Monthly Archives: May 2007

AUR#850 May 31 Sunflower Growers Gain; More Wheat Export Restrictions?; WTO Legislation?; Lawmakers Defy President, Fail To Pass Legislation; Estonia

                 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       

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
       Argentina is the world’s second- largest exporter of the oil after Ukraine.
            Minnesota-based Cargill is the world’s largest oilseed crusher, and
             is the biggest sunflower oil exporter in both Argentina and Ukraine.
By Matthew Craze in Buenos Aires, Bloomberg
New York,  New York,  Wednesday, May 30, 2007
                         FOR RUSSIAN EXPORTS SAYS ANALYST
                              Having hard time catching up with Ukraine
Interfax – Food & Agriculture, Moscow, Russia, Wed, May 16, 2007


                    OUTLOOK TWICE TO 400,000 TONS IN 2006/2007
Ukrainian News Agency, Kyiv, Ukraine, February 20, 2007
               The move gives confirmation that Ukraine’s crop “is in trouble,”
By Tom Polansek, Dow Jones Newswires
Chicago, Illinois, Wednesday, May 30, 2007

By John Marone, Kyiv Post News Editor, Kyiv, Ukraine, Wed, May 30 2007

                        EXPORT QUOTAS FOR GRAIN IN UKRAINE
Interfax Ukraine Business Express, Kyiv, Ukraine, Monday, May 21, 2007

By Pavel Polityuk, Reuters, Odessa, Ukraine, Wed, May 30, 2007

Ukrainian News Agency, Kyiv, Ukraine, Wed, May 30, 2007

UkrAgro Outlooks and Comments, UkrAgroConsult
Kyiv, Ukraine, Wednesday, May 30, 2007


Ukrainian News Agency, Kyiv, Ukraine, Wednesday, May 30, 2007

                              ON UKRAINE’S ACCESSION TO WTO
Ukrainian News Agency, Kyiv, Ukraine, Wed, May 30, 2007

                Agriculture, Wages and Pensions, Pre-Term Elections, WTO
UNIAN News, Kyiv, Ukraine, Wednesday, May 30, 2007

                             TO APPROVE WTO BILLS QUICKLY
TV 5 Kanal, Kiev, in Ukrainian 1400 gmt 30 May 07
BBC Monitoring Service, UK, Wednesday, May 30, 2007

                                  WEDNESDAY, MAY 30, 2007
Ukrainian News Agency, Kyiv, Ukraine, Tuesday, May 29, 2007

                       Company has two production lines in the Ukraine
Interfax Central Europe, Warsaw, Poland, Wed, May 30. 2007

Interfax Ukraine Business Panorama, Kyiv, Ukraine, Tue, May 29, 2007

Interfax Ukraine Business Panorama, Kyiv, Ukraine, Tue, May 29, 2007

18.                  NASDAQ TO COME TO UKRAINE BY MERGER, Kyiv, Ukraine, Tuesday, May 29, 2007 

By Dario Thuburn, Agence France Presse (AFP)
Kiev, Ukraine, Wednesday, May 30, 2007

Reuters, Kiev, Ukraine, Thursday, May 31, 2007

EIU Politics – Country News Analysis
The Economist Intelligence Unit Limited, NY, NY, Tue, May 29, 2007
COMMENTARY: By Stephen Velychenko, University of Toronto
Action Ukraine Report (AUR) #850, Article 22
Washington, D.C., Thursday, May 31, 2007
23.                               BUILDING ITS OWN DESTINY
                      Ukraine Seeks a Place Between Russia and Europe
ANALYSIS & COMMENTARY: By Paul Abelsky, Moscow, Russia, Wednesday, May 30, 2007
24.                              UKRAINE: PEACE DIVIDENDS
       Yanukovich got the date he wanted & achieved a victory for his image.
Kommersant, Moscow, Russia, Monday, May 28, 2007
                                 WANTS ‘PLENITUDE OF POWER’
EDITORIAL: Nezavisimaya Gazeta, Moscow, Russia, Tue, May 29, 2007
    Digital Fears Emerge After Data Siege, Somebody Orchestrated This Thing
By Mark Landler and John Markoff, The New York Times
New York, New York, Tuesday, May 29, 2007, Page 1
Ukrainian National Information Service (UNIS)
Washington, D.C., Wednesday, May 30, 2007
        Argentina is the world’s second- largest exporter of the oil after Ukraine.
             Minnesota-based Cargill is the world’s largest oilseed crusher, and
            is the biggest sunflower oil exporter in both Argentina and Ukraine.

By Matthew Craze in Buenos Aires, Bloomberg
New York,  New York,  Wednesday, May 30, 2007

BUENOS AIRES, Argentina – Sunflower growers from Argentina to
Ukraine are benefiting as companies such as McDonald’s Corp and
PepsiCo Inc. switch from saturated oils to healthier alternatives to combat
heart disease.

The price of sunflower oil, used in margarine and mayonnaise, is trading
close to an eight-year high of $800 a ton, Thomas Mielke, director of
Germany-based industry consultant Oil World ISTA Mielke, said today at
a meeting of the Argentine Sunflower Association in Buenos Aires.

Fast-food restaurants such as McDonald’s are using more monounsaturated
and polyunsaturated fats, such as sunflower oil, which help reduce

Argentina is the world’s second- largest exporter of the oil after Ukraine.

“There is a trend here; it’s going to go up a lot,” Mielke said in an
interview today. The premium that producers receive from selling
sunflower-seed oil over soy oil may rise this year, he said.

PepsiCo Inc.’s Frito-Lay unit can start advertising the heart benefits of
foods made with unsaturated corn and sunflower oils, spreads and
shortenings, the U.S. Food and Drug Administration said May 25.

Aramark Corp., which runs concession stands at 13 Major League Baseball
stadiums, has eliminated trans-fats in the cooking oils it uses.

It now uses corn and sunflower oils at concession kitchens including New
York’s Shea Stadium. Many major league baseball players munch sunflower
seeds for energy during games.

“We’ve found a new niche,” Ignacio Lartirigoyen, president of Argentina’s
Sunflower Association, said yesterday during the conference.
                                     GLOBAL SHORTAGE
The world needs growing supplies of sunflower seeds from Argentina to avoid
a global shortage, Mielke said. Argentina produced 3.9 million tons of the
oilseed last year, compared with 6.1 million tons in 1999, according to the
U.S. Department of Agriculture.

Global sunflower-seed oil production may decline 6 percent this year to 10.5
million tons, as producers of other edible oils derived from soybeans, palms
and rapeseeds increase production to meet new demand for biofuels, said
Francisco Morelli, manager of Cargill Inc.’s sunflower unit in Argentina,

Minnesota-based Cargill is the world’s largest oilseed crusher, and is the
biggest sunflower oil exporter in both Argentina and Ukraine.
Ukraine’s government is seeking to convince farmer unions to replace some
sunflower crops with other oilseeds such as rapeseed to supply the European
Union with the commodities needed to make biodiesel.

Argentina’s sunflower industry almost collapsed in 1999 as sunflower oil
prices traded below soy oil, prompting farmers to switch crops, Lartirigoyen
said. Soybean growers also get more revenue than sunflower growers from
protein-rich pellets used for cattle feed.

Sunflower oil is a “better” source of monounsaturated oil, along with corn
oil and soybean oil, the American Heart Association said in an April 10

Palm oil, the world’s most-used edible oil, contains more saturated fat
which raises cholesterol. Monounsaturated and polyunsaturated fats can
lower cholesterol levels.

About 90 percent of sunflower oil contains unsaturated fats, according to
Monica Melgarejo, a researcher at Argentine agriculture company Molinos
Rio de la Plata SA, which said it will prioritize crushing of high

“It’s a growing market,” said Domingo Massigoge, a farmer who grows
sunflowers on his 300-hectare (741 acre) farm in southern Buenos Aires
province. “The oil is of a very high quality, and it’s good for your
health.”                                         -30-
CONTACT: Matthew Craze in Buenos Aires at .

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
                      Russia having hard time catching up with Ukraine

Interfax – Food & Agriculture, Moscow, Russia, Wed, May 16, 2007

MOSCOW – A significant increase in the cost of sunflowers and vegetable oil
seen in Russia recently has exacerbated the problem of a lack of capacity
for their export,WJ InterAgro analyst Vladimir Petrichenko said.

“The sharp increase in prices was the result of an increase on the world
market due to constantly rising demand for sunflowers and vegetable
oil,including as a result of an expansion in the production of biofuel,” he
told Interfax.

Sunflower prices in Russia have risen by almost 600 rubles since the start
of April to 7,400 rubles per tonne,he said. “And the potential for growth
has not been exhausted,” he said. The cost of vegetable oil has risen by
1,600 rubles to 18,000 rubles per tonne since the start of April.
Russia’s annual capacity for exporting vegetable oil is about 1

million tonnes compared to 4.3 million tonnes in Ukraine, he said.

As a result,Ukraine exported 1.54 million tonnes of vegetable oil last
season,while Russia exported about 700,000 tonnes. “We’re having a hard
time catching up with our southern neighbor in terms of vegetable oil
exports,” he said.

The only ways to resolve the problem is to expand Russia’s capacity for
handling vegetable oil exports and increase the transit of such products via
Ukraine, he said.

“The urgency of this issue is growing because demand for vegetable oil for
the production of biofuel is picking up in the world.

In addition,Russia’s capacity has grown significantly in the last few years
for processing sunflowers,which are mainly oriented towards the foreign
market and thus not consumed by the domestic market,” he said.

Petrichenko said Russia currently has capacity to process 8 million-9
million tonnes of sunflowers per year. “Domestic demand for vegetable oil is
also growing,but the increase in capacity for processing raw materials is
overtaking it,too,” he said.

Russia harvested 6.7 million tonnes of sunflowers in 2006,up 3.8% from 2005.
Vegetable oil production grew 17.5% to 2.566 million tonnes in 2006.  -30-

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
                 OUTLOOK TWICE TO 400,000 TONS IN 2006/2007
Ukrainian News Agency, Kyiv, Ukraine, February 20, 2007
KYIV – Ukroliaprom association has upgraded sunflower exports outlook
twice to 400,000 tons in 2006/2007 marketing year (September 2006 – August
2007). Association director general Stepan Kapshuk disclosed this to the press.
He said that during five months of current marketing year, a total of 42,000
tons of sunflower was exported. Oil crop exports rose in February and
according to forecasts a total of 60,000 tons will be exported.
He also said that a total of 2 million tons of sunflower oil would be
produced in Ukraine in 2006/2007 marketing year, if it is possible to retain
such forecasts.
He said that in five months of this season, a total of 900,000 tons of
sunflower oil were produced, 510,000 tons were exported.
He also said that currently, about 1 million tons of sunflowers were at
elevators and about 2 million tons in farm producers and traders.
He said that in 2006, sunflower yield had been 5.36 million tons.
Kapshuk said that currently, domestic sunflower oil market was stable,
domestic prices tended to fall and quality of sunflower 2006 yield was very
At the same time, he expressed his concern about cancellation of customs
duty for sunflower, which was initiated in late 2006.

He said that after the cancellation, sunflower would be exported from
Ukraine, which would destabilize situation on the domestic market.
According to Kapshuk, in 2005/2006 marketing year, Ukraine produced 2
million tons of sunflower oil, of it 1.6 million tons were exported. Kapshuk
said that currently, Ukraine processes 6.2-6.3 million tons of oil corps a year.
As Ukrainian News earlier reported, in 2006, sunflower exports rose by 6.4
times or 193,900 tons, compared to 2005 to 229,500 tons worth USD 58.21
million.                                            -30-
FOOTNOTE:  Most economic analysts believe the cancellation of
customs duty for sunflower exports was a very good move.  This will
allow Ukrainian farmers to receive a fair market price for their crop and
stop the governments subsidy of those business concerns in Ukraine who
use sunflower seeds and have considerable political power. Paying a fair
market price cannot be considered destabilization of the local market.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
             The move gives confirmation that Ukraine’s crop “is in trouble,”

By Tom Polansek, Dow Jones Newswires, Chicago, IL, Wed, May 30, 2007

CHICAGO – U.S. wheat futures charged to strong gains Wednesday,
prodded by the suspension of new-crop grain exports from Ukraine and
domestic harvest delays, analysts said.

