AUR#855 Aug 8 Macroeconomic Situation Report By SigmaBleyzer; WTO Accession; Odessa-Brody Future?; Secret Sites For Tourism

 
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ACTION UKRAINE REPORT – AUR           
                 An International Newsletter, The Latest, Up-To-Date
                     In-Depth Ukrainian News, Analysis and Commentary

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

                        
ACTION UKRAINE REPORT – AUR – Number 855
Mr. E. Morgan Williams, Publisher and Editor, SigmaBleyzer
WASHINGTON, D.C., WEDNESDAY, AUGUST 8, 2007

INDEX OF ARTICLES 
Clicking on the title of any article takes you directly to the article.               
Return to Index by clicking on Return to Index at the end of each article
1. UKRAINE MACROECONOMIC SITUATION – JULY 2007
“Ukraine – Macroeconomic Situation – July 2007”
Monthly Analytical Report: Olga Pogarska, Edilberto L. Segura
SigmaBleyzer Emerging Markets Private Equity Investment Group,
The Bleyzer Foundation, Kyiv, Ukraine, Thursday, July 26, 2007

2IS A UKRAINIAN ‘ECONOMIC MIRACLE’ POSSIBLE?
ANALYSIS: By Alex Rodionov, for UP
Director of Donbass Wirtschaft Kooperation GbR
Original article in Russian, translated by Eugene Ivantsov
Ukrayinska Pravda, Kyiv, Ukraine, Friday, August 3, 2007

3UKRAINE: INVESTORS ARE LITTLE RATTLED BY POLITICAL STRIFE
ANALYSIS: Financial Times, London, United Kingdom, Friday, Jun 15, 2007

4. WESTERN EXPERTS DRAFTING REFORM PROGRAM

Interfax Ukraine News, Kyiv, Ukraine, June 9, 2007

5UKRAINE’S WTO BID COULD FACE MORE DELAYS
By John Marone, Kyiv Post Staff Writer
Kyiv Post, Kyiv, Ukraine, Wednesday Aug 01 2007

6UKRAINE AHEAD OF RUSSIA IN WTO BID
Russia and Ukraine are the largest economies outside of the WTO
By Frances Williams in Geneva, Financial Times
London, United Kingdom, Thursday, July 26 2007

7UKRAINE: WTO ACCESSION
BRIEFING: Oxford Business Group, UK, 3 August 2007

8ECONOMIC WONDERS OF ‘ProFFessionals’ OR THE

VERDICT TO INCOMPETENCE 
COMMENTARY & ANALYSIS: By Pavlo Zhebrivsky, for UP
Original article in Ukrainian, Translated by Eugene Ivantsov
Ukrayinska Pravda, Kyiv, Ukraine,

9. UKRAINE’S SHADOW ECONOMY STILL HIGH
Nearly 40 percent of Ukraine’s economy remains in the shadows
By Stephen Bandera, Kyiv Post Editor
Kyiv Post, Kyiv, Ukraine, Wednesday, Aug 01 2007

10. UKRAINE: CLOUDED FUTURE FOR ODESSA-BRODY PIPELINE
BRIEFING: Oxford Business Group, London, UK, Wed, 18 July 2007

11. CARLOS PASCUAL, “I DO NOT THINK THE ODESA-BRODY-
PLOCK OIL PIPELINE WILL EVER BE BUILT”

Explains why US investors are reluctant to invest

in the Ukrainian oil and gas sector

INTERVIEW: With Carlos Pascual
By Mykola SIRUK, The Day Weekly Digest #20
Kyiv, Ukraine, Tuesday, 10 July 2007

12. JAMES D. PETTIT, NEW DEPUTY CHIEF OF MISSION (DCM)

Morgan Williams, SigmaBleyzer
President, U.S.-Ukraine Business Council (USUBC)
Washington, D.C., Monday, August 6, 2007

13. TOURISM: UKRAINE’S GREATEST LOST OPPORTUNITY
By Oksana Bondarchuk, The Ukrainian Observer
The Willard Group, Kyiv, Ukraine, July 2007

14. TOURISM BOOMING IN UKRAINE AS MORE PEOPLE

TRAVEL ABROAD
Volodymyr Mashchenko, Kyiv Post, Kyiv, Ukraine, Wed, Aug 01, 2007

15. UKRAINE’S SECRET SITES FOR TOURISM!
By Olga Kovalenko, Kyiv Post Staff Writer
Kyiv Post, Kyiv, Ukraine, Wednesday, Aug 01 2007

16. MARKS & SOKOLOV, PHILADELPHIA LAW FIRM JOINS THE

U.S.-Ukraine Business Council (USUBC)
Washington, D.C., Monday, August 6, 2007
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1
. UKRAINE MACROECONOMIC SITUATION – JULY 2007

“Ukraine – Macroeconomic Situation – July 2007”
Monthly Analytical Report: Olga Pogarska, Edilberto L. Segura
SigmaBleyzer Emerging Markets Private Equity Investment Group,
The Bleyzer Foundation, Kyiv, Ukraine, Thursday, July 26, 2007

SUMMARY
[1] The Ukrainian economy has continued to show robust growth,
demonstrating a solid immunity to political instability.

[2] For January-May, real GDP grew by 7.9% yoy. Due to the droughty
weather, the grain harvest is expected to be notably lower than previously
expected. However, poor agricultural performance is unlikely to have a
substantial effect on total GDP growth in 2007.

[3] For the first five months of the year, the state budget ran an unusually
high surplus for this period due to higher than expected budget revenues
and under-execution of budget expenditures.

[4] Despite a high fiscal surplus so far, the government resumed issuance of
external and domestic debt in June to secure enough funds for the planned
budget deficit.

[5] The consumer price index keeps reporting double-digit growth; however,
the government forecast of 7.5% year-end inflation may still be realistic.

[6] Ukraine continued to demonstrate very strong export performance this
year; however, buoyant import growth resulted in further widening of the
merchandise trade deficit. A modest service trade surplus and a larger
deficit in the income account caused the current account deficit to widen by
almost 70% yoy in 1Q 2007.

[7] Robust capital inflow covered not only the CA gap, but also helped
replenish the gross international reserves of the National Bank of Ukraine.

[8] In mid-June, the EU and Ukraine officially started negotiations on a new
enhanced agreement.

ECONOMIC GROWTH
The Ukrainian economy grew by a real 7.7% yoy in May, up from 7.6%
yoy a month before. Notably, the acceleration of economic growth was
achieved on a rapidly waning low statistical base effect (in May 2006,
economic growth accelerated to real 8.5% yoy, up from about 2.7% yoy
over the first four months of the year) and a tense political environment.

As a result, cumulative real GDP growth remained unchanged from
January-April’s level of 7.9% yoy. Economic growth was primarily led by
double-digit growth in manufacturing, wholesale and retail trade,
construction and net taxes.

According to preliminary data of the State Statistics Committee of Ukraine,
value added in manufacturing (accounting for about 18% of total GDP)
grew by 13.8% yoy over the five months of the year, slightly down from
14.2% yoy over January-April.

Despite slowing output growth in almost all industries, which is mainly
attributed to an increased statistical base, the growth of industrial
production remained high and broad-based.

The major contributors to the 12.1% yoy growth in industrial production
were increases in machine-building, metallurgy, food processing and
chemicals.

Unlike other industries, the cumulative growth in machine-building
accelerated to about 23% yoy, driven by a substantial increase in
production of transport equipment.

The latter, responding to buoyant domestic and external demand,
advanced 36.7% yoy in May, bringing cumulative growth to 29.3% yoy.

Supported by rising world prices for steel as well as by strong domestic
demand from dynamically growing machine-building and construction,
metallurgy posted 15.8% yoy growth over January-May.

Increasing real household disposable income (up 10.5% yoy over
January-April) and a favorable external environment triggered 13.3% yoy
increase in food processing.

However, droughty weather during May-June and growing food imports
may exert downward pressure on further growth in the industry. High
international prices on chemicals, which helped to compensate for the higher
energy prices, prompted 7.1% yoy growth in the energy- intensive chemical
industry.

The improving performance of the utility generating sector (up by 6.6% yoy
in May, compared to 5.3% yoy in April and a 4.1% yoy decline over the first
quarter) also made a weighty contribution to the overall industrial output
figure.

Growing international prices on iron ores triggered a 12.8% yoy increase in
the extraction of non-energy materials, which helped compensate for the
weaker demand for domestic coal. As a result, output growth in the mining
sector decelerated to 4.4% yoy in January-May.

Buoyant economic activity, growing household income and active
commercial bank lending operations formed strong demand for new
construction facilities (construction of both residential and commercial
real estate, particularly retail, industrial and office spaces).

At the same time, value added growth in construction continued to
decelerate, reporting 11.5% yoy over January-May, down from 13.1%
yoy over January-April.

The deceleration may be attributed to the completion of several
infrastructure projects (mainly gas and oil pipelines, power supply and
communication circuits).

Robust growth in industry and construction and the population’s growing
propensity to consume prompted acceleration in value added growth to
15.5% yoy and 6.5% yoy in the wholesale and domestic trade and transport
sectors, respectively.

Solid consumption growth, which stimulated both domestic production and
imports, was reflected in the 15.1% yoy increase in net taxes on produce.
Holding about 13% of total GDP, it notably contributed to real GDP growth
over the period.

Despite the encouraging real sector performance, economic growth is
expected to slow down through the rest of the year. This will partially
occur due to the growing statistical base, which became fully apparent
in the fourth quarter of the year.

Deteriorating agricultural performance is among the main causes of the
potential economic growth slowdown in the coming months.

Over January-May, value added growth in agriculture slowed to a modest
2.3% yoy, down from about 5% yoy growth in the first quarter 2007 and
during the respective period last year. According to recent estimates of
the Ministry of Agriculture, 27-28 million tons of grain are expected to be
harvested, about 20% lower than in 2006.

On a positive note, the share of agriculture in total GDP has been declining
in recent years (from 13.5% in 2002 to less than 8% in 2006).

In addition, a smaller than expected grain crop may be compensated for by
the usually good harvest of vegetables. Hence, poor agricultural performance
is unlikely to have a substantial effect on total GDP growth, expected at
6.5% yoy in 2007.

FISCAL POLICY
For the first five months of the year, the state budget surplus amounted to
UAH 3.67 billion ($727 million), which is equivalent to 3.5% of period GDP.
High rates of economic growth helped the government to secure enough
budget revenues.

Over the period, state budget revenues reached UAH 46.85 billion ($9.3
billion), 31.1% higher than in the respective period last year, which fully
corresponds to nominal GDP growth (about 40% yoy over January-May,
according to operative data of the State Statistics Committee).

According to State Treasury information, state budget revenues were
4.8% above the targeted amount. At the same time, May’s target was
developed based on 2007 State Budget Law as of March 2007, while
the budget was amended at the beginning of May increasing the target
for state budget  revenues in 2007 by 2.5%.

The over-fulfillment of tax revenues to the state budget during January-May
was primarily achieved on account of corporate profit tax collections,
VAT proceeds and rent payments for crude oil extraction and natural gas
transportation.

However, an unusually high fiscal surplus for this period was achieved
mainly due to the under-execution of expenditures. According to the State
Treasury, over the first five months of the year expenditures from the
general fund of the state budget were 9.7% below the targeted amount
for this period.

As the government declared that it met all social liabilities, it is likely
that under-execution mostly relates to state budget transfers to local
budgets, credits from the state budget, and some infrastructure programs.
In addition, execution of expenditures from the special fund of the state
budget remains rather poor.

Under-execution of state budget expenditures at the beginning of the year
then catching up in the last few months of the year is a typical situation
in Ukraine.

However, this year, the larger magnitude of under-spending may be attributed
to little hope for collecting privatization receipts in the targeted UAH
10.6 billion ($2.1 billion).

According to the State Treasury, privatization proceeds came in at UAH 1.19
billion, just 11.2% of the annual target. Hence, to secure enough funds for
the planned budget deficit, the government resumed issuance of external and
domestic debt.

In particular, on June 18th, Ukraine issued $0.5 billion Eurobonds maturing
in 2012. Though Ukraine planned to attract $1 billion, the placement can be
considered successful as the yield on the newly issued bonds (6.385%) was
195 bps lower than the yield of 10-year Eurobonds placed in November 2006.

In addition, the placement occurred shortly after the political crisis in
Ukraine and on the back of growing yields on US-Treasury bonds during that
period. Fitch assigned a ‘BB-‘rating to these securities, which was in line
with Ukraine’s long-term foreign currency sovereign debt rating.

In June, for the first time this year, the government started issuing
domestic debt securities. On June 25th, the government placed 1.5-year
bonds with a 7.2% yield, receiving UAH 801.2 million ($158.7 million) to
the state budget.

Considering the loose liquidity in the banking sector and the large interest
in Ukraine’s domestic bonds from non-residents, the attracted amount could
have been much higher. Since the attracted amount represents only 21%
of the targeted UAH 3.8 billion set by the 2007 state budget law, issuance
of domestic debt is expected to continue in the coming months.

In May, however, the stock of public and public guaranteed debt continued to
decline. Since the beginning of the year, domestic debt has fallen by 7.8%
to $3.03 billion, while external debt has diminished by 5.7% to $11.9
billion.

