AUR#840 May 8 Political Sausage Factory; Horizon Capital, Vanco; Regulating Tobacco; Nuclear Boom; AES; ADM; Bunge; Graves In Bykivnia Forest

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                     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
Anya Tsukanova, Agence France Presse (AFP), Kiev, Ukraine, May 7, 2007
Interfax, Kyiv, Ukraine, Monday, May 7, 2007
COMMENTARY: John Marone, Kyiv, Eurasian Home, Mon, May 7, 2007

4.                             UKRAINE: A SECOND CHANCE
ANALYSIS & COMMENTARY: By Oksana Bashuk Hepburn
Action Ukraine Report (AUR) #840, Article 4, Tuesday, May 8, 2007

Horizon Capital, Kyiv, Ukraine, Monday, May 7, 2007

Interfax Ukraine Business Express, Kyiv, Ukraine, Friday, May 4, 2007

Interfax-Ukraine news agency, Kiev, in Russian 1651 gmt 4 May 07
BBC Monitoring Service, United Kingdom, Friday, May 04, 2007

8.                           UKRAINE: REGULATING TOBACCO
ANALYSIS AND COMMENTARY: By Tom Coupé & Olena Gnezdilova
Action Ukraine Report (AUR) #840, Article  8, May 8, 2007

9.                                 UKRAINE: NUCLEAR BOOM

              Westinghouse Electric will manufacture nuclear fuel assemblies
ANALYSIS: Oxford Business Group
London, United Kingdom, Friday, 30 March 2007

By Alla Bakulina, The Ukrainian Times, Kyiv, Ukraine, Mon, May 7, 2007

Interfax Central Europe, Warsaw, Poland, Monday, May 7, 2007

COMMENTARY: by Jules Evans, Moscow, Eurasian Home, Tue, Apr 24, 2007

Business Digest, AII Data Processing Ltd., Sofia, Bulgaria, Fri, May 4, 2007


CCNMatthews, Edmonton, Alberta, Canada, Monday, April 2, 2007

COMMENTARY: By John Marone, Kyiv, Eurasian Home, Mon, Apr 23, 2007

Yevhen Holovatiuk, Ukrainian News, Kyiv, Ukraine, March 23, 2007

          SEED PROCESSING BY 29.5% IN 2007, 94% OWNED BY BUNGE
Interfax Ukraine Agro, Kyiv, Ukraine, March 4, 2007

Interfax – Ukraine Business, Kyiv, Ukraine, March 27, 2007

19.                          RUSSIA: STUMBLING OVER THE PAST
EDITORIAL: In Vedomosti, published in Moscow Times

Moscow, Russia, Monday, May 7, 2007

20.                        A SOVIET MEMORIAL – AND MIND-SET
OP-ED: By Fred Hiatt, The Washington Post
Washington, D.C., Monday, May 7, 2007; Page A19

                          FROM PRE-REVOLUTIONARY UKRAINE”
                             May 7-June 22, University of Saskatchewan.
Prairie Centre for the Study of Ukrainian Heritage
St. Thomas More College, University of Saskatchewan
Saskatoon, Saskatchewan, Canada, Monday, May 7, 2007
                            Washington, D.C., Sunday, May 20 at 3 p.m.
The Washington Group Cultural Fund
Washington, D.C., Monday, May 7, 2007
No. 4, March 2006, Koszalin Institute of Comparative
European Studies (KICES), Koszalin, Poland
                    Bykivnia Forest used for mass burials of those repressed
                       and executed by NKVD in Kyiv, 120-130,000 victims
                         of Soviet repressions are buried in Bykivnia Forest
Ukraine 3000 International Charitable Fund
Kyiv, Ukraine, Monday, May 7, 2007

Anya Tsukanova, Agence France Presse (AFP), Kiev, Ukraine, Mon, May 7, 2007

KIEV  – After clinching victory over his rival, Viktor Yanukovych, in a
constitutional feud, Ukraine’s pro-Western President Viktor Yushchenko faced
a tricky task Monday to pin down details of their compromise.

Officials from the rival camps, Yushchenko’s and Prime Minister
Yanukovych’s, were expected to put forward their proposals for a special
session of parliament after they ended their month-long row on Friday.

Outside powers have closely watched the struggle, anxious about the
political course of this country of 47 million people which lies between the
European Union and NATO to the west, and Russia to the east. Yushchenko

has declared joining NATO a key objective while Yanukovych opposes the

The special session reconvening parliament is required to decide
arrangements for holding parliamentary elections.

It was Yushchenko’s decision to dissolve parliament on April 2 and to hold
fresh elections that sparked a political crisis as Yanukovych tried to
resist by bringing his supporters onto the streets.

Yushchenko had watched with alarm as the pro-Russian governing coalition in
parliament tried to undermine him by reducing his powers and luring deputies
into switching sides.

Under Friday’s deal, Yushchenko is expected to try to use the parliamentary
session to secure several political goals in addition to fixing an election

The deal foresees a reaffirmation by parliament of Yushchenko’s Western
course, a ban on deputies switching sides and the annulment of a law that
reduced the president’s powers.

But analysts said the prime minister’s camp might yet blanch at those
demands, while the election date is a contentious subject.

If, as Yushchenko proposes, parliament meets on Tuesday, elections would
be due within 60 days and would thus be likely around the start of July.  But
the governing coalition has said it would prefer a date in the autumn.

“The negotiations will be very difficult,” predicted political analyst
Mikhailo Pogrebinsky. “They’ll probably last a week… I don’t think the
coalition will make additional concessions apart from adopting the documents
on the elections,” he said.

Analyst Vadim Karasyov, of the Institute of Global Strategies, predicted
that Yushchenko would seek the government’s resignation in exchange for
agreeing to an autumn date.

The pro-presidential parties have been boosted by Yushchenko’s out-gunning
of Yanukovych, which he did through such wiles as dismissing two
constitutional court judges and a prosecutor general considered loyal to the
prime minister.

Usually accused of vacillation, Yushchenko’s firmness “will reinforce the
ratings of his party at the elections,” although no party can expect an
outright majority, said Pogrebinsky.                   -30-

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

Interfax, Kyiv, Ukraine, Monday, May 7, 2007
KYIV – Five political forces would have made it to the Rada if Ukraine had
early parliament elections on April 29, FOM – Ukraine  General  Director 
Alexander  Bukhalov  told  a  Monday  press conference at Interfax –
Ukraine office commenting on a recent poll.

He  said  30%  would have supported the Party of Regions, 17% – the
Yulia Tymoshenko  Bloc,  9%  –  Our  Ukraine,  3.9%  –  Yuriy Lutsenko’s
People’s Self-Defense and 3.7% – the Communist Party.

According  to Bukhalov, the Socialist Party would have gained 1.8%,
the Volodymyr  Lytvyn  Bloc  –  1.2%,  the Progressive Socialist Party –
0.8%, and  Ukrainska  Pravitsa  –  0.5%. Ten percent of Ukrainians would
have rejected  all  candidates;  10.8%  would  have  found  this  choice
difficult; and 9.7% would not have taken part in the elections at all.

The  poll  showed  that  the  Party  of  Regions would have won 212
mandates,  the  Yulia  Tymoshenko Bloc – 120, Our Ukraine – 64, People’s
Self-Defense – 28, and the Communist Party – 26.

A total  of  49.7%  of  the  respondents  approved President Viktor
Yushchenko’s  ordinance  that  disbanded the Verkhovna Rada; while

37.6% said the opposite; and 10.8% found it difficult to answer the question.
Some 30.4% said that the presidential ordinance was constitutional;
41.2% said it was not; and 28.4% could not say anything.   -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

COMMENTARY: John Marone, Kyiv, Eurasian Home, Mon, May 7, 2007

A well-known Ukrainian politician said not too long ago that reaching
political compromise in his country was a lot like the making of sausages –
the average Ukrainian really wouldn’t want to observe the process.

Nevertheless, as the standoff between President Viktor Yushchenko and his
arch rival Prime Minister Viktor Yanukovych heads toward a settlement, the
country’s sausage factory has been laid open to public view like never
before, making it clear who really calls the shots and possibly affecting
voters’ appetites in the next elections.

On May 4, Ukrainians were told that early parliamentary elections would be
held, as Yushchenko had ordered a month earlier.

Yanukovych and the majority he controls in parliament had been steadfastly
refusing to heed the presidential order, but now a deal appears to have been

The exact date of the snap elections, as well as all kinds of other
important legal issues, is still being worked out in backroom negotiations
between the so-called political elites.

To the average Ukrainian and the international community, the elites have
long been divided into two warring camps: President Yushchenko, who rose to
power during the country’s Orange Revolution with promises of Western
reform, and Yanukovych, who has tried to soften his pro-Russian image since
returning as premier last year.

Things seemed much simpler during the Orange Revolution, regardless of whom
one supported. Since then everything has been dragged through the slop of
the sausage factory, including the country’s rather innocent constitution.

Ukrainians have held a cynical view of their leaders and the institutions
that they control since Soviet times, but things like the media and
privatization were starting to get a little more transparent following the
Orange Revolution.

But ever since Yanukovych recovered from the ignominy of his defeat during
the 2004 presidential elections to challenge Yushchenko’s monopoly on
executive power, any illusions of a law-based system have vanished.

The main sausage makers tore into each other’s flesh in plain view of a
public long used to a single strong executive leader.

As a result, the sausage factory shut down, with the president’s party
joining an opposition boycott of the parliament, while the majority
continued to pass laws.

The courts and prosecutors proved to be as helpless and partisan in
providing a legal solution as everyone had suspected.

Despite their bluster and appeals to the international community, Yushchenko
and Yanukovych looked equally impotent.

Particularly pathetic were the attempts to turn the conflict into a revamped
Orange Revolution, with both sides claiming to be the champions of democracy
and free trade.

Although foreign leaders expressed concern, all but the Russian Duma avoided
taking sides this time.

After all, everyone at home and abroad had high hopes of Ukraine producing
bigger and better sausages. All the economic indicators were showing that
the country was looking attractive for investment and that Ukrainians were
living better.

So as the prospect of compromise now seems all but certain, one has to look
for other important players to credit.

The money bags in Yanukovych’s camp is industrialist Rinat Akhmetov,
Ukraine’s richest man. His holding company Systems Capital Management has

made serious efforts at transparency in recent years, with plans to conduct an
IPO on the front burner.

Like most Ukrainian industrialists, Akhmetov realizes the importance of
Western investment in modernizing his Soviet-era facilities.

Controversial political issues supported by the Regions like making Russian
a second official language are fine for whipping up voter support in the
country’s eastern regions, but Akhmetov, who is a member of Yanukovych’s
parliamentary majority is in politics for business, not the other way

Despite his democratic rhetoric, Yushchenko is also not immune to the
interests of Ukraine’s powerful tycoons. Maybe that’s why he’s been careful
not to alienate some of the less dogmatic elements in the Region’s bloc.

In the last month, the president has replaced two Constitutional Court
judges and the prosecutor general, officials who have hampered his legal
battle against Yanukovych. But the new top prosecutor and one of the judges
come from the Regions camp.