Chicago Board of Trade July wheat climbed 19 3/4 cents to $5.10 3/4 per
bushel. Kansas City Board of Trade July wheat rose 19 3/4 cents to $5.00
3/4, and Minneapolis Grain Exchange July wheat finished 15 1/4 cents higher
at $5.28 3/4.

Ukraine will allow the export of 900,000 metric tons of grain already held
by traders, but there will be no exports of the drought-reduced 2007-08 crop
until reserves are built, the government said.

[NOTE:  According to the best information received by the Action Ukraine
Report (AUR) the government of Ukraine has not announced any official
suspension of new-crop grain exports from Ukraine. The government has
only indicated they are considering doing this.  AUR EDITOR]

The ban shoved prices higher because the Black Sea has been an aggressive
seller of wheat on the world market, analysts said.

The move gives confirmation that Ukraine’s crop “is in trouble,” said Louise
Gartner, analyst with Spectrum Commodities. Ongoing dryness in Russia is
also concerning, she added.

A few thunderstorms developed in western and central Ukraine Tuesday,
although eastern areas were still dry, according to DTN Meteorlogix.
Temperatures were above normal but not as hot as recent days.

The next three days, however, will bring in a new heat wave to eastern
Ukraine and southern Russia, Meteorlogix said. Temperatures will then turn
cooler, but dry conditions will remain, the weather firm said.

There also is a lack of pressure on prices from harvest in the U.S., Gartner
said. Persistent, heavy rains in the Plains have delayed harvest there,
sparking concerns about yield and quality loss, she noted.

Thunderstorms that hit central Nebraska Tuesday also brought up to one
inch of rain to Colorado and Kansas, according to Meteorlogix.

More storms will fire up in the region through Friday, bringing rainfall of
up to one and one-half inches. The heaviest rain is headed for central and
eastern Kansas, the weather firm said.

The coming weekend will bring additional showers in Oklahoma and Texas,
along with normal to below normal temperatures, “a cool and rainy outlook,
which is unfavorable for crop maturation and harvest,” Meteorlogix said.

A rally in CBOT corn gave wheat further strength, analysts said. Wheat has
been following corn “very closely, especially Chicago wheat,” one analyst
noted.  Commodity funds were strong buyers of an estimated 7,000 contracts
at CBOT, traders said.

Looking forward, harvest pressure will eventually start to weigh on prices,
Gartner said. “It’s so difficult for me to be bullish going into harvest,”
she said. “It’s not unusual to have these harvest delay rallies. I would say
that ultimately harvest will prevail.”
                          KANSAS CITY BOARD OF TRADE
KCBT wheat futures felt support from ongoing harvest delays in the Southern
Plains and concerns about damage to the crop, a floor trader said. With more
rain headed to Kansas, the crop’s quality potential could decline, he added.

The U.S. Department of Agriculture’s weekly crop progress report lowered the
good-to-excellent rating for winter wheat two percentage points to 57%.
Kansas’ good-to-excellent rating dropped three percentage points to 37%.

The ban of new-crop grain exports in Ukraine and the rally in CBOT corn also
pulled prices higher, the trader said.
                        MINNEAPOLIS GRAIN EXCHANGE
MGE was seen as a follower of activity at the CBOT, a floor trader said.
There was a slight decline in condition ratings for the spring wheat crop,
and that may have given prices some strength, he added.

Seventy-nine percent of the crop was reported in good-to-excellent
condition, compared to 81% a week ago and 73% a year ago, according to the
USDA. Eighty-nine percent of the spring wheat crop was emerged, compared to
the five-year average of 76%, the USDA said.
By Tom Polansek, Dow Jones Newswires;

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

By John Marone, Kyiv Post News Editor, Kyiv, Ukraine, Wed, May 30 2007

Ukraine’s current spell of dry weather could mean a return to command-style
economics by the government of Prime Minister Viktor Yanukovych, which has
been mulling the maintenance of controversial restrictions on grain exports.

The government had recently announced an end to its lengthy ban on grain
exports, which has cost traders, as well as farmers, hundreds of millions of
dollars in losses since it introduction last fall.

But now the government looks set to keep the ban in place,

placing Ukraine’s reputation as a major international grain
exporter in jeopardy.

While further angering grain traders and farmers, the government might be
more concerned about high bread prices with elections on the horizon.

The cancellation of the ban on exports of food grain such as wheat and rye
was announced in a government resolution on May 16 following the annulment
of similar restrictions on feed grain for animals in February.

However, the resolution never came into force, and the government has been
sending out signals it may be getting ready to change its mind.

Deputy Prime Minister for Agriculture, Viktor Slauta, stated earlier this
week that the government was planning “to confirm anti-crisis measures due
to the drought to secure food reserves and compensate for the losses of
farmers, while analyzing the need to restore quotas on grain.”

Slauta didn’t specify how much of this year’s harvest had been damaged
by the drought.

Last fall, Ukraine’s harvest was also a little on the low side – 34.3
million tons of grain, in comparison to 38 million tons in 2005.

At the same time, world grain prices rose sharply, driven by poor harvests
in key producing countries, prompting the Yanukovych government to
abruptly halt grain exports by October to beef up domestic supply.

By December 2006, the government had come up with a grain export quota
of just over 1.1 million tons until June of this year, despite promises from
Yanukovych in November that the restrictions were about to be removed.

Grain traders protested and were supported in a joint statement by the
ambassadors of Germany, the Netherlands and the United States.

With their grain already at Ukrainian ports waiting to be loaded onto ships,
the traders said they were forced to pay additional storage costs and
penalties to buyers for breach of contracts. Some dumped rotting grain

into the Black Sea to avoid the crippling storage costs.

Ukraine’s Agriculture Ministry was unapologetic, blaming the traders
themselves for poor planning and dismissing criticism from the


Informed industry sources told the Post that traders lost at least $100
million as result of the government’s unexpected restrictions.

And if the bans are reinstated, there will be even more losses, as traders
say they already started loading up ports after the government’s May 16

According to grain traders, storage of grain beyond the initial 20-day grace
period costs $0.25 a ton per day, or $10,000 a day for 40,000 tons.

US Ambassador to Ukraine William Taylor welcomed the government’s
announcement that it had cancelled the grain bans in a statement made on

May 21. The government signed the resolution and registered it, but it
doesn’t go into effect until it is published.

As the Post went to press on May 30, Deputy Prime Minister Slauta appeared
to be waffling on the issue. He told a briefing at the Cabinet of Ministers
the same day that the government order to cancel the grain export ban
“should be published” on June 1.

But Slauta also defended the ban. “Once again, we have come to the
conclusion that it would have been very bad without the quotas,” he said on
May 30. Now the government must decide whether to maintain the ban.

With temperatures steadily hovering at about 30 degree Celsius through this
month, some of Ukraine’s feed grain, barley and corn has already been
damaged by drought. The jury is still out on the fate of food grain – wheat
and rye.

The State Statistics Committee announced on May 21 that industry grain
reserves were 6 percent lower than last year. Slauta said reserves were

currently at around 3 million or 4 million tons.
Serhiy Feofilov, general director of Ukragroconsult, a Kyiv-based
agriculture consultancy, said that the harvest for wheat and rye could
indeed be lower this year due to dry weather, but that there still would be
no reason to restrict exports. “According to information available today,
we don’t see that the drought could influence this year’s harvest.”

Considering current reserves and domestic demand, Ukraine should have
enough food grain, he added. “For the second year in a row, Ukraine will
have a smaller than usual harvest, but it still remains to be seen how much
rain we’ll get in June and July – the most crucial months.”

Leonid Kozachenko, president of the Ukrainian Agrarian Confederation,
said that “disaster has already struck” for feed grain, but the food grain
situation is not clear yet.

Kozachenko, a former agriculture minister, said the government is currently
eyeing two options: either to ask parliament for money to buy up most of
the grain it needs for reserves – something it failed to do last year – or
to cut a deal with grain traders to ensure that they will sell their grain
to the government in case of a shortage – an option that remains to be

spelled out.

“What I want is the government to take a decision in full transparency,
allowing grain traders and farmers to participate in the decision,” he said.

Ukrainian farmers lost around $200 million as a result of the government’s
bans from last year and another $40 million due to this year’s drought, he

Grain traders say if the government decided to use command-style methods
this time around, the real trouble would start next year, as farmers begin
planting things like export-oriented rape seed, which is used to make
bio-diesel as opposed to food, to ensure they get paid.         -30-

FOOTNOTE:  If the government of Ukraine once again restricts the export
of bread wheat the real reason will be that the government does not want
to pay the real market price for wheat and thus allow Ukrainian farmers to
receive a fair price for their product.  The government also receives
considerable political pressure from the internal buyers of bread wheat
who also do not want to pay the real market price for wheat and allow
Ukrainian farmers to receive a fair price for their product. Ukrainian
farmers and agribusinesses were forced to subsidize the price of bread
wheat purchased by the government and internal users of wheat through
government enforced grain export quotas which of course lowered the
internal price of wheat and other grains.  AUR EDITOR
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

Interfax Ukraine Business Express, Kyiv, Ukraine, Monday, May 21, 2007

KYIV – U.S. Ambassador to Ukraine William Taylor has welcomed Ukraine’s
decision to scrap export quotas for grain.

Export quotas for grain have finally been scrapped, the ambassador said. It
was a problem for Ukraine, and the government was aware of that. This would
benefit Ukraine and the companies selling grain, as well as farmers. It is a
good decision, Taylor told Interfax on Monday.

The Ukrainian cabinet annulled on May 16 the quoting of grain varieties, the
exports of which are subject to licensing in the 2006-07 marketing year. -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

By Pavel Polityuk, Reuters, Odessa, Ukraine, Wed, May 30, 2007

ODESSA, Ukraine – Ukraine appears increasingly likely to prolong grain
export quotas as severe drought threatens the 2007 harvest, prompting
industry analysts on Tuesday to slash forecasts for exports in the 2007/08

APK-Inform consultancy revised down its 2007 grain crop forecast to 33.3
million tonnes from 34.3 million last year due to a nationwide drought that
Ukraine’s top weather forecaster said was affecting 60 percent of winter and
spring grains.

Exports in 2007/08 would drop to 7.8 million tonnes, down from a forecast
8.9 million tonnes in 2006/07, analyst Anastasia Ivasenko told a conference
organised by her APK-Inform agency.

“We have to expect strict market regulation and export quotas could be
preserved in the 2007/08 season,” Ivasenko said. “There are only two
possible decisions: to import or to limit exports.”

The grain crop in Ukraine depends heavily on the weather in May. An

absence of rainfall could result in a sharp decrease in the harvest.

Last week the agriculture ministry said drought had already killed 400,000
hectares of crops and the damaged area was likely to rise sharply. The
ministry’s current grain harvest forecast for 2007 is about 38 million

The drought could force the government to cancel a decision to lift wheat
export quotas that disrupted shipments and inflicted millions of dollars of
losses on some trading firms.

“In line with our obligations to the World Trade Organisation, Ukraine has

a right to introduce some limitations if the situation affects the country’s
ability to feed itself,” Deputy Agriculture Minister Serhiy Melnik told the

Restrictions were lifted last week but their cancellation has not yet been
signed into law. “Traders are nervous that the abolition of wheat export
quotas could be suspended,” one trader said.
                                          HOT WEATHER
Tetyana Adamenko, head of Ukraine’s department of agrarian meteorology,
forecast winter wheat — which accounts for 90-95 percent of the total wheat
crop — falling to between 10 million and 12.5 million tonnes from 13
million tonnes in 2006.