As of the end of May, total public and publicly guaranteed debt fell to 9.3%
of forecasted full-year GDP, down from 9.8% at the beginning of the year.
Unlike public and publicly guaranteed debt, external private debt continued
its rapid expansion.

According to NBU data, external private debt grew by 65.6% yoy in 1Q
2007 to $46.8 billion. As a result, the gross external debt of Ukraine
approached $60 billion.

MONETARY POLICY
According to the State Statistics Committee, the consumer price index
advanced by 0.6% month-over-month (mom) in May. The largest
increase in prices was registered in the weightiest group -food products.

Food prices rose 1% mom, underpinned by 15.7% mom and 4.6% mom
increases in prices for fruits and vegetables. Since monthly changes in
prices are not seasonally adjusted, the upsurge in fruit and vegetable
prices in May can be attributed to seasonal factors.

However, in annual terms, which are relatively neutral to seasonality
effects, prices on fruits were 45.4% higher than in May 2006 while
vegetables were 16.4% cheaper.

An upsurge in fruit prices may be attributed to the robust growth of
households’ disposable income over the recent year, which triggered a
gradual shift in consumer preferences towards more expensive (often
imported) products.

High international prices on grain and droughty weather in May prompted
domestic prices for bread and bakery products to increase. In May, prices
on these commodities were 10.5% higher than in the respective month last
year.

The ban on meat imports on a give-and-take basis, imposed by the government
since May 1st, caused an increase in meat and meat product prices. Though
in May it was rather moderate (0.2% mom), the effect of the ban is expected
to manifest itself in the coming months. In annual terms, the growth of food
prices accelerated to 2.8% yoy, up from 1.5% yoy in April.

Service prices, the main contributor to CPI growth in 2006, grew by 0.8% mom
in May. Though utility tariffs reported a 0.8% mom decline that month (local
authorities continue to revise downwards utility tariffs from the upsurge in
the second half of 2006), it was outweighed by 3.3% mom growth in railway
transportation tariffs and a 0.9% mom increase in prices for healthcare
services.

At the same time, due to an increasing statistical base, the service price
index decelerated in annual terms (49.5% yoy in May vs. 53.7% yoy in April
2007).

An increase in gasoline prices by 8.2% yoy was compensated for by a more
moderate growth in prices for home appliances and computer equipment,
clothes and footwear. As a result, the non-food price index decelerated to
1.8% yoy, down from 2.5% a month before.

Though the consumer price index keeps reporting double-digit growth, the
government forecast of 7.5% year-end inflation may be realistic considering
the growing statistical base through the end of the year, the postponement
of an energy price pass-through to consumers, and administrative price
regulation of a number of socially sensitive commodities (e.g., bread).

Accelerating producer price inflation and monetary aggregates growth also
contributed to faster growth of consumer prices. In particular, the producer
price index sped up to 20.2% yoy in May from 18.2% yoy in April, affected
by high international prices for steel, chemicals, crude oil as well as
increasing labor costs.

Large-scale NBU interventions on the forex market ($1.4 billion in May
alone and $2.7 billion since the beginning of the year) led to acceleration
of  monetary base growth to almost 37% yoy in May, up from 27.7%
yoy a month before. Though the growth of money supply slightly
decelerated to 39% yoy, down from 40.5% yoy in April, it remained
rather high.

The deceleration may be attributed to slower deposit growth (42.3% yoy in
May vs. 44.3% yoy in April), which caused the money multiplier to decline
from 2.84 to 2.74 respectively. At the same time, money supply growth was
not a major force driving consumer inflation due to high money demand.

Bank credits to the economy of Ukraine, which may be used as one of the
indicators of money demand, expanded by 4.1% mom in May, despite a
politically turbulent month.

Although in annual terms, the growth decelerated to 72.6% yoy in May
(down from 73.7% a month before), it was higher than the 69.2% yoy in
May of last year; this the deceleration may be attributed to a high
statistical base effect.

INTERNATIONAL TRADE AND CAPITAL
Ukraine continues to demonstrate very strong export performance this year,
which is underpinned by robust world demand for Ukraine’s traditional
commodities.

According to the State Statistics Committee of Ukraine, exports of goods
surged by a record high 41.7% yoy in April, bringing year-to-date growth to
35.3% yoy.

Exports of metals and chemicals, which together account for more than
half of total merchandise exports, grew by 42.4% yoy and 29.4% yoy over
January-April respectively, accelerating from 40.9% yoy and 28.8% yoy
in the first quarter of 2007.

A 53.6% yoy increase in exports of machinery and transport equipment was
supported by robust economic growth in Ukraine’s main trading partners
(particularly Russia, the main outlet for Ukraine’s machinery export).

Despite good export performance, imports of goods grew even faster. In
April, the growth of imports accelerated to 47% yoy, driven by faster
growth for mineral products imports. Over January-April, imports
expanded by 35.9% yoy.

This commodity group account for about 1/3 of total merchandise imports.
High crude oil price and larger volumes of natural gas, gasoline and coal
imports drove imports of fossil fuels up by 33.7% yoy in January-April.

On a positive note, imports of machinery and transport equipment were also
on the rise, indicating strong investment demand in the country. Increasing
by 43.5% yoy in the first four months of the year, the share of
machine-building products reached 28.3% in total imports.

Despite remarkably strong export performance, buoyant growth of imports
resulted in further widening of Ukraine’s foreign trade deficit. In the
first four months of the year, the deficit reached almost $3 billion,
representing a 42% increase over the same period last year.

Driven by merchandise trade balance dynamics, a modest service trade
surplus and larger deficit in the income account, the current account
deficit widened to $1.3 billion in the first quarter of 2007, up by almost
70% yoy.

According to NBU data, exports of services grew by a moderate 14% yoy
due to lower natural gas transit to the EU (lower natural gas consumption
was the result of an unusually warm winter this year).

The growth of import of services accelerated to 24% yoy in 1Q 2007, driven
by strong domestic demand for travel, transport and financial services (up
by 30% yoy, 21% yoy and 70% yoy, respectively).

As a result, the surplus of foreign trade of services declined 4.4 times to
just $50 million. Higher dividend payments on foreign investments in Ukraine
and interest payments on foreign credits drove the income account deficit to
$400 million, up by 60% compared to the first quarter last year.

On a positive note, the surplus in the net transfer account (which primarily
consists of work remittances) continued to increase, reaching $790 million
in 1Q 2007, up by 27% yoy.

The widening CA deficit, however, is not alarming so far as FDI inflows
constituted $1.2 billion in the first quarter of the year, covering almost
90% of the CA gap.

In addition, the record high inflow of foreign capital due to private sector
borrowing from abroad allowed replenishing NBU international reserves
to $23 billion, which is enough to cover 4.3 months of future imports of
goods and services (as of the end of May, NBU gross international
reserves constituted $24.75 billion).

OTHER DEVELOPMENTS AND REFORMS

AFFECTING THE INVESTMENT CLIMATE
At the end of June, the National Bank of Ukraine tightened regulations on
foreign currency transactions by Ukrainian residents in an attempt to
decrease the dollarization of the Ukrainian economy.

In particular, the NBU shortened the period of holding foreign currency
previously bought by residents on the interbank forex market to repay loans
denominated in foreign currency to 5 days.

In addition, the NBU forbade using foreign-currency denominated household
deposits as a mortgage when taking foreign-currency denominated loans.

In mid-June, the EU and Ukraine officially started negotiations on a new
enhanced agreement. As a first step towards it, the countries signed
agreements on visa facilitation and readmission. The agreements are aimed
at easing travel of Ukrainian citizens across the EU countries, at the same
time fighting illegal immigration.

In mid-June, Ukraine and the EU signed an agreement envisaging an increase
in the EU quota for Ukrainian steel products by 31.4 % (from the current
1.005 million tons to 1.32 million tons per year). The quotas are effective
until Ukraine joins the WTO.

An increase in the quarter will help to further boost Ukraine’s exports,  as
metallurgical products traditionally hold a significant part of Ukraine’s
merchandise exports.
———————————————————————————————-
Chief Economist, Edilberto Segura; Editor, Rina Bleyzer Rudkin.
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NOTE: To read the entire SigmaBleyzer/The Bleyzer Foundation
Ukraine Macroeconomic Situation Report for July 2007 in a PDF
format, including color charts and graphics go to the following link

and click on Ukraine July 2007.
http://www.sigmableyzer.com/publications/monthly_reports
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BULGARIA, ROMANIA AND KAZAKHSTAN
NOTE: SigmaBleyzer/The Bleyzer Foundation also publishes monthly
Macroeconomic Situation Reports for Bulgaria, Romania and
Kazakhstan. The present and past reports, including those for Ukraine
can be found at http://www.sigmableyzer.com/en/page/532.
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Mr. E. Morgan Williams, Director, Government Affairs,
Washington Office, SigmaBleyzer, Emerging Markets Private
Equity Investment Group; Telephone: 202 437 4707
E-mail: mwilliams@SigmaBleyzer.com
Web: www.SigmaBleyzer.com
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[return to index] [Action Ukraine Report (AUR) Monitoring Service]
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2. IS A UKRAINIAN ‘ECONOMIC MIRACLE’ POSSIBLE?

ANALYSIS: By Alex Rodionov, for UP
Director of Donbass Wirtschaft Kooperation GbR
Original article in Russian, translated by Eugene Ivantsov
Ukrayinska Pravda, Kyiv, Ukraine, Friday, August 3, 2007

One can surely state that the XXI century began in 2002-2004 for Ukraine.
These years broke the course of Ukraine’s history. The public came up with
demands for a qualitatively new society and relations between the public and
the state by 2002, although such ideology was not new then.

We can either endlessly argue about the wrong state policy and the lost
years or even decades or begin modernization of the country as soon as
possible with the outstripping development rates that can be fast and
effective.

Analyzing current state of Ukraine’s society we can still hope that a modern
European civil society will be built in Ukraine. It is possible but
unfortunately not necessarily inevitable. The country dies without new
technologies and investments. Most enterprises have exhausted their funds.
Housing funds are on the way out.

Perhaps the entire underground and land-based infrastructure is worn out.
The power-hungry industry makes Ukraine’s companies absolutely
uncompetitive in the world market. The problems gather like a snowball.

Politicians of all colors make naïve statements on the possible ways-out
from the current crisis. It only stresses paralysis of the country’s top
management.

To offer Ukrainian society a new development strategy and an action plan the
country must gradually solve the problems that will enable Ukraine to work
out a brand new ideology – The National Strategy in the First Quarter of the
XXI century.

[1] Firstly, one must analyze main world trends and differentiate those
affecting future of the mankind, nations and states. In other words, one
must find the main trends for development of economy and society in the
modern world.

[2] Secondly, basing on a thorough objective analysis (total inventory
check) of Ukrainian state and society, one must specify Ukraine’s place in
the world, its prospects, peculiarities of development and key problems of
the country.

Above all, it is an adequate assessment of Ukraine’s capacities, its strong
and weak sides, use of competitive advantages and liquidation of the ‘blind
spots’.

[3] Thirdly, one must offer a new mechanism for the development of Ukraine’s
authority. It is the program of priorities, ideas, mechanisms and solutions.

[4] Fourthly, a new long-term program of social and economic development
must be introduced as a part of the state strategy.

The necessity to adopt a new strategy of Ukraine’s development has become
not only obvious but also urgent. The society must make the ultimate choice
in favor of a particular strategy.

Taking into account that it is impossible to develop the country in the
isolation, Ukraine must choose allies and become a full member of the chosen
political or military bloc. Postponing such a choice is the direct way to
marginalization of the country.

Then, the country must proceed to searching particular political and
economic means to achieve these goals. This work cannot be entrusted to
state institutions like the Finance or Economy Ministries. Soviet approaches
are useless here.

Working out of such a strategy must be transparent and open to public. Not
only national and foreign experts but also Ukrainian intelligentsia must be
engaged.

The strategy of Ukraine’s development must become an official document
which summarizes results of an all-national discussion.

Only then all state institutions and civil servants from the executive to
judicial powers at all levels will be oriented on the ideology and logic of
the official authority. They will settle down the citizens’ private problems
in the light of an all-national strategy.

It would be interesting to have a look at the strategy of Ukraine’s
development ordered by Akhmetov’s Fund to a foreign consulting firm
which is in actuality an overtask for it.

The thing is that writing business plans for metallurgic companies or energy
branches of industry somewhat differs from the strategic action plan for the
country. Besides statistics and bare figures there are living people in it.

Still, it needs mentioning that it is the first attempt to accomplish this
extremely difficult task of working out the strategic program of the
country’s development. That is why the country must support his
initiative instead of criticizing him.

All state and scientific institutions as well as the public must engage in
this work only under condition of the civil control over Akhmetov’s Fund.
Otherwise it will all be in vain.

There is no special Ukrainian way. There is the way of reasonable and
responsible people who would accept the best achievements of the mankind
rejecting everything negative and collaborating with the neighbors. Having
engaged the best men of the country Ukraine must set great objectives.

One should think the unthinkable and forget about imposed clichés and
standards. Soon after World War II one journalist said: “Germany is a
rubbish pile in which 40 million of Germans are messing around.” This
felicitous remark vividly described the state of the defeated country.

How did the Germans rise from knees? How did they overcome the crisis and
reached stability and prosperity? ‘Economic miracle’ saved them. The people
of Germany created this miracle. 20 years after the defeat Germany burst
into the club of the most developed countries in the world.