Whatever made Yanukovych conceded to new elections, clearly it wasn’t a
final ultimatum by Yushchenko, whose two years in office have been marked by
one fatal concession after another.

And we need not credit only Akhmetov, as powerful a player as he is, with
forcing a compromise.

Immediately after Yanukovych and Yushchenko announced that new elections
would take place, top European officials were quick to send their blessings.

General Secretary of the Council of Europe Terry Davis said that he was
“very pleased.” “This is an important step towards the end of a dispute
which has for too long blocked the normal functioning of the democratic
institutions in the country.

Now the priority should be to maintain a constructive dialogue and ensure
that the elections will be free and fair and properly prepared,” reads a
statement released by the Council of Europe on May 4.

No less important was the reaction of the market. The price of blue chip
stocks on Ukraine’s primary exchange rose by an average of 2-4 percent on
the same day compromise was announced.

There are still a lot of details that have to be worked out in Ukraine’s
political sausage factory, but clearly the higher powers have ruled in favor
of compromise.

For one thing, the president’s Our Ukraine party, together with the faction
of fiery opposition leader Yulia Tymoshenko will have to return to
parliament to hammer out legislation needed to hold the snap elections.

The actions of neither the opposition nor the majority have been on firm
legal footing for quite some time, but now things have to be tidied up.

Feeling rather triumphant, Yushchenko again showed his usual inclination for
compromise, suggesting that he would now work with the parliament that he
dismissed a month ago.

“Maybe I will run a little ahead, if all conditions are met, I am ready to
go to the Verkhovna Rada, and at a session of the Verkhovna Rada, after the
passing of all relevant decisions, sign all the decisions that need to be
signed,” he said on May 4.

Yushchenko has already compromised by stating he is willing to push back
the date of the elections, which the government would prefer to hold later
in the year, after the pension rises it approved kick in.

It’s not clear how such date shifting jives with the constitution, but
neither side has been particularly worried about the constitution for some
time now.

As for Yanukovych, the only thing he can do now is try to win more
concessions during back room bargaining while trying to save face before

Speaking to supporters in the center of Kyiv on May 4, the premier sounded
much less defiant than even a day earlier.

“We have practically come to the single conclusion that there is no other
way of resolving the crisis besides holding democratic and honest elections.

The question now is what conclusion Ukrainian voters have come to. Polls
show that Regions, the pro-presidential Our Ukraine party and BYuT will
again get into parliament, but Our Ukraine is expected to do even worse than
last year, while BYuT stands to continue increasing its support.

As for the Communists and Socialists, the Regions’ allies in the majority,
they may not make it in at all.

There is still a lot of messy work to be done in Ukraine’s sausage factory
before the details of the next elections are revealed, with the final
product – the new parliament – likely to contain a few new ingredients this
time around.                                            -30-
John Marone, Kyiv Post Senior Journalist, based in Ukraine.

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
4.                 UKRAINE: A SECOND CHANCE

ANALYSIS & COMMENTARY: By Oksana Bashuk Hepburn
Action Ukraine Report (AUR) #840, Article 4, Tuesday, May 8, 2007

As the first anniversary of the squandered March parliamentary election was
drawing near in Ukraine, the chief concern of the Orange opposition focused
on the aggrandizement of power by Prime Minister Victor Yanukhovych to
whom their former hero, President Victor Yuschenko, had handed the reins of

By calling a snap election President Yushchenko aimed to reverse the trend.
By getting the Prime Minister’s agreement, following a stormy fight, the
President scores a political victory.

Regardless of outcome–it looks like the elections will take place post
June– the call puts the President in the most favourable light with
Ukraine’s pro-West Orange population since starting his presidential watch. 

He is showing  leadership, placing himself firmly in the Orange camp, rallying
supporters, reconfirming pro-West positions, and challenging the Party of
Region’s pro-Russia government.

It remains to be seen whether this is enough to help the Orange forces win.
Current rankings in the polls are lower than those of the Prime Minister’s
party.  Then there’s always the issue of a fair election.  However, they
have succeeded before by winning with slight majorities both at the
presidential elections of 2004 and the parliamentary in 2006.

They have proven that the people want Orange power in Ukraine.  However, the
Orange coalition has yet to demonstrate the know-how required to translate
election victories into government and political power.

The snap election offers another second chance.  Are they up to it?  Sober
skeptics point to the legacy of squabbling and to the Orange President’s
two-year inaction.  They worry that these attributes rather than the
electorates’ yearning for a pro-West Ukraine and their distaste for Russian
political dominance-after nearly a century of it–may translate into an
Orange loss.

To get a second chance the Orange forces must convince Ukrainians that they
will do the job right this time.  This means providing assurance that an
Orange parliament, and President, will abide by the Orange revolution
principles– the rule of law, punishment of violators, pro-Ukraine economic
policies ranging from privatization of its industrial capital to control of
the energy sector, and a pro-West foreign policy orientation.

It means ensuring that the 8% economic growth cursing through Ukraine
trickles down to the furthest reaches of the nation’s impoverished majority,
its voters.

How, then, to get this second chance? First, they must win the elections.
To do so their election strategists need to bring greater clarity to
Ukraine’s electorate on the country’s key and most divisive internal issues


[1] stating plainly the reasons for the election call.  It is still much

[2] downplaying the east/west geographic divide in Ukraine, underscoring
such nation-building fundamentals as its common history, culture, religion,
language which have endured despite centuries of foreign oppression,

[3] setting out clearly, particularly in Eastern Ukraine, reasons why the
Orange coalition is pro-West.  Offering up such persuasive arguments as the
West’s proven pro-people record; individual high standard of living; its
governments’ respect to human rights and freedoms,

[4] identifying changes the Orange government aims to implement if elected.

Also, to bring the eastern Ukrainians into the fold.  This means diffusing
the divisive pro/anti-Russia scenario by convincing the voters from Luhansk
to Donetsk of the benefits of a “Ukraine first, last and always policy” by

[1] the negative aspects to Ukraine’s people of Russia’s hungry
determination to control its energy, Black Sea, entrance to WTO and
NATO, among others, for its own ends

[2] the benefits to independent trade versus the role of being Russia’s
provider of raw material, human intellect and labour force

[3] concede the benefits of good relations with geographic neighbours,
regardless of past history.  Cite Canada as an example.  It has excellent
relations with the United States and equally fine ones with Europe and other
parts of the world.  The former USSR needs a “Canada” in its midst.
Offer a vision to Ukraine, and to the world, as being the one.

Moreover, the strategists must get the President to seek the people’s
forgiveness for betraying the Orange Revolution.  Despite recent advances
his popularity is hovering at 20%.  Without clearing the air further past
inactions may be a liability during the election campaign.  The good news
for the Orange side is that Ukraine’s pro-West voter has no alternative to
the Orange parties.

However, about half of Ukraine’s electorate is uncommitted.  A clear
majority for the Orange side requires some of these undeclared voters: some
of them may have been former supporters.  A statement of reconciliation will
help to bring the disillusioned pro-West electorate, as well as others, on

And more work to get a second chance.  Elections are won by candidates who
keep in touch with the people.  The Committee of Voters, Ukraine’s election
watchdog, commends the Party of Regions for solid performance in meeting
with constituents.  Other parties get no mention.

This absence of praise should get the Orange coalition working at the
grass-roots level.  In doing so, they might forfeit the sexy suits and fancy
cars of the so called “political elite”.  The image of a pin-striped
politician, equated with the mafia and oligarchs, is a turn off for the vast
majority Ukraine’s poverty ridden electorate.

Yulia Tymoshenko, the leader of the Opposition, may be the exception.  She
dresses expensively yet is generally viewed as speaking from the heart, her
party’s symbol.  The entire Orange election machine might wish to adopt more
heart in their campaign by telling the people how an Orange government will
close the gap between rich and poor.

And, more importantly, how they, the people, are the real “political elite”
in a democracy.  They hold power during the elections not some pin-striped

Mush in the first point-winning the elections– is old news to the Orange
forces especially to the Yulia Tymoshenko Block who worked the system
remarkably well during the last two elections.

The second point is new but vitally important.  To get another chance to
govern the Orange forces must turn their attention to what they are less
good at: ensuring cohesion and party discipline beyond the elections.

This requires another group of people-the post election strategists– to get
to work now and prepare a take-over power scenario.  They might start by

[1] Planning for a transition as soon as the elections are called.  That’s
now!  In Canada, for instance, post election scenario planning starts early
to ensure preparedness for a  smooth change-over of power

[2 Developing a power -sharing approach in parliament among the Orange
members.  Without such a plan the down-side is grim.  By being unprepared
they risk losing power as happened after last year’s parliamentary

[3]Composing a shadow cabinet, a common practice in western democracies.
It develops expertise and clarifies policies.

If given a second chance, the Orange forces must resist taking fancy
holidays as was the case after the presidential elections. After all, the
hope of the Orange forces, once elected, is to get the job done for the
people and the country, not to join a self-serving high life of the many in
the so called “political elite.”                             -30-
Oksana Bashuk Hepburn, President U*CAN Ukraine Canada Relations

Inc. and is a several-time OSCE elections observer and commentator.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
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Horizon Capital, Kyiv, Ukraine, Monday, May 7, 2007

KYIV, Ukraine – Horizon Capital, fund manager of Emerging Europe Growth
Fund, LP (EEGF), a mid-cap private equity fund investing in Ukraine and
Moldova, has realized its investment in the Shostka City Milk Plant
(“Shostka”), a high quality Ukrainian manufacturer of hard cheeses.

EEGF sold its controlling stake in Shostka to French Fromageries Bel S.A
achieving a 5.9 times cash-on-cash return and 470% IRR.  This is the first
full exit in the EEGF portfolio since the fund closed to new investors in
February 2007.

Shostka’s excellent reputation, strong management, product quality and a
rapidly growing dairy industry attracted Horizon Capital to invest.

During the life of its investment, Horizon Capital focused efforts on
improving product quality, access to the region’s raw material base (milk),
and strengthening Shostka’s brand portfolio and distribution within Ukraine.

Over the past two years, sales increased by an impressive 57% to over $45
million, reflecting Shostka cheese’s growing popularity among Ukrainian

“We are very pleased with the results of our investment in Shostka.  Early
in our investment process through our role on the Board of Directors, we
focused on improving strategic elements of the company’s position on the
domestic market.  This enabled us to build a very inviting platform for
strategic investors, such as Fromageries Bel S.A.

Combining Shostka’s domestic market leadership with Bel’s global experience
makes for a perfect match”, commented Natalie A. Jaresko, Managing Partner
of Horizon Capital.  Horizon Capital was advised in this transaction by
Golden Gate Business, a Ukrainian M&A boutique.

Horizon Capital ( is a private equity fund manager
that originates and manages investments in mid-cap companies with
outstanding growth and profit potential in Ukraine and Moldova.