“We have passed the critical point in the south of the country,” she said.
“Those in the centre of Ukraine have another five days, but even if the
rains come, the harvest will be 30 percent less than it might have been.”

Spring wheat would also be affected, the meteorologist said. “It has a
chance if rains come at the start of June although it’s already the case
that we won’t have a good harvest.”

APK-Inform’s Ivasenko forecast Ukraine’s 2007 wheat crop at 14.01 million
tonnes compared with 13.9 million last year. She said wheat exports would
dip to 2.1 million tonnes in 2007/08 from 2.8 million forecast in 2006/07.

She forecast the barley crop at 10.73 million tonnes against 11.34 million
tonnes last year, and said exports would slip to 4.5 million tonnes in
2007/08 from 4.8 million in the current season.

Maize output would fall to 5.96 million tonnes from 6.43 million and exports
would be unchanged from a forecast 1.0 million tonnes in the current season,
she said.

Another agriculture consultancy, UkrAgroConsult, last week revised its 2007
wheat crop outlook to 16-17 million tonnes from its previous estimate of
17.7 million. It cut its barley harvest forecast to 9.5-9.7 million tonnes from

10.3 million. Ukraine consumes about 12 million tonnes of wheat a season.
FOOTNOTE: Contrary to the remarks by the Deputy Agriculture Minister
Ukraine does not have a problem feeding itself.  It does have a very serious
problem of the government interfering with the workings of private markets
which lowers the price to farmers, cuts their income and reduces their desire
to plant bread wheat.  The hectares of wheat planted continues to go down in
Ukraine. The reasons given by the government in the fall of 2006 and the
spring of 2007 to justify the severe restrictions on the export of grain
were severely flawed. AUR EDITOR
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
    NOTE: Send in a letter-to-the-editor today. Let us hear from you.

Ukrainian News Agency, Kyiv, Ukraine, Wed, May 30, 2007

KYIV – The Ukrainian Grain Association is proposing that the Cabinet of
Ministers stop the sale of wheat from the state reserve.

The press service of the association announced this to Ukrainian News.  ‘It
is worth stopping the sale of wheat from the state reserve on the free
market,’ the press service said.

The association believes if necessary, foodstuffs from the state reserve
should be sold exclusively to flour mills and bakeries for production of
flour and baking of bread for domestic consumption.

This is one of the proposals that the Ukrainian Grain Association sent to
the Cabinet of Ministers in connection with the preparation of measures
aimed at facilitating creation of a food reserve and compensating farmers
for losses resulting from drought.
                         PRICES FOR STATE RESERVE
The Ukrainian Grain Association also believes that it is necessary to
promptly allocate funds to the Agrarian Fund and the State Committee for
Material Reserves to enable them to purchase wheat for creating state
reserves of grain. At the same time, it believes that they should buy the
wheat at market prices.

The association is also proposing that the Cabinet of Ministers officially
publish its resolution on abolition of quotas for importation of wheat,
which is posted on the official portal of the Cabinet of Ministers. This is
connected with the need to ship about 900,000 tons of wheat of the 2006

The Ukrainian Grain Association believes that the decision on the grain
export regime in the next market year should take into account the weather
conditions in the first half of June and the situation on the world grain

If the need arises to limit exports, the association says participants on
the market should be informed beforehand.

The association is confident that the Cabinet of Ministers will make the
optimum decision on the grain market and that the proposals of the market’s
participants will be taken into account.

As Ukrainian News earlier reported, Deputy Prime Minister Viktor Slauta is
not ruling out the possibility of imposition of restrictions on grain
exports if the current drought continues until mid-June.

The Cabinet of Ministers is concerned about the negative effect that the
draught may have on the situation on the grain market.

The Agricultural Policy Ministry believes it is necessary to re-sow crops on
500,000 hectares because of the drought. The Weather Center recently said

that the hot weather and the drought would significantly reduce the yield of
early grain crops.                                          -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

UkrAgro Outlooks and Comments, UkrAgroConsult
Kyiv, Ukraine, Wednesday, May 30, 2007

KYIV – The drought in April/May will result in lower yields of grains in
2007. In particular, the wheat harvest is likely to decrease from 17.7 MMT
to 16-17 MMT. Spring barley will also suffer from the drought: its potential
total crop will shrink from 10.3 MMT to 9.5-9.7 MMT.

A detailed forecast for the Y2007 crop will be prepared by June 1, 2007.
This year, extremely adverse conditions for crop vegetation developed in

The April precipitation deficit was from 40 to 70% in most regions.   Along
with windy weather this caused intensive evaporation of moisture from the

As a result, the soil moisture content decreased 2-3 times in May compared
with the beginning of spring.   Local rains seen in late April/early May
moistened only the top soil layer and did not improve the situation

Starting from May 11-12, the plant growing conditions abruptly worsened
because the air temperature rose to 29-36 degrees C everywhere.

Especially adverse conditions set in over the Kherson, Mykolaiv,
Zaporizhzhia, Odesa, Dnipropetrovsk, Kirovohrad, Kharkiv, Kyiv and
Cherkasy regions, where the soil moisture content accumulated during the
fall and winter was far less than in other regions.

At the moment, on most of those areas the productive moisture content
reduced to 1-10 mm at the plow soil layer and to 60-70 mm at the one-meter
layer, locally to 30-40 mm. This is not enough to generate even a
satisfactory harvest.                                  -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

Ukrainian News Agency, Kyiv, Ukraine, Wednesday, May 30, 2007

KYIV – The Cabinet of Ministers proposes that the Verkhovna Rada provide
UAH 270 million for farmers to take measures and save the harvest because of
unfavorable weather conditions. Reporters learned this from First Deputy
Finance Minister Vadym Kopylov.

He noted that the Cabinet of Ministers proposes that the Rada amend the
national budget for UAH 150 million to be channeled directly to farmers, and
UAH 120 million through the reserve fund of the budget.

According to Agricultural Policy Minister Yurii Melnyk, extra funds to be
provided for the agriculture ministry costs will be spent to form food
reserves and the state insurance fund of seeds (sowing reserve).

Melnyk noted that the agricultural policy ministry had drafted a Cabinet of
Ministers resolution for measures to be taken to overcome the results of the

Apart from this, the draft resolution proposes a number of efforts involving
preparations for the sowing of winter crops, as some regions may experience
problems with seeds due to the drought. The agriculture ministry also
intends to grant support to the farms hit by the drought.

The volume of assistance will be determined respective of the evaluation of
losses sustained. He also said that the draft resolution proposes increasing
the size of compensation of interests on framers’ credits. As Ukrainian News
reported, the Ukrainian weather center forecasted a serious decline in the
expected grain crop because of hot weather and drought.          -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

                         ON UKRAINE’S ACCESSION TO WTO

Ukrainian News Agency, Kyiv, Ukraine, Wed, May 30, 2007

KYIV – The Cabinet of Ministers suggests that the Verkhovna Rada endorse
a package of 11 bills necessary for Ukraine’s accession to the World Trade

First Vice Premier and Finance Minister Mykola Azarov told the press that
the package was approved at Cabinet of Ministers on Wednesday.

He said that currently, representatives of the Cabinet of Ministers and
Verkhovna Rada would jointly work over the package of the bills to
coordinate them and prepare for Verkhovna Rada endorsement as soon as

At the same time, Azarov said that he has doubts that the Verkhovna Rada
would manage to endorse the package of bills. ‘Tomorrow is more possible,’
he said.
The package contains:
1) the bill on amending the law “On value added tax” concerning equal
conditions of VAT application on the domestic market and during imports;

2) the bill “On creation, testing, transportation and use of genetically
modified organisms;”

3) the bill on amending the law ‘On insurance’ concerning cancellation of
limitation in insurance sum at the level of 75% of the insured object value
in accordance with agreements on risk insurance linked with sea
transportations, commercial aviation, spacecraft launches;

4) the bill “On amending the law “On Ukraine’s customs tariff” concerning
introduction of technical corrections.

5) the bill on amending the law “On safety and quality of foodstuff”
concerning increase of the term the importer is informed about inspection
from 48 hours to 60 days;

6) the bill on amending the law ‘On rates of import duty for seeds of some
types of oil-bearing crops’ concerning cancellation of indicative prices for
the produce;

7) the bill ‘On rates of the export duty for scrap alloyed ferrous metals,
scrap non-ferrous metals and for semi-finished goods’ concerning
introduction of lowered rates of export duty for the produce as of the
moment Ukraine enters the WTO;

8) the bill ‘On export duty for wastes and scrap ferrous metals’ concerning
introduction of lowered rates of duty for the scrap metal as of the moment
of accession to the WTO, but not in a year after the accession;

9) the bill on amending the law “On standards, technical regulations and on
procedure of correspondence estimation” concerning priority of international
standards over regional ones;

10) the bill on amending the law ‘On order of payments in foreign currency’
concerning increase of goods delivery time to 180 days;

11) the bill on amending the Civil Code concerning elimination of
counterfeit, ‘pirate’ goods and equipment.

The amendments have to be introduced into Verkhovna Rada laws on
Ukraine’s accession to the WTO. As Ukrainian News earlier reported,
Ukraine intends to enter the organization by 2008.               -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

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                Agriculture, Wages and Pensions, Pre-Term Elections, WTO

UNIAN News, Kyiv, Ukraine, Wednesday, May 30, 2007

KYIV – The plan on regulating the political crisis signed by the President
of Ukraine, Prime Minister and Chairman of the Verkhovna Rada is in force.

But consideration of necessary issues in the Parliament requires more time
than it was envisaged by this plan. Prime Minister Viktor Yanukovych stated
in his speech at the Government sitting, according to the government’s web

“As regards the negotiating process it is going on within the agreements
which have been achieved by the common statement. We face some
problems but we have agreed that we’ll find an answer to these questions –
it is desirable a positive one.

If one or another signatory side violates the agreements of the common
statement that side will bear responsibility to the whole country. We, I
mean the coalition, will spare no effort to fulfil our assumed obligations,”
the Prime Minister said.

According to the Head of Government, the top priority task today for the
Government is agriculture because the weather conditions are so complicated
now that if we do not undertake proper measures the country runs risks to
lose grain.

[1]Therefore, the first issue submitted for the Government’s consideration
includes budget amendments which provide for all measures aimed to
preserve the harvest and help villagers.

“If there is no grain we’ll have it at a higher price – and already by the
end of the year. It cannot be allowed,” Viktor Yanukovych said.

[2] The second priority task the Prime Minister called increase in wages and
pensions which had been practically resolved. But a final decision can’t be
made without providing relevant procedure, in other words, adopting budget
amendments, passing this budget in the Parliament etc.

[3] The third place, according to the PM, takes a political issue -necessity
to consider laws ensuring conduction of pre-term elections. We are under
such conditions when we must solve these issues and overcome the crisis,”
Viktor Yanukovych stressed.

As the Prime Minister noted, all the issues submitted today for the
Government’s consideration are extremely important for Ukraine.

[4] Besides, it also concerns the laws necessary for Ukraine’s accedence to
the WTO.

In this connection, the Head of Government commissioned First Vice Prime
Minister of Ukraine Mykola Azarov and Minister of Economy of Ukraine
Anatoliy Kinakh to make immediately an examination of these bills and to do
their best for bills consideration as the agenda envisages, that is by the
governmental committees and then – the committees of the Verkhovna Rada.

“If we fail to submit them for the Parliament’s consideration we’ll insist
on continuing the work of the Parliament for one more day. We have no other
way. I will personally insist during the meeting with the President, Speaker
of the Verkhovna Rada and faction leaders on adopting all economic laws
which we’ll consider today,” Viktor Yanukovych stated.