By the way, Germany is carefully watching political and economic processes
in Ukraine. Despite seeming apathy to Ukraine almost every ministry in
Germany has special departments of collaboration with Ukrainian colleagues.

Economic and political institutes monitor and analyze processes in Ukraine
and prepare recommendations for ministries and departments as well as the
government in general.

When talking to experts one can often here this: “Are Ukrainian colleagues
not interested in our experience and our help?” There is no one to discuss
possible collaboration!

Lack of professionalism and frequent change of Ukrainian partners hampers
our cooperation. Every new partner has totally different approaches and
concepts of the mutual goals.

As to Akhmetov’s Fund, many German experts take a keen interest in its
initiative. Moreover, some of them are even ready to participate in this
project.

After so many years of social decay and economic turndown it would be
a real miracle for Ukraine to stop this collapse and start economic
recovery. But this miracle is impossible without the miracle of social

progress.

Former Gulag prisoners must become free people willing to live decent
lives surrounded by civilized countries. It is up to us to decide.
————————————————————————————————-
LINK: http://www.pravda.com.ua/en/news/2007/8/3/8488.htm

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[return to index] [Action Ukraine Report (AUR) Monitoring Service]
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3. UKRAINE: INVESTORS ARE LITTLE RATTLED BY POLITICAL STRIFE

ANALYSIS: Financial Times, London, United Kingdom, Friday, Jun 15, 2007

Political turmoil has overshadowed much of the action but investors’
appetite for Ukraine’s fast-growing markets is rising.

They are following pioneers such as Nestlé and Coca-Cola, which entered
Ukraine in the 1990s and are making big returns.

Investors tune out the political noise and focus on the economic attractions
of a country of 46m, which last year registered a rise of more than 7 per
cent in gross domestic product, with another 7 per cent expected for 2007.

Tomas Fiala, managing director of Dragon Capital, a Kiev investment
company, says he thinks the political squabbles will be kept in check for
fear of hurting business.

“It is just an internal power struggle in the political elite. If the
population is not reacting, not withdrawing money from the banks, and
the currency is stable, then nobody pays attention.”

Although growth started in 1999, it took the televised events of the Orange
Revolution, which brought the reform-minded Viktor Yushchenko to power,
to put Ukraine on international investors’ radar screens. “Everyone is
fishing around,” says Jorge Zukoski, president of the American Chamber of
Commerce in Kiev.

Among the first to commit itself was Mittal Steel, which paid $4.8bn
(£2.4bn, euro3.6bn) for Ukraine’s most modern steel complex.

Domestic business groups, built from sometimes murky privatisations, have
meanwhile turned themselves into formidable competitors and have recently
been going to international capital markets to secure global valuations for
their assets and enhance their integration into the European economy.

Medium-sized Ukrainian companies raised some $600m last year, mainly in
London, Warsaw and Frankfurt, according to Mr Fiala.

Now businessmen are preparing larger offers, starting with Kostyantyn
Zhevago, a 33-year-old billionaire, who is raising about $500m this week on
the London Stock Exchange, offering 25 per cent of his Ferrexpo iron ore
business.

Rinat Akhmetov and Viktor Pinchuk, Ukraine’s richest men, are expected to
list steel, energy and media businesses by 2009.

But Ukraine still has a long way to go. Annual GDP per capita stands at
about $2,275; in Poland it is $8,655. Foreign investment is a fraction of
central European levels.

Incomes are unevenly distributed: while top businessmen rank among the
world’s richest, middle-class salaries are typically below $1,000 a month
and the elderly often live on less than $200, despite pension increases.

Corruption, red tape, weak courts and poor infrastructure remain problems
for business people and ordinary citizens alike. Jeffrey Franks, the
resident International Monetary Fund economist, says: “At some time in the
future, the lack of structural reforms will take a bite out of economic
growth.”                                               -30-

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4.  WESTERN EXPERTS DRAFTING REFORM PROGRAM
FOR UKRAINE, REGIONS PARTY SAYS
 
Interfax Ukraine News, Kyiv, Ukraine, June 9, 2007

KYIV – A group of Western specialists are developing a reform program

or Ukraine under a contract with the charity fund Ukraine’s Development
led by prominent Ukrainian businessman Rinat Akhmetov, said Borys
Kolesnykov, a deputy head of the Regions Party parliamentary faction,
in an interview published in the Saturday issue of Dzerkalo Tyzhnya.

“I have reasons to hope that the program that is being drafted at Mr.
Akhmetov’s request will be the Marshall Plan for Ukraine,” Kolesnykov

said.

Kolesnykov said that, according to his information, the program is nearly
ready and suggested that, after it has been presented in Ukraine, it will be
open for public debate.

“I think, after the program of Rinat Akhmetov’s Fund program has been
presented, the government should organize the accumulation of resources for
its implementation,” Kolesnykov said.
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5. UKRAINE’S WTO BID COULD FACE MORE DELAYS

By John Marone, Kyiv Post Staff Writer
Kyiv Post, Kyiv, Ukraine, Wednesday Aug 01 2007

Ukrainian officials have been promising since early last year that their
country’s membership in the World Trade Organization is right around the
corner, but as the deadline continues to be pushed back, the sincerity of
the government’s efforts looks increasingly suspect.

Joining the WTO would promote efficiency, foreign investment and greater
integration with the European Union, but it could also pose a threat to some
domestic industries, as well as Russian interests.
THE PROMISES
The latest meeting of the WTO-Ukraine working party, which consists of
representatives from 43 of the WTO’s 150 member countries and is tasked
with examining Ukraine’s progress toward membership, was held in Geneva
on July 23.

Two days later, on July 25, the Economy Ministry released a statement
suggesting that Ukraine’s bid was moving along as planned.

“The member countries of the working party stated their support for
Ukraine’s prompt completion of talks on obtaining WTO membership, and

they agreed to hold the next meeting in the beginning of October,” reads a
statement posted on the ministry’s website.

The ministry statement went on to explain where Ukraine needs to go from
here, including further work on a couple of bills.

The previous meeting of the working party was held on May 14, about two
weeks before parliament approved what it said were final amendments to
WTO-related legislation.

“Formally, Ukraine has fulfilled all its obligations to the working party on
joining the WTO,” First Deputy Prime Minister and Finance Minister Mykola
Azarov announced on Ukrainian TV in late May.

As early as last December, just before a working party meeting was to be
held, the government had made similar boasts.

It was in December that Ukraine’s parliament proudly announced that it had
passed the last of several bills needed for the country to join the WTO.

Since then, everyone from President Viktor Yushchenko, who has made WTO
entry a top policy goal, to his political nemesis Prime Minister Viktor
Yanukovych, who has been accused by his political opponents of derailing the
bid, have bandied 2007 around as the likely year of accession. This summer,
Yushchenko said Ukraine would join by the end of this year.
IN THE BALANCE
Ukraine has been negotiating WTO entry for 13 years. But the country’s
prospects only began to look realistic when Yushchenko became president in
2005.

By early 2006, the United States had recognized Ukraine as a market economy
and cancelled the stigmatizing Jackson-Vanik amendment. Yushchenko began
predicting WTO membership by the end of 2006, as part of a wider policy of
European integration.

The European Union has made WTO membership a precondition to a bilateral
free-trade agreement much coveted by Ukraine. At the same time, officials in
Brussels continue to express support for Kyiv’s WTO efforts.

Russia has suggested that Ukraine and Russia join the WTO simultaneously.

Serhiy Teryokhin, a lawmaker in the opposition Byut faction and a former
economy minister, said the Kremlin is concerned that Kyiv would get the
upper hand in outstanding trade issues if Ukraine achieves WTO membership
first.

According to WTO rules, an applicant country must sign bilateral agreements
with all relevant WTO member countries as a precondition to accession.

Teryokhin said one issue that Ukraine could hold over the Kremlin’s head is
Russia’s oil export tariffs, which effectively tax importing countries like
Ukraine instead of Russian producers.

The opposition deputy said he personally suspects the government-led
majority in Ukraine’s parliament of purposely crafting faulty WTO
legislation to slow down Ukraine’s bid.

The parliamentary majority, comprised of Communists, Socialists and
Yanukovych’s big-business-backed Regions party is widely considered
to lean more toward Moscow than the West.

“What this is really about is synchronization of Ukraine’s and Russia’s WTO
bids,” Teryokhin told the Post. Teryokhin said he raised his concerns about
faulty legislation passed in May but was ignored.

Another issue that is preventing Ukraine from joining the WTO, in addition
to incomplete legislation, is a final bilateral agreement that it must sign
with Kyrgyzstan, a WTO member.

According to Teryokhin, Kyrgyzstan’s conditions for signing the agreement
are “ridiculous” and demonstrate that the small Central Asian country is
doing Moscow’s bidding.

Russian continues to negotiate for WTO membership but observers say a
lot of trade issues remain for Moscow to resolve. The West-allied country
of Georgia, itself a WTO member, has pledged to block Moscow’s bid in
retaliation to trade restrictions and border disputes.

Ukrainian Foreign Minister Arseniy Yatsenyuk, a close ally of President
Yushchenko, denied during his July Brussels visit that Ukraine was holding
up its bid to please Russia. “Russia has its path and Ukraine has its. We
are not going to synchronize these issues.”
MISSION IMPOSSIBLE?
A source close to Ukraine’s WTO negotiation process said at least one of
the two obstacles to Ukraine’s bid, the bilateral agreement with Kyrgyzstan,
could easily be resolved by “a single high-level meeting.”

The Kyrgyz government’s main demand has been that Ukraine pay what it says
is a $28 million debt going back to Soviet times.

There are two reasons why the Ukrainian government wouldn’t want to resolve
the issue, the source told the Post: Either in support of synchronized entry
with Russia and/or lobbying by industries who fear large foreign competition
that will enter the market when Ukraine joins the WTO.

According to Oleg Riabokon, the managing partner of Kyiv-based law firm
Magister & Partners and a specialist on international trade issues, WTO
membership will be tough for uncompetitive sectors of Ukraine’s economy.

“Ukraine’s entry into the world trade club would certainly create uneasiness
for industries that have not been able to find their competitive edge since
the privatization took place,” he said. But the overall economy will gain,
he added. “Ukraine’s economic future depends on those who can fight.”

In the mean time, however, the country’s journey along the road to the WTO
is anything but over. For Ukraine to get into the WTO by the end of this
year, as the country’s authorities have promised, the government will have
to finish up all technical issues “flawlessly,” the source close to the
talks said.

Then parliament, which won’t be operational until after the Sept. 30 snap
elections, will have to enact necessary legislation. Finally the working
party will have to meet again to approve Ukraine’s draft report and pass it
on to the WTO General Council for a final decision.

The Ukrainian Parliament must ratify the decision before the country
actually becomes a member.
————————————————————————————————
LINK: http://www.kyivpost.com/nation/27088/
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6. UKRAINE AHEAD OF RUSSIA IN WTO BID
Russia and Ukraine are the largest economies outside of the WTO

By Frances Williams in Geneva, Financial Times
London, United Kingdom, Thursday, July 26 2007

Ukraine is on track to complete negotiations to join the World Trade
Organisation by the end of this year and Russia has a fighting chance of
doing the same, trade officials said on Thursday.

The two former Soviet republics are the largest economies remaining outside
the WTO, which on Friday welcomes the tiny Pacific island of Tonga as its
151st member.

Despite its turbulent domestic political scene, Ukraine has made faster
progress than Russia in its WTO application in the last couple of years,
largely due to the pro-western stance of President Viktor Yushchenko who
has made WTO membership and closer trade ties with the European Union
a key goal.

Russia’s 14-year-old accession bid has meanwhile become embroiled in
disputes with the US and EU over intellectual property piracy and
restrictions on agricultural imports.

In addition, formal meetings of the working party negotiating Russian
membership are being blocked by neighbouring Georgia, which insists Russia
stop trading with its breakaway regions of Abkhazia and South Ossetia, and
end its ban on Georgian wine and mineral water.

Earlier this year Peter Mandelson, EU trade commissioner, referred to a
“level of mistrust” between Moscow and Brussels unseen since the cold war,
while just last month a frustrated President Vladimir Putin criticised the
WTO as “archaic, undemocratic and inflexible”.

However, Maxim Medvedkov, head of Moscow’s WTO negotiating team,
said on Thursday: “I hope that with the support of the membership it will be
possible for Russia to complete negotiations by the end of this year.”

Mr Medvedkov said Russia had now completed bilateral market access
negotiations with over 50 WTO members, counting the EU as one, leaving
only talks with Saudi Arabia still ongoing.

WTO accession procedures require applicants to negotiate market opening
for goods and services with all trading partners that request it, as well as
conclude a multilateral accord on how they will apply WTO rules.

Agricultural subsidies and Russia’s food health regulations that have led to
the barring of imports from the US, Poland and Thailand, among others,
remained sticking points in the multilateral negotiations, Mr Medvedkov
acknowledged.

Moscow wants to be allowed to spend up to $9.2bn in annual farm subsidies
compared with about $4bn last year.