Currently Horizon Capital manages two funds, Emerging Europe Growth Fund

and Western NIS Enterprise Fund, with over $280 million under management.
Contact: Oksana Monastyrska, Senior Account Manager, The
PBN Company, E-mail:
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

Interfax Ukraine Business Express, Kyiv, Ukraine, Friday, May 4, 2007

KYIV – The interagency commission on concluding and implementing
production sharing agreements (PSA) has agreed with a proposal by U.S.-
based Vanco International Limited to prolong the term for concluding a
PSA for the Prikerchensky oil and gas field in the Black Sea by six months.

As the Environmental Protection Ministry’s press service reported on Friday,
a corresponding agreement was passed at a meeting on April 26 after
consideration of Vanco’s proposal.

As reported earlier with reference to the Vice-Premier and Head of the
interagency commission Andriy Kliuyev, at its meeting on April 3, 2007, the
commission passed its version of a PSA for the Prikerchensky oil and gas
section with the investor Vanco International Limited.

Ukrainian Environmental Protection Minister Vasyl Dzharty told
Interfax-Ukraine that Ukraine was proposing that Vanco take a 25:75 share
in the PSA during trial production and 60:40 during industrial production.

Vanco International, a subsidiary of Vanco Energy Company, in April 2006
won a tender announced by the Ukrainian government on the right to reach
a PSA agreement on the Prikerchensky oil and gas field.

Vanco sent its draft PSA to the commission in July 2006. The agreement
was amended several times at that time. The Ukrainian government was
dissatisfied with the document submitted by the company and in October
2006 it instructed the interagency commission to prepare its wording of the
agreement.                                            -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

Interfax-Ukraine news agency, Kiev, in Russian 1651 gmt 4 May 07
BBC Monitoring Service, United Kingdom, Friday, May 04, 2007

Kiev, 4 May: Ukrainian President Viktor Yushchenko has instructed the
Prosecutor-General’s Office to examine outstanding VAT refunds.

Yushchenko was meeting heads of regional state administrations
[governors] in Kiev today.

“This will be a separate instruction of mine for the Prosecutor-General’s
Office to examine the issue and report on it,” Yushchenko said.

He said that untimely VAT refunds are an extraordinary threat to business
activity, adding that outstanding VAT refunds now exceed 8bn hryvnyas

[more than 1.6bn dollars] resembling the situation in Ukraine two or two
and a half years ago. “This is a disgrace,” Yushchenko said.

He also said that privatization processes lacked transparency, adding that
“facilities, including the Luhansk locomotive plant, were privatized several
weeks ago in an uncompetitive and nontransparent manner”.

[Passage omitted: Yushchenko condemned disrespect for ownership by the
executive and the judicial.] [Yushchenko said that the cabinet failed to
fund the bulk of social programmes and that the cabinet’s ban on grain
exports was erroneous, according to Interfax-Ukraine news agency, Kiev,

in Russian 1609 gmt 4 May 07.]                            -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
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ANALYSIS AND COMMENTARY: By Tom Coupé & Olena Gnezdilova
Action Ukraine Report (AUR) #840, Article  8, May 8, 2007

 Smoking is costly to society, both in terms of health and in terms of
wealth. Indeed, according to the World Bank’s projections, smoking will
become the major cause of death by the year 2030.

And according to the World Health Organization (WHO), the direct medical
cost of the treatment of smoking related diseases constitutes six percent of
total medical spending in China, one of the leaders in the world as far as
tobacco consumption is concerned. In addition, the estimations of the
productivity losses are three times higher than the direct medical costs.

These days, more than a third of the adult (15+) Ukrainian population is a
client of the tobacco industry. The most recent studies show that more than
60 percent of adult males smoke. For women, the corresponding estimate is
around 17 percent.

Euromonitor International further reports that the volume of retail
cigarette sales increased by 23.7 percent between 2000 and 2004. According
to some estimates, smoking is a cause of more than 100,000 deaths annually
in Ukraine.

A recent report of the WHO indicates that while at the beginning of the
seventies, the cigarettes consumption per adult in rich countries was more
than 3 times higher than in poor countries, the situation is slowly

While smoking prevalence is decreasing in the higher-income countries, the
opposite is happening in the developing countries and countries in
transition, including Ukraine.

Economists do typically not refer to the direct negative effects of smoking
on an individual’s health when arguing in favour of government intervention
in the tobacco market. Instead, they propose government regulation because
the market for tobacco products is plagued by ‘market failures’.

That is, there are some reasons why an unregulated market would not work
very well – these failures are due to the addictive nature of tobacco, the
externalities exposed on non-smokers, i.e. the so-call ‘second-hand smoke’,
and the imperfection of information about health risks connected to tobacco

If left unregulated, these three failures would lead to a too high level of
tobacco consumption, compared to the level that would exist if there were a
perfectly working free market in tobacco products.

According to the World Bank, there exist a variety of cost effective tobacco
control measures. These range from setting high tobacco taxes, banning and
restricting smoking in public places, banning advertising and promotion of
tobacco products, providing information to warn the consumers about the
health risks of tobacco consumption imposing large direct warning labels on
tobacco products packaging, to providing assistance for those wanting to

The fact that in developed countries smoking prevalence has decreased
steadily has been attributed by some researchers to the successful
implementation of such tobacco control regulations by these developed
countries. Developing countries however, have been much less successful in
this regard.

Given the negative influence of tobacco on the health and productivity of
its citizens, and indications that a free tobacco market would not work
optimally, one can wonder why not all governments are following the example
of the more developed countries.

One answer is that anti-smoking regulations in each country are the result
of the interaction between the tobacco industry’s bargaining power,
politicians’ concern about public support of their actions and domestic and
international public pressure towards tobacco regulations.

Several case studies provide examples of such interaction. The Pan American
Health Organization for example, revealed, based on an analysis of internal
documents of the tobacco industry, that an agency called “ETS Consultants
project” was created by major players in the tobacco industry to ‘mislead’
the public and the authorities about second-hand smoking effects.

Another analysis of documents of the tobacco industry showed that
significant political contributions were made to the authorities in the
Philippines in exchange for weaker tobacco control regulations and lower

Also Uzbekistan’s Health Decree #30 was allegedly modified according to
demands of a major tobacco firm: such modification was a precondition for
the firm to acquire Uzbekistan’s cigarettes-producing monopoly.

And a voluntary agreement between the tobacco industry and the Mexican
government replaced a proposed tax increase and the application of labels on
cigarette packs by a relatively low payment by the industry to Mexican
health funds.

Some authors have also reported about the tobacco industry’s lobbying power
in Ukraine. In 1996, the anti-tobacco lobby pushed for a tobacco-advertising
ban and almost succeed.

However, a report of the so so-called “Association of Independent Advisors”
computed that Ukraine would lose US$400 million if a tobacco advertising ban
were introduced.

As a consequence, the Ukrainian president vetoed the new law and a revised
and considerably softened version was then approved which only included a
ban on tobacco advertising on TV, radio and cinema.

Later, it turned out that a tobacco company had in fact supported the
‘Association of Independent Advisors’. Another attempt to completely ban
tobacco advertising was made in 2001. This time, successful lobbying by
advertising agencies defeated the attempt.

Compared to the countries of Western and Central Europe, tobacco control
regulations in Ukraine remain pretty moderate even after a set of new
restrictions have come into effect in the summer of 2006.

Like in many countries, there is a minimum age restriction and compared to
the European average, Ukraine has slightly higher requirements in terms of
health warnings.

This is partially attributable to the lack of other regulations. For
example, while in Ukraine health warnings in tobacco advertisements are
required, in many European countries such regulation is not applicable
because they have implemented a comprehensive advertising ban. Indeed, the
number of media in which tobacco advertising is banned is low in Ukraine.

According to the WHO’s classification, 8 media types can be subject to a
direct tobacco advertising ban: national and cable TV, radio, local and
international printed editions, billboards, cinema and points of sale.

In Ukraine direct tobacco advertising is banned only for three media out of
8 (and the advertising in three more media is restricted), while the
European average number of direct advertising bans is 5.3.

The legislation on sponsorship and indirect advertising is also below the
European average: only sponsorship of events with tobacco product names is
banned, while product placement in TV and films, promotional discounts and
direct mail giveaways are not regulated.

Note that research has shown that only a comprehensive advertising ban has a
measurable effect on tobacco consumption, with partial bans having very
limited or no effect.

Interestingly, the Verkhovna Rada deputies Tomenko and Bespaliy have not
long ago proposed a draft law that would impose a quite comprehensive ban on
tobacco advertising.

Of course, one can argue that advertising bans are not necessarily the only
solution, or necessarily the best solution. Indeed, the problem of excessive
tobacco consumption basically comes from the market failures in the tobacco
market: the addictive character of tobacco, the lack of information related
to health consequences and the fact that a smoker affects the health of the
people around him.

Since an advertising ban does not really solve these, a government might
want to try other measures that do solve these market failures – like
information campaigns about the health consequences and the addictive
character of smoking, and by for example taxing smokers and using the raised
tax to compensate the second-hand smokers.

After all, why should a government not allow a well-informed person, who is
compensating other people for the damage he or she inflicts, to smoke?
NOTE: Tom Coupé is director of the Kyiv School of Economics and academic
director of the Kyiv Economics Institute. Olena Gnezdilova is a researcher
at the Kyiv Economics Institute. The views expressed in this article are the
authors’, not the views of the institutions to which they are affiliated.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

9.                 UKRAINE: NUCLEAR BOOM
               Westinghouse Electric will manufacture nuclear fuel assemblies

ANALYSIS: Oxford Business Group
London, United Kingdom, Friday, 30 March 2007

Ukraine’s government has set a long-term goal to triple its uranium
production. The country hopes to reduce nuclear energy costs through
self-sufficiency in supplying the radioactive metal used to produce nuclear

According to Ukrainian President Viktor Yushchenko, speaking in the
Northeastern industrial city of Sumy last week, the country hopes to raise
annual uranium production to 1000 tonnes in the near term, increasing to
3000 tonnes in the long run.

Ukraine currently produces around 800 tonnes of uranium annually, meeting
only one third of the country’s energy production industry needs. The
remainder is purchased on foreign market at what the president called
“monopoly” prices.

Indeed, the price of uranium remains extremely high, increasing more than
five times in the past three years to around $91 a pound. According to
Yuschenko, developing the country’s production capacity by an extra 200
tonnes will allow Ukraine to save $42m while an extra 2200 tonnes will save

Uranium exploration in Ukraine began in 1944. Since then, 21 deposits have
been discovered, mostly located in south-central Ukraine. The president said
Ukraine possesses the largest recoverable uranium ore reserves in Europe.

Though secrecy laws make accurate figures difficult to ascertain, according
to some estimates, Ukraine is the world’s eighth-largest miner of uranium,
and needs 3000 tonnes a year for its 15 nuclear reactors.

Though comprising a little more than a quarter of installed capacity, with a
generation capacity of 13,835 MW, these reactors produce just under half of
the country’s electricity. The government announced plans in 2006 to build
up to 11 new reactors in the next few years, with as many as 22 by the year

The push is part of the government’s efforts to curb Ukraine’s heavy
dependence on Russian energy imports, particularly natural gas. Quite apart
from gas prices, the electricity gap is widening as consumption goes up
every year and installed capacity remains the same.