Moreover, according to the Head of Government, the Cabinet of Ministers
shall focus its attention now on drafting a series of social laws and work
at drafting 2008 State Budget which should be drafted already in September
so that new Parliament could pass it in time.                      -30-

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         Send in a letter-to-the-editor today. Let us hear from you.
                             TO APPROVE WTO BILLS QUICKLY

TV 5 Kanal, Kiev, in Ukrainian 1400 gmt 30 May 07
BBC Monitoring Service, UK, Wednesday, May 30, 2007

KYIV – [Presenter] The last day of work of the legitimate parliament of the
fifth convocation encouraged the Cabinet of Ministers to work at a lightning
rate. Government members approved 12 bills needed for Ukraine’s WTO

Foreign Minister Arseniy Yatsenyuk is sure that parliament will be able to
vote on them all today. He said that the documents do not require detailed

[Yatsenyuk] I see that there is a whole lot of time left until midnight. So
given that the majority of these bills are purely technical in character,
and that the only sensitive one is the bill on VAT for the agro-industrial
complex, and it is necessary to understand that agriculturalists will in any
case receive different forms of compensation in the 2008 budget, the
procedure for voting should be cut as short possible and will not take much

[President Viktor Yushchenko yesterday suspended his decree on the
dissolution of parliament dated 26 April 2007 for two days, 29-30 May, to
enable parliament to adopt laws needed for the holding of a snap
parliamentary election on 30 September.]                    -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
                                  WEDNESDAY, MAY 30, 2007

Ukrainian News Agency, Kyiv, Ukraine, Tuesday, May 29, 2007

KYIV – Premier Viktor Yanukovych has directed First Vice Premier and
Finance Minister Mykola Azarov and Economy Minister Anatolii Kinakh to
secure agreement on the package of draft bills required for Ukraine’s
accession to the World Trade Organization and their endorsement by the

Cabinet of Ministers by the end of Wednesday.

Yanukovych announced this at a meeting of the Cabinet of Ministers on
Tuesday, Yanukovych said such a package of the bills had been drafted.

He said the government committees should urgently consider them.

Yanukovych stressed that he would insist on the prolongation of the
Verkhovna Rada work, if the parliament didn’t endorse the bills on

As Ukrainian News earlier reported, the Cabinet of Ministers planned to
consider a package of the WTO bills on Wednesday.           -30-

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
                     Company has two production lines in the Ukraine

Interfax Central Europe, Warsaw, Poland, Wed, May 30. 2007

WARSAW – Polish agricultural machinery producer Pol-Mot Warfama
subsidiary Invest-Mot expects 6,000 tonnes in renewable energy straw
briquette sales per year following July’s upcoming stock exchange debut,
Invest-Mot production manager Tadeusz Kasjanowicz told Interfax.

“There is a 50% surplus of straw in Poland,” Kasjanowicz said. “A tonne of
straw briquettes produces 75% of the energetic value of coal. We think that
the use of bio-mass for power stations is likely to continue increasing.”

Briquettes are an ecological fuel which produces some 15 giga-jules of
energy per tonne compared to coal which produces between 21 and 24
giga-jules of energy.

EU regulations stipulate that by 2010 5% of Poland’s energy comes from
renewable energy source, according to a report by the Polish Institute for
Sustainable Development. Pol-Mot expects demand for renewable energy to
increase to more than 2 mln tonnes per year in the next three to five years.

Invest-Mot has been selling bio-mass energy to power stations since 2006
and hopes to produce 250,000 tonnes in 2007.
The company has two production lines in the Ukraine which also produce
ecological energy for Poland.

Pol-Mot Warfarma made PLN 76.9 mln in revenues for 2006 which is just under
50% more than in the analogus period of the previous year. The company had a
net profit of PLN 4.9 mln in 2006. It plans to debut on the Warsaw Stock
Exchange in mid-July.

Poland applied for 284 mln tonnes of CO2 emissions annually in 2008-2012,
but the EC cut this amount by 26.7% to 208.5 mln tonnes in late March.
Poland will also be forced to decrease its CO2 emissions by 20% before the
end of 2020 which includes an increase of at least 10% in the production of
renewable energy.                                    -30-

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

Interfax Ukraine Business Panorama, Kyiv, Ukraine, Tue, May 29, 2007

KYIV – Ukraine’s GDP may double by the end of 2010, to $200 billion, which

will help boost stock market development, managing director of Kyiv-based
Dragon Assets Management company Dmytro Isupov believes.

According to him, an important factor influencing economic development will
be hosting the EURO-2012 football finals in Ukraine. The investments for the
event may reach $15-25 billion, which may result in hryvnia revaluation in
the mid-term.

“Probably, the NBU will act according to the tried-and-tested scenario – it
will prevent the hryvnia’s rate from strengthening via interventions, until
abrupt inflation begins. After that, the NBU will have to fix the official
exchange rate, which, in the mid-term, may be UAH 4.8/$1,” he told
journalists on Wednesday.

According to him, hosting EURO-2012 may cause a considerable increase in
metallurgical and engineering industry share prices, as well as the
appearance of new portfolio investors in the country.

According to the state statistics committee, Ukraine’s real GDP grew by 7.6%
in April 2007 year-on-year. In January through April 2007, GDP growth fell
to 7.9% year-on-year, compared to 8% in January through March.

Ukraine’s real GDP grew by 7.1% in 2006, while in 2005 the growth was 2.7%.
Ukraine’s government forecasts that GDP growth will slow to 6.5% in 2007.

According to Ukraine’s economic and social development program for 2008,
inflation will be 6.8% in 2008, and real GDP growth will be 7.2%.

According to the principles of Ukraine’s money and credit policy for 2007,
the exchange rate is expected to by UAH 4.95-5.25/$1 in 2007.    -30-

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
Interfax Ukraine Business Panorama, Kyiv, Ukraine, Tue, May 29, 2007

KYIV – Ukraine has a considerable economic growth potential, which is

higher than the Russian one, says Anders Aslund, a leading expert of the
Peter G. Peterson Institute for International Economics [Washington].

“In 1989, Ukraine’s GDP per capita was 10% higher than in Russia. Today
this indicator is only 34% of the Russian one – that’s absolutely abnormal.
During the ten years Ukraine’s GDP per capita should be not lower than in
Russia,” he said at the third annual investment conference organized by
Dragon Capital in Kyiv on Thursday.

Aslund said that due to a critical mass of market-oriented reforms and
privatization, the Ukrainian economy has been demonstrating a high growth
pace since 2000, which is 7.4% on average, which could be higher if not
affected by “the chaotic politics.”

At the same time, inflation in Ukraine is about 10%, budget deficit is lower
than 3% of GDP, the state debt equals 14% of GDP, and although the current
account of the balance of payments is not negative, it is small in figures.

The expert said that Ukraine’s nominal GDP grew by 19% in dollar terms on
average per year from 2000 to 2006, having increased from $31 billion in
2000 to $106 billion in 2006.

In his words, in 1999 Ukraine’s GDP per capita was a mere 2.8% of the EU’s
level, in 2005 the figure hit 5.7%. “I see no reason why this indicator
cannot double again in six years,” he said. He forecasted that Ukraine’s GDP
in dollar terms might soar seven times in a decade.

Among the advantages for Ukraine’s growth potential are the low level of
monetization and market capitalization, considerable investments in capital
(23% of GDP) foreign direct investments (6% of GDP), as well as an

extremely high number (66%) of students, according to him.

Aslund says that Ukraine’s agriculture and the hospitality sector are most
promising. Speaking about necessary reforms, Aslund pointed out to judicial

and administrative and territorial reforms aimed at the decentralization of
power and finance, and medical insurance reform.

He also spoke out for the introduction of a liberal tax code, a decrease in
budget spending, an improvement in corporate legislation, the cancellation
of the Economic Code and a moratorium on the sale of agricultural land.
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18.        NASDAQ TO COME TO UKRAINE BY MERGER, Kyiv, Ukraine, Tuesday, May 29, 2007 

American NASDAQ stock exchange and the Scandinavian OMX announced
about a merger. The united stock exchange will get a name NASDAQ OMX
Group. The bargain price will make USD 3.7 bln.

The merger won’t change the group plans on entering Ukraine by buying a
local market participant, among which OMX calls PFTS.

Stockjobbers predict that the presence of NASDAQ OMX Group in the

Ukrainian market will strengthen a competition and make the stock exchanges
get consolidated.        LINK:
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

By Dario Thuburn, Agence France Presse (AFP)
Kiev, Ukraine, Wednesday, May 30, 2007

KIEV – Ukraine remained in political deadlock on Thursday after parliament
failed to approve the laws required to end a two-month constitutional crisis
in the former Soviet republic.

The votes were part of a political agreement struck between President Viktor
Yushchenko and Prime Minister Viktor Yanukovych to hold early parliamentary
elections on September 30.

Under the terms of the deal, parliament was given just two days — Tuesday
and Wednesday — to pave the way for the early polls and Yushchenko had
urged lawmakers to show “political responsibility.” Yushchenko undertook to
set the official election date after the votes.

But at a stormy session of parliament on Wednesday deputies failed to
approve votes on election financing, reform of the electoral commission and
Ukraine’s bid to join the World Trade Organisation (WTO).

This raised fears that Ukraine could again be plunged into political
turmoil, although the president hinted on Wednesday that he may give
parliament more time for debate.

Yanukovych’s Regions Party holds a strong majority in a parliamentary
coalition with the Socialist and Communist parties, while Yushchenko’s Our
Ukraine party is in opposition. Yushchenko met with Yanukovych and other
political leaders on Wednesday.

Yulia Tymoshenko, leader of Ukraine’s biggest opposition party, was quoted
by Interfax news agency as saying the president and prime minister had found
consensus on all outstanding issues at the talks.

But Yanukovych earlier warned of new obstacles in resolving the crisis,
while Yushchenko accused parliament of “political corruption.”

In a further sign of the tensions surrounding the session of the
legislature, the parliament building was briefly evacuated in a bomb scare
after an anonymous call made to the police.

Analysts have warned that the deal between Yushchenko and Yanukovych, which
was announced after lengthy negotiations on Sunday, could falter because of
ongoing disagreements.

The crisis in Ukraine began on April 2, when Yanukovych defied orders from
Yushchenko to hold early elections, issued after what the president called a
power grab by the prime minister’s allies in parliament.

Tensions escalated sharply last week, when the president and prime minister
sparred for control over security forces and scuffles broke out in the
prosecutor general’s office.

The rivalry between Ukraine’s leaders dates back to the Orange Revolution of
2004, when mass protests helped bring pro-Western Yushchenko to the
presidency, overturning a flawed vote initially granted to Moscow-backed

The international community, including the European Union and the United
States, have expressed concern over the power struggle and welcomed

Sunday’s political agreement as a sign of progress.

But analysts said the agreement did not signal the end of the crisis as
there were still numerous disagreements between the two sides, including
over the appointment of the prosecutor general.

Svyatoslav Piskun was sacked by Yushchenko last week, but with support from
Yanukovych he has refused to stand down. A top pro-Yushchenko official said
on Wednesday the refusal was “destabilising the situation.” Yushchenko has
already appointed another prosecutor to replace Piskun.            -30-

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

Reuters, Kiev, Ukraine, Thursday, May 31, 2007

KIEV – Ukraine’s parliament failed early on Thursday to pass a series of
laws necessary to proceed with a September snap election intended to end
Ukraine’s protracted political crisis.

Pro-Western President Viktor Yushchenko, at odds for months with
Moscow-leaning Prime Minister Viktor Yanukovich, dissolved parliament by
decree last month and ordered the snap poll. An election date of September
30 was agreed by the government rivals last weekend after weeks of

The president, an advocate of European Union and NATO membership,

suspended his decree to give parliament two days — Tuesday and Wednesday
— to approve laws required for the poll.

The chamber made three attempts to pass the enabling legislation, but a
series of votes fell short just after midnight. Parliament speaker
Oleksander Moroz said debates would resume later on Thursday.

It was unclear what action the president might take. He suggested on
Wednesday he could extend the deadline for parliamentary approval.
Yanukovich, his rival from the 2004 “Orange Revolution”, said he would seek
such an extension.