With so many issues still to settle, Russian hopes of wrapping up accession
talks this year look optimistic. By contrast, Ukraine and its trading
partners were this week putting the finishing touches to its detailed entry
terms.
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LINK: http://www.ft.com/cms/s/15cf0dac-3b9d-11dc-8002-0000779fd2ac.html

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7. UKRAINE: WTO ACCESSION

BRIEFING: Oxford Business Group, UK, 3 August 2007

Ukraine’s so-called “Orange Revolution” brought to the world’s attention in
late 2004 seemed for a while to presage a period of political change that
would move the country toward membership in the World Trade Organisation
(WTO), the North Atlantic Treaty Organisation (NATO) military alliance and
eventually to full membership in the EU.

Almost three years later, some of those dreams – some would say illusions –
have crumbled as those who fought for change, those who still harbor
political ideas much like those of Soviet times and those whose only thought
is for their own financial interests have collided repeatedly and
disruptively.

After considerable progress over the past year, it appears likely that WTO
accession is still very much in the balance and may be postponed at least
temporarily and perhaps even further by the chaos surrounding impending
parliamentary elections on September 30, 2007.

Slowly but surely, some of the most troubling hurdles have been breasted as
the parliament passed part of the laws needed to complete the legislative
package demanded by the WTO.

On July 24, the Pacific constitutional monarchy of Tonga gained WTO
membership, leaving Ukraine and Russia as the largest economies remaining
outside the WTO trading framework.

For quite a long time it appeared that there might be a battle over which of
the two republics, the two largest members of the old Soviet Union, would
enter the WTO first, with some fear that one might try to block the other’s
entry. However, other events seem to have muted the Ukraine-Russia rivalry
and put Ukraine in a clear lead to be the first to enter.

Ukraine’s WTO progress has been slow but fairly steady under the constant
prodding of President Viktor Yushchenko and the recent leadership of
Anatoliy Kinakh, former prime minister and now minister of the economy.

While Russia’s WTO bid remains in the deep freeze, not helped by President
Vladimir Putin’s public charges in June that the organisation is “archaic,
undemocratic and inflexible” a July 17 Brussels visit by Ukraine’s new
foreign minister, Arseniy Yatsenyuk, seemed almost euphoric in comparison.

After a meeting with Yatsenyuk, EU external relations commissioner Benita
Ferrero-Waldner declared the EU “fully supports Ukraine’s early entry into
the World Trade Organisation” and “welcomed good progress in the
negotiations”. Ferrero-Waldner added the new agreement with Kiev “will be
the most advanced agreement within the EU’s neighbourhood policy”.

EU Trade Commissioner Peter Mandelson was equally effusive about Ukraine’s
prospects during the working group meetings.

In spite of all the WTO happy talk coming out of Kiev and Brussels, there
are still some difficulties, at least in the short run.

Parliamentary elections are scheduled for September 30 and that appears
unlikely to change. However, what happens after September 30 is much more
volatile and unpredictable.

Although the old parliament could possibly call itself back into session,
the possibility of that happening seems extremely remote.

There is a long tradition of post-election chaos with court challenges to
either the entire election or to individual races taking up some time. Even
when the membership of the new parliament is more or less final, the law
does not allow the parliament to begin regular business sitting until a
majority has been agreed within the parties that win seats in the
proportional elections.

The jockeying for committee chairs and particularly for the speakership of
the parliament is often more hard-fought than the elections.

What all this means in practical terms is that it is highly unlikely that
the parliament could even begin considering the remaining WTO accession
legislation before late November or early December.

With the period between what it generally called Catholic Christmas
(December 25) and the New Year’s celebrations an almost impossible time for
legislative activity to occur, even further delays are considered quite
possible.

Yuriy Alatortsev, political analyst, told OBG, “In spite of the fact that
almost all the necessary preliminary work has been accomplished, I am
convinced that the legislative situation will stymie any progress on final
approval of required WTO legislation until very late in this year or early
next.

It is ironic that after all the years of discussion and debate, Ukraine’s
WTO accession should be held hostage to a political situation that is in no
way related to the trade issues at hand. I believe we will get the job done,
but I have no confidence in it happening any earlier than the first quarter
of 2008.”
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General Enquiries mail@oxfordbusinessgroup.com
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8. ECONOMIC WONDERS OF “ProFFessionals’ OR
THE VERDICT TO INCOMPETENCE 

COMMENTARY & ANALYSIS: By Pavlo Zhebrivsky, for UP
Original article in Ukrainian, Translated by Eugene Ivantsov
Ukrayinska Pravda, Kyiv, Ukraine,

On July 23, Ukrayinska Pravda published an article “Economic Wonder of
Yushchenko’s Governments: The Wonder of Crisis” by a journalist Vitaliy
Lukyanenko.

We must give the author his credits as he appeared to be a very modest
person. He forgot to mention that he was an advisor to the First PM of
Ukraine and the Finance Minister.

What is the main idea of Mr. Lukyanenko’s article? It is another praise to
his boss who considers himself an outstanding expert in matters of state
finance. Also, this article is an attack at his political rivals.

Well, such devotion is worthy of appraisal. But unfortunately, the author
tries to substitute an expert analysis of the government’s current policy
with pure populism mixed with inadequate comparisons and God knows

where taken from indexes of the country’s economic performance.

To support my position I offer to refer to facts and bare figures. To avoid
any ambiguity let’s state the source of information. It is official data of
the State Statistics Commission and The State Treasury on execution of the
budget in the first half of 2007.
So, let’s start, shall we?
GDP INCREASE

Gross domestic product (GDP) is a real fetish of Yanukovych’s government.
However, as it turns out, people who form the state economic policy still do
not know how this index is defined.

Mr. Lukyanenko sincerely believes that GDP is calculated as the “difference
between the produced goods at the market prices and their production
expenses!”

After that, any freshman of an economic school has only to shed bitter tears
over the fate of the country run by such ‘proFFessionals’. Moreover, they
even dare to speak of incompetence and lack of professionalism of Viktor
Bondar and Oleksandr Shlapak who are deputy heads of the President’s
Secretariat.

Now, let’s return to the indexes. Having a precise look at the diagram of
GDP increase it becomes obvious that the first half of 2006 was the most
successful in this regard. After that, the increase was gradually slowing
down. Since the beginning of 2007 the growth dynamics has become negative.

One can draw a conclusion that in was under Yekhanurov’s government that the
economy was gathering momentum having freed from the state interference.
Current government was even unable to maintain this trend.
REAL WAGES INCREASE AND INFLATION 
Mr. Lukyanenko writes that supposedly inflation brought to nought populist
increase of social payments. Let’s have a look at the statistics data.

For the first half of 2006, growth rates of the population’s real income
totals 118.3% as compared with the growth rate of the nominal income –
130.0%. Let’s draw Mr. Lukyanenko’s attention and other advisors to the
Finance Minister that this is real income of the population free of
inflation.

According to the State Statistics Commission, the similar rate for 2007 was
111.8% (127.0% – growth rate of the nominal income).

Now let’s talk about consumer prices. For the first half of 2006 the
Consumer Price Growth Index constituted 106.8% as compared with the year
2005 while the same index was 113% under Yanukovych’s government.

So, under what government did people receive more money and under what
government were social payments brought to nought by inflation?

Statements like: “Prices for potatoes, bread and sugar grew in June as
compared with the May of this year. But as compared with 2005 and 2006 the
prices are lower” evoke a bitter smile of the people who buy potatoes, bread
and sugar every day.
MONEY FOR SOCIAL PAYMENTS

Mr. Lukyanenko claims that Mr. Yanukovych’s predecessors left him no money
for social payments for public sector employees, pensions for the military.
He also said that “Tymoshenko’s and Yekhanurov’s governments did not budget
money for social payments at all for the year 2007.”

Statements like “financing of social programs ended in August while the
budget hole totaled UAH 2 billion” are absurd for any more or less educated
person. It needs mentioning that as of September 4, 2006 only the State
Treasury had UAH 11.122 billion on its united bank account.

It is ridiculous to talk about lack of money and mythical budget holes.
Following the formal logic Mr. Lukyanenko appeals to, it is interesting to
ask him where Mr. Yanukovych’s government found the money to carry out all
social payments.

Or was maybe one of the Party of Regions MPs right when in response to my
question about the anticrisis activity of the current government he said:
“God help us!” Well, of course it is possible that the financial God donated
some money to the state budget. But I tend to think that we are simply
misinformed.

Now let’s comment on the thesis aboutthe 100% financing of the state
budget’s expenses.

Everyone who is a little bit familiar with the national budget practice must
know the following statement: “Last year during the seven months the
government financed only 29% of capital expenses planned for the fiscal
year.”

This year during the five months all state programs have been 100% financed.
It is pure populism. It is known that the Finance Ministry planned financing
of about 50% programs for the fourth quarter of this year.

Thus, theoretically it is possible to allocate one hryvna for each state
program in the first half of the year and report on the 100% financing,
postponing all expenses for the next accounting period.

Actually, there is nothing strange in postponement of financing for the
second half of the year in our country. It is accounted for dependence of
the country on agrarian sector. Our budget received the most inflows during
summer and autumn. But there are a number of programs with astonishing
disproportion of financing periods.

 Besides, Mr. Lukyanenko so impudently compares financing of annual social
programs by Yekhanurov’s government with fulfillment of current plans by Mr.
Yanukovych’s Cabinet.

As it seems that advisors to ministers have no access to the documents with
which they must work every day, I will inform them and also UP readers with
some economic statistics of the budget execution.

Let’s start with the humanitarian field.
EDUCATION
The program “Securing development and use of the Ukrainian language”. The
annual plan is UAH 21 million. The government set the financing of the fist
half-year at UAH 700 thousand (feel the difference!). But even this plan is
not being executed. Only UAH 526.6 thousand has been allocated which makes
2.5% from the annual plan.

Program “Computerization of the secondary, technical and high schools.” The
annual plan is UAH 27.083 million. Financing of the first half-year – UAH
8.125 million. UAH 4.5 million has been allocated which makes 55% of the
half-year plan and only 16.6% of the annual financing. Cash execution of

the program equal zero.

Program “Re-building and building of educational buildings and dormitories
for higher educational establishments of the IV level”. Annual plan – UAH
75.9 million. Plan for the first half-year – UAH 3.137 million. Cash
execution – 0%.
HEALTH PROTECTION 
Program “Purchase of equipment for hospitals”. Annual plan – UAH 231
million, half-year plan – UAH 28.6 million. Cash execution – 0%.

Program “Health activities against tuberculosis, prevention and treatment of
AIDS, treatment of cancer patients.” Annual plan – UAH 457.6 million,
half-year plan – UAH 153.5 million . Cash execution – 5.2%.

The same situation is with financing of other government health care
programs. Health activities against epidemics of tuberculosis and AIDS are
not financed at all!

Now let’s talk about security.
Program “Reform and development of the Armed Forces.” Annual plan –

UAH 382 million, half-year plan – UAH 181 million. Cash execution – UAH
142.3 million. (37% of the annual plan)

29.9% of the annual plan was executed in the program “Modernization of
 arms.” Financing of the defense industry – 9.2% (cash execution – less than
1% ). Utilization of ammunition and liquid elements of rocket fuel – only
UAH 443 thousand was allocated from the necessary UAH 2.8 million. Is maybe
our government waiting for the new Hovobohdanivka to heroically overcome the
problem it created itself?!

The program of social and professional adaptation of the retired military is
not financed at all. Both central and local governments do not execute the
program of transferring real estate (lodging and objects of social and
cultural sphere) into the ownership of the Defense Ministry. Annual plan –
UAH 170 million, half-year plan – only UAH 5 million. Cash execution – 0%.

Capital investment into the development of infrastructure.

“Development and reconstruction of the centralized water supply and sewer
systems.” Annual plan – UAH 200 million, cash execution – UAH 9 million
(4.5% of the annual plan).

“State program of reforming and development of housing and communal
services.” Annual plan – UAH 270 million, half-year plan – only UAH 12.15
million, cash execution – 0%!

“Reconstruction of old city districts”. Financing of the program – UAH 1.7
million from the annual plan of UAH 50 million. The annual plan of the
programs “Capital repair and modernization of elevators”, “Purchase of
carriages for trams and underground trains” is UAH 50 million. Only

UAH 2.25 million was allocated.

Millions of hryvnas are not allocated from the special budget fund. This
money will never be allocated because the State Property Fund that planned
to receive over UAH 10 billion (the annual plan is over UAH 3 billion)
managed to ‘earn’ only UAH 1 318.6 million which is quite understandable
taking into account specific approach of the fund’s top management to
privatization of the strategic enterprises, like the ill-famed
Luhanskteplovoz and some other companies.

Again, Mr. Yanukovych’s government vents frustration on the agrarian sector.
First, they lost remains of the last year crop. Now it prevents farmers from
exporting grain which makes them sell it at depressed prices in Ukraine.

Besides, programs of banking loans and operations of financial leasing for
farmers are very poorly financed. The program “Banking loans and

development of rural areas” is not financed at all!

The facts stated above (it is a very small part of the programs which are
not executed by the government) is not the PR campaign which disappointed
the ministers advisor so much.

It is the verdict to the incompetent government that mixes up
professionalism with populism. The government tries to draw the people’s
attention away from the urgent problems caused by incompetence of the
‘proFFessionals’ and their inability to formulate the strategic goals, say
nothing of implementing them.

