the government’s decision,” Basov said. [Passage
omitted: Reference to the government decision dated from 2 August 2006]

Earlier, a special government commission for examining bids from potential
investors to complete building the KHOKOR viewed more optimum proposals
of the Russian Metalloinvest and the Smart Group of Zaporizhzhya. The
commission considered proposals of the share-holders of Metalloinvest,
Smart Group and Mittal Steel.

One of the factors that influenced the final decision in favour of the
Ukrainian-Russian consortium was the proposed scheme of minimizing
Ukraine’s promissory note to states that were [Romania and Slovakia] to
build the KHOKOR.

Under preliminary estimates, the overall amount of investment required to
complete the building and the commissioning of the complex totals 804m
dollars. The construction of the KHOKOR began in 1985 and Ukraine has
become its assignee after the demise of the USSR.           -30-
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UNIAN News, Kyiv, Ukraine, Tue, February 13, 2007

KYIV – Interpipe and Danieli (Italy) companies will sign a contract on

15 February of the current year on building the Ukraine’s biggest arc-
furnace complex.

According to the announcement, forwarded to UNIAN by the Interpipe

group, the amount of the company’s investments into the project will make
up more than 600 million dollars.

Interpipe owner Victor Pinchuk, Interpipe pipe company director general
Oleksander Kyrychko, Danieli president Jeanpietro Benedetti, and Danieli
executive director Franco Alcetta will take part in the contract signing
ceremony. Interpipe is the Ukraine’s biggest pipe producer.       -30-
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Interfax, Warsaw, Poland, Tue, February 13, 2007

WARSAW – The European Commission maintains its interest in extending the
Odesa-Brody pipeline to the Polish town of Plock as a key element of
diversifying crude oil supplies to Europe, EU Commissioner Andris Piebalgs
said at a press conference in Warsaw on Monday.

“The Odesa-Brody-Plock project is important for the EU,” Piebalgs said.

“The EU Commission is doing everything possible to reverse the flow of oil
the current part of the pipeline. The Commission supports the project, as it is
a key element of diversification of oil supplies to Europe. “I believe that
the Poland will begin the realization of the project,” he said.

Recently, Polish Economy Minister Piotr Naimski said that Poland’s
involvement in extending the Odesa-Brody pipeline to Plock will depend on
cooperation between five states, these being Poland, Kazakhstan, Azerbaijan,
Georgia and Ukraine.

Naimski said that before the investment can be launched it is necessary to
determine the source of oil to be transported along the pipeline, which is a
question of agreement with Kazakhstan and Azerbaijan.

Naimski said this cannot happen that Poland will build a pipeline that will
remain empty. He emphasized that as long as this five-side agreement is not
reached, Poland will not do any investment.              -30-
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Steel Business Briefing (SBB), London, UK, Tue, February 13, 2007

LONDON – Finnish steelmaker Rautaruukki has provided more information

about its latest investment in construction steel production in Ukraine, a
project first announced in September 2006.

In a statement seen by Steel Business Briefing the company said that the
$19m development involves the construction of a new plant located about 20
km west of Kiev. The 13,000 square metre factory will produce roofing,
load-bearing and cladding profiles and sandwich elements, the company adds.

Construction of the new plant will commence in spring 2007 with production
due to start in spring 2008. The factory will employ 130 people, Rautaruukki

The steelmaker, as part of its strategic drive both geographically eastwards
and further into the steel services sector, has three other production units
in Ukraine, with fabrication facilities in Kiev and Dnepropetrovsk and a
coil colour-coating line in Antrazit acquired in 2006. (

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Ukrayinska Pravda On-line, Kyiv, Ukraine, Monday, February 12, 2007

Local authorities rob Kryvyi Rih metallurgical giant Kryvorizhstal  now
belonging to Mittal Steel of 5 thousand hectares of lands, as reported by
Delo newspaper.

Kryvyi Rih metallurgical works has possessed agricultural lands in the
Apostolovo district of the Dnepropetrovsk region.

The works was growing potato and other cultures to feed their employees.
The labor collective of the works comprised 54 thousand of workers at the
start of 2007.

Head of the Trade Union of Mittal Steel Yuriy Bobchenko told the Head of

the Apostolovo Council had released a decree on withdrawal the works’s
lands categorizing them as reserve lands at the end of 2006.

The local authorities claim it was Kryvorizhstal which was allowed to own
those lands. The change of owner dictates quite different game rules.

Director of Juridical Department of Mittal Steel Nadiya Yalymova questions
validity of authorities’ actions. Top officials of the metallurgical works
have protested the decision in the State Property Fund and in the

Commercial Court of the Dnepropetrovsk region.

Kryvorizhstal gained the right to possess agricultural lands as a state
enterprise in the Apostolovo District in 2003. The local administration

gave the works the act of state on permanent land use but has recently
suspended it.

It is a normal practice for enterprises to be engaged in farming. Two
industrial giants in Donetsk region own almost 1/3 of agricultural lands

For instance, Ilyich Mariupol steel and iron works headed by MP

Volodymyr Boyko has 60 farms using some 180 thousand hectares of
lands.                                              -30-
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Ukrainian News Agency, Kyiv, Ukraine, Tue, February 13, 2007

KYIV – The Agricultural Policy Ministry initiates introduction of tax
concessions for producers of biofuel. Agricultural Policy Minister Yurii
Melnyk disclosed this to the press. In particular, on Tuesday, the
parliament discussed legislative provision of production of alternative
types of fuel.

Melnyk said that the Verkhovna Rada considered two bills, which foresee
provision of tax concessions for biofuel producers and also for producers

of equipment for biofuel plants. The bills also foresee allowance for
production of biofuel by enterprises of all property types.

Besides, according to the bills, biofuel is proposed to be listed as
non-excise produce setting zero excise rate for production of bioethanol.
The bills also propose to exempt biofuel producers from taxes for 5-10

As Ukrainian News earlier reported, the Ukrainian Agrarian Confederation
(UAC) sees the need to improve biofuel production standards and introduce
its mandatory use.

The Cabinet of Ministers approved the Program for Development of Diesel
Biofuel on December 22. Under the program, Ukraine is to build at least 20
biodiesel plants capable of 5,000 to 100,000 tons a year and with a combined
capacity of at least 623,000 tons a year.                      -30-
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Ukrinform, Kyiv, Ukraine, Monday, February 12, 2007

KYIV – The “Soyuz Victan USA” has contracted the US spirits distributor
“Glazer’s” for 5 years, the “Soyuz Victan’s” press service told Ukrinform.
The “Glazer’s means to hold a joint distributing campaign with the “Soyuz
Victan” in US 12 states.

The company intends to realize as many as 90,000 deciliters of its produce.

The “Soyuz Victan” Group is Ukraine’s leading alcohol producer and
distributor. The company was set up in 1994. In 2006 the “Soyuz Victan”

manufactured as many as 11,309,000 deciliters of spirits.          -30-
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Moscow Times, Moscow, Russia, Wednesday, Feb 14, 2007

A pivotal 12 months lies ahead for Russian politics. According to the
Constitution, President Vladimir Putin has to leave office at the end of his
second term, in March 2008, and he has maneuvered himself into a lose-
lose situation.

He needs to stay on for a third term, because his popularity is the key
source of legitimacy in current Russian politics. Yet if he prolongs his
rule in violation of the Constitution, he will lose his legitimacy.