To reduce vulnerability, Ukraine has developed a strategy that envisages
greater reliance on domestic coal and nuclear power stations.

In the wake of the 2006 gas dispute with Russia, many in the country’s
leadership have made diversifying the energy supply an issue of national

With the price of natural gas doubling in 2006 and increasing by another
third at the beginning of 2007, the commercial impetus for diversifying into
other methods of energy production is strong.

There has been significant help abroad in developing the sector. Save for
two large new reactors commissioned in 2004, all of Ukraine’s reactors date
to the Soviet era.

Ukraine has been open to international assistance in upgrading its
facilities and improving safety. The US announced earlier in March that it
would help Ukraine diversify its sources of nuclear fuel through the joint
US-Ukraine Nuclear Fuel Qualification Project (UNFQP), administered by
the US Department of Energy.

The US will invest $14m to provide 42 nuclear fuel assemblies to the
Pivdenniy Nuclear Power Plant, the biggest of Ukraine’s four nuclear power
According to the agreement, Westinghouse Electric, a major American nuclear
technologies company responsible for the design and supply of nearly 50%
of the world’s nuclear power plants, will manufacture nuclear fuel
assemblies accounting for a quarter of the fuel that powers a reactor for up

to four years of operation.

Since Ukraine’s independence in 1991, the US has been eager to find areas in
which it can cooperate with the strategically important country. Energy is a
route mutually beneficial to both countries.

To ensure a path of economic growth, we must promote policies that encourage
open and transparent market principles, increase energy efficiency, and
further cooperation in nuclear non-proliferation, said US Department of
Energy Deputy Secretary Clay Sell in Kyiv in the middle of March.

Ukraine will provide low-enriched uranium to manufacture the fuel
assemblies, as well as funding for technical services.

Though there is a degree of public distrust of nuclear energy in the wake of
the 1986’s infamous Chernobyl nuclear disaster, this has largely given way
to the official need for energy independence from Russia – an issue perhaps
even dearer to the public hearts.

Though most would state a preference for alternative sources of energy, low
nuclear energy prices and memories of shortages following independence in
1991 have inclined many to regard nuclear energy as the best option for

This is remarkable given the lasting effects of Chernobyl on Western
European attitudes. Indeed, the Chernobyl nuclear reactor was only closed in
2000 following enormous pressure from the West.

But Ukraine’s potential for nuclear energy remains limited by its lack of
infrastructure needed to enrich uranium. According to the president, only
two companies in Ukraine are engaged in its production and processing, and
just one involved in enrichment.

Therefore even in nuclear energy, Ukraine remains largely dependent on
Russia for nuclear fuel to power its reactors. Uranium concentrate and
zirconium alloy from Ukraine are usually sent to Russia for fuel
fabrication, and Russia is Ukraine’s primary supplier of other nuclear
fuel-cycle services.

There are plans that could meet with public opposition. Part of the
government’s energy strategy unveiled in 2006 involved the construction of
facilities to recycle nuclear fuel and store nuclear waste. Waste storage
could prove to be a controversial issue.

Ukraine’s long-term goal of energy independence, with nuclear power
generation planned to be doubled by 2030, depends on developing the full
nuclear cycle in Ukraine.

The recent move for self-sufficiency in production and downstream
development are steps toward reduced dependence and increased nuclear
energy generation.                                      -30-
General Enquiries
Editorial Enquiries
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

By Alla Bakulina, The Ukrainian Times, Kyiv, Ukraine, Mon, May 7, 2007

KYIV – The private company Contour Global of the United States plans
to invest $300 million in the modernization and construction of power
generating capacities and central heating systems in Ukraine.

According to the Contour Global vice-president for Eastern Europe and
the Commonwealth of Independent States, the company has already
started building a cogeneration plant with a capacity of 28 megawatts.

It uses exhaust of the compressor house Bogorodchany that maintains
working pressure of the natural gas pipeline Soyuz. The project is valued
at a total of 34 million euros. Reportedly, 30% of investment falls on funds
of Contour Global and 70% on commercial credits.          -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]


Interfax Central Europe, Warsaw, Poland, Monday, May 7, 2007

WARSAW – Firm support is required from Ukraine in order to extend the the
existing pipeline from the Black Sea port of Odessa to the Polish city of
Plock, Poland’s Economy Minister Piotr Wozniak said Monday. The pipeline,
known as Odessa-Brody, currently stops near the border with Poland.

In truth we need to have oil suppliers in order to have this pipeline built,
Wozniak said in an interview for the Polish daily Rzeczpospolita. There is,
however, the second condition – firm support of this investment by the
Ukrainian authorities.

Poland has been pushing for the flow of the Odessa-Brody pipeline to be
reversed to pump crude from the Caspian Sea northwards to Plock and on to
Western Europe. At present, the pipeline carries Russian oil to Odessa,
where it is loaded onto tankers.

In April Polish President Lech Kaczynski said that the launch of pipeline
deliveries of Caspian crude oil via Ukraine would be possible in 2011, even
if Kazakhstan – the region’s top producer – decided not to participate.

The plans to extend the Odessa-Brody pipeline, and to reverse its flow to
carry oil from the Black Sea port of Odessa to Poland, form a key part of
the government’s energy-diversification agenda.

Kazakhstan, the Caspian region’s largest producer, insists on Russia’s
participation in the project, which would defeat its purpose from the point
of view of diversification. At present, Russia accounts for more than 90% of
Poland’s hydrocarbon imports.

Kaczynski said, however, the project could go ahead, even if Astana decides
to stay away pointing out that Azerbaijan’s oil resources are sufficient to
operate the pipeline.

Kazakhstan’s oil reserves are estimated at 9 bln barrels of oil, according
to the US Energy Information Administration, while Azerbaijan holds some 7
bln barrels.

Kaczynski plans to talk about the transport of Caspian oil to Europe with
the presidents of interested states, such as Ukraine, Azerbaijan, Georgia,
Lithuania and hopefully Kazakhstan, during an energy summit to be held on
Poland on May 11-12.                                    -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

If you are receiving more than one copy of the AUR please contact us.

COMMENTARY: by Jules Evans, Moscow, Eurasian Home, Tue, Apr 24, 2007

Don’t say the C-word in Kyiv. It tends to get businesspeople uptight. “This
is not a crisis” insists Vadim Mironyuk, head of international business at
Ukrsibbank, the country’s fourth largest bank. “It’s not even a particularly
dramatic situation for most Ukrainians.”

It certainly looks dramatic to an outside observer. Maidan Square, which two
years ago was filled with the orange banners of the supporters of Viktor
Yushchenko and Yuliya Tymoshenko, is now filled with hundreds if not
thousands of the blue flags of Viktor Yanukovych’s party of the regions, and
the red flags of the communist party.

The twists and turns of Ukrainian politics read like a cheap political
thriller. The story so far: two years ago, Yushchenko ran against Yanukovych
for the presidency.

Yushchenko survived a poisoning and a rigged election to become president.
Yuliya Tymoshenko, his beautiful ally, became prime minister.

However, the two fell out after less than a year over differences in
economic policy. During parliamentary elections, Yanukovych’s party did
quite well, and managed to lure the socialist party away from the ‘Orange
Coalition’ to form a blue coalition. Yushhchenko was forced to appoint
Yanukovych, his most bitter rival, as his prime minister.

The government didn’t survive much longer than the previous one. Yushchenko
and Yanukovych were incessantly at odds, partly because of a constitutional
amendment, which was signed during the Orange Revolution, whereby the prime
minister took many of the powers of the president.

As Kamen Zahariev, head of the EBRD’s office in Kyiv, says: “This was a
hastily-written document, created during a revolution with the threat of
bloodshed nearby, and nobody bothered to read the small print. It’s a badly
written document and it’s not clear who has what powers.”

The problem became more acute as Yanukovych ousted more and more Orange
ministers from his government, or lured them over to the party of regions.

Ukraine’s foreign minister, Arseniy Yatsenyuk, who organized Yushchenko’s
2004 election campaign, tells me: “The prime minister’s coalition was formed
eight months ago, of three factions, or 238 deputies. But then the
government tried to eliminate the opposition, by inviting individual
deputies from opposition parties to join the coalition.”

For example, Anatoly Kinakh, once Yushchenko’s finance minister, defected
from the opposition to join the coalition in May, taking with him 12 other
deputies. He is now minister of economy.

The president and his supporters argue that such moves are unconstitutional.
Yatsenyuk says: “The constitution says that the coalition can only be formed
by factions, and that it must be formed 30 days after the first meeting of

Even more, the ruling coalition announced its intentions to attain a
constitutional majority of 300, which would have enabled them to overrule
the president’s veto. And they would definitely have got it.”

As an act of self-defence, Yushchenko issued a presidential decree on April
2 dissolving the parliament and calling for snap elections at the end of

I ask Yatsenyuk if the coalition had bought the deputies who joined them. He
declines to say, but he says the two main problems of Ukrainian politics are
political immaturity and political corruption.

Kinakh himself says he joined the coalition in rebellion against an
opposition that opposed everything the government suggested. He tells me:
“It is important for political parties not to oppose nation building but to
propose alternatives to the central government.

Of course what is really needed is good political will from all parties
involved. We expect the politicians of this country to put national interest
above party interests or elections.”

The constitutional court is meeting to discuss the issue. But despite the
thousands of protestors waving various banners outside the court, it seems
more likely at this stage that the solution to the crisis, sorry,
disagreement, will be political rather than legal. Analysts think there will
be parliamentary elections in the autumn.

So much for the politics. And is all this political volatility having a
disastrous effect on the economy? Not so far. It’s on course this year to
have GDP growth of 6-8%, as much as last year’s great performance of 7%.

The stock market grew by over 200% in the first quarter of the year, the
strongest performance in the world, and has only lost 9% (at the time of
writing) since the stand-off began. Sovereign bond spreads widened by about
100 basis points in the week after Yushchenko dissolved the parliament, but
they have also tightened since then.

And Ukrainian corporates are still able to find financing from the
international capital markets, even if the country doesn’t have a
government. For example, on April 20, Raiffeisen Bank Aval raised a $500
million syndicated loan, which was the biggest ever loan for a Ukrainian
financial institution.

At the time of writing, Ukrsibbank and Ukreximbank are also in the process
of raising syndicated loans. Vadim Mironyuk of Ukrsibbank says: “The
interest from foreign investors is good, so it’s reasonable to assume that
they too don’t think the situation is a crisis.”

While Ukrainian politicians are hardly thinking beyond next week, Ukrainian
big business has already embarked on multi-year modernization plans.

Kamen Zahariev of the EBRD says: “We don’t see local investors postponing
decisions. The big financial groups are continuing with their
multi-billion-dollar investment plans, such as the Industrial Union of
Donbass’ $2 billion modernization of the Alchevsk steel mill, which we’re
helping them with. You can’t just stop a train like this. These are
long-term projects.”

Ukrainian big business is, in fact, increasingly cleaning itself up in its
search for international capital. One example is System Capital Management,
the holding group owned by Ukraine’s richest man, Rinat Akhmetov.