It is the verdict to incompetence that has gripped the government. It is
another reminder that something needs to be done about it.
——————————————————————————————–
Pavlo Zhebrivsky, MP of the fifth convocation, Our Ukraine faction
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9. UKRAINE’S SHADOW ECONOMY STILL HIGH
Nearly 40 percent of Ukraine’s economy remains in the shadows

By Stephen Bandera, Kyiv Post Editor
Kyiv Post, Kyiv, Ukraine, Wednesday, Aug 01 2007

Nearly 40 percent of Ukraine’s economy remains in the shadows,
according to a recent report from a government think tank.

The experts of the State Scientific Research Institute of Informatization
and Economic Modeling (DNDIIME) estimated on July 27 that Ukraine’s
“shadow GDP” will amount to Hr 443 billion (nearly $89 billion) in 2007,
while the country’s “official” gross domestic product will exceed Hr 692
billion ($138 billion).

The institute that provides research services for the Economy Ministry
estimates that Ukraine’s economy will exceed Hr 1 trillion ($200 billion) in
value in 2007.

DNDIIME’s methodology is based on a complex calculation of macro-
economic factors ranging from demand for cash in the economy and term
deposit rates offered by banks to real income levels.

The shadowiness of the economy is caused by the “unjustifiably high burden
on personal and business incomes. An inexplicable paradox exists: Labor is
the most utilized factor in production and is the main source of budgetary
revenues at the same time,” according to the report.

“It’s well-known that Ukraine currently occupies an unflattering position in
the world ‘GDP per capita’ rating at a time when the country is very rich in
natural and human resources,” said Yuri Kharazishvilli, deputy director of
DNDIIME and one of the report’s authors.

“If we are so rich, then why are we so poor?”

“One of the primary indicators that provide the real picture of a country’s
socio-economic development is the share of payments for labor in GDP,”
Kharazishvilli said.

Wages in Ukraine account for slightly more than a quarter of the country’s
GDP. By contrast, that number stands at nearly 60 percent in the United
States, while wages account for half of GDP in countries like Germany and
France.

According to experts, the shadow segment of average monthly wages in
Ukraine amounts to Hr 2,700 ($540), more than double of the official
average monthly wage of Hr 1,300. Combined, the average monthly wage
in Ukraine is around Hr 4,000 the study found.

The experts noted that in 2006, the value of underground economic activity
in the industrial sector stood at 132 percent. In other words, shadow
industrial activity surpassed officially-reported industrial activity by
nearly one-third.

The analogous figure stood at 73 percent in agriculture, 71 percent in
construction and 32 percent in the services sector.

Another government report based on data from the State Statistics
Committee painted a somewhat rosier picture of the shadow economy
claiming that it stood at 27 percent of GDP in 2006, or 2 percent lower
than in 2005.

The report, made public on the Ministry of Economy website on July 27,
did note that underground economic activity is on the rise in real estate
transactions, insurance and automotive sales and remains high in the
construction and wood-processing sectors.

Economist and former cabinet minister Viktor Lysytskyi said that “we can
argue about exact shadow economy statistics forever.” “But it’s absolutely
certain that the shadow sector is enormous,” he added.

According to Lysytskyi, large shadow economies are present in most
post-Soviet states and Ukraine is not alone in this respect. “I am sure that
in Russia the shadow economy is the same in terms of its share in the
economy.”

Nevertheless, the fact that such a large part of the economy is underground
has its blessings, as the economy develops certain immunity to external
factors.
———————————————————————————————–
LINK: http://www.kyivpost.com/nation/27087/
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10. CLOUDED FUTURE FOR ODESSA-BRODY PIPELINE

UKRAINE BRIEFING: Oxford Business Group

London, UK, Wed, 18 July 2007

The 674-km Odessa-Brody pipeline, planned and built to allow transportation
of Caspian crude oil to Europe without passing through the Russian pipeline
stranglehold, has had a confused and chaotic history.

With its basic configuration – from Odessa on the Black Sea to Brody near
the Polish border – completed in 2001 during the term of President Leonid
Kuchma, the tube remained unused until 2004 when an agreement was signed
between Ukraine and Russia to begin moving Russian crude in what is
considered opposite direction from the original plan.

The pipeline was intended to transport Caspian oil from the newly built
Pivdenny terminal in Odessa to the existing Druzbha pipeline for transport
to European refineries.

However, after it was completed, Ukraine did not have the money required to
fill it with Caspian crude and none of the European states was willing to
build the connecting pipelines to link Odessa-Brody to European refineries.

While the original Caspian to Europe design of the pipeline is still
strongly supported by many in Ukraine, most notably President Viktor
Yushchenko, the reality is that the flow of the Odessa-Brody has been
reversed in the southerly direction to the Black Sea and the pipeline has
seen limited movement of Russian crude from late 2004 until the present
time.

During the first five months of reverse use in late 2004 and early 2005,
only about 1.3m tonnes were pumped, which meant that during that period the
pipeline operated at a loss to the Ukrainian government. In 2004, the
government oil transport company UkraTransNafta estimated that a throughput
of at least 4m tonnes annually would be necessary for a break-even financial
result.

This was based on the beginning tariff of just over $10 per tonne. Sources
close to the situation suggest that Ukraine made no money on the pipeline in
2005 or 2006 because it agreed to substantially lower tariffs with TNK-BP.
It is only now in 2007 with much higher throughput that there may be some
chance of pipeline profitability for Ukraine.

On July 11, the Russian-British firm TNK-BP Ukraine, one of the largest oil
companies operating in Russia (Russian oil giant TNK was purchased by
British Petroleum in 2003), announced that Russian oil pumped across the
Belarussian-Ukrainian border via the Mozyr-Brody oil pipeline and then from
Brody to the Pivdenny oil terminal in Odessa amounted to 4.566m tonnes in
the first half of 2007. TNK-BP also said that Ukraine had received $170m as
payment for transit and port taxes since the contract began in 2004.

David Sears, an energy consultant who headed the Ukrainian government study
with regards to use of the pipeline in the reverse direction, told OBG,
“These recent figures are impressive but they fail to reflect the more
important reality, the cost of buildings, staff and operating costs
associated with the Odessa-Brody pipeline.

Today’s news is very similar to articles we read in 2003, governments still
sign agreements, as they have done since completion, but I’m not aware of
any significant contracts for either breaking ground on Brody-Plock
construction or Caspian oil supplies. Many of those who were working hard on
those issues have been replaced or dismissed.”

Use of the Odessa-Brody pipeline for its original purpose of transporting
Caspian oil to Europe continues to be a matter of discussion, but
considering profitability concerns and the increasing use of the pipeline
for movement of Russian crude southward, it is hard to imagine rapid
development in the westward direction.

“In our study, we laid out five major parameters that should be met, but
most were not realised. As I recall, the contract comes up for negotiation
in August and proponents of either reversal or direct use will be stating
their cases. My current opinion is that the government will extend the
contract (with TNK-BP), in spite of high potential for big losses.”

Further development of Odessa-Brody was a major topic at the June summit of
GUAM, a regional grouping of four ex-Soviet countries. Begun in 1997 by the
leaders of Georgia, Ukraine, Azerbaijan and Moldova, GUAM was joined in 1999
by Uzbekistan, which later withdrew.

In response to Yushchenko’s fervent support at the June 2007 GUAM summit in
Baku for using Odessa-Brody as a way of diversifying energy routes and
reducing dependence on Russia, Azerbaijani President Ilham Aliyev reassured
other GUAM members that his country had enough crude in its Caspian fields
to fill the pipeline.

There was, however, considerable scepticism among observers, given the
intense interest of China and other far eastern countries in Caspian oil,
that Odessa-Brody, with its necessity of sea transshipment from the Caspian
to Odessa, would ever be the most desirable marketing and transport option.

Further interest in the Brody-Plock portion of the pipeline has been clouded
by a lack of Ukraine’s ability to fill even the original portion with oil.

Moreover, little in the way of firm direction emerged because of the
weakness of the Yushchenko administration, vacillating governments and a
considerable number of old-line energy professionals within the
government-owned oil company who pushed the Russian alternative

relentlessly and effectively.

The future of GUAM, originally the brainchild of then presidents Kuchma of
Ukraine and Eduard Shevardnadze of Georgia, and the future of the
Odessa-Brody pipeline – at least so far as its original direction is
concerned – seem intertwined. Designed as a counterbalance to the
Commonwealth of Independent States (CIS), GUAM has been critical of the

CIS because of Russia’s domination.

However, it is no secret that GUAM has always been, to a large extent,
dependent upon substantial financial backing from the US and is widely
regarded as nothing more than a “talking shop” with little chance of
expansion and an uncertain future.

The construction of the Odessa-Brody pipeline, largely accomplished through
the determination of Kuchma and with Ukrainian money, still has the
possibility to see substantial use in the westward direction. However, it
appears that in the near future, the Odessa-Brody may only see Russian crude
in the other direction.

Sears added, “From my discussions with the Kazakh leadership, I have no
doubt whatsoever that they are ready to sign a contract with Ukraine that
would guarantee full utilisation of the current capacity of 14.5m tonnes per
year in the westward direction. Also, once that capacity is reached, the
pipeline could be self-financing to further develop it to carry 45m tonnes
per year.

However, no one in Ukraine has ever shown the determination and will to sit
down and work out a contract with the Kazakhs, the potentially largest
supplier of Caspian oil to Europe and the world.”

The problems with striking a deal with the Kazakhs are many, but in general
they come down to the strength of the pro-Russian orientation of many of
those in the Ukrainian government oil sector and further to the
preoccupation of top officials with upcoming parliamentary elections.

No one wants to take the lead in negotiations when it is unclear who will be
in the energy power positions after the elections now scheduled for
September 30.

Sears concluded, “The window was open but will soon close because of other
developments. Ukraine is on the verge of missing one of the best energy
trains ever to leave the station.”

Unless Ukraine soon takes strong steps to assure completion of pipeline
development in the westward direction, the possibility of increasing demand
from China and other far eastern buyers willing to pay a higher premium for
Caspian crude could turn Odessa-Brody into a virtually irrelevant footnote
in Eastern European energy history.
————————————————————————————————-
CONTACT US: General Enquiries mail@oxfordbusinessgroup.com
Editorial Enquiries cmartin@oxfordbusinessgroup.com
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[return to index] [Action Ukraine Report (AUR) Monitoring Service]
========================================================

11. CARLOS PASCUAL, “I DO NOT THINK THE ODESA-
BRODY-PLOCK OIL PIPELINE WILL EVER BE BUILT”
Explains why US investors are reluctant to invest
in the Ukrainian  oil and gas sector
INTERVIEW: With Carlos Pascual
By Mykola SIRUK, The Day Weekly Digest #20
Kyiv, Ukraine, Tuesday, 10 July 2007

Carlos Pascual, vice-president and director of the Foreign Policy Studies
Program at the Brookings Institution and former US ambassador to Ukraine,
is now dealing with energy issues and closely watching events in Ukraine.

It will be interesting for The Day’s readers to learn this expert’s opinion
on Ukraine’s energy policy and the viability of Kyiv’s plans to extend the
Odesa-Brody oil pipeline to the Polish city of Plock.

In The Day’s exclusive interview with Carlos Pascual, the American expert
explains why US investors are reluctant to invest in the Ukrainian oil and
gas sector, and offers advice on what Ukraine should do to attract American
investments, and how the US can help Ukraine join the European Union.

[THE DAY] Mr. Pascual, you must have heard German ex-chancellor Gerhard
Schroeder saying that there will be a 249 billion cu. m. increase in demand
for gas in Europe by 2015.

He thinks the EU will benefit from all the gas pipeline projects in which
Russia is involved. What do you think of Russia’s latest attempts to build
as many gas pipelines as possible?

[PASCUAL] “If you look at the dynamics from the Russian point of view, it
is obvious that Russia is interested in building a lot of pipelines to be
able to supply gas to Europe. At the same time, the Russians do not want to fall
hostage to 20 individual routes.

“Russia is also trying to exercise control over all these pipelines, which
gives it powerful influence on the European market. Russia is thus trying to
be a transiter of gas, not just a supplier.

“From this angle, it is all the more important for Ukraine to focus on its
own infrastructure, especially the one related to gas, and to understand
what it can do to improve the management of its gas infrastructure, attract
investments to this sector, and become an effective competitor.

“This should be of great importance for Europe, which needs Russia as a gas
transit rival. It is no good for consumers to have a market dominated by one
monopolist.

“So, in this case Ukraine can put itself in a far stronger position
vis-a-vis Europe if it manages to show reliability as an oil and gas transiter

and an ability to attract investments in the gas and oil infrastructure. Ukraine
will thus show that it is an effective transiter and a transparent manager.”

[THE DAY] You have just suggested what Ukraine should do. What do
you think of the efforts our country has already made in these questions?

[PASCUAL] “I would say Ukraine has been paying very little attention to
these issues. An added difficulty is that Ukraine has reached transit
agreements with Russia, including those via RosUkrEnergo, which has
directly involved Moscow in the transit of gas from Central Asia across
Russia to Ukraine.

“I think that if Ukraine wants to effectively overcome this problem, it
should turn over a new leaf and tackle this problem in a new and creative
way.

“Ukraine should also reach a consensus about its European ambitions, so
that the focus of attention is on European integration and the introduction
of indispensable reforms in the energy sector, which will allow it to further
integrate into the European market.