At issue in months of sniping between the two leaders is a division of
powers on just who is to run the ex-Soviet state. The president had earlier
warned that “certain forces” were intent on torpedoing the election.

“For some, it would mean new corruption allegations, for others it would be
political death,” Yushchenko told a briefing. “That’s why today there are so
many destructive factors. This is indeed a political fight for the truth.”

Yanukovich had met Yushchenko twice during the day. He told a cabinet
meeting there was “not enough time to examine all issues in parliament. The
idea of doing this over two days has not worked out.”

Much of the evening debate focused on objections from Yanukovich’s allies to
the president’s call to bar parliamentarians from switching parties once
elected. Other rows centred on the voters’ list and a proposal for a minimum
poll turnout, rejected by the president’s allies.

On Tuesday, parliament tacitly recognised the president’s decrees. It also
formally approved more than 50 laws passed while the chamber operated in
defiance of the dissolution order.

The president called the election after accusing Yanukovich, who is lionised
by voters in Russian-speaking eastern Ukraine, of illegally poaching
supporters to expand his majority in parliament and change the constitution.

Yushchenko defeated Yanukovich in the re-run of a rigged 2004 election.
Yanukovich made a comeback when his Regions Party took first place in a
parliamentary election a year ago and he was later made prime minister.
(Additional reporting by Dmitry Solovyov and Natalya Zinets)
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EIU Politics – Country News Analysis
The Economist Intelligence Unit Limited, NY, NY, Tue, May 29, 2007

Ukraine’s leaders have agreed to hold a fresh parliamentary election on
September 30th, in a move widely regarded as bringing an end to the
two-month political crisis.

Yet the cause of that crisis is a lack of clarity and consensus on the
division of powers between president and government–and there is little
reason for believing this will be solved by a fresh election.

Unless the two sides can reach agreement on constitutional questions, the
crisis could resume within a matter of months.

Ukraine’s president, Viktor Yushchenko, reached agreement on May 27th
with Viktor Yanukovych, the prime minister, and Oleksandr Moroz, the
parliamentary speaker, on the timing of an early parliamentary poll.

The date is a compromise between Mr Yushchenko, who wanted a summer
poll, and Mr Yanukovych, who didn’t want to face the electorate before

The deal came shortly after a dramatic escalation of the political battle
between president and prime minister, which began in early April when Mr
Yushchenko issued a decree dismissing parliament and calling fresh elections
for May. In response, the government accelerated its efforts to strip powers
from the presidency.

In the process, the legal basis of the Ukrainian state was undermined. On
May 25th Mr Yushchenko sacked Prosecutor General Svyatoslav Piskun, a
Yanukovych ally.

Interior Minister Vasyl Tsushko deployed interior ministry troops to prevent
the newly appointed prosecutor general from entering office, after which Mr
Yushchenko announced that he was taking direct control of the interior
ministry’s troops–a command that Mr Tsushko refused to acknowledge.

According to some accounts, the crucial impetus to the agreement came from
the so-called oligarchs, Ukraine’s politically well-connected business
leaders. They have influence within both camps and were reportedly worried
that the escalating crisis was bad for business and endangering their
                           IT’S THE CONSTITUTION, STUPID
Inside and outside Ukraine, the deal has been hailed as bringing an end to
the crisis. As during the late-2004 Orange Revolution, Ukraine’s leaders and
people have once again succeeded in avoiding violence despite a highly tense
and lengthy political clash.

This, certainly, is positive. So too is the public display of unity by
president and prime minister in the wake of the agreement.

In an interview with Italy’s Corriere Della Serra, Mr Yushchenko said that
the political crisis was over and the compromise underlined that Ukraine was
a mature democracy.

He added that recent events had demonstrated the need to change the
constitution, in particular with regard to the running of the constitutional
court, election commission and prosecutor general’s office.

On this second point, Mr Yushchenko is undoubtedly correct. The
constitutional court should have resolved the dispute between president and
parliament, but it proved to be a politicised and divided body that was
subordinated to the principal combatants.

Because Mr Yushchenko is right about the flaws in Ukraine’s constitutional
set-up, his claim that the crisis is over does not fully convince. Until all
sides agree on constitutional arrangements and other rules concerning how
the country is run, the crisis could erupt once again.
                     THE ROCKY ROAD TO COMPROMISE
A fresh election, while sought by the president, is unlikely to resolve the
battle for control. Neither side, even with the help of allies, has a
realistic chance of getting the two-thirds majority needed to amend the

At present, Mr Yanukovych’s Party of Regions (PoR), Mr Moroz’s Socialists
and the Communists have a reasonably comfortable majority, of around 250
seats in the 450-member parliament.

There are few wholly reliable opinion polls, but an election this year would
most likely result in the PoR once again being the largest party, with the
Yuliya Tymoshenko Bloc (YTB) coming second and Mr Yushchenko’s Our
Ukraine third. This much would be unchanged from the current parliament.

The Communists too would probably cross the threshold to enter parliament,
but the Socialists probably would not; their supporters are disillusioned
with Mr Moroz for betraying the Orange Revolution by allying with Mr

In the place of the Socialists, an Orange-inclined party, Yuri Lutsenko’s
People’s Self-Defence, seems likely to enter the chamber.

The net effect of these changes would be to reduce Mr Yanukovych’s majority,
or perhaps to shift power in favour of Orange parties–assuming that they
could work together, despite a track record of acrimony. However, it is
highly improbable that either side could command a two-thirds majority.

As a result, the only way to resolve the problems created by the hasty
rewriting of the constitution in early 2005 is through negotiation. Initial
talks may start soon, but discussions will only begin in earnest after the
election is held and a new parliament convened.

A less hostile political atmosphere should help matters, but it will not
change the fundamental dispute between Messrs Yushchenko and

The best hope is that the deadlock of the past two months, and a new
election that confirms the country is approximately divided into two camps,
will convince both leaders that power must be shared. That should not be so

The tricky part will be to get agreement on the precise balance, and the
particular competences assigned to each. Reaching a compromise on these
points is likely to be much more difficult than setting a date for a new
election.                                                  -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

COMMENTARY: By Stephen Velychenko, University of Toronto
Action Ukraine Report (AUR) #850, Article 22
Washington, D.C., Thursday, May 31, 2007

In his study, “The Problem of Restoration” (1967), Robert Kann concluded
that regime- restoration is unlikely unless it is done in the life-span of a
political generation by people active in the old-regime and able to take
effective part in the restored regime.

This condition was met in Russia where Putin successfully controls a
neo-soviet style resource-based autocracy. Bulgaria, Romania and Slovakia
faced  a similar prospect in 1996, 1997 and 1998 had their neo-communists
managed to win the elections. They did not and now restoration in those
countries is improbable.

In Ukraine, the neo-soviet Party of Regions/ Communist Bloc lost the 2004
elections, despite widespread black-ops, fraud, bribery and blackmail.

Had Yushchenko been more resolute at the time he would have arrested and
tried the convicted felon Ianukovych and all his top associates for what
they did.  As is known, that is not what happened.

Consequently, within the year the discredited Kuchma-elite had returned from
self-imposed exile or retirement. A man who because of his criminal record
could not by law hold any government job, became Prime Minister, and, by May
2006, the Party of Regions/Communist coalition was able to take power again
in what  amounted to a coup-d’etat.

Within the year, resorting to dubious methods and bribery, this coalition
was on the way to creating a majority in parliament. The EU still had
instability on its eastern border and Ukrainian citizens could not go about
their business due to the uncertain domestic climate.

In the summer of  2007 Yushchenko reacted and called for new elections. He
realized at last that  neo-soviet forces had no intention of compromising
with his national-democrats.

They were not interested in bringing Ukraine into the English-language
communications sphere, democratizing the country, or preparing it for entry
into the  EU.

But because he foolishly failed to exploit his popular support in 2004-05,
the old neo-soviet elite had  entrenched itself  and the national democratic
Orange Coalition still faces the threat of restoration.

The neo-soviet Regions leaders  also understand that if they fail to restore
the old-regime again, they are unlikely to get a third chance.

Having again taken over the government the Regions stopped the few changes
begun by the Orange national-democratic government and re-established
Kuchma’s “black-mail state.” A state in which officials apply the full force
of the law to those who do not do what they are told or don’t pay-up on time.

More aware than before of the importance of democratic patina to their
activities, Region’s leaders  fired their old Russian campaign advisors and
now listen to new American ones like Paul Manafort, who are not known to
have supported democratic leaders in the past and are close to the US
Republican party.

Old-time communists, new neo-soviet capitalists and American
neo-conservatives  may seem a strange mix, and it is rumoured that one of
Manafort’s suggestions that the Region’s ignore, is his advice to join the

In any case, in the neo-liberal global world where politicians in country
after country have been selling-off the public-sphere to private
corporations and lining their pockets with the profits, this ostensibly
strange association in Ukraine is not abnormal.

So, no one should be surprised when  a majority Region’s government
begins selling-off what is left of Ukraine’s public sphere to its biggest
supporters. On May 25th, for instance, we learned that Kyiv province will
sell all of the province’s museums.

Those interested in the upcoming Ukrainian election, therefore, should note
that Yanukovych’s fraudulent and manipulative  electoral practices were
similar not only to Putin’s.

US Republicans also used dubious and outright illegal methods to bring
George W. Bush into power. And since they worked in the US, observers
must realize that American advisors in Kyiv will want to add some of their
inventions to the Region’s bag of tricks.

Thanks to this kind of  “American know-how” the Region’s now not only
pay “political tourists” and ‘rent-a-crowds”, but wear the “right”  shoes
and sport new hairstyles. The tricks, sadly, work.

Naive journalists look at this and then run articles in newspapers like the
Telegraph and the Observer explaining how Yanukovych has become a
“new man.”

Eighty-years ago, a similarly profound article would have argued that Herr
Hitler had become a “new man” because he had trimmed his handle-bar
moustache and replaced it with a Chaplin-style broom- then very fashionable.

In Ukraine, meanwhile, it is not known if Region’s tell their supporters
that they take advice from “American capitalists.”

How long do party leaders think that the soviet Russophile nostalgia they
dispense to their rank and file supporters in lieu of infrastructure and
services, will distract those people from their terrible living conditions,
and the untaxed wealth controlled by party backers– who teach their
children English and don’t holiday or invest in Russia?

For how long can the Party of Regions reconcile its rank and file directed
rhetoric with its pro-oligarch policies?

What we do know is that after three months in power only 14% of the total
population thought the Party of Regions’ government was looking after the
interests of the average citizen – 45% thought it reflected exclusively  the
interests of Donetsk province, and 30%  thought it reflected the interests
of only the “mafia” or of Russian capital.

Perhaps his Americans have told Yanukovych that time is on his side. People
cannot remain indefinitely mobilized. And, as disinterest and indifference
set- in they will withdraw from politics – which for most means not voting.

From this perspective, we can  understand why, for the last two months the
Region’s ignored Presidential Decrees. They were delaying. Convoluted
events, accusations and counter-accusations can make voters cynical enough
not to bother to vote.

Also, perhaps, the intention was to discredit Yushchenko by obliging him to
use force – a move they hoped would discredit Ukrainian national
independence in moderate world opinion, which has difficulties in accepting
the use of force to protect or establish democracy.

All sides compromised by the end of May 2007, but the likelihood of

planned Region’s brinkmanship must not be overlooked.

Robert Kann’s book reminds us that regime-restoration is rare but not
unprecedented. It also reminds us that the conditions for restoration still
exist in Ukraine.

A new Ukrainian election that still includes a restorationist party,
therefore, obliges observers to  remember  that  the top and middle-level
people in that party responsible for the dirty-tricks in 2004, and on a
smaller scale in 2006, are still in their offices and will do the same

Only this time they will probably do it better – which means observers  must
watch even closer. Observers must observe behind the scenes, in the
provinces, and what goes on at places of work before polling time. They

must not be distracted or confused by smoke, lights, hairstyles and outright

The Party of Regions is a neo-soviet party and should it come to power in
Ukraine only Russia and a small minority will benefit.