SCM’s head of international business relations, Jock Mendoza-Wilson, says:
“We’re about to do our debut syndicated loan, a $400 million deal arranged
by BNP Paribas, and we’re making all our different business units

Akhmetov has traditionally been a staunch supporter of Yanukovych, however,
there are signs the present situation is not to SCM’s liking.

Mendooza-Wilson says: “The political situation is an unwelcome distraction.
What business really wants is liquidity, and political uncertainty creates a
sense of instability.”

Several analysts think that Ukrainian big business will, or at least should,
act as a ‘civilizing influence’ on the various political leaders. Volodimir
Fesenko, a leading Ukrainian political analyst, says: “The oligarchs want to
increase the value of their assets, so they will try to reduce political
risks after the election.

In general, big business and foreign investors need to be clearer in
formulating their interests to politicians. The politicians are, if
anything, too independent from business at the moment.”

Ukrainian business can do well despite the lack of political leadership in
the country, but only up to a point. FDI was $5 billion last year and is
likely to be the same this year, but it could have been a lot more if the
country finally passed a proper tax code.

The stock market grew very strongly, but would probably grow a lot more if
the government finally passed a joint-stock law.

And the economy will take a whole leap forward when the government finally
passes WTO accession, which will itself open the door to a new free trade
agreement with the EU, which would be the first step on the long road to EU

As Denis Gorbunenko, CEO of Rodovid Bank, says: “We all want more stability.
The politicians should be strong enough to sit down and work something out.”
NOTE: Jules Evans, is a British freelance journalist based in Moscow.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
         Send in a letter-to-the-editor today. Let us hear from you.

Business Digest, AII Data Processing Ltd., Sofia, Bulgaria, Fri, May 4, 2007

In the last years Ukraine has seen robust retail development, buoyant
expansion of domestic chains and international gravitation toward its
burgeoning market.

Rising purchasing power in larger Ukrainian cities, coupled with sector
underdevelopment in provincial areas, has lured international chain
operators to explore the potential of the second biggest country in Europe.

Ukraine ranked fourth most attractive market for mass merchants and food
retailers, according to management consultancy AT Kearney’s 2006 Global
Retail Development Index (GRDI). The country’s retail sales totalled $14.237
bln (10.816 bln euro) in 2006, data of British marketing researcher
Euromonitor International showed.
Austrian Billa, owned by German REWE Group, was the first one-stop chain
to enter Ukraine in 2000, followed by German wholesaler Metro AG in 2003.
Economic turbulence, bureaucracy and low spending potential stalled other
players for a while.

However, in 2006 retail majors such as French Auchan, British Marks &
Spencer, Swedish Ikea, Russian Mosmart and Seventh Continent made a
serious bid for a stake of the Ukrainian retail market.

Local analysts hint that international newcomers and retail convergence
might prompt some M&A activity and the emergence of strategic alliances
with domestic chains.

This trend was confirmed as early as March 2007, when French Auchan
signed an agreement to acquire a 20 pct stake in Ukraine’s second largest
supermarket chain Furshet.

New entrants face direct competition from the local units of German Metro
AG, Dutch supermarket chain Spar International, Austrian Billa, Russian
grocery chain Paterson, and domestic peers Furshet, Fozzy Group, Velika
Kishenia, Amstor, Intermarket and Pakko.
Expansion has been primarily driven by the lack of certain retail outlet
types, such as discounters and department stores. Supermarkets remained the
favoured format.

As much as 80 pct of Kyiv citizens preferred making grocery purchases at
supermarkets and hypermarkets in 2006, up from 75 pct a year earlier,
according to data of global market researcher GfK Group, released by its
unit GfK Ukraine.

The leading supermarket chains in Kyiv were domestic operators Silpo with a
24 pct share, Velika Kishenia with 20 pct, Furshet with 15 pct, and
MegaMarket with 6.0 pct. German group Metro Cash&Carry held a 6.0 pct
                      CONSUMER SPENDING ON THE RISE
Enhanced purchasing power and a boost in consumer lending and installment
sales are expected to shape the expansion of the retail market. Consumer
lending in the country is likely to grow by over 6.0 bln Ukrainian hryvnias
($1.188 bln/905 mln euro) in 2007 on the back of increased borrowing and a
wider scope of consumer goods sold on hire-purchase, according to local

The total disposable income of Ukrainians rose by 26.6 pct year-on-year in
nominal terms and by 16.1 pct in real terms to 362.433 bln hryvnias ($71.62
bln/55.42 bln euro) for the whole 2006.
In Kyiv the retail boom has already reached such a level of saturation that
leading operators have declared plans to move to regions outside the
capital. Cities with over one million in population were the first to
witness the retail expansion, as consumer disposable income was relatively
high there.

Retailers entered into battles over scarce space in urban areas, which
constituted a major obstacle toward further sector development. Hence, the
lack of suitable terrains and drawn-out administrative procedures has so far
hindered the attempts of IKEA and Auchan to step in Ukraine.

IKEA founder Ingvar Kamprad met in April 2006 with Ukrainian President
Viktor Yushchenko, who promised government assistance in finding land
plots for the retailer’s Ukrainian stores.

Similarly, Metro’s expansion plans were stalled by hurdles in finding
terrains available for construction. AUCHAN French retail giant Auchan will
set foot on the Ukrainian market with the opening of an outlet in Kyiv by
the end of 2007 and three more in 2008.

Groupe Auchan will most likely enter the former Soviet state with its
subsidiary Banque Accord and real estate unit Immochan. On March 13,
2007, Auchan said it had signed an agreement to acquire a 20 pct stake in
Ukraine’s second largest supermarket chain Furshet.

The agreement also envisages the creation of two new companies,
majority-owned by Auchan, to strengthen the group’s presence on the
Ukrainian market.

The local arm of German wholesaler Metro Group, Metro Cash&Carry Ukraine,
is most likely to feel the pinch of competition from Auchan’s discount
on the back of narrow profit margins and increased bargaining power over
suppliers for bulk purchases. The retailer will also focus on outlet size
and product variety to build a sustainable competitive advantage.
IKEA representatives Sven Holm and Lennart Dahlgren held a meeting on
October 18, 2006 with Ukrainian Prime Minister Viktor Yanukovich, seeking

to untie some red tape for a project to set up a chain of shopping malls.

In December 2006, the Kyiv regional administration said it had allocated a
50 ha terrain for IKEA’s first Ukrainian shopping and entertainment complex
and construction works were scheduled to start in the first half of 2007.

The Swedish giant has earmarked $1.7 bln (1.3 bln euro) for outlet
construction and production operations in Ukraine, according to an official
statement, released by IKEA’s local sales manager in November 2006. The
chain is most likely to set up a shopping centre of its Mega brand in Kyiv,
in line with the strategy it used in neighbouring Russia.
                                      MARKS & SPENCER
British apparel and home furnishing retailer Marks & Spencer (M&S), lured
by the high growth potential of Ukraine’s retail sector, in November 2006
declared intentions to open its first department store in Kyiv in 2007.

The British store operator has leased 1,000 sq m of retail space on the
third floor of Kyiv’s shopping and entertainment centre Komod from real
estate developer Ukrainian Trade Guild (UTG).
                                               METRO AG
Metro Cash&Carry has been present on the Ukrainian market for more than
three years, operating 13 wholesale outlets in nine cities. The company
boosted its sales revenue to 615 mln euro ($821.9 mln) in 2006 from 338.5
mln euro ($425.4 mln) a year earlier.

It ended 2005 with a net profit of 67.54 mln hryvnias ($13.4 mln/10.6 mln
euro) on a net revenue of 2.282 bln hryvnias ($454 mln/358 mln euro), up
188.1 pct year-on-year.

In June 2006, Metro Cash&Carry entered the construction materials market in
Ukraine, after it started adding do-it-yourself (DIY) sections to its
existing outlets in the country.

Thus, the German group will face direct competition from major Ukrainian DIY
chains EpiCenter K and Novaya Linia, which started rapid country-wide
expansion in 2006, trying to take up market niches ahead of the expected
investment boom by foreign rivals.

German Real hypermarket chain, also part of Metro Group, in February 2007
declared plans to pump some 100 mln euro ($132.3 mln) into expanding its
retail chain to Ukraine. Real will develop its business independently of
Metro Cash&Carry, the latter said.
                                          BILLA UKRAINE
Billa Ukraine, part of German REWE Group, will spend $80 mln (61 mln euro)
on outlet setups in 2007. The chain plans to open stores in Kyiv,
Dnipropetrovsk, Sumy and Odessa by the end of 2007, company CEO Marcel
Haratsti said in November 2006.

At present, the company runs three stores in Kyiv, two each in Kharkiv and
Dnipropetrovsk, one each in Zaporizhzhia and Dniprodzerdzhinsk.
Russian store operator Mosmart contemplates launching a chain of
hypermarkets on the Ukrainian market under a country-specific brand, head of
the company’s development department, Dmitriy Fadeev, said in March, 2007.
Mosmart is in talks to lease retail space in the cities of Kharkiv,
Dnipropetrovsk and Odessa, as well as in the capital city.

Mosmart’s outlets in Ukraine will cover a retail area of around 6,000 sq m
each and will strongly resemble the flagship store format.

According to Ukrainian retailers, the setup of an outlet will cost $17 mln
(13 mln euro), land price excluded, but can be reduced to $6.0 mln (4.6 mln
euro), if the store is accommodated in a mall. The company recorded $480
mln (366.9 mln euro) in turnover for 2006, according to preliminary data.
                                    SEVENTH CONTINENT
Moscow-based supermarket chain Seventh Continent is looking to acquire store
operators in Ukraine and the Baltic states, company CEO Galina Ilyashenko
said in November 2006. The Russian retailer intends to spend $300 mln (231.8
mln euro) on capital investments in 2007, chiefly on acquiring commercial
space for its operations.
Ukrainian retailer Spar Ukraine, the local unit of Amsterdam-based
international supermarket chain Spar International, plans to spend $30 mln
(22.7 mln euro) on expansion in the region of Kyiv over the period 2007 to

Spar Ukraine, set up in 2001, had five stores and a shopping mall under
construction until the first half of 2005, when it decided to sell off its
business to Russian competitor Perekryostok.

Now the international retailer is set to revive the Spar brand in Ukraine in
partnership with local company Cherkassy Trade House. Spar Ukraine targets
a 12.3 pct hold of Ukraine’s grocery retail market in 2007. By 2011, the
company aims to become one of the five largest food retailers in the

The expansion strategy envisages developing in the Kyiv region a network of
retail outlets of varying size and layout, from grocery stores of about
3,000 sq m to shopping and entertainment centres with an area of 20,000 sq
m. The shopping malls will include the EuroSPAR and InterSPAR-branded
                                           FOZZY GROUP
Kyiv-based Fozzy Group, allegedly Ukraine’s largest retailer, was granted a
13.7 mln Ukrainian hryvnias ($2.7 mln/2.1 mln euro) loan in November 2006 to
fund outlet operations. The company then started offering private label
products. The group recorded a turnover of $1.0 bln (752 mln euro) for 2006,
up from $700 mln (526.2 mln euro) in the previous year.