“But if Ukraine stops addressing these problems, it will run the great risk
of ending up in a situation where Russia, not Ukraine, exercises greater
control over this infrastructure.”

[THE DAY] What can the EU do, perhaps together with the US, to ensure the
supply of Caspian and Turkmen gas to Europe through the trans-Caspian gas
pipeline or maybe other routes that bypass Russia?

[PASCUAL] “I think there is great interest in the trans-Caspian gas pipeline
project. But as far as I understand, the construction of this pipeline
depends to a large extent on Turkmenistan and its desire to supply gas. At
the moment, Turkmenistan has not shown this desire and continues to
transport gas across Russia.

“This is very ironic and sad because this could be an alternative by which
Turkmenistan would get the chance to help itself and build a stronger
relationship as a direct supplier of gas to Europe. It looks as though
Ashkhabad has forgotten this interesting option because of its short-term
dependence on Russia as a transiter of Turkmen gas.”

[THE DAY] What about the reserves of gas and oil in Azerbaijan?

[PASCUAL] “Clearly, Azerbaijan is interested in the transit of gas across
Turkey to Europe. The Baku-Tbilisi-Ceyhan oil pipeline is already
operational.

“As for gas, the question is whether Azerbaijan has enough gas to justify
investments in the construction of a large pipeline and whether the gas
reserves are big enough to influence the European market. Another limitation
is that Azerbaijan is not that big a gas supplier to wield substantial
influence on gas deliveries to Europe.”

[THE DAY] How would you assess Ukraine’s efforts to attract investors,
including Americans, in order to exploit gas and oil wells in Ukraine,
modernize existing gas and oil pipelines, and take part in extending the
Odesa-Brody oil pipeline to Plock?

[PASCUAL] “I do not think the Odesa-Brody-Plock pipeline will ever be built.
The Odesa-Brody pipeline may well be merged with existing pipelines into
routes that will cross Slovakia to Germany.

“This has real potential for a handsome economic profit, and it can be done
without any additional construction. Unfortunately, this issue was
considered without the necessary aggressiveness.

“The EU could play an effective role by encouraging a joint policy in all
the transit countries. This would have been one of the greatest problems in
2003.

“As for attracting US and European investments to Ukraine, potential
investors in the gas and oil sector still do not feel they are wanted here.
They are aware of opportunities to invest funds that Ukraine needs. But they
can’t unless there are juridical guarantees that their investments will be
protected.

“I must admit that investments in the gas and oil sector are rather risky
because you cannot expect your investments to begin to pay off in a year
or two. It usually takes 20 to 30 years to make sure that your investments
produce a result.

“And very few companies will opt for this in a volatile political situation
without any guarantees that their juridical rights will be protected. Right
now they do not feel certain on the Ukrainian market.”

[THE DAY] You know that at the recent GUAM summit in Baku President
Ilham Aliev of Azerbaijan promised to supply – in two to three years – a
sufficient amount of oil to be transported through the Odesa-Brody-Plock
pipeline. Is this not an argument in favor of extending the oil pipeline?

[PASCUAL] “The pipeline should be extended, and somebody should
provide funds for this. But it can only be extended if there is a sufficient
market of oil to be supplied through the pipeline.

“This is necessary to justify the investments made. But right now there is
no such market for the Odesa-Brody-Plock project.

“On the other hand, there is a sufficient market in Slovakia and Germany
for Caspian oil that can be transported through the Odesa-Brody pipeline.

“I think that the Ukrainian side should, first of all, do its best to make
the existing pipelines work and perhaps in the future, once the market
develops further, explore the possibility of, say, extending the
Odesa-Brody-Plock oil pipeline. But it would be just a waste of time to
focus too closely on this project now.”

[THE DAY] In other words, you are sure there is no market for Caspian
oil in Poland now?

[PASCUAL] “Right, there is no market that would justify making investments
in the construction of this pipeline as far as Plock.”

[THE DAY] What is your goal as a participant in the fourth annual Yalta
Conference?

[PASCUAL] “My goal is to intensify the domestic dialogue in Ukraine about
why it is important for the country to develop a vision of a European future
and what should be done to achieve this aim.

“I have said many times that I see Ukraine as a European state with a
European future. But this depends to a large extent on what Ukraine itself
is doing about its policies, economy, and rule of law.

“I hope that cooperation between the international community and Ukraine
will produce more clarity with regard to the opinion both in Ukraine and the EU
as to how Ukraine can move more constructively toward occupying the place
in Europe that it really deserves.”

[THE DAY] Does this mean that the US has a voice in the EU to promote
Ukraine’s entry into the European community?

[PASCUAL] “No, we do not have a voice in the EU. But we can be a useful
partner of both Ukraine and the EU on such issues as rule of law, economic
reforms, and investments aimed at integrating Ukraine with the EU.”

[THE DAY] Can the US help Turkey join the EU?

[PASCUAL] “As I just said, we do not have a voice in the EU. We have
friends in the EU and can discuss things with them. But the nature of our
dialogue with the EU about Turkey or Ukraine will depend chiefly on what
will be going on in these countries.

“As for Turkey, the way it is tackling the current political situation will
be a critical factor in the viability of the agenda aimed at European
integration.

“The same applies to Ukraine – how the political crisis will be settled and
whether Europe will feel that Ukrainians are concerned about rule of law.
These things will be instrumental in the Europeans’ attitude to Ukraine. The
EU has incorporated a lot of new members. This was a complicated and
challenging task.

“So there is no natural desire to further enlarge until there is a feeling
that the EU will benefit from this. And in order to help Europe see the
advantages of further enlargement, it is critically important to show that
Ukraine has a strong desire to achieve political stability and rule of law.”

[THE DAY] Some Ukrainian diplomats think that President Nicolas Sarkozy
of France opposed Turkey’s EU membership during his election campaign,
hoping to obtain some privileges or concessions from the US in exchange
for further concessions in this matter. Is this assumption correct?

[PASCUAL] “I think that the US position, irrespective of whether the
president is a Republican or a Democrat, is that Turkey is a critical
country, a key bridge between the West and Islam.

“This is a European Islamic country that has the right to integrate into the
EU if it meets the criteria of European membership. I believe the US will
go on defending this position.”
———————————————————————————————–
LINK: http://www.day.kiev.ua/183740/
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========================================================

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========================================================
12. JAMES D. PETTIT, NEW DEPUTY CHIEF OF MISSION
(DCM) AT UNITED STATES EMBASSY IN KYIV
 
Morgan Williams, SigmaBleyzer
President, U.S.-Ukraine Business Council (USUBC)
Washington, D.C., Monday, August 6, 2007

WASHINGTON – Sheila Gwaltney has completed her tour of duty at

the U.S. Embassy in Ukraine as Deputy Chief of Mission (DCM).  The
Council has sent her our special thanks for the outstanding work she
performed and best wishes for the future.  Sheila was always very
supportive and responsive to the Council. 

The new DCM is James D. Pettit.  I met him recently at the U.S.

Ambassador’s 4th of July Reception held at the Ambassador’s residence
in Kyiv. Jim has been at the U.S. Embassy in Moscow the last few years.
His biography is listed below. The U.S.-Ukraine Business Council looks
forward to working with Jim. William B. Taylor Jr. is the U.S. Ambassador
in Kyiv.
———————————————————————————————
JAMES D. PETTIT, DEPUTY CHIEF OF MISSION (DCM)
U.S. EMBASSY KYIV, BIOGRAPHY 
CAREER ——–
2003 – 2007   Consul General and Minister Counselor for
Consular Affairs, U.S. Embassy Moscow
1999 – 2003  Consul General, U.S. Embassy Vienna
1997 – 1999  Chief, Office of Post Liaison, Visa Services, Dept. of State
1995 – 1997  Director, Washington Processing Center (Soviet
Refugee Program), Dept. of State
1994 – 1995  Student, National War College
1992 – 1994  Deputy Consul General, U.S. Embassy Moscow
1990 – 1992  Desk Officer, Taiwan Coordination Office, Dept. of State
1988 – 1990  Desk Officer, Office of Cuban Affairs, Dept. of State
1986 – 1988  Consular Officer, American Institute in Taiwan,
1983 – 1985  General Services Officer/Political Officer, U.S.
Embassy, Moscow
1981 – 1983  Consular Officer, U.S. Consulate General,
Guadalajara, Mexico
1979 – 1981  Letter of Credit Specialist, International Division, First
American Bank, Washington, D.C.
EDUCATION ——–
National War College (1994-1995), M.A. (National Strategic Studies)
Iowa State University (1974-1978), B.A. (Russian/International Studies)
FOREIGN LANGUAGES ——–
Russian, Spanish, German, Chinese (Mandarin)
PERSONAL HISTORY ——–
Grew up in Iowa.  Married, two children.
———————————————————————————————–
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========================================================
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========================================================
13. TOURISM: UKRAINE’S GREATEST LOST OPPORTUNITY

By Oksana Bondarchuk, The Ukrainian Observer
The Willard Group, Kyiv, Ukraine, July 2007

Ukraine’s official statistical agency reports that Ukraine had 18.9 million
tourists in 2006, a substantial increase from the 17.6 million counted in
2005. However, local tourist business professionals suggest that these
figures are grossly exaggerated because of the way in which the state does
it tabulation.

A highly respected website offers a tourist arrivals figure of 7.356 million
for Ukraine, a figure that is considered much closer to reality and probably
a bit inflated even at that.

Of the seven countries that share borders with Ukraine, three far outstrip
it in tourist business. Ukraine is far behind Poland, Hungary and Russia,
which count annual tourist arrivals of 19.5,17.3 and 15.3 million
respectively.

The four other countries on Ukraine’s borders, Romania, Slovakia, Belarus
and Moldova, have tourist arrivals of 2.95 million, 814,000, 254,000 and
21,000 respectively.

We set out to talk to some of Ukraine’s tourism professionals and some
tourists about their views of how much progress Ukraine has made and what it
needs to do to improve tourism’s contributions to the Ukrainian economy.

Walk down Kyiv’s Volodymyrska Street on any spring or summer morning
and you are likely to notice a number of large European touring buses in
groups of two or three at the roadside. The buses could be from anyplace in

Europe, but tend to originate from Germany more than any other country.

There is another type of tourist, almost 100 percent male, and their reasons
for venturing to Ukraine vary depending on their intentions. Some come as a
part of well-planned tours that, at least theoretically, involve meeting
Ukrainian women who have an interest in marrying a foreigner.

The statistics are unclear as to how many of them actually meet a person
whom they later marry, but the anecdotal evidence strongly suggests that the
process has resulted in several thousands of marriages between foreign men
and Ukrainian women over the last decade.

Peter, a 49-year-old food-engineer from Munich, Germany, told the UO that he
came to Kyiv first in 2001. After first good impressions of the people and
the opportunities Kyiv offers for tourists, he got into his first bad
experience.

“I was checked by police at night. I had no passport with me; as a result, I
had long discussion with the policemen,” he said.

Since then, Peter has visited Kyiv about 30 times on business, to see
friends and to vacation here for periods ranging from two days to two weeks.

As an example of what the inexperienced visitor might face, Peter said that
on one early trip he had quite a problem with a cab driver. “At the end of a
trip this guy asked me to pay him $80 instead of 80 Ukrainian hryvnia (UAH).
I “offered” him to call the police and he decided to accept the 80 hryvnia.”

The tourist agencies warn that Ukrainian guests should be ready for such
situations. Irene Trantina, a director of products from one of the leading
local incoming tour operators OLYMP Travel Ltd., working in the market for
14 years, recommends tourists to use only taxis, but not private cars.

She also warns that a foreigner can easily become a victim of public
transport robbers. “But it’s possible in every country. Certain rules of
safety for tourists are to be followed everywhere,” she added.

Staying in Ukraine can be more pleasant and easier if a tourist uses
services of tour operators and agencies. For example, Bob from Salt Lake
City came to the country for the first time but doesn’t have any complaints.
He has arrived to adopt a child and spent 25 days in the northern Ukrainian
city of Sumy.

“The language was a problem there. It was hard even at McDonald’s…But I
have my interpreter with me everywhere. She is my guardian angel,” he told
the Observer.

The services of a travel agency make the whole trip more expensive, but a
guest avoids a number of problems because the operator takes all
responsibility for his client.

Ukraine can’t offer any special services for foreign guests. It is waste of
time to look for any information tourist center or any organization, helping
visitors in trouble.

“Even in Kyiv we do not have any information tourist bureau of the type
that exists throughout the world. For ten years this has been a subject of
discussion, but still nothing has been done,” Stepan Romanyuk, the
president of the International Tourist Agency Ukraine-Rus, dealing with
incoming tourism for 15 years, told the Observer.

While state tourism support leaves a great deal to be desired, there is an
increasingly wide range of choices so far as accommodation. The Ukrainian
capital has about 120 hotels but only two of them belong to world-known
chains.

These are the 4-star Radisson SAS Hotel Kiev, launched in 2005, and the
recently opened 5-star Hyatt Regency Saint Sophia Kyiv, where the lowest
priced single room costs at least $430 per night during the summer season.

After many years during which there really was no such thing as a five star
or even four star hotel in Kyiv, business travelers who really want top
flight accommodations have several options and no less than 1,000 rooms
that meet international business standards.