While Russian-speakers may be relieved of the need to learn Ukrainian, they
might also find themselves relieved of their jobs, pensions, government
funded services,  medical care and education.               -30-
A version of this article was also published by the Kyiv Post:
Stephen Velychenko, CERES Associate; Research Fellow,Chair of Ukrainian
Studies; Munk Center, University of Toronto,

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
23.                        BUILDING ITS OWN DESTINY
                     Ukraine Seeks a Place Between Russia and Europe

ANALYSIS & COMMENTARY: By Paul Abelsky, Moscow, Russia, Wed, May 30, 2007

The opening of Roszarubezhtsentr in Kiev was a crowded affair. The
organization’s name is an acronym for the Russian Center of International
Scientific and Cultural Cooperation, an institutional network operated
throughout the world by Russia’s Ministry of Foreign Affairs.

An unassuming three-story mansion in the scenic Podol district of Kiev was
set to become a repository and an outpost of Russian culture, hosting
lectures, film screenings, conferences and language instruction.

The guests of honor for the jam-packed ceremony in late March included
Ukrainian Deputy Foreign Minister Vladimir Ogryzko and Viktor
Chernomyrdin, Russia’s ambassador to Ukraine, along with a sizeable
contingent of top Russian and Ukrainian officials.

Public democracy is back in vogue within the CIS, if only to offset the
economic and diplomatic strains that have pulled at the alliance. While
making available Russia’s cultural heritage to the Ukrainian public,
Roszarubezhtsentr defines its primary task in the country as an effort to
foster an “objective view of contemporary Russia” and educate the visitors
about Russia’s past and present.

“Objective” is a strong word – injecting a measure of intelligibility into
Russia’s policies would seem an equally urgent task – but this expectant
commitment to the exercise of soft power could turn the tide in the
increasingly awkward ties with Ukraine.

Although the Ukrainian establishment has seemingly downgraded the CIS to
the status of an almost trivial diplomatic association most important for
sustaining informal relations between national leaders and of occasional use
as a tool of public relations, questions about the nature and direction of
the strategic partnership with Russia remain of utmost importance in
Ukraine’s political discourse.

Russia may have discredited itself as an effective player in Ukraine’s
domestic politics, infamously trying to midwife Viktor Yanukovich’s
presidency during the 2004 ballot, but it has also served as an expedient
foil in the political intrigues that have roiled Ukraine in recent years.

Along with the status of Russian language and the constitutional reforms
undertaken following the Orange Revolution, which shifted more powers to
the parliament, the question of Ukraine’s foreign policy course with regard
to Russia has remained a political lightning rod that often obscures critical
long-term concerns.

Following the 2004 debacle, Russia has tried fitfully to forge a more
pragmatic basis in its relations with Ukraine, reacting with prudence to the
political predicament in which its neighbor has found itself after the
gridlock and infighting that followed the parliamentary elections in 2006.

Even as Ukraine has shifted yet again to a crisis footing during the first
days of April with the escalation of a political showdown between President
Viktor Yushchenko and the Verkhovna Rada, Ukraine’s parliament, Russian
officials have tried to send words of caution and extend guarded offers of

A week had passed before the State Duma effectively took sides, approving
a motion in support of Ukraine’s “lawfully elected” parliament.

Vladimir Kornilov, director of the Kiev-based Ukrainian branch of the
Institute of CIS Countries, believes the chief shortcoming of the current
approach is that the transfer to a more pragmatic form of relations – with
Russia reassessing the subsidized pricing of its energy exports – was not
balanced with a sufficient rise in cultural and social interchange.

“These factors should have proceeded hand in hand, but Russia has never
moved far beyond declaratory statements,” Kornilov said. “A deepened
cultural relationship should have followed closely behind the more pragmatic
economic course.”

The challenge is not strictly to stem the retreat of Russian culture, but to
bolster a constructive relationship between the two countries. The CIS has
not only failed to sustain and deepen processes of integration across the
post-Soviet space, but has also fallen short of offering an appealing model
of development in the face of European enlargement.

“The CIS is hardly a match for the EU, which is a product of a long-term
political evolution in the West,” said Andrei Yermolayev, director of
Kiev-based “Sofia” Center for Social Research.

“The CIS has succeeded the crumbled Soviet domain but was unable to
consolidate the course of integration between the former republics, at best
ensuring the maintenance of diplomatic ties. The epoch of the CIS as a
potentially viable regional partnership is swiftly passing into oblivion.”

Handy stereotypes continue to circulate in Ukraine, contrasting the allure
of Europe against the inertia of rejoining the Russian sphere of influence.
According to Iskander Khisamov, chief editor of Expert Ukraina magazine,
the CIS plays a minimal role in these deliberations.

“The CIS worked as a means of civilized divorce, but its effect has
otherwise been negligible,” he said. “Other institutions of integration may
yet arise in its place, although Ukraine’s participation in them remains

More fundamentally, Khisamov said, Ukraine is trying to choose between
becoming the subject of others’ ambition – whether they stem from the EU,
Russia or the CIS – and finding a path where it remains a sovereign object
of the ongoing transformation.

“The natural inclination for countries in Eastern Europe is to reincorporate
themselves into some political system instead of expending resources and
capital to determine their own future,” he said.

“Ukraine is balancing between these tendencies as a young country with an
uncertain identity. There is a temptation to delegate responsibility for
own development to someone else. But the momentum for European integration
may have been lost anyway, as the EU has become mired in its own problems.

So Ukraine may be forced into building its own destiny as a state and a
nation, becoming a player in its own right, independent of Europe and
Russia. And that may be the most promising course for the country to take.”
                                  A DIFFICULT HISTORY
Worsening Ukraine’s conundrum is not just a pull between European
integration and former Soviet bonds, but also the smoldering rift within the

Even by the standards of the Soviet Union’s arbitrary internal borders,
which created a patchwork of republics that ran roughshod over historical
and cultural fault lines, Ukraine presents a particularly volatile

In addition to territories that became part of the Russian Empire beginning
in the mid-17th century, Ukraine features a distinct western part – first a
domain of the Habsburgs and then a subject of Poland between the world
wars – which was annexed by the Soviet Union in 1939 and then brought back
into the fold following the Second World War.

In 1954, Nikita Khrushchev fatefully joined the Crimean peninsula to the
Ukrainian Soviet Socialist Republic, in honor of the tercentennial
anniversary of the “unification” of Russia and Ukraine. The coastal towns of
Novorossiya (New Russia), many of them founded in the early 19th century,
gradually developed an identity that sets them apart from the rest of the

Pro-European sympathies coalesce naturally in Lviv, western Ukraine’s
cultural nucleus. After straining to hear Ukrainian language spoken in the
central region or the southeast of the country, Lviv appears as a stronghold
of a linguistic and ethnic identity that has outlasted the trials of Soviet

European integration seen from Lviv is not only an appealing option but a
strategic imperative, the only means to yank Ukraine from the political
morass and overcome the internal divide.

“We may be unable to solve all the problems ourselves, and joining Europe
has a greater potential to consolidate the nation than a move in the other
direction,” said Natalya Balyuk, editor of Vysoky Zamok newspaper in Lviv.
“European values and standards of living provide the only sensible
alternative for Ukraine. The same cannot be said about the Russian model as
it stands today.”

Not unlike the political elites in the Baltic states, western Ukrainian
ideologues advocate the promotion of nationalist-minded linguistic policies
and a distinct historical narrative just as they urge their countrymen to
relinquish elements of sovereignty by entering the European institutions.
And there are questions about the pro-Western elite’s embrace of European

“What we are seeing is the aspiration to join Europe without adopting the
corresponding standards and commitments,” said Kornilov.

“The pro-European mantras are more often used to cover up the struggle
over the electorate and pursue strictly political aims. If some
constituencies have turned against the outcome of the Orange Revolution,

particularly in Kiev and in the center of the country, it is because they realized
how hollow those enthusiastic slogans and promises have turned out to be.”
The process of “Ukrainization” extends to introducing Ukrainian as the
primary language of instruction in schools and in the conduct of public
affairs. For Balyuk, “Ukrainization” is nothing more than the “restitution
of justice,” a non-coercive but necessary approach to forging a
nation-state, but Russian-speaking residents of Lviv espouse a different

Alexander Svistunov, head of the Russian Movement of Ukraine, says the
early 1990s brought about an atmosphere of reprisals, singling out and
marginalizing the Russian-speaking population of western Ukraine. Five
Russian schools remain in Lviv, he says, and only eight continue to function
across western Ukraine, where Russian speakers number around 700,000.

“Ukrainization has grown increasingly more aggressive, pursuing a civilized
policy of cultural suffocation,” Svistunov said. “They may not smack you
straight in the face, but ask politely instead, ‘May I please punch you
hard?’ There are many elements intensifying the estrangement, which will
become a tragedy not just for the Russians, but for Ukrainians themselves,
cutting them off from a whole cultural and spiritual tradition.”

A distressing symmetry is at play in the outlook of different parts of
Ukraine. When citizens in the west of the country identify red lines that
must not be crossed to preserve civility and national accord – safeguarding
Ukrainian as the only state language, for example, or signaling the course
of European integration – the very same issues encroach on some of the
decisive concerns for the Russian-speaking population in the southeast of
the country.

For Valery Kaurov, head of the Odessa-based Union of the Orthodox Citizens
of Ukraine, the “wave of Ukrainization” trespasses on the cultural patrimony
of the country’s inhabitants that historically looked to Russia for its
sense of identity. Complications arise in everyday situations, when
Ukrainian is used for courtroom proceedings or on medicine labels.

His organization has launched an initiative – “I Speak Russian” – that aims
to secure a protected status of Russian as a regional language by setting up
tents around Odessa and collecting signatures in support of the legislation.

“To maintain Ukraine’s unity, the authorities must renounce policies of
Ukrainization in the southeast and not go against the wishes of the majority
of the population in imposing movement toward NATO,” Kaurov said.

“If such a consensus is reached, the tensions will subside immediately.
Federalization of Ukraine is the only option – that’s the only way out of
the dead end. With all the linguistic, religious, cultural differences,
parts of the country can only co-exist within a federally regulated polity.”
                                      A HOUSE DIVIDED?
For all the palpable disparities, the divisive attributes have been
mobilized to serve quick-fix political ends, most notably during the 2004
presidential vote when the resulting electoral map closely followed regional
fears and biases.

“There is no doubt that they were politically exploited, but that is not to
say that there were no significant differences between eastern and western
parts,” said Yaroslav Hrytsak, an eminent Lviv historian who now teaches at
the Central European University in Budapest.

“The revolution has antagonized two parts to the extreme, and since then,
nothing serious has been done to mend this. The chance to integrate the two
Ukraines is not lost, since there is a set of ideas on which they agree.
Ironic as it may sound, both of them agree that they would not be better off
outside Ukraine.”

What stirs up the divide, however, are the polarizing topics that resonate
with the political constituencies. “The similarities between east and west
of Ukraine fade away as soon as politicians bring up the hot topics – the
status of Russian language, integration with NATO, and memories about
World War II – then the differences grow rapidly,” Hrytsak added.

“There is a chance for Ukrainian reintegration, but it is getting slimmer
and slimmer because of the irresponsibility of the two antagonistic
political camps.

Reintegration may happen if a ‘third Ukraine’ emerges, capitalizing on
similarities rather then on differences. The question is: who will place it
at the top of the political agenda?”

What reignited the latest phase of Ukraine’s political face-off were
defections of parliament members to the ruling coalition based around Prime
Minister Viktor Yanukovich’s Party of the Regions.

Although the opposition has alleged that the renegade politicians were
coaxed into switching factions with extortions and bribery, some have seen
the trend as a positive effort to overcome the lingering regional divide.

“The gains of the parliamentary majority came at the expense of those who
took the Orange side during the revolution,” said Khisamov of Expert
Ukraina. “The moves were driven more by pragmatism and economic concerns,
chipping away at the ideological extremes of both sides and forging
something close to what they call themselves, a coalition of national unity.