The company added 42 supermarkets to its Silpo chain and 16 discount outlets
to its Fora store chain in 2006. Fozzy Group currently operates supermarkets
under the brand Silpo, discount shops Fora, drugstores Bud Zdorov, food
stores Dniprianka, wholesale hypermarkets Fozzy and household appliances
chain Otto Shtekker.
Ukrainian Volyn-based retail store operator Pakko aims to post $170 mln
(129.1 mln euro) in turnover and boost retail space to 40,000 sq m by the
end of 2007. The company is well placed to pursue growth through takeovers,
having recently acquired peer chains ABC and Douglas in western Khmelnitsky.

Pakko runs the Vopak and Pakko cash&carry chains with around 35 outlets in
eight central and western Ukrainian regions with an overall retail area of
30,000 sq m. The company’s turnover stood at $110 mln (87.3 mln euro) in
                                          RETAIL GROUP
Retail Group, which runs grocery store chain Velika Kishenia, plans to make
an initial public offering (IPO) in the second quarter of 2008. Velika
Kishenya is one of the largest retail chains with its 25 supermarkets and
five hypermarkets, covering a total 70,000 sq m of retail space in 12
Ukrainian cities. The company’s turnover stood at 1.6 bln hryvnias ($318
mln/249 mln euro) in the first three quarters of 2006.
Furshet said it planned to expand its network to 112 supermarkets by the end
of 2007 from the current 70. The chain’s turnover rose 41 pct year-on-year
to $481 mln (360.4 mln euro) in 2006. Furshet targets to boost its turnover
to $900 mln (683.2 mln euro) in 2007, based on a robust growth rate in the
past years.

Furshet issued $75 mln (56.9 mln euro) in loan participation notes (LPN) in
late-2006 to support its expansion. The supermarket operator posted revenue
of $348 mln (264.2 mln euro) for 2005. The European Bank for Reconstruction
and Development (EBRD), investment fund Euroventures Ukraine, UK-registered
Anthousa Limited, and Auchan control stakes in Furshet.
                         SYSTEM CAPITAL MANAGEMENT
Ukraine’s largest industrial group System Capital Management (SCM), owned
by the country’s wealthiest tycoon Rinat Akhmetov, said in March 2007 it had
set up a retail operator under the name of Ukrainian Retail.

In 2007, Ukrainian Retail will develop a chain of 30 convenience stores in
eastern Donetsk, aiming to boost their number to 400 nationwide by 2011.

SCM will create a brand image for its retail business and launch an
awareness campaign by June 2007. The new venture is to come up with a
development strategy, setting out the scale of investments and the format of
the chain.                                           -30-

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

CCNMatthews, Edmonton, Alberta, Canada, Monday, April 2, 2007

EDMONTON, ALBERTA– Shelton Canada Corp. (“Shelton”) (TSX

VENTURE:STO) and Kroes Energy Inc. (“Kroes”) (TSX VENTURE:KRS)
are pleased to announce that they have entered into an agreement whereby
Shelton will acquire 100% of the issued and outstanding shares of Kroes’
wholly owned subsidiary Zhoda 2001 Corporation (“Zhoda”)(the

Zhoda’s only operating asset is a 45% interest in a joint venture oilfield
exploitation and development project in Ukraine.

The most recent engineering report dated December 31, 2005 prepared by
Calgary engineering firm Petroglobe (Canada) Ltd. has estimated Zhoda’s net
proven producing reserves to be 547,000 barrels of oil, its total net proven
reserves to be 3,765,000 barrels of oil and its total net proven and
probable reserves to be 5,977,000 barrels of oil.

This report is attached to the Annual Information Form filed by Kroes on
SEDAR on April 28, 2006. Another engineering report is being prepared with
information updated to December 31, 2006.

In consideration for this acquisition, Shelton will pay to Kroes a total of
$4,927,753 as follows: (a) $1,000,000 paid by cash; (b) $3,498,753 by
issuance of 6,997,507 common shares of Shelton; and (c) $429,000 by way of
transfer of Shelton’s only remaining western Canadian oil and gas interests.

The completion of the Transaction is subject to a number of conditions
including approval for the Transaction by the shareholders of Kroes and all
relevant regulatory authorities and due diligence on the part of both
Shelton and Kroes. Subject to the fulfillment of all conditions, this
transaction is expected to close on or before May 31, 2007.

Zenon Potoczny, President of Shelton, said “We are pleased to have been able
to work with Kroes in what we think is a very positive arrangement for both

The acquisition of this producing property in Ukraine further enhances
Shelton’s business plan and will supplement the current inventory of
exploitation and exploration projects that it already has in inventory.”

Fred Callaway, President of Kroes, said “The addition of the Kashtan joint
venture will enhance Shelton’s growing inventory of projects in Ukraine and
we look forward to participating through our significant shareholding.

Kroes will now concentrate on expanding its fledging program in western
Canada where it has had good initial success, and this transaction
strengthens Kroes’ capacity to pursue domestic opportunities. We look
forward to both companies growing and adding significant shareholder value.”

Following completion of this transaction Shelton will continue as a junior
oil and gas company listed on the TSX Venture Exchange. Kroes also will
continue as a junior oil and gas company on the TSX Venture Exchange with
emphasis on its operations in western Canada and Trinidad.

This news release contains certain forward-looking statements. These
statements relate to future events or the Shelton’s future performance. All
statements other than statements of historical fact may be forward-looking

Forward-looking statements are often, but not always, identified by the use
of words such as “seek”, “anticipate”, “plan”, “continue”, “estimate”,
“expect”, “may”, “will”, “project”, “predict”, “potential”, “targeting”,
“intend”, “could”, “might”, “should”, “believe” and similar expressions.

These statements involve known and unknown risks, uncertainties and other
factors that may cause actual results or events to differ materially from
those anticipated in such forward-looking statements.

Shelton and Kroes believe that the expectations reflected in such
forward-looking statements are reasonable but no assurance can be given that
these expectations will prove to be correct and such forward-looking
statements included in this news release should not be unduly relied upon.

Shelton and Kroes disclaim any intention or obligation to update or revise
our forward-looking statements whether as a result of new information,
future events or otherwise expect as required under applicable securities

With respect to the forward looking statements contained in this news
release, numerous assumptions have been made. In the event that any of these
assumptions prove to be incorrect, or in the event that Shelton and/or Kroes
are impacted by any of the risks identified above, neither may be able to
continue in their business as planned, or at all.

The TSX Venture Exchange has not reviewed and does not accept responsibility
for the adequacy or accuracy of this release.                    -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

COMMENTARY: By John Marone, Kyiv, Eurasian Home, Mon, Apr 23, 2007

Ever since Viktor Yanukovych returned as Ukraine’s prime minister last
summer, the country’s privatization drive has started moving in reverse,
back to the days of shady state auctions, as under former President Leonid

In fact, concerns have recently been raised that Yanukovych’s government may
now find it expedient to turn over valuable state assets without even going
through the trouble of holding tenders.

Bolstered by the pro-Moscow majority it controls in parliament, the
government appears to be particularly sympathetic to business interests in
Russia, from where it continues to enjoy no little support in its fights
with Ukrainian President Viktor Yushchenko.

One of the most significant achievements of President Viktor Yushchenko’s
first two pro-Western, or Orange, governments was the resale of the
country’s largest steel mill, Kryvorizhstal, which had been auctioned off under the
Kuchma administration for a fraction of its worth to companies controlled by
Kuchma’s son-in-law and another tycoon close to Yanukovych.

Using the country’s courts, Yushchenko’s Orange governments repossessed
Kryvorizhstal and re-sold it at a crystal clear auction for $4.8 billion –
$4 billion more than it had fetched the first time – to the largest steel
company in the world.

Many, including Western investors, were initially frightened that the resale
of the major steel mill would lead to a witch hunt into the many other
questionable privatization deals that had taken place after Ukrainian

This did not happen. Instead, Yanukovych returned to power as premier,
and privatization started going back in the other direction.

Protection of property rights and the rule of law are, indeed, the pillars
of a democratic society. But so is social justice.

The billions of dollars in assets acquired by well-connected businessmen at
a pittance from the state could have financed the rebuilding of the
country’s crumbling infrastructure, a professional army, or the salaries of

honest officials not inclined to taking bribes.

The often heard explanation from Ukraine’s privatization chiefs, when asked
why one firm was allowed to buy a state enterprise for much less than what
other bidders had offered, is that the deal was done in the state’s

However, no few Russian companies have been among the bargain buyers
of Ukrainian enterprises.

Moreover, it hasn’t been uncommon for a Ukrainian business group to get
an enterprise for cheap from the state, only to resell it at a higher price
to a foreign buyer.

The money bilked from the state often didn’t stay in Ukraine but was
channeled to off-shore accounts.

But most important of all is that shady privatization deals are recurring
with greater frequency.

Last month, a lucrative locomotive plant was sold for at least half its
market price to Russian investors during a highly questionable tender.

Luhanskteplovoz, a monopoly Ukrainian producer of locomotives and trams,
was only last year being eyed by major European investors, such as German
electronics giant Siemens, with some analysts estimating at the time that
the state could fetch as much as $200 million.

The State Property Fund (SPF), Ukraine’s privatization body, announced in
March that the plant had been sold in a last-minute auction that included,
essentially, one bidder from Russia for around $60 million.

The auction was supposed to have been held last October, but was suspended
immediately following public statements made by Yanukovych, who said the
issue should be studied more closely.

The head of the parliament’s Special Monitoring Commission on Issues of
Privatization, Andriy Kozhemyakin, said that there was no competition, no
transparency and that the 76 percent stake should have been sold for far

The SPF denied any wrongdoing, but President Yushchenko has since asked
the PGO and SBU to look into the deal to see if the SPF had held a fair

In December 2006, the city of Kyiv had its majority stake in a prized bank
watered down in a controversial share emission deal that opposition parties
say robbed the capital of hundreds of millions of dollars.

Khreshchatyk Bank, ranked 20th out of more than 150 Ukrainian banks, with
over $600 million in net assets, was until late last year 51.2 percent owned
by the Kyiv City Administration.

Supporters of the emission said it was intended to raise additional
investment into bank capital, but instead it diluted the city’s stake to
23.7 percent.

A private company’s stake in the bank went from 34 percent to 44.2 percent.
Other privately-owned minority stakes were also increased.

The city’s administration declined to take part in buying up the new shares
from the emission, yielding the majority stake to private interests. The
opposition ByuT faction said the city’s shares could have been sold for
hundreds of millions of dollars in badly needed municipal revenues.

ByuT, which is in opposition in the Kyiv City Council as well as the
national parliament, accused the majority in the Kyiv City Council of
promoting the interests of two councilmen allegedly affiliated with the
companies that gained from the share emission.
Most worrying of all, in the government’s privatization policy, is its
willingness to relinquish valuable state assets without holding any auction.