First came the Premier Palace, followed by the Radisson, the Opera and
the Hyatt Regency. By the end of 2007, at least one and possibly more
world-class hotels should join those in existence.

However, tour operators say that the average tourist cannot or will not
afford the higher prices of the top quality hotels. Instead they opt for the
comfortable but much older hotels such as the Dnipro, the Kyiv, the Kyivsky
Rus, the Khreshchatyk and the Kyivsky President where one may find rooms
at an average of about $125 per night.

Not everyone is pleased with the hotel options. “The choice of hotels in
Ukraine is very poor… I can’t even compare local hotels with western ones
because the low quality of service and meals, and unfriendly staff,” Peter
complained.

Market insiders say that insignificant competition on the market cause
unreasonably high prices for suites. It makes renting of private apartments
more attractive, although not safer.

“We try to place our clients at hotels because there is an administration
there and we can guarantee something [safety there],” Romanyuk said.

Romanyuk also pointed out that state statistics are grossly inflated and use
the total number of persons who cross the border, rather than accurately
reflecting Ukraine’s true tourist business. “A tourist is a person who spent
at least 24 hours in the country and spent a night here…If a group came
from Krakow (Poland) to Lviv on an excursion and left at the same day, they
can’t be considered as tourists; they are simple visitors,” Romanyuk said.

While there are still problems with coming to Ukraine, one major hurdle has
been made immensely easier. Anyone arriving at any of Ukraine’s
international airports may gain entry, at least if they happen to carry a
passport issued by any of 36 countries for which Ukraine’s visa regime
was abolished.

The Kyiv City State Administration registered 209,000 tourists in the
capital in 2006. Considering that Kyiv is the destination of most persons
visiting Ukraine, that number alone tends to bring into question the more
expansive numbers quoted by state tourist officials.

“I think that of the whole number of real foreign tourists, those from the
West rather than the former Soviet Union, about 90 percent comes to Kyiv
because of International Airport here,” Trantina said.

Market insiders refuse even to suggest the approximate number of people
visiting Ukraine who might be considered real tourists. Trantina said that
OLYMP Travel Ltd., which is one of the largest among incoming tour
operators, accepted only 10,000 people in 2006.

According to the State Service, the second most popular destination is
Crimea, followed by Lviv. Also, there are increasing significant numbers of
tourists visiting Odesa and the Zakarpattya region. The latter two have
gained popularity with visitors from neighboring countries.

Most of Ukraine’s visitors come from Russia (about 34 percent), many to a
long time favorite Russian destination, the Crimean coastal region. The
second largest number of visitors comes from Poland (about 21 percent),
partly because of commerce and partly because of family relationships dating
back to the period when what is now western Ukraine was a part of Poland.

Also, there are substantial numbers of visitors from neighboring Moldova,
Belarus, Hungary and Romania. About one percent of visitors come from the
United States and about the same number from Germany. Tour operators also
add that the number of Swedes and Australians visiting the country is
growing.

Having said that, it must also be said that Ukraine is one of the few
countries in the region that has done nothing in the way of major television
advertising. Any viewer of international television channels such as BBC
World, CNN and CNBC is inundated with highly effective tourism
advertising for Egypt, India and Russia. And it isn’t just the larger
countries.

Some of the most creative international television advertising in recent
months has been for tourism in Croatia – and even tiny Georgia.

When Ukraine will wake up to the potential of effectively advertising its
attractions – and making them more easily accessible remains to be seen.
———————————————————————————————–
LINK: http://www.ukraine-observer.com/articles/233/1057

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14. TOURISM BOOMING IN UKRAINE AS MORE
PEOPLE TRAVEL ABROAD

Volodymyr Mashchenko, Kyiv Post, Kyiv, Ukraine, Wed, Aug 01, 2007

As tourism increases in Ukraine, low-quality service, deliberate price
dumping and lack of satisfactory government legislation remain major
problems facing the industry.

Ukrainians’ disposable incomes are growing and so is their interest in
travel and tourism. Ukrainian travel agencies and tour operators have
experienced a boom in outbound tourism, while the number of incoming
tourists has also grown, although at a much slower pace.

However, the low quality of services, deliberate price dumping, an
unsatisfactory legislative environment and lack of support from the
government remain major problems facing the tourist industry in Ukraine.

Industry insiders say that tourism to Ukraine is growing at a slower rate
than the number of Ukrainian tourists traveling abroad. Most tourists
traveling to Ukraine come from neighboring countries, namely Russia, Belarus
and Moldova. Russia alone accounts for around 34 percent of all visitors to
Ukraine.

Market players attribute the low rate of inbound tourism to the lack of
legislation aimed at developing the industry, the comparatively low quality
of services, underdeveloped infrastructure, and the lack of good hotels and
means of transportation.

“The law on tourism has many defects. Moreover, there is a shortage of air
travel companies, hotels and resorts. In addition, travel agencies cannot
afford good offices due to skyrocketing rental fees, especially in Kyiv,”
said Alexey Tugay, director general of the Karya Tour agency. His company,
which has operated in Ukraine since 2003, specializes in Turkish and
Egyptian destinations.

Nevertheless, positive trends in inbound tourism have been observed in
recent years. According to Anna Malivska, director general of the Ukrainian
Tourist Center, inbound tourism is growing at a rate of around 7 percent
annually.

Since 1998, UTC has offered travel services to diverse destinations in the
Scandinavian and Baltic countries, Russia, the US, Japan, Switzerland,
Hungary, the Czech Republic and Poland.

Ukraine’s State Statistics Committee reported that some 18.9 million
tourists visited Ukraine in 2006 – over 1 million more than the 17.6 million
counted in 2005. Around 35 percent of inbound tourists come from EU
member states, according to Malivska.

Demand for business travel is growing as well. According to Karolina
Zhekova, PR director for UTI Travel & Education, demand from business
travelers is currently growing at a rate of 17 percent annually. She said
that demand for tourism in general is growing by 25 percent every year.

Since 1992, UTI has provided tourist, educational and recreational programs.
The company also publishes the monthly Travel News magazine.

There are an estimated 3,000 travel agencies and tourist operators currently
offering their services in Ukraine, with the absolute majority – around
2,500 – located in Kyiv, according to market insiders.

The prices charged by travel agencies have also been growing consistently.
By the end of 2006, the price of an average trip was 30 percent higher than
in 2005.

This is due to higher airline ticket prices, an overall boom in demand for
tourist services and the expansion of the European Union. As a rule, the
costs of traveling to a country tend to grow once a country joins the EU.

Industry insiders say that tourist market players are isolated from one
another and would benefit greatly from membership in professional tourist
associations. They say that there is a lack of highly-skilled tourist
managers and the quality of services offered by agencies suffers when
competition among them leads to the artificial deflation of prices.

According to Zhekova, the majority of travel agencies need to recognize the
fact that Ukrainians first look at prices when choosing between different
tour operators. Factors such as quality, health safety and exclusivity of
destinations are secondary.

As a result, travel agencies compete for clients not by improving service
quality and offering new travel routes, but by lowering prices. Quality
suffers as a result.

“For example, travel agencies find cheap contracts with hotels and use
worn-out transport to be able to offer low prices for the most popular
destinations, like Egypt, Turkey and Europe,” said Zhekova. “Often, to
partially recover costs, travel operators raise prices for exotic
destinations that are less popular and more expensive because they are
targeted at a richer audience.”

Insiders agree that this state of affairs ultimately damages the Ukrainian
tourist industry’s reputation. Clients are often disappointed by the low
quality of hotels, service and transport they experience on cheap discount
tours, particularly during the high tourism season.

“How can a trip to Egypt cost $100, if an airplane ticket alone costs at
least $200,” quipped Zhekova.

She said that problems with quality and price dumping can only be solved by
developing a solid legislative base for the tourist industry.

She said that travel operators should form professional associations to work
out common standards and rules. She said the focus has to shift from
competing on the basis of prices to developing business and improving
service quality.

“As a result, we often run business at a loss. We cannot afford to expand
and develop business, since our revenues are hardly enough to stay afloat,”
said Zhekova. Taking all of this into consideration, Zhekova said that it is
strange to hear the government’s claim that the Ukrainian tourist industry
makes a significant contribution to the country’s economy.

“All this looks more like a wild scramble at the local business level and
not like a true branch of the country’s economy,” said Zhekova.

The practice of price dumping is further encouraged by the fact that
Ukrainians have grown accustomed to low prices for certain destinations,
particularly in Eastern Europe.

However, prices for many favorite destinations rose after a number of
countries joined the EU, forcing operators to revert to the tested “cheap”
contracts with countries like Turkey and Egypt instead.

“It’s a proven fact that as soon as a country joins the EU, this results in
improved infrastructure and increased cost for certain services. But demand
for this country as a tourist destination falls amongst Ukrainians,” said
Zhekova. “Ukrainians expect a trip to a country such as Bulgaria to be
inexpensive. They cannot accept the fact that prices change when a country
joins the EU.”

Another problem faced by Ukrainian travel agencies is the low
professionalism of tourist managers and the inability of tour operators to
help managers improve their professionalism due to the lack of finances and
incentives.

“In many travel companies, one manager is responsible for several
destinations simultaneously, for example, arranging tours to Switzerland and
Southeast Asia. Often a manager will know little about either country,” said
Zhekova.

She added that the problem of unskilled tourist managers could be solved by
increasing travel-operator specialization and creating professional
associations. She said that changes are required in the way prospective
tourism managers are educated. She said they require more specific knowledge
instead of being trained as “low-skilled ‘jacks of all trades.'”

Concerning the short-term, industry insiders agree that the Ukrainian travel
industry will continue growing at its current pace mostly due to outbound
tourism to Russia, Turkey, Egypt and CIS countries that offer relatively
cheap vacations. Trips and travel to Western Europe are also expected to
grow, albeit at a slower pace.

As for inbound tourists, market insiders are less optimistic in their
forecasts, primarily due to the country’s underdeveloped tourist
infrastructure.

“Incoming tourism to Ukraine will remain underdeveloped until the sector is
recognized as an integral part of the country’s economy,” said Zhekova.
“Ukraine’s current tourist infrastructure is in its embryonic state, which
negatively affects the image of the entire country.”
————————————————————————————————

———————————————————————————————–
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
========================================================
15. UKRAINE’S SECRET SITES FOR TOURISM!

by Olga Kovalenko, Kyiv Post Staff Writer
Kyiv Post, Kyiv, Ukraine, Wednesday, Aug 01 2007

Sunny days are without a doubt the best fit for an entertaining trip, so all
you have to do is choose a destination. About two or three years ago all my
friends picked the seaside, presumably Crimea, for their summer trips.

However, during our recent chat in a small coffee house, a lot of my friends
pointed out a larger list of places for a journey – Turkey, Egypt and.
Ukrainian towns and villages. It’s a new tendency in fact.

Year after year tourism in Ukraine becomes more and more popular, not only
among foreigners, but also among Ukrainians, searching for lesser known
spots that are only being slowly discovered by tourists. Besides, exploring
Ukraine is rather cheap – just get in a car and get whisked away to some
small, unexpected place for a weekend.

[1] POCHAYIVSKO-USPENKA LAVRA (Ternopil Region, Pochayiv city)
Apparently one of the most well known Orthodox spots in Ukraine is
Pochayivsko-Uspenska Lavra, which is actually the second monastery (the
most holy and significant monastic complex in Orthodox religion) in the
country after the local Kyivo-Pecherska Lavra.

Pilgrimages to Pochayivska Lavra began in the 13th century and continued
even through Soviet times. According to legend, in 1240 when Kyivska Rus
was plundered by Mongol Tatar nomads, two eremites and a shepherd
suddenly saw the holy Virgin Mary appear in the blazing flames of fire.

In the place where she stood, her footprint remained, giving birth to a
salutary spring, which was later encircled with church walls. Another
artifact that made the Pochayivska Lavra one of the most frequently visited
places, was a healing icon of the Holy Mary granted to the church by a local
aristocratic family in the 17th century, after it was said to have restored
the health of several people.

The monastery’s construction was accomplished only in the 20th century by
the well-known Soviet architect Oleksandr Shchusev, who paradoxically was
also the creator of Lenin’s mausoleum in Moscow.

Another peculiarity of the monastery is the mosaic over its southern
entrance, made up according to sketches by the Russian painter, theosophist,
and spiritual teacher Nickolas Roerich, who took his first painting classes
together with Taras Shevchenko.
[2] VILKOVO VILLAGE (Odessa Region)
Vilkovo, a small settlement with a population of 11,500, is commonly
referred to as a “Ukrainian Venice,” since almost all of its territory is
covered with water channels. The reason is simple: Vilkovo (Slavic for “a
Fork”) is situated right at the spot where the Danube flows into the Black
sea, splitting into three branches.

Yet when you see the picturesque banks, covered with bushes and shaggy
houses, you barely think about its Venetian namesake, but to the contrary,
Vilkovo more resembles a Vietnamese settlement or a village on a marsh.

The citizens of Vilkovo can save on cars and gas, since almost all
transportation is possible by boats that float along the two main channels,
Belgorodskiy and Gorkogo, and numerous tiny ones. The water from the
channels is used for washing dishes, cooking, and fishing all at the same
time.