Ukraine was able to turn away from the brink of civil war and relocate the
conflict inside the cabinets, delegating to Yanukovich, Yushchenko and
others the right to debate each other directly and not on the streets. This
has taken the edge off a mounting nationwide split.

As we have seen, the parliamentary coalition absorbed members not just from
the southeast, but also deputies from the more nationalist-minded areas in
the west, negating the sharp regional contradictions.”

At the same time, the countrywide split that has given some politicians
increased clout and propelled them during the revolution has continued to
reverberate within Ukraine.

“The politicians who took power and made the most of the nation’s divide
didn’t fully appreciate the genuine problems that existed between parts of
the country,” said Anatoly Romanyuk, political scientist at the Ivan Franko
National University of Lviv.

“They may have exploited these issues unconsciously, but they did next to
nothing to address them in the years that followed. Starting in 2006, the
divisions reappeared, and what we are seeing now once again resembles the
identity politics of the earlier struggle.”
                                       NOT PRO-RUSSIAN
Despite the stereotype of the pro-Russian southeastern part of the country,
precisely those areas stand to lose the most as a result of any economic
integration with Russia. The heavily industrialized Donbass would enter into
direct competition with the corresponding sector of the Russian economy.

The Russian language and historical kinship with the eastern neighbor may
shape identity politics in Donetsk, the stronghold of the Party of the
Regions, but that does not translate into sympathies for Russia as a state
or an economic entity.

“If nationalism is effectively a particular attitude to one’s own soil, then
Donetsk is the most nationalist part of Ukraine,” said Dmitry Durnev, chief
editor of newspaper Moskovsky Komsomolets in Donbass.

“Russian-owned assets and investments in Donbass are kept at a minimum
because there’s an understanding that local businesses will be squeezed out
if Russian corporations move into the region.”

The Ukrainian establishment has tried to counter the receding value of the
CIS with other levers of integration. Besides the EU and NATO, another
alternative path was GUAM, the largely ineffective grouping with Georgia,
Moldova and Azerbaijan.

Joint efforts with Russia included the Eurasian Economic Commonwealth
(EvrAzEs) and the Joint Economic Space (EEP), initiatives which have stalled

For all the socio-cultural rifts within Ukraine, it has grown increasingly
unified as an economy, even as clans and large corporations have continued
to feud over the continuing privatization of assets.

“Ukraine’s economy has become globalized, and despite the internal
competitive pressures, the country has grown economically integrated,” said

“The interested parties have learned how to negotiate and reconcile, ending
the phase of wild capitalism. There are no longer signs of ruptures between
the economy’s component parts.”

Despite the political and diplomatic strains with Russia, the two countries
remain bound not only by threads of cultural continuity, but also function
as interrelated economic entities. The pipeline network that passes through
Ukrainian territory is used for transit of over 80 percent of Russian energy

Political integration with Russia is a non-starter for many Ukrainians, but
a more transparent and mutually beneficial economic interchange could
counter the divisive issues that have roiled the relationship.

Any integration for Ukraine must begin from within. Pro-European
catchphrases have not stopped the country’s polity from splintering over
the basic issues of historic and cultural identity, and self-interested
politicians continue to ride the electorate’s instinctive urges to identify
with sensitive issues of linguistic and ethnic belonging.

It has already set in motion forces that have paralyzed the political
process. People from Odessa to Lviv whisper about the worse-case scenarios
of reaching the threshold of a decisive break. Most, however, would prefer
never to have to make this choice.                         -30-
FOOTNOTE: Paul Abelsky was born in Minsk, Belarus, and grew up in the
Chicago area after immigrating to the United States in 1991. Educated in
European history at Amherst College and Yale University, he has worked
as a journalist in Russia since 2004. He joined Russia Profile as a staff
writer in May 2005 and has covered a wide range of subjects, from cartoons
to Kaliningrad to Chinese migration, and has also been writing movie and
book reviews for the magazine. His other interests, in no particular order,
include architecture, fast cars and photography.

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
24.                 UKRAINE: PEACE DIVIDENDS
         Yanukovich got the date he wanted & achieved a victory for his image.

Kommersant, Moscow, Russia, Monday, May 28, 2007

You count your chickens in autumn. That old saying applies literally to the
latest turn of events in Ukraine, where the Central Elections Commission
will be counting votes after the September 30 early elections.

The standoff between the two political camps equal in power, with financial
and industrial group comparable in power standing behind them, was settled
after it became clear that there would be no forceful arbitration in the
disagreement. The split that ran through the country divided the enforcement
agencies as well.

Thus the political crisis in Ukraine was settled by an unknown traffic cop
somewhere in Kolebyaki by Poltava, who held up his stick in front of the
Interior Ministry forces heading to Kiev to settle the argument in favor of
the president.

His stick was a magic wand that stopped the troops obediently in their
tracks. But it was not magic there in Gogol’s homeland.

Simply people in the capital understood that one turn would lead to another,
one special force to another and if, God forbid, it led to bloodshed, the
blood would be on the hands of both opposing politicians. And then who
would vote for their parties and what would their image be abroad?

Simple arithmetic will show who won finally from the holding of the
elections in autumn. The question of the date of the elections was a
technical issue, not a political one.

For the Orange ­Our Ukraine and the Yulia Timoshenko Bloc ­ it was of
principle importance that the elections occur as soon as possible.

Having succeeded in dissolving the parliament they considered illegitimate,
they took on the role of fighters for justice and the people’s interests and
reached a peak in popularity.

To preserve that popularity as votes, they had to seize the moment, and hold
elections as soon as possible. So they insisted on holding the elections no
later than July 8.

Viktor Yanukovich’s Party of the Regions and its partners in the ruling
coalition were in an uncomfortable spot. There was little moral victory in
the elections for them.

Thus the Regionals decided not to agree to elections any earlier than
October. By that time, the Orange popularity would have waned and
Yanukovich would have time to take action to raise the popularity of his

Yanukovich got what he wanted. September 30 is essentially the same date as
they had mentioned before. Yanukovich also achieved a victory for his image.

During the current crisis, he called for peace, agreement and unity the
whole time, out of character for the wrecker Yulia Timoshenko portrayed him
as. Now she has to find new arguments against him, and fast.         -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
                          WANTS ‘PLENITUDE OF POWER’

EDITORIAL: Nezavisimaya Gazeta, Moscow, Russia, Tue, May 29, 2007

The political crisis in Ukraine has settled down for now. Until the fall.
Until the new parliamentary election which will take place on the last day
of September.

Each side (the president, the premier, and the legislature) tries to claim
credit for the agreement setting the election date and to present it as its
personal victory.

Meanwhile, it is clear not only to politicians, political analysts, or
deputies, meaning, direct participants in the latest show on Maydan
Nezalezhnosti (Kiev’s central square), but also to ordinary Ukrainians who
are far from political intrigues that there are no winners in this game.
There are losers only, including the overwhelming majority of the Ukrainian

Two years ago, it made its choice in favor of European values and proclaimed
a policy of integration with the West. However, as the events of the past
two months demonstrated, one can regard oneself as a European, but

becoming a European is not easy.

When viewed from the political perspective, the European level of relations
primarily presumes the skill of reaching agreement, as well as the ability
and readiness to achieve compromise.

Otherwise the result will be the same as the one we observed in Kiev. All
those to whom the people delegated powers — the president, the parliament,
and the premier — demonstrated their unwillingness to “yield their

The Ukrainians were taught an instructive lesson on the consequences of
homegrown interpretation of democracy presuming the existence of democratic
freedoms and the opportunities they offer, but no personal responsibility
for the country’s future.

This gave rise to parliamentary, judicial, and legal conflicts, fights
between prosecutors in which Spetsnaz soldiers take part, and attempts to
disband the Constitutional Court and bypass the law altogether and was
accompanied by primitive reasoning along the lines “this is being done to

prevent war” and with slogans on the protection of democracy, which
cannot deceive anybody.

The people to whom these slogans were addressed made an absolutely
undemocratic choice in favor of an iron glove and pointed at neighboring

People on Maydan Nezalezhnosti directly spoke about this on the last day

of the standoff between the authorities in Kiev. The Ukrainian authorities
failed to pass the democracy and parliamentarism test.

Viktor Yushchenko on whom the Ukrainians pinned their hopes of
transformations in society and of the country’s prompt entry into European
orbit not only failed those hopes, but also cast doubt on the possibility of
transforming presidential republics in the post-Soviet area into
parliamentary ones.

He demonstrated again that Ukrainians (as well as Kazakhs, Belarusians,
Moldovans, and the like) differ from people in the Baltics.

Parliamentarianism above all has to do with mentality — mentality of elites
and society as a whole.

Meanwhile, the elites on the territory known under the common name CIS
managed to rise to the level of state independence and ethnic
self-identification, but in all other respects remained at the level of
Soviet mentality, which became not only their own problem, but also a
barrier preventing reform of post-Soviet societies as a whole.

Moldova was the first country to demonstrate this when it abolished
presidency in 2000 and proclaimed the republic’s new parliamentary status.
The deputies who voted for this decision wanted to get rid of the
president’s autocracy.

In practice, however, they received what they wanted to avoid. President
Vladimir Voronin has the plenitude of power despite the fact that it was
elected by the legislature. Even presidents elected by general vote can envy

Voronin is the leader of the ruling party and controls the parliamentary
majority which can be given orders without constitutional powers.

The situation in Ukraine is different, but Viktor Yushchenko also wants the
plenitude of power. Mutating parliamentarianism in Ukraine and Moldova
demonstrated that changes in society are impossible without changes in
political elites’ world outlook.                           -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
  Digital Fears Emerge After Data Siege, Somebody Orchestrated This Thing

By Mark Landler and John Markoff, The New York Times
New York, New York, Tuesday, May 29, 2007, Page 1

TALLINN, Estonia, May 24 – When Estonian authorities began removing
a bronze statue of a World War II-era Soviet soldier from a park in this
bustling Baltic seaport last month, they expected violent street protests by
Estonians of Russian descent.

They also knew from experience that “if there are fights on the street,
there are going to be fights on the Internet,” said Hillar Aarelaid, the
director of Estonia’s Computer Emergency Response Team.

After all, for people here the Internet is almost as vital as running water;
it is used routinely to vote, file their taxes, and, with their cellphones,
to shop or pay for parking.
What followed was what some here describe as the first war in cyberspace,
a monthlong campaign that has forced Estonian authorities to defend their
pint-size Baltic nation from a data flood that they say was set off by
orders from Russia or ethnic Russian sources in retaliation for the removal
of the statue.

The Estonians assert that an Internet address involved in the attacks
belonged to an official who works in the administration of Russia’s
president, Vladimir V. Putin.

The Russian government has denied any involvement in the attacks, which
came close to shutting down the country’s digital infrastructure, clogging
the Web sites of the president, the prime minister, Parliament and other
government agencies, staggering Estonia’s biggest bank and overwhelming
the sites of several daily newspapers.

“It turned out to be a national security situation,” Estonia’s defense
minister, Jaak Aaviksoo, said in an interview. “It can effectively be
compared to when your ports are shut to the sea.”

Computer security experts from NATO, the European Union, the United
States and Israel have since converged on Tallinn to offer help and to
learn what they can about cyberwar in the digital age.

“This may well turn out to be a watershed in terms of widespread awareness
of the vulnerability of modern society,” said Linton Wells II, the principal
deputy assistant secretary of defense for networks and information
integration at the Pentagon. “It has gotten the attention of a lot of

The authorities anticipated there would be a backlash to the removal of the
statue, which had become a rallying point for Estonia’s large
Russian-speaking minority, particularly as it was removed to a less
accessible military graveyard.

When the first digital intruders slipped into Estonian cyberspace at 10 p.m.
on April 26, Mr. Aarelaid figured he was ready. He had erected firewalls
around government Web sites, set up extra computer servers and put his
staff on call for a busy week.