A top SPF official announced last September that a joint venture between
Russian and Ukrainian investors had moved in as the main investor in a
potentially lucrative but still unfinished ore-enrichment plant.

The SPF is headed by a member of the Socialist Party, a part of Yanukovych’s
parliamentary majority since last summer. The SPF had repeatedly pledged to
transparently auction off the Kryviy Rih Oxidized Ore-Enrichment Plant

Instead the plant has now effectively ended up in the hands of Moscow-based
Metalloinvest and Dnipropetrovsk-based SMART-group on the basis of a
closed-door government decision.

World steel giant Mittal-Arcelor, Ukraine’s biggest overall investor to
date, had hoped to take part in a tender for KGOKOR but has now been left
out in the cold.

The SPF said that the KGOKOR deal concerned the creation of a joint venture,
in which the Ukrainian state would hold a controlling stake, and no actual
sale of state property was involved.

However, Metalloinvest is financing the completion of the plant, and is
therefore calling the shots. SMART-group is widely considered the Russian
company’s junior partner in the deal.

Although the attention of the world and the media are glued on the latest
political standoff between Yushchenko and his premier, the government says
it is planning to move ahead with even more lucrative state sell-offs

On April 18, the Cabinet confirmed a list of state enterprises to be sold
this year, including fixed-line monopoly Ukrtelecom and the Odessa Portside
chemical plant, valued at up to $400 million, but auction dates have yet to
be set. Also slated for sale are 10 regional energy suppliers.

Successful privatization of these assets could be a boon for the treasury
and attract a strategic investor willing to put money into modernization and

Another rigged tender will mean more losses for the state and confirmation
for foreign investors that Ukraine’s privatization is going back into the

Ironically, the longstanding political chaos in Ukraine is playing into the
hands of the country’s well-connected tycoons by scaring off competition
from Western bidders willing to pay top dollar in privatization tenders for
Ukrainian assets. The opportunity is open for Ukrainian and Russian tycoons
to snap up what’s left for below market prices.                 -30-
NOTE: John Marone, Kyiv Post Senior Journalist, is based in Ukraine.

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

Yevhen Holovatiuk, Ukrainian News, Kyiv, Ukraine, March 23, 2007

KYIV – The Antimonopoly Committee of Ukraine (AMCU) has permitted the
companies AES AgriVerde Holdings B.V. (the Netherlands) and AES AgriVerde
Limited (the Bermuda Islands) to establish a company in Kyiv named AES
AgriVerde Service for construction and maintenance of facilities reducing
emission of greenhouse gases.

Ukrainian News learned this from the press service of AMCU. The new company
is also supposed to sell the credits remaining from the quotas on the amount
of greenhouse gas emissions to the countries that ratified the Kyoto

As Ukrainian News earlier reported, AES Washington Holdings B.V. bought
75% + 1 stakes in each of Kyivoblenerho and Rivneoblenerho regional power
distribution companies from the State Property Fund in 2001.

AES Corporation operates 113 power generating facilities and 17 power
distribution companies in 27 countries.

Ukraine ratified the Kyoto Protocol on February 4, 2004. The Kyoto Protocol
set quotas on the amount of greenhouse gases countries can produce.

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
        SEED PROCESSING BY 29.5% IN 2007, 94% OWNED BY BUNGE

Interfax Ukraine Agro, Kyiv, Ukraine, March 4, 2007

DNIPROPETROVSK – CJSC Dnipropetrovsk vegetable oil refinery, a large
vegetable oil producer, is planning to process 390,000 tonnes of sunflower
seeds in 2007, which will be 29.5% up on 2006, Ihor Bilynsky, the chairman
of the refinery’s board, told reporters on Monday. As he put it, among the
company’s key tasks for 2007 are an increase in output and the extension of
sales markets.

He said that the company is going to develop exports to the Middle East and
North Africa. The company’s representatives are currently in talks on the
supply of vegetable oil under the Oleyna brand to those markets.

Bilynsky also said that the company is also working to widen the assortment
of its oil-based products, giving no details about what products he meant.

Oleyna occupies from 25% to 30% of the Ukrainian market of bottled sunflower
oil, according to different estimates. In 2006, the refinery produced
153,643 tonnes of bottled oil, which was 3% up on 2005. Over 94% of the
refinery’s stocks belong to the Bunge company.

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Interfax – Ukraine Business, Kyiv, Ukraine, March 27, 2007

KYIV – U.S.-based Archer Daniels Midland Company (ADM) has completed

the acquisition of all outstanding shares in CJSC Illichivsk sunseed crushing
plant from Risoil S.A.,the U.S. company said in a press release. ADM and
Risoil became 50/50 shareholders in the plant in 2004.

“The IMEZ [stands for Illichivsk Maslo Extractionniy Zavod or Illichivsk
sunseed crushing plant] facility at Illichivsk complements our global asset
base in an important origination location,” the press release quotes Mark
Zenuk, ADM Vice President and Managing Director-Europe and Asia, as saying.
“We look forward to working with Ukrainian farmers to help meet the changing
needs of our food customers due to evolving global demands.” The cost of the
deal has not been disclosed.

Ukraine is the second largest producer of sunseed in the world after the
Russian Federation with harvests of approximately five million metric tons
per year,said ADM.

Archer Daniels Midland Company (ADM) is the world leader in BioEnergy and
has a premier position in the agricultural processing value chain. ADM is
one of the world’s largest processors of soybeans,corn,wheat and cocoa.

ADM is a leading manufacturer of biodiesel,ethanol,soybean oil and meal,corn
sweeteners,flour and other value-added food and feed ingredients.

Headquartered in Decatur,Illinois,ADM has over 26,000 employees,more than
240 processing plants and net sales for the fiscal year ended June 30,2006
of $37 billion.

CJSC Illichivsk sunseed crushing plant in 2006 posted a net profit of UAH 2
million,whereas in 2005 it was in the red with losses estimated at UAH 2.389
million. Its assets shrank by 2.4% in 2006,to UAH 105.859 million.

As the State Commission for Securities and Stock Market reported in
September 2006,half of the plant’s stocks belonged to ADM’s
subsidiary,Archer Daniels Midland Nider BV (the Netherlands),and another
half to Sunseed Swiss Holding S.A. (Switzerland). The plant was commissioned
in June 2005 and its core business is sunseed oil production.          -30-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
19.                    RUSSIA: STUMBLING OVER THE PAST

EDITORIAL: In Vedomosti, published in Moscow Times

Moscow, Russia, Monday, May 7, 2007

The past matters, and an incomplete understanding of the past can become a
chronic illness. The Estonian government’s decision to transfer a monument
in Tallinn that Russians call the Soviet soldier-liberator generated open
hostility from ethnic Russians living in Estonia and in Russia itself.

The results were riots in Tallinn that killed one person and a new stumbling
block in relations between Russia and Europe.

There is no absolutely right or wrong side in the current conflict. Both
countries have their own version of history.

Whether moving the monument and the remains of soldiers interred beneath is
in line with the Geneva Convention is a question for European institutions,
but the political damage has already been done.

Both sides willingly shifted the conflict into the political arena. It was
clear what the reaction from the Russian side was going to be from the
outset, so Estonia could have simply left the monument alone, or at least

For its part, Russia could have held back from offering its stock reaction
in such cases — threats to boycott goods or cut off oil supplies.

This kind of pressure hasn’t delivered much in the way of success. The
conflict with Tbilisi, which could also have been solved by more diplomatic
means, ended with a complete economic and transportation blockade of

The Georgian economy adapted, and now the country has been lost as a
potential partner for the foreseeable future.

After the gas war with Ukraine, not only the pro-Western political elite but
also the pro-Russian Party of the Regions and big business now favor greater
integration with Europe. There has been an increase in concern over the
country’s dependability as an energy supplier.

It is starting to look as if official Moscow, without hope of any
discernable political benefit, is glad for any opportunity to argue with its
neighbors. This chance to stand up to its neighbors may make it possible for
officials to talk about the recovery of Russia’s place on the world stage,
but the reality is that it’s position is worsening.

Over the past few years, measure of attitudes toward Russia in the West have
plunged into the negatives, and post-Soviet republics have been transformed
into enemies.

Ignoring the technical date for the break up of the Soviet Union, the real
and final disintegration has come in the first decade of the 21st century.
With each new conflict the former Soviet republics move further away from
being abstract enemies for Russians and toward being real foreign policy
opponents for the country.

The roots of the conflict with Estonia all lie in the past. Russia’s foreign
policy looks like a holdover from the Soviet variety, and those responsible
for making it live in a “cold” world, surrounded by enemies.

Economic recovery and the strengthening of Russia’s position on the
international arena have had the ironic effect of narrowing the world
surrounding the country to the geographic borders of the state.

For Russia to hope to have more friends in a world that has broadened, and
not narrowed, it needs an entirely different foreign policy that is oriented
toward the future with an understanding of the past.

Besides its Soviet and imperial heritage, Russia has a multitude of cards

to play that would allow it to act effectively on the international stage,
including its location, the state of its economy and, perhaps most
important, its great cultural tradition.

But to start living in the future, the past has to be transformed from a
stumbling block to a common understanding. In order to chase away the

ghosts of the past, you first have to reconcile yourself with them.

As long as Russians continue to turn a blind eye to parts of the history of
Soviet repression — living peacefully with both Stalin’s national anthem
and the two-headed eagle, with Lenin’s body on Red Square and Tsar

Nicholas II canonized — the past will only continue to get in their way.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

OP-ED: By Fred Hiatt, The Washington Post
Washington, D.C., Monday, May 7, 2007; Page A19

In 1994, Russian President Boris Yeltsin and his Estonian counterpart, the
polymath Lennart Meri, chummily drank together in a Kremlin chamber as their
foreign ministers labored nearby to complete a historic treaty to withdraw
all Russian troops from the tiny Baltic state.

When it was time to celebrate the finished draft, Yeltsin mocked his own
foreign minister, Andrei Kozyrev, for his weak drinking skills — “Bring the
boy some ice cream,” he roared to an attendant — but approved the
agreement. That may have been the high-water mark of Russia’s willingness
to face its imperialist history and allow its neighbors to live in peace.

How far Russia has regressed since then became shockingly evident last week
when Vladimir Putin’s Russia (population: 143 million) unleashed a barrage
against neighboring Estonia (population: 1.34 million) that included Kremlin
cyber-attacks on official Estonian Web sites, gangs of Kremlin-sponsored
youths menacing Estonian diplomats in Moscow, Russian officials and
government-controlled media spewing incendiary propaganda, Russian
companies suspending contracts with Estonian firms and, in predictably
Putinian fashion, Russian threats to cut off the tiny nation’s energy

(Suddenly, the Russian railway announced, all its coal-carrying railcars
were in desperate need of repair.)

The onslaught illustrated the dangerous real-world consequences of
mythologizing history — of Putin’s glorification of Stalinism — and the
link between Russia’s atrophied democracy and its increasingly aggressive
foreign policy.

The episode began on April 26 when Estonia began relocating a Soviet-era
war memorial and the remains of a dozen Soviet soldiers buried beneath it
from a central square in the capital, Tallinn, to a nearby military
cemetery. Russian-speaking youth, after meeting with Russian diplomats,

rioted in protest.