During his presidency, Putin has systematically diluted the country’s
nascent democratic institutions. The members of the Federation Council
are now appointed, as are regional governors.

Formally, the State Duma is still elected, but the parties, nominations,
media coverage and the elections themselves are now so manipulated that
nobody can take them seriously.

As a consequence, few elements of political legitimacy remain in Russia.
Putin’s election in March 2004 was the last free election, although the

OSCE rightly labeled it not fair.

Today, no Russian election can be sufficiently free and fair to lend any
credence to the “winner.” The Putin regime’s profound dilemma is that it

has deprived itself of all means to generate political legitimacy.

Russia’s economic achievements are impressive, but a growing standard

of living is not enough to guarantee long-term political survival.

Economically, Putin has linked his fortunes ever more to high world energy
prices, which will not last forever.

Although the Kremlin has worked hard to stir up Russian nationalism,
Russians at large do not seem ripe for such an extreme choice. The Russian
Orthodox Church does not enjoy widespread respect.

The formation of an alternative, pro-Putin party, A Just Russia, makes
United Russia look all the more artificial. The reproduction of more
pseudo-parties would only make Putin’s Russia more reminiscent of the
former East Germany, with its three official pseudo-parties.

The conventional wisdom is that Putin wants to leave his presidency in
constitutional order. One of his two semi-official heirs apparent, First
Deputy Prime Minister Dmitry Medvedev or Defense Minister Sergei Ivanov, is
supposed to be appointed as his successor, after which the grateful Russian
people are supposed to vote for Putin’s choice. Any one of a number of dark
horses could still be brought in, but the modus operandi will be the same.

If this sounds like some kind of dream world, that’s because it is. Boris
Yeltsin could appoint Putin and get away with it because no one thought his
team could pull it off. The very essence of Russian politics is surprise, so
what is anticipated becomes difficult, and sometimes impossible to pull off.

Another reason why a smooth succession is unlikely is that, in the best
Machiavellian tradition, Putin has encouraged a maximum of strife between
his subordinates to ensure that they cannot collude against him.

According to most accounts, the relationships between his underlings are on
the verge of open warfare. Whomever Putin chooses as his successor will be
seen as a dangerous enemy by his or her colleagues, who will insist that
Putin stay.

Putin’s top people currently control huge amounts of wealth through state
companies. Because they do not officially own these companies, they have
to operate through informal contracts, often worth billions of dollars. But
they cannot defend these informal contracts in court.

People kill for less, and Russia has already seen a regression to the
high-level commercial murders of the mid-1990s. Regardless of who takes
over, many of Putin’s top officials will likely fear the loss of their
fortunes and will do whatever they can — meaning a lot — to ensure that a
real transition does not take place.

The final reason no orderly transition is likely stems from Putin himself.
He is notorious for making decisions as late as possible. Inevitably, he
will make this final big decision very late, if at all, because he is afraid
of becoming a lame duck. In all probability, he will miss the most favorable
time to make his exit.

His recent statement that he will announce his preference at the beginning
of the election campaign presumably means less than three months before
the scheduled election date.

Putin’s success at maintaining high popularity ratings is admirable, but
that is the only strength that remains of this regime, and it may pass
faster than anybody currently imagines. Few people remember today that
Ukrainian President Leonid Kuchma was quite popular and won a run-off
in reasonably free presidential elections in the fall of 1999.

One year later, however, when it appeared plausible that he had ordered the
murder of a critical journalist, his popularity plummeted to single digits,
never to recover. And all this despite the fact that he controlled Ukrainian
media almost as closely as Putin manages Russia’s.

Is there a chance, alternatively, that the government could change the
situation with the application of effective policy? After the disaster with
the social benefit reforms, Russia has maintained a near moratorium on
changes to the system of this magnitude.

At present, the main government policy initiative is to evict all foreign
nationals from outdoor markets by April 1, which will reduce supply and
boost the prices of produce for the country’s poorest, who are the markets’
chief customers. This is hardly an election-winning strategy.

Another possible election strategy is a war on corruption. Corruption is a
dominant popular grievance, but eminent Bulgarian political scientist Ivan
Krastev has pointed out that all postcommunist governments that lose
elections do so because of corruption.

The more attention a government pays to corruption, the more people
realize how bad the problem is, with the incumbent administration being
viewed as the culprit.

Corruption in Russia has risen in the last few years, while it has been
abating in most other postcommunist countries, according to Transparency
International, the EBRD, the World Bank and the Indem think tank.
Eventually, this observation will come home to roost with the would-be

Furthermore, Putin has built a structure that does not allow him to retire.
Yeltsin could do so because he had established a certain rule of law, which
guaranteed the validity of the law on his immunity.

Putin has undermined the rule of law to such an extent that he cannot repeat
Yeltsin’s elegant exit, because no successor can guarantee that he will not
be prosecuted.

Putin is no fool. He understands that he is currently at the peak of his
power, so things can only get worse. He no doubt realizes that it would be
best for him to resign after two terms, but he has painted himself into a
corner. His only apparent option is to stay on as president.

Even if Putin were to become chairman of the Constitutional Court and tried
to impose his professed “dictatorship of the law,” he could not control the
country because of insurmountable strife among his former underlings. The
fundamental problem is that Russia no longer possesses institutions that can
grant legitimacy to any successor.

So is this a dead end? Can Putin avoid crashing? The answer is “yes.” As
in any cul-de-sac, the solution lies in hitting reverse, which in this case
leads back to the road of democratic principles.

Admittedly, societies based on civil rights and freedom often present rulers
with some rude surprises, but they do function and generate legitimate
leaders. Hitting reverse makes more sense than crashing.     -30-
NOTE: Anders Aslund is a senior fellow at the Peterson Institute for
International Economics, Washington, D.C.

FOOTNOTE: There are rumors going around Washington that
Anders Aslund will have a birthday on Thursday, February 15th. 
Usually reliable sources say he will turn 55. It has not been possible,
ha, to reach Anders to verify if the rumors floating around are true
or not.  Happy Birthday Anders!  AUR EDITOR
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21.                           RUSSIAN FOR CHUTZPAH

GLOBAL VIEW: By Bret Stephens 
The Wall Street Journal, NY, NY, Tue, February 13, 2007; Page A24

The nearest equivalent the Russian language has for the word chutzpah is
naglost. In you, Vladimir Putin, the Russian nation has found the embodiment
of naglost.

Naglost: During the question-and-answer session following your speech on
Saturday to the 43rd Munich Conference on Security Policy, you were asked
about the Oct. 7 murder (your birthday, Mr. President) of muckraking
journalist Anna Politkovskaya.

You never quite got around to uttering her name. But you did helpfully point
out that in the past 18 months “the largest number of journalists were
killed in Iraq.”

True. But Moscow is not a war zone. And next to Russia Iraq has a reasonably
free press. Thirteen journalists have been murdered contract-style since you
took office, according to the Committee to Protect Journalists. In not one
of these cases has a suspect been convicted.

Politkovskaya herself complained of “the weekly summons to the prosecutor
general’s office to sign statements about practically every article I write
(the first question being, ‘How and where did you obtain this

Former Soviet President Mikhail Gorbachev described her murder as “a blow to
the entire democratic, independent press.” You chose to eulogize her by
noting her influence “was minimal.”