By April 29, Tallinn’s streets were calm again after two nights of riots
caused by the statue’s removal, but Estonia’s electronic Maginot Line was
crumbling. In one of the first strikes, a flood of junk messages was thrown
at the e-mail server of the Parliament, shutting it down.

In another, hackers broke into the Web site of the Reform Party, posting a
fake letter of apology from the prime minister, Andrus Ansip, for ordering
the removal of the highly symbolic statue.

At that point, Mr. Aarelaid, a former police officer, gathered security
experts from Estonia’s Internet service providers, banks, government
agencies and the police.

He also drew on contacts in Finland, Germany, Slovenia and other countries
to help him track down and block suspicious Internet addresses and halt
traffic from computers as far away as Peru and China.

The bulk of the cyberassaults used a technique known as a distributed
denial-of-service attack. By bombarding the country’s Web sites with data,
attackers can clog not only the country’s servers, but also its routers and
switches, the specialized devices that direct traffic on the network.

To magnify the assault, the hackers infiltrated computers around the world
with software known as bots, and banded them together in networks to
perform these incursions. The computers become unwitting foot soldiers, or
 “zombies,” in a cyberattack.

In one case, the attackers sent a single huge burst of data to measure the
capacity of the network. Then, hours later, data from multiple sources
flowed into the system, rapidly reaching the upper limit of the routers and

By the end of the first week, the Estonians, with the help of authorities in
other countries, had become reasonably adept at filtering out malicious
data. Still, Mr. Aarelaid knew the worst was yet to come.

May 9 was Victory Day, the Russian holiday that marks the Soviet Union’s
defeat of Nazi Germany and honors fallen Red Army soldiers. The Internet
was rife with plans to mark the occasion by taking down Estonia’s network.

Mr. Aarelaid huddled with security chiefs at the banks, urging them to keep
their services running. He was also under orders to protect an important
government briefing site. Other sites, like that of the Estonian president,
were sacrificed as low priorities.
The attackers used a giant network of bots – perhaps as many as one million
computers in places as far away as the United States and Vietnam – to
amplify the impact of their assault. In a sign of their financial resources,
there is evidence that they rented time on other so-called botnets.

“When you combine very, very large packets of information with thousands
of machines, you’ve got the recipe for very damaging denial-of-service
 attacks,” said Jose Nazario, an expert on bots at Arbor Networks, an
Internet security firm in Ann Arbor, Mich.

In the early hours of May 9, traffic spiked to thousands of times the normal
flow. May 10 was heavier still, forcing Estonia’s biggest bank to shut down
its online service for more than an hour.

Even now, the bank, Hansabank, is under assault and continues to block
access to 300 suspect Internet addresses. It has had losses of at least $1

Finally, on the afternoon of May 10, the attackers’ time on the rented
servers expired, and the botnet attacks fell off abruptly.

All told, Arbor Networks measured dozens of attacks. The 10 largest assaults
blasted streams of 90 megabits of data a second at Estonia’s networks,
lasting up to 10 hours each. That is a data load equivalent to downloading
the entire Windows XP operating system every six seconds for 10 hours.

“Hillar and his guys are good,” said Bill Woodcock, an American Internet
security expert who was also on hand to observe the response. “There
aren’t a lot of other countries that could combat that on his level of calm

Estonia’s defense was not flawless. To block hostile data, it had to close
off large parts of its network to people outside the country.

“It is really a shame that an Estonian businessman traveling abroad does not
have access to his bank account,” said Linnar Viik, a computer science
professor and leader in Estonia’s high-tech industry. “For members of the
Estonian Parliament, it meant four days without e-mail.”

Still, Mr. Viik said the episode would serve as a learning experience. The
use of botnets, for example, illustrates how a cyberattack on a single
country can ensnare many other countries.

In recent years, cyberattacks have been associated with Middle East and
Serbian-Croatian conflicts. But computer systems at the Pentagon, NASA,
universities and research labs have been compromised in the past.

Scientists and researchers convened by the National Academy of Sciences
this year heard testimony from military strategy experts indicating that
both China and Russia have offensive information-warfare programs. The
United States is also said to have begun a cyberwarfare effort.
Though Estonia cannot be sure of the attackers’ identities, their plans were
posted on the Internet even before the attack began.

On Russian-language forums and chat groups, the investigators found
detailed instructions on how to send disruptive messages, and which
Estonian Web sites to use as targets.

“We were watching them being set up in real time,” said Mr. Aarelaid, who
weeks later could find several examples using Google.

For NATO, the attack may lead to a discussion of whether it needs to modify
its commitment to collective defense, enshrined in Article V of the North
Atlantic Treaty. Mr. Aarelaid said NATO’s Internet security experts said
little but took copious notes during their visit.

Because of the murkiness of the Internet – where attackers can mask their
identities by using the Internet addresses of others, or remotely program
distant computers to send data without their owners even knowing it –
several experts said that the attackers would probably never be caught.

American government officials said that the nature of the attacks suggested
they were initiated by “hacktivists,” technical experts who act
independently from governments.

“At the present time, we are not able to prove direct state links,” Mr.
Aaviksoo, Estonia’s defense minister, said. “All we can say is that a server
in our president’s office got a query from an I.P. address in the Russian
administration,” he added, using the abbreviation for Internet protocol.
                               MOSCOW OFFERS NO HELP
Moscow had offered no help in tracking down people who the Estonian
government believes may be involved.

A spokesman for the Kremlin, Dmitri S. Peskov, denied Russian state
involvement in the attacks and added, “The Estonia side has to be extremely
careful when making accusations.”

The police here arrested and then released a 19-year-old Estonian man of
Russian descent whom they suspected of helping to organize the attacks.

Meanwhile, Estonia’s foreign ministry has circulated a document that lists
several Internet addresses inside the Russian government that it said took
part in the attacks.

“I don’t think it was Russia, but who can tell?” said Gadi Evron, a computer
security expert from Israel who spent four days in Tallinn writing a
post-mortem on the response for the Estonians. “The Internet is perfect for
plausible deniability.”

Mr. Evron, an executive at an Internet security firm called Beyond Security,
is a veteran of this kind of warfare. He set up the Computer Emergency
Response Team, or CERT, in Israel. Web sites in Israel are regularly
subjected to attacks by Palestinians or others sympathetic to their cause.

“Whenever there is political tension, there is a cyber aftermath,” Mr. Evron
said, noting that sites in Denmark became targets after a newspaper there
published satirical cartoons depicting the prophet Muhammad.

The attacks on Estonia’s systems are not over, but they have dropped in
volume and intensity, and are aimed mainly at banks. The last major wave of
attacks was on May 18.

Now that the onslaught has ebbed, Mr. Aarelaid is mopping up. A few days
ago, he managed to get to the sauna with Jaan Priisalu, the head of computer
security at Hansabank, and other friends from Estonia’s Internet security

“I’m a simple I.T. guy,” he said, gazing at a flickering computer screen. “I
know a lot about bits and packets of data; I don’t know about the bigger
questions. But somebody orchestrated this thing.”           -30-
Mark Landler reported from Tallinn and John Markoff from San Francisco.
Steven Lee Myers contributed reporting from Moscow.

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

Ukrainian National Information Service (UNIS)
Washington, D.C., Wednesday, May 30, 2007

Ask your Representative to support a resolution condemning Russian
interference in Estonia!

On May 23rd, Rep. John Shimkus (R-IL) introduced H.Res.397, a resolution
condemning the violence in Estonia, as well as the cyber attacks on Estonian
government websites, and expressing solidarity with the people of Estonia.

The riots and the severe reaction of the Russian government following the
removal of the monument to the Soviet ‘liberators’ from Tallinn reminds us
that the Soviet legacy to exercise control over former Soviet states still

The Ukrainian community should respond to this blatant Russian aggression

in Estonia, as similar incidents could occur in Ukraine.  It is our duty to
condemn the interference of the Russian Federation in the internal affairs
of another sovereign state and express our support for the Estonian nation.

The Ukrainian National Information Service (UNIS) encourages the Ukrainian
American community to contact their respective representatives in Congress
and urge them to support H.Res.397. For your convenience, please find below
a sample letter to Members of Congress. 
                            SAMPLE LETTER
The Honorable (Name)
U.S. House of Representatives
Washington, D.C. 20515

Dear Representative (Name):

Following the Estonian government’s removal of a monument to the Soviet

Army soldiers, demonstrations by pro-Russian groups turned violent resulting
in injuries to 153 people.

The propaganda offensive from Moscow, which reacted aggressively and
inappropriately to this decision by the Estonian Government included
implicit encouragement of further rioting and violence.

The attacks against Estonia were not limited to statements. A number of
Estonian media and government web sites have also been sabotaged.

The Putin regime in Russia has become increasingly aggressive towards

former Soviet states and continues to exercise influence over its neighbors
in a brutish manner.

I strongly rebuke the Russian government’s attempts to interfere in the
affairs of neighboring states and I stand in steadfast support of the
Estonian people.  H.Res.397 is a very timely bill that deserves the full
support of the United States Congress.

As an American of Ukrainian descent, I understand the outrage of the
Estonian nation, as Ukraine has, and continues, to experience Russian
interference in its internal affairs.

The international democratic community should stand together and resist the
efforts by the Russian Federation to re-establish control over the former
Soviet Union.  As your constituent, I encourage you to support H.Res.397

and become a co-sponsor of that resolution.

   Representatives who have already signed onto H.Res.397 are:
Rep. Howard L. Berman (D-CA); Rep. Gus M. Bilirakis (R-FL)
Rep. Roy Blunt (R-MO); Rep. Mary Bono (D-CA)
Rep. John Boozman (R-AR); Rep. Dave Camp (R-MI)
Rep. Jim Costa (D-CA); Rep. Jerry F. Costello (D-IL)
Rep. Tom Feeney (R-FL); Rep. Luis G. Fortuno (R-PR)
Rep. Elton Gallegly (R-CA); Rep. Bob Goodlatte (R-VA)
Rep. Tim Holden (D-PA); Rep. Bob Inglis (R-SC)
Rep. Dale Kildee (D-MI); Rep. Steve King (R-IA)
Rep. Tom Lantos (D-CA); Rep. Daniel Lipinski (D-IL)
Rep. Connie Mack (R-FL); Rep. Michael T. McCaul (R-TX)
Rep. Thaddeus G. McCotter (R-MI); Rep. Candice S. Miller (R-MI)
Rep. Marilyn N. Musgrave (R-CO); Rep. Richard E. Neal (D-MA)
Rep. Bill Pascrell, Jr. (D-NJ); Rep. Joseph R. Pitts (R-PA)
Rep. Mike J. Rogers (R-MI); Rep. Ileana Ros-Lehtinen (R-FL)
Rep. John Shimkus (R-IL); Rep. Bill Shuster (R-PA)
Rep. Christopher H. Smith (R-NJ); Rep. Bart Stupak (D-MI)
Rep. Fred Upton (R-MI); Rep. Diane E. Watson (D-CA)
Rep. Robert Wexler (D-FL)

Write or call your Representative and ask them to co-sponsor the resolution,
or thank them if they have already done so.  Contacting your Representatives
is one of the most effective ways to communicate your views.  Tell them:

     [1] As your constituent and a Ukrainian American, you are asking

     your representative to co-sponsor H.Res.397 condemning Russian
     interference in Estonia’s internal affairs;
     [2] our support for the Estonian nation as it battles cyber-warfare
     instigated by the Russian government; and,
     [3] Thank you for supporting a resolution which brings light to Russia’s
     continued meddling in countries within their alleged “sphere of influence.”

Letters may be e-mailed directly to your Member of Congress from the
following site: Should you have any
questions, please contact UNIS at (202) 547-0018 or via email at                                          -30-
Ukrainian National Information Service (UNIS), 311 Massachusetts Avenue,
NE Washington, DC 20002, e-mail:;
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