Besides, I was told by one of the village dwellers that Vilkovo produces the
tastiest salt herring in Ukraine. Except for herring and other fish, Vilkovo
is a real paradise for all kinds of birds – 265 different species. For
comparison, there are 382 species in all of Ukraine.

Near Vilkovo you can also visit Izmail fortress, which is closely connected
to the military history of the Russian Empire through the storming of Izmail
conducted by the Marshal Alexander Suvorov during the Russian-Turkish
War in the 18th century.
[3] THE MUSEUM OF STRATEGIC ROCKET FORCES (ICBM)
As the museum was once a part of Soviet military forces, it isn’t so easy to
find, but don’t be afraid. It is located on the crossing of two oblasts,
Mykolayivska and Kirovohradska, in the Pervomaysk region of Ukraine,
near Pobuzke village.

The 46th rocket division of 18 launch control centers was reduced in 2001
and became a museum. Among its personnel there are officers that can give
detailed and professional answers to all your questions. Among the exposed
armory is machinery for rocket service, installation, removal, and
transportation.

There are no more real rockets, but the basic elements of the construction
and rocket models are on display. Such structures as household, store, and
guard buildings are preserved and open for visits. As a friend of mine told
me, the army habits are partially preserved on the territory of the museum,
and at the entrance you may even be asked about your occupation and place
of living.

Having a good memory of Cold War spy hysteria, some veterans are still
suspicious of foreigners. However preposterous it may seem, foreigners are
sometimes prohibited to enter the command center, where the launch control
panel is situated.

The excursion (which according to the latest data is Hr 15 for Ukrainians
and $15 for foreigners) is only allowed with guidance, and it is prohibited
to walk around the territory on your own.
[4] NEVYTSKIY CASTLE (Zakarpattya Region, 12 kilometers to Perechin)
A visit to a half-ruined castle in the west or south of Ukraine is a regular
element of a trip across Ukraine, and the most popular among them are those
of Hotyn, Kamyanets-Podilskiy, and Bilhorod-Dnistrovskiy.

Yet there are some castles that may be less impressive in terms of size, but
are more romantic looking, like the one near Nevytskiy village. Its ruins
stand on top of a mountain that was once a volcano.

One side of it borders a wide plain, another borders a deep gorge with a
flowing torrent. The image is completed by a narrow path that leads you
through the forest up the mountain. Like most castles with old traditions,
the place is linked with many legends and creepy stories.

One of them dates back to the 14th century and tells about Pohana Diva (Vile
Maiden), a cruel princess and witch, who ordered the castle to be built and
constantly terrorized the local population.

Yet, according to more pragmatic historical facts, in the 13th century the
place was a fortification constructed against Mongol Tatars, which later
became one of the Hungarian empire’s strategic strongholds, constantly
besieged and seized either by monarchic armies or the rebellious
aristocracy.
[5] WEHRWOLF (Vinnytsya Region, near the village Stryzhanivka and
the railroad Vinnytsya-Kalynivka)
Hitler’s military headquarters, or rather their remains, are claimed to be
the most secret military base on the territory of Ukraine during WWII.

The base, which was first intended to be built in Poltava region, changed
names several times during its construction, including Wehrwolf (“Werewolf”)
and Eichenhain (“Oak Grove”).

It was finished by 1942 and was maintained by local people, foreigners,
Germans, and captives, whose number and occupation, were documented and
controlled by the Nazi soldiers. All armories were thoroughly masked under
the cover of a sanatorium for German officers.

The central zone, which was intended for Hitler himself and his commanders,
was constructed by the Germans only. This central zone included Gestapo,
Wehrmacht, a telephone station, hotel, casino, tea house, cinema, sauna,
gym, swimming pool, officers’ and generals’ canteens, houses of generals,
and Hitler’s personal lodgings with a bomb shelter.

The headquarters were visited by almost all members of the Nazi command
office, including Hitler, who was there five times (May-June and
July-September of 1942, January, March and July of 1943).

During the army retreat, the headquarters and practically all documents were
destroyed – no interesting artifacts were found on the territory in any
case.

Now the headquarters look like a peaceful field mixed with scattered
concrete remains. However, like all war sites, Wehrwolf is sometimes
mentioned in connection with the Third Reich treasures and hidden artifacts.
[6] ESKI-KERMEN AND CHUFUT-KATE (Crimea, Bakhchisaray, near
Kholmovka village)
These two places with strange-sounding names are actually the remains of two
cave cities built in the Crimean Mountains in the 6th century. Eski-Kermen,
Tatar for “Old Castle,” doesn’t look like a traditional city or
fortification.

The plateau was dug through so smoothly that it could be accepted as a
delicate work of nature. Only one area of the place looks like a real city.
You can see the remains of walls, forming rooms, separated by narrow
streets.

Walking across the plateau, be careful so as not to accidentally fall into
one of the openings, which in ancient times served as windows, hatches,
chimneys and wells. In the southern part of the city, the remains of a
temple were preserved, carved in a huge rock with frescoes of three horse
riders painted inside.

Around the temple you can see destroyed tombs from the 10th century.
Travelers of the 16th century wrote about Eski-Kermen as a devastated but
still beautiful city embellished with marble, whose true name wasn’t
remembered either by Tartars or Turks.

From the Eski-Kermen plateau one can observe the remains of a tower named
Kiz-Kule (Maiden’s Tower). If you decide to visit it as well, don’t be so
optimistic about the seemingly short distance – the road will take you from
one to two hours.

Another cave city, Chufut-Kale (Jews’ Fortress), located several kilometers
from Bakhchisaray on the plateau over the gorge Maryam-Dere, dates back to
the 6th century. I first visited it when I was 10 and admired the serenity
and desertedness of the abandoned city.

Lizards crawled briskly along the low fence and speckles of sun reflected on
the bare walls. No one knows who built the city, but during the rule of the
independent Crimea khans the city became the residence of royalty.

Until the 16th century, the city was inhabited by various religious and
cultural groups – including Muslims, Christians, and Jews – but after khan
and his court moved to Bakhchisaray the city became a military
fortification. One of the remaining buildings is a mosque and a mausoleum
of Dzhanike-Khanym, khan Tokhtamysh’s daughter.

You won’t find a tour guide in Eski-Kermen and Chufut-Kale, so if you want
to hire one to show you around you will have to do it at one of the tourist
centers in the big cities nearby.
[7] PARK KACHANIVKA (Chernihiv Region, Ichnyanskiy region, village
Kachanivka)
The village Kachanivka has gradually gained popularity for its huge manor
and the park and beautiful landscapes surrounding it.

In different times the manor was owned by aristocrats, tradesmen, and
mercenaries, supporting of painters and composers – Rumyantsev-
Zadunayskiy, Tarnovskiy, Kharytonenko and Oliv families.

The place was frequented by well known Ukrainian and Russian artists,
including Taras Shevchenko, Nikolay Gogol, Marko Vovchok, Panteleymon
Kulish, Opanas Markevych, Kuzma Petrov-Vodkin and Valentin Serov.

The manor was always open for all spheres of art and housed a large library
and collection of paintings, sculptures, and traditional Ukrainian
artifacts, which were later donated to a museum in Chernihiv.

The main attraction of Kachanivka is its park. After you walk along the
narrow paths you should come up to the Great Lake.

There you will see a vivid looking old sugar factory, situated on the
opposite bank of the lake. The building is designed and painted like a
classical-style house, and if not for a high rising chimney, the building
could hardly be called a factory.

Unfortunately, like all manors, after the revolution Kachanivka was
transformed into an orphanage, which lead to the slow destruction of the
building. Actually, now the manor is considered a national reserve and
little by little has gained popularity among local travelers.
[8] KHERSONES TAVFRIYSKIY (Crimea, near Sevastopol)
Ukraine can boast not only castles in Western-European style, but its
connections to ancient Greek history as well. Near Sevastopol, right on the
bank of the Black Sea, stand the remains of a Greek colony, once the rich
city Khersones, referred to as a “Russian Troy.”

The image of lonesome columns standing against the background of the sea
is a familiar picture seen on the back of the one hryvnia bill. Some decide
to hire a boat at the Sevastopol berth and see everything on their own.

Around 2500 years ago, Khersones was inhabited by Greek colonists and
people of various nations, and later became the Christian capital of the
peninsula.

Multitudes of monks formed hermitages and monasteries near the ancient city.
Khersones is built according to the traditional plans of Greek and Roman
settlements and if you have already been to Italy or Greece and visited the
ruins of the old cities, you’d find Khersones very similar.
———————————————————————————————–
LINK: http://www.kyivpost.com/guide/general/27081/
———————————————————————————————–
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
========================================================
16. MARKS & SOKOLOV, PHILADELPHIA LAW FIRM JOINS THE

U.S.-UKRAINE BUSINESS COUNCIL, OPENS OFFICE IN KYIV
 
U.S.-Ukraine Business Council (USUBC)
Washington, D.C., Monday, August 6, 2007

WASHINGTON – The Executive Committee of the U.S.-Ukraine

Business Council (USUBC) recently approved Marks & Sokolov,
LLC, a law firm headquartered in Philadelphia, as the 38th member
of the Council. The firms managing director is Bruce Marks.

The Marks & Sokolov law firm recently opened an office in Kyiv,

Ukraine.  Gene M. Burd, is the managing director of the Kyiv office.
A news release about the new office is found below.

Morgan Williams, SigmaBleyzer, President of the U.S.-Ukraine
Business Council, said Marks & Sokolov is the 15th new member

for the Council in the last six months. The Council’s membership
is now the largest it has ever been. The new members are:
     (1)    American Continental Group, LLC
     (2)    Atlantic Group (media companies)
     (3)    Bunge North America
     (4)    Cardinal Resources
     (5)    The Coca-Cola Company
     (6)    The Eurasia Foundation
     (7)    Holtec International
     (8)    Kennan Institute, of the Woodrow Wilson
             International Center for Scholars (WWICS)
     (9)    Kyiv-Atlantic Group of Companies
     (10)  Marks and Sokolov, LLC
     (11)  Northrop Grumman
     (12)  Open World Leadership Center at the
             Library of Congress
     (13) TD International, LLC
     (14) U.S. Civilian Research Development Foundation (CRDF)
     (15) Vanco Energy Company
——————————————————————————————–
PHILADELPHIA FIRM OPENS OFFICE IN KYIV, UKRAINE
Only Pennsylvania law firm to have offices in Russia and Ukraine

PHILADELPHIA, PA, — The Philadelphia law firm of Marks & Sokolov,
LLC has announced the opening of an office in Kyiv, Ukraine.  The office
will operate under the name of Marks, Sokolov & Burd, LLC.

The twenty attorney firm is the only law firm in Pennsylvania to have an
office in Ukraine as well as Moscow, Russia. Only a handful of U.S. firms
have offices in these countries.

Founded in 1998 by former Pa. State Senator Bruce S. Marks, the firm
represents foreign and US businesses clients in complex commercial
litigation throughout Europe and the United States.

The firm is known for its substantial experience in handling transactions
for Western clients doing business in Russia and Russian/Ukrainian clients
doing business internationally.

According to Firm Managing Director Marks: “We are excited to be the first
Philadelphia law firm to open an office in Ukraine, just like we are the
first and only Philadelphia firm to have an office in Moscow.  The events
following the “Orange Revolution” have opened up the doors for Ukrainian
companies to do business in the West and Western companies to do business
in Ukraine.

Already, we have represented Ukrainian interests in purchasing major metal
plants in the United States and Western companies in substantial, world-wide
litigation arising from their Ukrainian business dealings. We look forward
to doing more.”

Gene M. Burd, will be the managing director of the Kyiv office. He is a
Ukrainian born, US trained and practiced attorney. He is fluent in
Ukrainian, Russian and English.

As he has stated, “It is a great pleasure to come back to Ukraine after many
years to see a dynamic country striving to be independent. US companies
who come to Ukraine see a strong and vibrant economy-becoming more
attractive to the global investment community on a daily basis.”

Marks & Sokolov, LLC is a boutique law firm known for its ability to
handle complex litigation and commercial work in countries around the
world including the U.S., Russia and Ukraine. The firm has offices in
Philadelphia, Moscow, and Kyiv and its lawyers are fluent in English,
Russian, and Ukrainian.   -30-     (http://www.marks-sokolov.com/)
———————————————————————————————–

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make sure the spam blocker used by your server and also the one on your
personal computer, if you use a spam blocker, is set properly to receive
the Action Ukraine Report (AUR).
HOTMAIL.COM AND YAHOO.COM

We are also having serious problems with hotmail and yahoo servers not
delivering the AUR and other such newsletters. If you have an e-mail
address other than hotmail or yahoo it is better to use that one for the AUR.

========================================================
PUBLISHER AND EDITOR – AUR
Mr. E. Morgan Williams, Director, Government Affairs
Washington Office, SigmaBleyzer, The Bleyzer Foundation

Emerging Markets Private Equity Investment Group;
President, U.S.-Ukraine Business Council, Washington;
P.O. Box 2607, Washington, D.C. 20013,
Mobile in Kyiv: 8 050 689 2874
mwilliams@SigmaBleyzer.com; www.SigmaBleyzer.com
========================================================
Power Corrupts and Absolute Power Corrupts Absolutely.
========================================================
return to index [Action Ukraine Report (AUR) Monitoring Service]
========================================================
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