Naglost: Your speech in Munich contained a curious broadside against the
Organization for Security and Cooperation in Europe, which you denounced for
“imposing a regime that determines how these states should live and

That may not have been the most eye-catching of your comments, but it was
the most revealing. Among its other benign functions, the OSCE bureaucracy
monitors elections among its 56 members.
That never raised an eyebrow until the OSCE raised a red flag over the
Ukrainian election of November 2004, which had been rigged in favor of your
preferred candidate, Viktor Yanukovych.

The OSCE’s verdict was crucial to having the results overturned and a new
election called. You’ve never forgiven it.

Since then, the OSCE’s election-monitoring office has come under a
relentless barrage of criticism from your foreign ministry and from other
former Soviet republics with questionable democratic credentials, all with
the view to putting the monitors under your political control.

Naglost: So now you tell the Munich conferees that “no one feels safe” in
the face of America’s military, economic, cultural, political, legal and
educational assertiveness. That’s one way to look at it.

Then again, some four million Georgians didn’t feel especially safe when
unaccounted explosions — reliably attributed to your security services —
disrupted fuel supplies to Tbilisi in the dead of last winter.

Nor did hundreds of thousands of Georgians living in Russia feel safe after
you imposed trade, travel and even postal bans on the country last fall,
following Tbilisi’s expulsion of four of your spies.

As to your question about NATO’s enlargement — “we have the right to ask:
against whom is this expansion intended?” — the answer, of course, is you.
You don’t bully the Baltic states the way you do Georgia, Ukraine and even
Belarus because the former are members of the European Union and have an
American security guarantee at their back.

Naglost: Speaking of feeling unsafe, a recent item in the Daily Telegraph
reports that a Russian court in the southern city of Novorossiysk condemned
nine members of the ethnic minorities-rights group Froda for having an
“unsanctioned” tea with two German students.

“We were told that, under the new law [on NGOs], any meeting of two or more
people with the purpose of discussing publicly important issues had to be
sanctioned by the local administration three days in advance,” Froda
director Tamara Karastelyova told the Telegraph. New legislation also
requires NGOs to receive official clearance for any planned events months in

At Munich, you airily dismissed any suggestion that Russian NGOs operate
under repressive conditions by claiming your registration requirements are
“not that different from registration systems in other countries.” Just what
other countries did you have in mind?

Naglost: “In the energy sector Russia intends to create uniform market
principles and transparent conditions for all,” you said on Saturday. “It is
obvious that energy prices must be determined by the market instead of

being the subject of political speculation, economic pressure or blackmail.”

Perhaps you define the words “market principles,” “transparent” and
“blackmail” differently in Russia than we do in the West. In December, the
Russian government offered transparently phony environmental reasons —
“unauthorized tree felling” — to force Royal Dutch Shell to relinquish
control of its $20 billion Sakhalin-2 oil-and-gas project.

In January, state-owned Gazprom used the threat of supply disruptions to
gain control over Belarus’s gas-pipeline network. This month, state
prosecutors filed new charges against former Yukos CEO Mikhail

Khodorkovsky that will keep him in a Siberian gulag past the 2008 elections.
Could you tell us just what might be in store for March?

Naglost: You savaged the U.S. for “an almost uncontained hyper-use of force”
in international relations and a “greater and greater disdain for the basic
principles of international law.”

That’s funny, because when it comes to the hyper-use of force it’s hard to
top what your men did in Chechnya. “During ‘Satchistkas’ [clean-up
operations], I killed all men,” one returning Russian soldier told the
American journalist Maura Reynolds.

“I did not feel the least bit sorry for them. They deserved it. I didn’t
listen when they begged for their lives or when their wives cried and begged
to have mercy on their husbands.” There are many other testimonials like

And then there is the unsolved killing of Alexander Litvinenko, British
subject. Not much of a mystery anymore as to where that polonium trail
leads: Scotland Yard has found traces of it everywhere Moscow businessman
Andrei Logovoi went in London. So why do you refuse British authorities a
chance to question him?

A man who knows you and your friends well observes that the world has seen
monarchies, dictatorships, military juntas and democracies, but “we have it
only in science fiction stories of a secret service coming to power.” Until
now. Its defining characteristic: naglost.
                             ABOUT BRET STEPHENS
Bret Stephens is a member of The Wall Street Journal’s editorial board. He
joined the Journal in New York in 1998 as a features editor and moved to
Brussels the following year to work as an editorial writer for the paper’s
European edition.

In 2002, Mr. Stephens, then 28, became editor-in-chief of the Jerusalem
Post, where he was responsible for its news, editorial, electronic and
international divisions, and where he also wrote a weekly column. He
returned to his present position in late 2004 and was named a Young

Global Leader by the World Economic Forum the following year.

Mr. Stephens was raised in Mexico City and educated at the University of
Chicago and the London School of Economics. He lives with his family

in New York City. He invites comments to
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22.                            “CRIMEAN ANTALYA”
 Ukraine’s ruling coalition trying to squeeze presidential powers in Crimea

Zerkalo Nedeli, Kiev, in Russian 10 Feb 07, p 4
BBC Monitoring Service, UK, Saturday, February 10, 2007

President Viktor Yushchenko is planning a visit to Ukraine’s Crimea to
introduce his new representative in the peninsula, an analytical weekly has

As a counterbalance to the president’s new representative, the ruling
coalition has appointed a former police officer from Donetsk Region,
Anatoliy Mohylyov, as Crimea’s new police chief. In addition, the coalition
is seeking to limit the representative’s powers in Crimea by tabling a
relevant bill in parliament.

The following is the text of an article by Valentyna Samar entitled “Crimean
Antalya” published in the Ukrainian newspaper Zerkalo Nedeli on 10 February:
subheadings have been inserted editorially:

The job of the president’s permanent representative in Crimea, which fell
vacant after the appointment of Henadiy Moskal as deputy chairman of the

SBU [Security Service of Ukraine] in early January, is still vacant.

It is reported that [President] Viktor Yushchenko will personally present
the leader of his southern outpost during his visit to the autonomy planned
for 22 February.

Meanwhile, on the other side of the power logjam, a replacement of staff at
the occupied strong point is proceeding almost instantaneously.

At the end of last week the chief of the Crimean main directorate [of
police], Viktor Khomenko, who had previously stated publicly his refusal
voluntarily to leave his post without weighty grounds for it, nevertheless
submitted his resignation.

What is more, he resigned from police agencies altogether. Gen Khomenko

told journalists that he was not going of his own free will.

After his refusal to follow the insistent wishes of the Interior Ministry
leadership (Minister [Vasyl] Tsushko and his first deputy, Korniyenko,
talked three times with Khomenko), a group of verifiers was sent to Crimea
headed by the deputy chief of the Interior Ministry main staff, the chief of
the inspection directorate, Usiyenko.

The results of the verification are not yet known, but Khomenko decided not
to wait. “I cannot and will not work in such conditions: they’re not giving
me any work,” the general said, adding that remaining at his post would mean
embarrassing his subordinates.

By the way, we recall that a week earlier at a news conference in Ternopil,
former [Interior] Minister Yuriy Lutsenko made public a transcript of
conversations in Crimea that took place before his dismissal.