Russia’s foreign minister attacked this “disgusting . . . blasphemy.” The
upper house of Russia’s parliament demanded a severing of relations. The
Kremlin-controlled press furiously (and inaccurately) assailed the
“dismantling” of the statue.

Why such a fuss? To Russians, the statue was a tribute to their overwhelming
losses in World War II — which they know as the Great Patriotic War.

To Estonians, it was a reminder of a half-century of Soviet occupation
during which the Kremlin shot thousands of Balts; sent hundreds of thousands
to Siberia; moved hundreds of thousands of Russians in to take their places;
and tried to eradicate their culture, their language and any memory of

The trouble is that Russia has never acknowledged this history, and under
Putin it grows less and less willing to do so. The passing of the Soviet
Union is mourned, the old KGB is celebrated — imagine if Germans continued
to honor the Gestapo — and the current independence of former Soviet states
is treated as a transitory error.

Neither Putin nor even his foreign minister has deigned to pay a bilateral
visit to independent Tallinn. Virtually every neighbor — Georgia, Ukraine,
Latvia, Lithuania, even Finland — has been subjected to bullying.

“It seems they cannot tolerate any democracy on their borders,” Estonian
President Toomas Ilves told me in a phone conversation late Friday night.

He sounded weary after a week of crisis, but hopeful that tensions would
ease, particularly after Estonia had received support from the West,
including an invitation that day from President Bush for Ilves to visit the
White House in June.

Democracy in Estonia or Georgia, Ilves suggested, calls into question
Kremlin claims that “Western-style” democracy won’t work in that part of
the world.

An absence of democracy at home, in turn, makes it awkward to face history,
“because if you start saying the Soviet Union was bad, well, what was at
fault? One-party rule, a lack of human rights?” — it’s all too familiar.

Russian leaders dwell inordinately on the lack of respect paid them — but
the more they stifle democracy at home, the less cause others have to show
respect and the more the Kremlin ends up having to demand respect in a
Soviet way.

“Now Germany commands a tremendous amount of respect,” Ilves told me,
“not because people any longer are afraid of it, but because it is a
thriving and effective country.

“For Russia, respect is based not on achievement or accomplishment, but
intimidation and fear — that was the ‘greatness’ of the Soviet Union.”

Yeltsin, for all his drinking and Siberian gruffness, had at least glimmers
of understanding that Russia could become a greater country by withdrawing
unwanted troops than by imposing them.

Putin, clean-cut and fit, seems the more modern man. But his troops remain
in parts of neighboring Georgia and Moldova, and no decisive Kremlin summits
to solve those problems, with vodka or ice cream, seem likely anytime soon.
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                         May 7-June 22, University of Saskatchewan.

Prairie Centre for the Study of Ukrainian Heritage
St. Thomas More College, University of Saskatchewan
Saskatoon, Saskatchewan, Canada, Monday, May 7, 2007

The Prairie Centre for the Study of Ukrainian Heritage presents the
Exhibition “Far, Far Away: Postcards from Pre-Revolutionary Ukraine”
May 7-June 22, 2007, St. Thomas More Gallery, University of

At the end of the nineteenth century the attraction of the picture postcard
followed, after a fashion, the growing appetite for travel. Every corner of
the globe was within reach and Ukraine was no exception.

The allure of Ukraine, however, was limited. It was unknown and its relative
isolation made it an unlikely destination for the traveler.

Nevertheless, for the adventurous the rewards were great. There they
encountered a landscape full of contrasts and mystery; a land rich in
cultural diversity. Much of it, of course, is no more.

But there are reminders; not least of which are the vistas and scenes
captured in the postcard, printed initially in the thousands but of which
only the odd few remain today.

Far, Far Away, an exhibition of one hundred and thirty four postcards of
Ukraine’s pre-1917 urban landscape, speaks to this distant past, providing
charming representations of a lost world and a forgotten time.

As historical illustrations they serve to document changes in the built
landscape. As images that inspired the traveller they articulate a
particular aesthetic, one that perhaps inclined as much to the imaginary as
it did to the real.

A Public Reception hosted by the PCUH, St Thomas More Gallery, and
the STM Development Office will be held Sunday May 27th 12-1:30 pm.
All are welcome.

The exhibit, organized to coincide with the Annual Conference of the
Canadian Association of Slavists, is accompanied by a specially
prepared illustrated colour catalogue published by the Heritage Press.

Bohdan Kordan. Far, Far Away: Postcards from Pre-Revolutionary
Ukraine. Saskatoon: Heritage Press, 2007, colour ill., 112 p. ISBN
978-0-88880-527-0. Price $19.95.

To order the catalogue please visit the Heritage Press webpage at:           
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

                     Washington, D.C., Sunday, May 20 at 3 p.m.
The Washington Group Cultural Fund
Washington, D.C., Monday, May 7, 2007
WASHINGTON: The Washington Group Cultural Fund under the
patronage of the Embassy of Ukraine invites you to enjoy the virtuosity
of two outstanding violinists, Marta and Iryna Krechkovsky and pianist
Kevin Louks. 
The program features L Janacek, Sonata for Violin and Piano; P
Tchaikovsky, Melody, Op. 42; P. Tchaikovsky, Scherzo, Op. 42; Cesar
Franck, Sonata for Violin and Piano in A Major; Myroslav Skoryk,
Melody for two violins; and Pablo de Sarasate, Navarra for two violins.

WHEN: Sunday, May 20 3:00 p.m.
WHERE: The Lyceum, 201 South Washington St., Alexandria, VA
COST: There is a suggested donation of $20.00, Unreserved Seating
FOR MORE INFORMATION: Please visit the TWG website or call 202-244-8836. Contact Event
Phone: 703-241-1817, Venue Phone: 703-838-4994

If you would like to become a sponsor of the 2006-2007 series, please
send a check ($100-individual, $160-couple) made out to TWG Cultural
Fund to Rosalie Norair, 9311 Persimmon Tree Road, Potomac, MD 20854.
Chrystia Sonevytsky, Publicity Chair, TWGCF, 703 241 1817

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
               Sovietophilism in the West Ukrainian Diaspora in the 1920s”

ARTICLE: by Christopher Gilley, KICES Working Papers,
No. 4, March 2006, Koszalin Institute of Comparative
European Studies (KICES), Koszalin, Poland


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                     Bykivnia Forest used for mass burials of those repressed
                        and executed by NKVD in Kyiv, 120-130,000 victims
                          of Soviet repressions are buried in Bykivnia Forest

Ukraine 3000 International Charitable Fund
Kyiv, Ukraine, Monday, May 7, 2007

KYIV – On Saturday, May 5, 2007, the ‘Memory Beyond Time’ patriotic
charitable action was held at Bykivnia Graves State Historical and Memorial
Preserve, initiated by the Ukraine 3000 International Charitable Fund.

The Head of the Supervisory Board of the Ukraine 3000 International
Charitable Fund Kateryna Yushchenko, member of the Supervisory Board of

the Children’s Hospital of the Future Charitable Fund Volodymyr Kosterin,
Director of the Commercial Department of the Hrinko Company Serhiy Kovtun,
and Head of the Kraieva Starshyna (Country General Staff) of the PLAST
Ukrainian Scouting Organization Kostiantyn Yakovchuk-Besarab took place in
the action.

Others who participated were the pupils of the Bukivnia Secondary School and
representatives from the Ukraine 3000 Fund, SPOK All-Ukrainian Public Youth
Organization, Hrinko Company, Green Party of Ukraine, PLAST Ukrainian
Scouting Organization, and other youth and public organizations.

The action was organized by the Ukraine 3000 Fund and PLAST Ukrainian
Scouting Organization. The Hrinko Company undertook organizing garbage
disposal as beneficent aid.

Addressing those present the Advisor to the Head of the Supervisory Board

of the Ukraine 3000 International Charitable Fund Andriy Myroshnichenko
thanked them for responding to the organizers’ call to take part in the ‘Memory
Beyond Time’ action. He said that its goal was primarily to commemorate
those buried in the Bykivnia Forest.

“I would like you to remember these people of various nationalities,
religions, professions, and political convictions, who had always held their
native land close to heart. These people died for our sake; they rest in our
land, and we have to revere their memory, first of all, through action,” he

Head of the Kraieva Starshyna of the PLAST Ukrainian Scouting Organization
Kostiantyn Yakovchuk-Besarab emphasized in his speech that young people
should get more actively involved into such actions.
           SITES OF MASS SHOOTINGS IN 1937 AND 1945
The participants of the ‘Memory Beyond Time’ action have cleaned up part

of the Bykivnia Graves State Historical and Memorial Preserve territory.
Specifically, they tidied up the sites of mass shootings of Ukrainian
intelligentsia in 1937 and of Soviet prisoners of war returning from Germany
in 1945.

A commemorative plaque was placed on the site where the executed prisoners
of war were buried.
Addressing the journalists, Head of the Supervisory Board of the Ukraine
3000 Fund Kateryna Yushchenko said, “We don’t know all the names of the
people who are buried here. We don’t even know their number. But what we
know is, if we forget about them, we’ll lose an important part of our
historical memory.

If we don’t learn our history lessons, they’ll be doomed to repeat
themselves. (.) We urge all young people in Ukraine to get involved into
such actions more actively. We wish that these days such actions,
commemorating our history, would be held throughout Ukraine.”

Mrs. Kateryna thanked everybody who had responded to Ukraine 3000 Fund’s
initiative and called on other youth, public, and charitable organizations
to initiate and actively support actions aimed at preserving and renewing
the history of our country.

After the ‘Memory Beyond Time’ action had been finished, tour guide

Tetiana Skrypnyk narrated for those present the history of the Bykivnia
graves, their research, and creating a memorial preserve.

The ‘Memory Beyond Time’ action was timed to coincide with memorial events
dedicated to the Victory Day and commemorating the victims of political
repressions, traditionally observed at the Bykivnia Graves in the third week
of May.
In 1936-1941, the Bykivnia Forest was used for mass burials of those
repressed and executed by NKVD in Kyiv. In 1936, the construction of a
special zone for secret burials officially began.

Since then till Kyiv’s occupation by the Nazis, the victims of the Communist
regime had been systematically buried in the woods near Bykivnia.
Also in the thick of the forest, 800-900 meters away from the territory once
enclosed into the green fence, mass graves of the Soviet prisoners of the
war and Ostarbeiters were found, who returned home from the German

prison in 1941-1945 and were also shoot.
By the historians’ data, around 120-130,000 people were buried in the
Bykivnia Forest.

April 30, 1994, the Bykivnia Memorial Compound was unveiled. May 22,
2001, the Cabinet of Ministers of Ukraine led by Viktor Yushchenko passed
a decision, On Creating the Bykivnia Graves State Historical and Memorial
Preserve, May 22, 2006, by an order of President of Ukraine Viktor
Yushchenko, the preserve received the national status.

On June 24, 2001, Pope John Paul II visited Bykivnia.          -30-

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