It follows from the “Lutsenko tapes” and subsequent comments that the reason
for replacing the chief of the Crimean police may be the closure of a plant
that illegally produced vodka and provided Donetsk dealers with 5m hryvnyas
profit a month.

“If Khomenko doesn’t go, then we need to look for a way out, look for a roof
[protection] and move to another region,” people unnamed by Lutsenko said.
On Saturday [3 February] Ukrainian Interior Minister Vasyl Tsushko presented
members of the collegium of the Crimean police directorate with their new
chief – Anatoliy Mohylyov. Several people sitting in the room experienced a
complex gamut of feelings.

There had never been such a chief policeman in Crimea. Even under the
amusing Crimean President [Yuriy] Meshkov there was a general, albeit an
army general, at the then Interior Ministry. Anatoliy Volodymyrovych’s rank
is that of colonel and his last place of work in the system was chief of a
town police department.

True, the location of the town explains much in the new appointment, if not
everything – Makiyivka in Donetsk Region.

Soon after the Orange Revolution, Mohylyov resigned and moved into
“regional” politics – he became a deputy of the Makiyivka town council and
headed the standing commission for law and order. In connection with all the
aforesaid, the minister’s speech was received by Crimean policemen with
special trust.

“Today we have a chance to create a new police force that will really
respond to the interests of the whole of society. All strata of society have
an interest in this – politicians, state figures, businessmen,” Vasyl
Tsushko said. “We have to move away from orders and political games\.
[ellipsis as published] The police will operate outside politics.

Radical changes are coming to the Interior Ministry system, and today what
is planned may seem fantastic. But I guarantee you that it will all be put
into effect. If we all consciously want changes, then it’ll all happen for
us. If not all of us want it, it’ll happen anyway, but without some of you.”
Well, almost – whoever is not with us is against us. And, most importantly,
no politics.

Otherwise, the fact that the influential “regional” [member of ruling Party
of Regions] and party supervisor of Crimea, Anton Pryhodskyy, is registered
as domiciled in Makiyivka is a fantastic coincidence.

And this was discovered accidentally as a result of journalistic “digging”
into the question of who was behind the Antal-Krym firm, which was allocated
120.9 ha of land by the Crimean authorities in the region of Hurzuf for
construction of a golf club.

Antal-Krym was founded and registered in the village of Otradnyy (Greater
Yalta) only two months ago by the Kiev-based firm Antal-servis.

The founders of the latter are “two private persons: Kievite Heorhiy
Lebedynskyy and people’s deputy from the Party of Regions Anton Pryhodskyy,
registered as residing in Makiyivka in Donetsk Region.

Evil tongues say that he is the `minder’ of Crimea”, the publication
writes, aligning the material with information about the appointment of the
new chief of the police directorate under a single heading: “The Makiyivka
people are on the spree!”
                                   GOLF CLUB SCANDAL
The speaker of the Crimean parliament, trying on the hoof to suppress the
scandal with the agreement of the Council of Ministers over the location of
the golf club, is calling on Crimean political forces not to speculate “on
the land problems that exist in Crimea regarding individual housing
construction against a background of allocation of plots for the location of
such facilities”.

Who is arguing – there must be building in Crimea. Only who would explain
why “a very serious investor” is receiving 120 ha of land stock on the south
coast for commercial construction virtually gratis and why he doesn’t buy
it, preferably at an open auction?

It is also strange that nobody knew earlier about such a big and unnecessary
allotment of land to the essential oils plant in Alushta, otherwise it would
have been easy to avoid the problems of land seizure in this region.

The mass enthusiasm of Crimean bosses, not so much for the alien amusement –
playing golf – as the construction of clubs, is also curious.

Let me remind you that the [former] Orange [propresidential] prime minister
of Crimea, [Anatoliy] Matviyenko, was also involved in a scandal with the
Golf City project – an unknown firm laying claim to 6,500 ha on the west
coast, as a consequence of which the Crimean Prosecutor’s Office instituted
a criminal case.

The answer to the riddle is simple – under an “investment project” it is
easy and simple (having your own power in the region) to receive enormous
plots of land.

And even if, as in this case, there are nature reserves around – the Yalta
mountain forest and the Crimean nature reserves – as a consequence of
departmental expertise it turns out that the allotment of the land beloved
by Antal is not in the category of especially valuable land and in general
is located in a landslide area.

And although two thirds of it are occupied by pastures, shrubbery and arable
land, i.e. in every respect agricultural land, it is considered in the
Crimean republican land committee that there are no obstacles to locating a
golf club there!

But Crimea has already been through something similar. The piquancy of the
situation in question lies in an unprecedented affair. They trimmed the
village of Partyzanske into the land allotment for the future golf club!

The “new serfs”, residents of the village, appealed to the Prosecutor’s
Office of Crimea asking for an explanation as to how they should carry on

On Friday [9 February] Zerkalo Nedeli was told by the autonomy’s prosecutor,
Viktor Shemchuk, that the decision of the Crimean Council of Ministers on
agreeing the place for construction of the golf club had received protests.

(Here one recalls a once popular joke. At a government sitting the chairman
says: “Well, we’ve already done everything for ourselves: shared out the
land, privatized the property, distributed the deposits\. [ellipsis as
published] It’s time to think about people” A voice from the hall: “Well,
10,000 people for each of us – that’s probably sufficient”).
The president’s new permanent representative is due to appear in Crimea at
the height of the scandal. The secretariat head, [Viktor] Baloha, has
already listed the merits that Moskal’s successor should have – such a
person should be local, have prestige in Crimea and experience of work in

Two of those requirements are met by virtually all the main candidates named
in the press – former Prime Minister [Valeriy] Horbatov; the former head of
Chornomornaftohaz [Black Sea oil and gas company], [Ihor] Franchuk; the
present deputy permanent representative, [Valeriy] Probyy-Holova; the former
prime minister and chief of Sevastopol city, [Serhiy] Kunitsyn; the former
head of the SBU directorate, A. Kasyanenko.
But as far as prestige is concerned, one would like some more precise
criteria. Something like decency, professionalism, patriotism. In that case
there would be fewer claimants and their lobbyists.

But it is a matter of indifference to Crimean speaker [Anatoliy] Hrytsenko,
who successfully survived the war with Moskal, who will be appointed the
president’s new representative in the autonomy. This is what he said: “It’s
all the same to us”. However, it is thought that he is being somewhat

Otherwise, why is it that one of the claimants – Valeriy Horbatov – has
become a constant visitor to the sixth floor of parliament, the speaker’s

What is more, Crimean “regionals” decided to make themselves thoroughly
safe, just in case. As Hrytsenko reported, a draft law has been drawn up
introducing amendments to the law on the representation of the president in
Crimea: “Our specialists have made the conclusion that a number of
provisions of this law do not comply with the Constitution of Ukraine.

How can the president’s permanent representative today deal with questions
of the observance of the Constitution of Ukraine on the territory of the
autonomy, if the actual provision of the president’s representation
contradicts the Constitution of Ukraine!”

The draft law will be tabled for consideration by the Supreme Council of
Ukraine [parliament] by a people’s deputy from the Party of Regions and –
let there be no doubt – the amendments will be directed at cutting the
already symbolic powers of the president’s permanent representation in
And the personnel purge of the region meanwhile will continue. From Monday
[12 February] a new commission will arrive at the police directorate, again
with a high verifier at its head – I. Vasylyev, deputy chief of the

It is being said in the directorate that it is certain that dismissals await
deputies of the chief of the main directorate of the Interior Ministry and
heads of service.

It looks as if the theory of Prosecutor Viktor Shemchuk is starting to be
confirmed: he links the proposal of the prosecutor-general for him to be
transferred at his own request to another region with the desire of as yet
unnamed figures to return the former prosecutor of the autonomy, Volodymyr
Haltsov, to Crimea.

He is a Donetsk man and a protege of the former prosecutor-general, Henadiy
Vasylyev, who managed after the presidential elections “to leave” Crimea,
thanks to administrative sleight of hand, by scrapping the post of Crimean
prosecutor and introducing the post of prosecutor – deputy

According to our information, Haltsov intends to be restored to office
through the court. If that is the case, and the court that he has chosen is
precisely Kiev’s Pecherskyy district court, then nobody will be surprised if
the “correct” decision is taken and then there should be a long drawn-out
epic to remove Shemchuk.

He still does not intend to leave his post voluntarily ahead of the time
stipulated by the constitution and without weighty grounds.

It can be boldly assumed that after the protest against the decision by the
Crimean Council of Ministers on the golf club (especially if people’s deputy
Pryhodskyy really has a personal interest in the matter), the manoeuvres to
oust Shemchuk will have to be stepped up.

The prosecutor is already stating through the press that if the process
takes on an irreversible nature and his subordinates are subjected to
repressions and pressure, he will not stay quiet – he will name both the
names and the firms of those people who are trying to get him dismissed.

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
23.               “GAZPROM BELIEVED IN TEARS”
Ukraine obliged to use middlemen in gas purchases says energy minister

INTERVIEW: With Ukrainian Fuel & Energy Minister Yuriy Boyko
BY: Mariya Bondar and Roman Kulchynskyy
Kontrakty weekly newspaper, Kiev, in Ukrainian 5 Feb 07, pp 8-12
BBC Monitoring Service, United Kingdom, Wed, Feb 07, 2007

Ukrainian Fuel and Energy Minister Yuriy Boyko has explained why
Gazprom cannot sell Turkmen gas without middlemen. Speaking in an
interview with a business magazine, he denied any connection between
RosUkrEnergo gas trader and controversial Russian businessman Semen

Boyko said that Naftohaz Ukrayiny did not lose much by allowing
UkrGazEnergo trader to sell Turkmen gas to industrial consumers, and that
Naftohaz made losses by selling cheap domestic gas to industrial customers
and expensive imported gas to the population at fixed rates.

The following is an excerpt from the interview that Boyko gave to Mariya
Bondar and Roman Kulchynskyy entitled “Gazprom believed in tears”
published in the Ukrainian weekly Kontrakty on 5 February. Subheadings
are as published:

[Correspondent] Have definitive agreements been reached on gas supplies
to Ukraine in 2007?

[Boyko] A contract has been concluded between RosUkrEnerho [Swiss-
registered middleman company, RUE] and UkrGazEnergo [Ukrainian gas
supplier, UGE] (50 per cent – RUE, 50 per cent – Naftohaz Ukrayiny
[Ukrainian oil and gas company] – Ed.).

It envisages in particular that in 2007 RUE will supply Ukraine with 55bn
cubic metres of Central Asian gas at a price of 130 dollars per 1,000 cu.m.

The formula of the gas price for Ukraine is as follows: 100 dollars per
1,000 cu.m. on the Turkmenistan-Uzbekistan border (or 80 dollars per
1,000 cu.m. on the Uzbekistan-Kazakhstan border) plus transit to the
Russo-Ukrainian border – approximately 30 dollars per 1,000 cu.m.

[Correspondent] What will the tariff be for transit of Russian gas through
Ukrainian territory?

[Boyko] The rate is 1.6 dollars per 1,000 cu.m. per 100 km. In the agreement
signed by our predecessors, the tariff was fixed for five years, but the
price of gas for Ukraine was fixed only for six months.

[Correspondent] Why are transit rates for independent gas traders working in
the Russian Federation twice as high as the ones that Gazprom [Russian gas
monopoly] has in Ukraine?

[Boyko] Russia’s independent extraction companies have an alternative:
either to sell the gas to Gazprom, or to make capital investment in the gas
transport system, or to pay for the transit.

We will be conducting a similar policy as well: if independent economic
entities want to sell gas to industrial enterprises, let them finance the
overhaul of the gas transport system. This is normal practice underpinned
by relevant government decisions.

We cannot raise the transit price for Gazprom under the contracts concluded
by our predecessors. I don’t have warm feelings for the management of the
NJC [National Joint-stock Company] Naftohaz Ukrayiny that worked prior to
the arrival of the government of [Prime Minister Viktor] Yanukovych, but we
have to come to terms with what they signed.

The agreement can, of course, be torn up, but we want Ukraine to be
respected, so we have to fulfil the conditions of the contract.

[Correspondent] The cost of transporting gas directly depends on its price –
5.5-5.8bn cubic metres of energy sources are spent each year on the work of
compressor stations of the Ukrainian gas transport system. How will the rise
in gas prices without an appropriate rise in the transit tariff affect the
financial state of Naftohaz Ukrayiny?

[Boyko] That’s a good question. I hope that the cost of the technological
gas that the NJC uses for transporting Russian gas will not increase.

[Correspondent] How much will that gas cost?

[Boyko] Cheaper than 130 dollars per 1,000 cu.m. I assume that it will be
approximately at the level of the price at which Belarus buys gas. But
negotiations on this question are still ongoing.

[Correspondent] What prevented the election promises being fulfilled and
agreement being reached with Gazprom on gas supplies at a price of 50
dollars per 1,000 cu.m. on the basis of an intergovernmental protocol?

[Boyko] It was easy to sign an intergovernmental protocol, but Gazprom
agreed to sell gas to us at a price of 265 dollars per 1,000 cu.m. It is
obvious that Ukraine did not need that sort of gas. And the Russian
government is not obliged to ensure Ukraine’s gas balance.

At present our gas relationship with Russia is regulated by 18 contracts
and a range of intergovernmental agreements and other documents.

The basic agreement – about long-term cooperation in the area of transit
that fixed a minimum volume of gas that we have to transport in a westerly
direction – is for 10bn cubic metres. It is still in operation.

In 2004 another contract was signed that was important for us, under which
the debts of the NJC Naftohaz Ukrayiny to Gazprom were cleared.

I remind you that an addendum to that contract envisaged an advance payment
of 26bn cubic metres of gas for Ukraine at a price of 50 dollars per 1,000
cu.m., on account of which we had to transport Russian gas at a preferential
rate for five years.

And all our problems in the gas sphere started from the fact that this
agreement was breached. [Passage omitted: Gazprom’s differing gas prices
for various CIS countries]
                                         INTO THE OPEN
[Correspondent] It is known that Gazprom has contracted for the whole of
Turkmen gas starting from 2007. Whose gas will RUE be supplying to
[Boyko] Turkmen.

[Correspondent] But surely the throughput capacity of the Uzbek gas
transport system is limited – about 34bn cubic metres a year. How will
RUE transport Turkmen gas to Ukraine?

[Boyko] I’ll explain. In 2003 Turkmenbashi [former Turkmen President
Saparmyrat Niyyazow] sold all the gas to Gazeksport (a Gazprom affiliate –
Ed.) starting from 2007 for 25 years ahead. If I’m not mistaken, the
agreement was signed in April.

It was a political decision. When we understood that from 2007 we would not
be getting Turkmen gas, which accounted for 50 per cent of Ukraine’s gas
balance, we managed to reach agreement with the Russians that we would buy
gas back from them on the border of Turkmenistan and Uzbekistan.

The Russians put forward a condition in response: a joint enterprise would
be the operator for the Uzbekistan – Kazakhstan – Russia transit. It was
precisely then that RUE arose. It bought gas with a 2-per-cent margin for

The NJC Naftohaz Ukrayiny concluded an agreement that it would buy gas
from RUE on the Ukrainian-Russian border. In this way we receive Turkmen
gas through Gazeksport and RUE.

[Correspondent] What prevents us from simplifying the scheme and buying
Asian gas directly from Gazprom?

[Boyko] At one time Gazprom was faced with a strategic question: to expand
the throughput capacity of Central Asian gas pipelines (in order to get gas
from there for the domestic market or for export) or to invest money in the
construction of the Russian Yamal – Europe trunk line.

The Russians decided that they were not interested in investing money in the
gas transport networks of Kazakhstan and Uzbekistan at Gazprom’s expense.

At the same time, they deemed it advisable to create a joint enterprise
(which would include parties interested in Asian gas) in order to pump gas
from Central Asia and expand local transit capacities.

[Correspondent] Do you know the co-owner of RUE, Dmytro Firtash?

[Boyko] Yes. I met Firtash when he was a trader and supplied gas from
Turkmenistan. He was in charge of gas transit via Uzbekistan, Kazakhstan
and Russia.

[Correspondent] The Uraltransgaz company [Gazprom division], which used
to deal with supplies of Turkmen gas to Ukraine, fulfilled the same
functions that RUE is now fulfilling. Why was the middlemen changed?

[Boyko] No, Uraltransgaz dealt exclusively with the transit of Turkmen gas
and did not have obligations regarding the development of the gas transport
system of Uzbekistan and Kazakhstan.

Unlike Uraltransgaz, which was a simple operator, RUE can attract credit
resources and invest funds in long-term projects. It was all the same to the
Russians who was to work with the Asian gas, but the Uzbeks and Kazakhs
needed a new operator.

[Correspondent] Was Firtash a co-owner of Uraltransgaz?
[Boyko] I don’t know, but he was the head of the company.

[Correspondent] What is the role of [controversial Russian businessman]
Semen Mogilevich in the gas business on post-Soviet territory?

[Boyko] All talk about Mogilevich and gas is political insinuations. Former
SBU [Security Service of Ukraine] Chairman Oleksandr Turchynov shouted
loudest of all about Mogilevich.

If he had had any proof in support of his allegations, he would not have
organized exposure news conferences, but would have instituted a criminal
case, or at least tried to bring all the criminals into the open. [Passage
omitted: outlining numerous recent meetings with Gazprom]

[Correspondent] With whom are you cooperating in Turkmenistan after the
death of Saparmyrat Niyyazow?

[Boyko] The Ukrainian government maintains relations with officials who,
according to the Constitution of Turkmenistan, are carrying out the duties
of the state’s leadership.

[Correspondent] What will the gas price be for Ukraine in 2008?
[Boyko] Acceptable for the economy.
                            STRENGTH OF LEGISLATION
[Correspondent] What is your attitude to the idea of creating an
international gas transport consortium to run the Ukrainian gas transport

[Boyko] First of all let’s define the concepts. A consortium in the form in
which it was created with the participation of the first Viktor Yanukovych
government boils down to completing construction of two non-functioning gas
pipelines (Torzhok-Dolina and Ivatsevichi-Dolina) and also an uncompleted
200 km gas pipeline.

The guideline throughput capacity of the consortium pipeline amounts to
5-10bn cubic metres of gas a year. That was all that Ukraine agreed to; the
documents did not contain a single word about transferring the running of
the existing gas transport system.

[Correspondent] The deputy chairman of the board of Gazprom, Aleksandr
Medvedev, in an interview with Kontrakty, named control of Ukraine’s gas
transport system as a strategic aim of the Russian monopolist.

[Boyko] I know about Gazprom’s strategic aim not only from interviews.
During the first negotiations the Russians did indeed propose joint running
of the Ukrainian gas transport system. But that is impossible, both from the
political and the juridical point of view.

Therefore we decided on the idea of building a new gas pipeline that will
belong to the consortium. And the fact that their aim is control…
[ellipsis as published] We also have an aim: to extract Russian gas in

[Correspondent] The Russians don’t allow even European companies to
extract their gas. What are the chances that Ukraine will get such a
[Boyko] Big.

[Correspondent] How did you convince the Gazprom management?
[Boyko] It wasn’t I who did the convincing, nor Gazprom representatives.
Agreements in principle were reached at prime minister level.

[Correspondent] And what arguments did our prime minister use as far as
your information goes?
[Boyko] Weighty ones.

[Correspondent] By the way, why did Gazprom not get control of Ukraine’s
gas transport system in 2006, when the NJC was on the verge of bankruptcy?

[Boyko] The Russians are pragmatic: they understood perfectly well that it
was impossible. There is no legislative basis in Ukraine that would allow
them to realize their aim and that was understood back in 2004.

[Correspondent] At the same time, Gazprom gained control over the gas
transport system of almost all CIS countries and even some East European
states. Do the Russians really view Ukrainian legislation as a serious

[Boyko] Of course, I can’t comment on Gazprom’s agreements with the
countries that have transferred part of their gas transport systems to the
Russian side. I believe that it’s enough for Gazprom that it has entered the
Ukrainian market.

This is a normal, civilized situation. For example, in Europe, in particular
on the Austrian market, there is a joint enterprise of OMV and Gazprom
operating, and in Italy of ENI and Gazprom.

It is understandable that a gas owner would try to get to its end user, but
we have our national interests. This is a plus, since a company coming on to
the market understands its demands and problems, conducting a balanced
policy. And so, I don’t find anything dreadful in such cases.

However, Ukraine’s trunk pipelines are state property, and I don’t see any
possibilities, not only of changing their owner, but also of transferring
them to someone to run.

[Passage omitted: it would be prohibitively expensive for enterprises to buy
gas direct from Gazprom]
                                      CREDIT HISTORY
[Correspondent] What are the losses of the NJC Naftohaz Ukrayiny as a result
of the fact that the joint venture UGE has switched over to supplying gas to
industrial consumers?

[Boyko] Such a conclusion is a typical mistake. The resale of imported gas
never brought super-profits. Back in the times when the financial state of
the NJC was considerably better and the cost of imported gas on the Russian
border was 58 dollars per 1,000 cu.m., Naftohaz sold gas to industrial users
at a price set by the NERC [National Energy Regulatory Commission] of 63
dollars per 1,000 cu.m.

Considering the credit provided to individual facilities, taxes and payments
made when buying and selling currency etc, the net profit in this sector
amounted to about two or three dollars per 1,000 cu.m.

The NJC was selling 30bn cubic metres a year to industry. Let’s multiply
that figure by 2.5 dollars, divide by 1,000 cu.m. and we get 70m dollars a

More profitable operations for the NJC are gas extraction, sale of petroleum
products, transit of gas (if it is not subject to tax), and, of course,
re-export, which was banned by the [Yuliya] Tymoshenko government on 15
February 2006. After all, it was precisely on account of revenues from
re-exports that Ukraine restrained the price rises for private consumers.

Not many people know that in 2004 we sold 6bn cubic metres of Turkmen
gas in Europe, netting as a result 400m dollars of net profit.

Thanks to this, Ukraine survived the orange events [revolution that brought
President Viktor Yushchenko to power] unscathed, when, for a period of
three months, nobody was paid for gas at all.

As soon as they banned re-exports and cancelled the accords with the Russian
Federation reached in 2004, the financial condition of Naftohaz sharply
deteriorated. [Passage omitted: more on the finances of Naftohaz]

[Correspondent] According to the SBU’s information, the Naftohaz debt
obligations were bought up by companies connected with Gazprom. Do you
know about this?

[Boyko] No, your sources are trying to turn an economic question into a
political one.

[Correspondent] But you won’t deny that the conditions under which Naftohaz
was receiving credits allow the creditors to sell on the debt obligations,
informing the debtor about it post factum?

[Boyko] The NJC’s internal credit obligations can indeed be resold. But it
is a matter of insignificant amounts… [ellipsis as published] In any case,
we have no grounds for talking about a concentration of Naftohaz debt
obligations in a single pair of hands.

Nor are there grounds for saying that someone is deliberately and
systematically buying up these obligations with the aim of putting pressure
on the NJC or the government.

[Correspondent] Has the Naftohaz finance plan for 2007 been approved?

[Boyko] No. Only at the end of December the government passed a
resolution about gas prices for the public, and so neither the company, nor
the Finance Ministry have been able until recently to start work on the
finance plan. [Passage omitted: Boyko’s background]         -30-

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
24.                    IN SEARCH OF THE VANISHED
His mother’s relatives hailed from the town of Bolechow, now in Ukraine.

BOOK REVIEW: By Sara Dowse
Canberra Times, Canberra, Australia, Feb 10, 2007

The Lost by Daniel Mendelsohn

THE DIFFICULTY I’ve had reviewing Daniel Mendelsohn’s The Lost is due
to the fact that it’s so much like the book I wanted to write myself. It was
almost a decade after I set about tracking down the story of vanished
relatives that Mendelsohn, a New York critic and classicist, embarked on

his search for six of his own.

Ten years had made a world of difference. By that time the genealogical
industry had consolidated, facilitated by the web, which made access to
documentation and places far easier than it had been.

Another aspect of the industry was the growth of an army of fixers, like the
hilarious Sasha in Jonathan Safran Foer’s novel Everything is Illuminated,
and the resourceful, less excitable Alex in this true account of

Before I leave you with the impression that my review is saturated with
envy, let me make it plain that I am full of admiration for his tenacity and
the skill deployed in braiding together the many strands of his story.

But most of all, I loved his prose, beginning with what is arguably the best
opening sentence I’ve come across in a book, fiction or otherwise: ”Some
time ago, when I was six or seven years old, it would occasionally happen
that I’d walk into a room and certain people would begin to cry.”

These were his mother’s relatives, the Jaegers, who hailed from a town in
Polish Galicia, in what had previously been part of Austria-Hungary and now
is in Ukraine.

For hundreds of years Bolechow’s inhabitants were evenly divided between
Poles, Ukrainians and Jews. That is, before the German occupation during
World War II.

Early last century, three Jewish brothers and three sisters left Bolechow
for America, but the eldest brother returned, having not succeeded in
establishing himself there. Back in his home town he flourished, but as
anti-Semitism deepened and Nazism advanced eastward he began to realise
his mistake.

He needed money to get his family out of Europe, and begged for it from his
American relatives, but either it wasn’t forthcoming or was too late or not
enough. Shmiel Jaeger, his wife and three daughters never did escape.

Was it lack of funds, insufficient attention, or something more sinister
that prevented those relatives, safe in America, from helping?

Thus Mendelsohn’s obsession, fuelled by a sense of guilt as well as a
burning curiosity, began to take hold. He didn’t have much to go on the
stories his grandfather had told him before his death, the letters and
photos he left.

Mendelsohn began by interviewing other relatives and Bolechow landsmen. He
searched through databases on the Net. (The Mormon attempt, for one, to
establish lines of descent from biblical times has proved a boon to amateur
and professional genealogists.)

He made the first of his visits to Bolechow, now Bolechiv, and spoke with
witnesses and their descendants who could tell him something of his
great-uncle’s fate and that of his wife and four daughters.

Eventually Mendelsohn was able to get his siblings interested, and on
various other journeys to the Ukraine, Poland, Israel, Sweden, Denmark and
Australia some of them joined him. Most significant of these collaborations
was with his younger brother Matthew, a photographer, who took many of the
photographs in the book.

Mendelsohn had worked for some time with the Greek and Roman texts, and
the book’s structure shows their influence, with stories opening out into
other stories, circling and backtracking as they move forward.

Yet for his primary framework he chose what was for him, relaxed in his
observance, more recent territory the first book of the Old Testament, or
the Tanach as it is known to Jews. At several intervals he interposes
analyses of the stories, or parashats, of Genesis into his own narrative.

Fascinating in themselves, these exegeses, drawing on the works of Rashi,
the 11th-century commentator, and Richard Elliot Friedman, a contemporary
scholar, lend powerful resonance to Mendelsohn’s text.

The vagaries of memory and the meaning of time form major themes, and
because of the age of his witnesses the book is both a tussle with fading
memories and a race against time.

For his inspiration here Mendelsohn takes the Jew who was so intrigued by
these phenomena that he penned a modern classic about them, so the prose I
mentioned earlier takes much of its depth and sinew from Marcel Proust.

I have read many Holocaust stories, so many heartbreaking stories, about
people, places, whole cultures lost. All have been chilling, all absorbing,
but their gravitas comes from their subject, testimony bar none to the human
capacity for evil.

Not all would succeed as Mendelsohn’s has on literary grounds alone. The
combination of biblical echoes and sensitive, sinuous prose has put The Lost
in a sub-class of its own.

Did Mendelsohn find the answer he was seeking? Yes, and no. What he did
learn was remarkable enough, and readers will find much to ponder in his

As for me, it was of no little moment to be reminded yet again that it is
possible for people of different origins or religious persuasion to live in
relative harmony, until some demonic force enters their world and shatters
that precious coexistence.                               -30-
NOTE: Sara Dowse is a novelist and reviewer, and lives in Sydney.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
25.                               THE PLOT THICKENS
   New Book Promises Intriguing Twist to Epic Tale of ‘Doctor Zhivago’

By Peter Finn, Washington Post Foreign Service
The Washington Post, Washington, D.C.
Saturday, January 27, 2007; Page C01

[“The Laundered Novel”
By Ivan Tolstoy (not yet released)]

MOSCOW – Into one of the most sordid episodes in Russian literary history,
the Soviets’ persecution of Boris Pasternak, author of “Doctor Zhivago,” a
Russian historian has injected a belated piece of intrigue: the CIA as
covert financier of a Russian-language edition of the epic novel.

Ivan Tolstoy, who is also a broadcaster for Radio Liberty and Radio Free
Europe, writes in a forthcoming book that the CIA secretly arranged for the
publication of a limited Russian-language edition of “Doctor Zhivago” in
1958 to help Pasternak secure the Nobel Prize in Literature that year.

“Pasternak’s novel became a tool that was used by the United States to teach
the Soviet Union a lesson,” Tolstoy said in a telephone interview from
Prague, where he works as a Russian commentator for the U.S.
government-funded radio stations. The novelist knew nothing of the CIA’s
action, according to Tolstoy and the writer’s family.

Tolstoy said his book, “The Laundered Novel,” is based on more than a
decade of research and will be released later this year, the 50th
anniversary of the publication of “Doctor Zhivago.” He previewed its

contents in a recent lecture in Moscow.

A CIA role in printing a Russian-language edition has been rumored for
years. Tolstoy offers the first detailed account of what would rank as
perhaps the crowning episode of a long cultural Cold War, in which the
agency secretly financed literary magazines and seminars in Europe in an
effort to cultivate anti-Soviet sentiment among intellectuals.

A CIA spokesperson said the agency would have no comment on Tolstoy’s
account. The agency’s files on its cultural underwriting in Europe remain
closed, historians said.

An official at the Swedish Academy, which chooses the Nobel winner in
literature, said that materials on the prize committee’s internal
deliberations are sealed for 50 years. The Pasternak file will not become
public until 2009.

The CIA connection has dismayed Pasternak’s family and sparked a feud with
Tolstoy, himself the grandson of an acclaimed Soviet-era novelist, Alexei

“It is a detail hardly worth mentioning, a cheap sensation,” said Yevgeny
Pasternak, the author’s 84-year-old son and an editor of his collected
works, in an interview at his Moscow apartment. “I can add that my father
knew nothing about this game. There is no doubt he would have won the
prize anyway — in 1959.”

Pasternak, also a renowned poet, finished “Doctor Zhivago” in 1955 and
submitted the novel to a Soviet publishing house for consideration.

The story of a man torn between two women against the backdrop of the
Russian Revolution was rejected. But Soviet-era documents published in
2001 show that even in unpublished manuscript form it was hardly ignored.

“Boris Pasternak’s novel is a malicious libel of the USSR,” wrote Soviet
Foreign Minister Dmitry Shepilov in an August 1956 memo to members of the
Central Committee of the Communist Party. In a memo of its own, the KGB
offered the opinion that “a typical feature of his work is estrangement from
Soviet life and a celebration of individualism.”

Other Soviet papers show that the KGB knew that Pasternak was looking
abroad as well and had reached a deal with the Italian publisher
Giangiacomo Feltrinelli to issue the novel in Italian.

In the months leading up its publication date in late 1957, the Soviet
authorities called on Italian communists to urge Feltrinelli, himself a
communist, not to go forward with it.

Pasternak was pressured into sending Feltrinelli telegrams telling him he
was withdrawing his consent for publication. But Pasternak sent separate,
secret letters to Feltrinelli urging him to go ahead despite what his
officially encouraged cables might have said, according to extensive
correspondence between the two that is quoted in a memoir of Feltrinelli
by his son, Carlo.

In early November 1957, just days after Feltrinelli received a letter from
Pasternak scolding him for lack of decency because of his determination to
publish, Pasternak secretly wrote how happy he was that the Italian was not
“fooled by those idiotic and brutal appeals accompanied by my signature (!),
a signature all but false and counterfeit insofar as it was extorted from me
by a blend of fraud and violence.

“We shall soon have an Italian ‘Zhivago,’ French, English and German
‘Zhivagos’ — and one day perhaps a geographically distant but Russian

Pasternak had been nominated for the Nobel Prize for his poetry every year
between 1946 and 1950. The novel, which after the Italian edition appeared
in English and French, received almost universal acclaim abroad, rekindling
interest in Pasternak as a potential laureate.  In 1958, he was nominated
again for the prize by the previous year’s winner, the French writer Albert

But there was still no Russian-language edition of “Doctor Zhivago,” and the
Swedish Academy required that any work under consideration be submitted
in its original language, Tolstoy said. Soon a Russian “Zhivago” appeared at
the academy, bearing the name of Feltrinelli as publisher. But the Italian
house had not printed it.

In the memoir, Carlo Feltrinelli wrote that his father had suspected a CIA
hand in the pirated edition. The agency “allegedly photographed the
typescript at the Malta airport when the plane Feltrinelli was traveling in
made a bogus emergency landing,” the younger Feltrinelli wrote in his
book “Feltrinelli: A Story of Riches, Revolution, and Violent Death.”

Later, in a 1970 article for the Sunday Times of London, the elder
Feltrinelli wrote that “while the literary world was acclaiming ‘Doctor
Zhivago’ and its author, I became aware of the first signs of a battle
between me and a number of persons and institutions (all connected with
the same circle of anti-Soviet activities that in one way or another were
connected to the CIA). It would seem that someone had printed an edition
at the request of some Russian emigres in Paris who had certain ties with

According to Tolstoy, among those seeking a Russian-language copy in
1958 was Nikolai Nabokov, secretary-general of the Congress for Cultural
Freedom. The organization, based in Paris, was exposed in the 1960s as
a leading vehicle of the CIA’s attempt to woo anti-Soviet intellectuals in

Carlo Feltrinelli remains skeptical that any such secret publication was
aimed at the judges in Stockholm. “If there were some fake copies, if there
was some CIA edition, I still don’t see the connection with the Nobel
Prize,” he said in a phone interview from Milan, where he runs the company
founded by his father.

Tolstoy said that he tracked down the Russian emigre who typeset the book,
found the publishing house that printed it, and interviewed ex-CIA
operatives to unravel a web of agency deceptions behind the publication.

The forthcoming book “has all concrete details,” said Tolstoy, who added
he was not going to steal his own thunder by revealing all his evidence in
advance of publication.

The Soviets, certainly, had no doubt that the writer had Western promoters.
“In the summer of 1958, a large campaign to award Pasternak a Nobel prize
was initiated by Americans and launched in the West,” wrote a KGB official
in a memo to the Central Committee of the Communist Party. “All reactionary
and anti-Soviet forces took an active part in this campaign.”

Pasternak won the prize on Oct. 23, 1958, “for his notable achievement in
both contemporary poetry and the field of the great Russian narrative

“Infinitely grateful, moved, proud, amazed and confused,” wrote Pasternak
in a telegram hurriedly sent to the Swedish Academy. “He was very happy
for a few hours,” recounted his son.

But Soviet authorities quickly unleashed a torrent of abuse on the
celebrated author. He was forced to turn down the honor and was expelled
from the Writers’ Union, where 29 members, including some old
acquaintances, spoke against him.

Tolstoy argues that the Nobel Prize kept Pasternak out of prison because
such a punishment would have been too embarrassing internationally for the
Soviets. “The KGB wanted to destroy him,” said Tolstoy. “A Russian
publication and a Nobel Prize were necessary to save him.”

That is an interpretation that Pasternak’s son contests. He said the
writer’s health, already fragile, buckled under the official onslaught.
Boris Pasternak died of cancer in 1960 at the age of 70.

“Some of his friends believed that it would be fine if he got the prize one
year later — the scandal would be over and everything would be quieter,”
said his son, who accepted the honor on his father’s behalf in 1989. “I
don’t know.”                                        -30-

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