AUR#886 Nov 1 Investing In Independence; Champagne Factory; Kosmo Retail Chain; Tourism; Current-Account Blowout; President’s Website

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

Ukrainian History, Culture, Arts, Business, Religion,
Sports, Government, and Politics, in Ukraine and Around the World       
Mr. E. Morgan Williams, Publisher and Editor, SigmaBleyzer
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Return to Index by clicking on Return to Index at the end of each article
Agreement reached with Vanco for Black Sea oil and gas field
Oleksii Savytsky, The Day Weekly Digest #32,
The Day, Kyiv, Ukraine, Tuesday, October 30, 2007
Maria Aksyonova, Staff Writer, Kyiv Post, Kyiv, Ukraine, Thu, Nov 1, 2007

Interfax Ukraine Economic, Kyiv, Ukraine, Wed, October 24, 2007

Anna Melnichuk, Business Ukraine magazine
Kyiv, Ukraine, Monday, October 22, 2007

Government needs to be told again and again: Stay out of the market.
Editorial: Kyiv Post, Kyiv, Ukraine, Thu, Nov 1, 2007

Dow Jones Newswires, New York, NY, Mon, October 29, 2007


Interfax Ukraine Economic, Kyiv, Ukraine, Wed, October 31, 2007

ANALYSIS: By Jim Davis, Business Ukraine magazine
Kyiv, Ukraine, Monday, October 29, 2007

Plans call for the yard to be sold to Ukrainian company Donbass.
Associated Press (AP), Warsaw, Poland, Monday October 29, 2007
News Analysis: The Economist Intelligence Unit Limited
New York, New York, Monday, Oct 15, 2007

By BosNewsLife Special Reporting Unit with BosNewsLife
reporters in the Netherlands, Hungary and Ukraine
BosNewsLift, Budapest, Holland, Tuesday, 30 October 2007

Interfax Ukraine Business, Kyiv, Ukraine, Wed, October 31, 2007

Current account deficit in the first nine months of the year expanded
to US$2.5bn, nearly ten times as much as in the year-earlier period.
Country Briefing: EIU IndustryWire – News Analysis
The Economist Intelligence Unit Limited
New York, New York, Tuesday, October 30, 2007

Looking at economic relationships with other countries
Analysis: By Boris Lastochkin-Smirnov, Mirror Weekly #40 (669),
Kyiv, Ukraine, Saturday, 27 Oct – 2 Nov, 2007

Inflation Rates, Price of Gas, Russian Relations, NATO, EU
Political Review, Ukrainian News Agency, Kyiv, Ukraine, Wed, Oct 31, 2007


Concludes that corruption in Ukraine constitutes a real threat
to the principles of democracy and the rule of law.
Council of Europe, Strasbourg, France, Monday, October 29, 2007
Associated Press, Kiev, Ukraine, Tue, October 30, 2007

Associated Press (AP), Kyiv, Ukraine, Monday, October 29, 2007


Political Review, Ukrainian News Agency, Kyiv, Ukraine, Wed, Oct 31, 2007
Analysis: Paul Johnson, Business Ukraine magazine
Kyiv, Ukraine, Monday, October 22, 2007
Commentary: By Halya Coynash
Kharkiv Human Rights Protection Group
Kharkiv, Ukraine,  Monday, October 29, 2007
The Ukrainian Observer, Kyiv, Ukraine,  Sund, October 28, 2007
The Day Weekly Digest, Kyiv, Ukraine, Tue, October 30, 2007
By Anshel Pfeffer, Haaretz, Israel, Sunday October 28, 2007
ForUm, Kyiv, Ukraine, Wed, October 31, 2007
Agreement reached with Vanco for Black Sea oil and gas field

Oleksii Savytsky, The Day Weekly Digest #32,
The Day, Kyiv, Ukraine, Tuesday, October 30, 2007

KYIV- Ukraine has taken an important step toward energy safety. Our
government and Vanco International Ltd., a subsidiary of the Vanco
Energy Company, have reached an agreement on the conditions for oil
and gas production in a Black Sea oil and gas field near Kerch.

The agreement was signed by Vanco’s president and founder Gene Van
Dyke and Ukraine’s Deputy Prime Minister Andrii Kliuiev in the presence
of President Viktor Yushchenko.

“For Ukraine this is a project of strategic importance and a uniquely
positive precedent for developing, first of all, the foundations of
a national energy strategy as well as cooperation with leading
international investors,” the president said.

At the meeting before the signing ceremony Yushchenko praised the
agreement, declaring that in the context of bolstering our country’s
energy safety this document has multifaceted value.

In his opinion, it is also a good incentive  to step up large-scale
exploration of the Ukrainian part of the Black Sea continental shelf.

The agreement was the culmination of a tender that attracted the U.S.-
based Hunt Oil Company of Ukraine, Shell, Exxon Mobil, Turkey’s Turkiye
Petrolleri, Britain’s Alphex One Limited, and Ukraine’s Ukrnafta. Shell
and Exxon Mobil competed jointly, as did Turkiye Petrolleri and Alphex

The winner was Vanco International Ltd.

The subsequent negotiations on exploration and extraction in the Ukraine-
owned part of the deep-sea fields in the Black Sea were launched in April

According to Van Dyke, it was not easy to reach an agreement, but both
sides are satisfied with the end results and are discussing details.
The exploration will start next year.

“We will get to work right away and follow a detailed exploration program,
including an all-around 3D seismic study followed by deep-sea drilling,”
he said. Three wells are scheduled for drilling within the next three

As far as the main conditions of the production-sharing agreement are
concerned, i.e., the division of production, Van Dyke says that the
approximate shares are as follows: 65 percent of the total production
is reserved for the Ukrainian government and 35 percent for Vanco
Energy, which will sell its share to Ukraine.

However, the press service of the Ministry of the Environment and Natural
Resources says that this ratio will be valid only for the development
stage. Once exploitation work begins, the production will be divided

“We believe that this field has potentially huge deposits. Geologically,
the Black Sea is very similar to the Caspian Sea, where a lot of oil
and gas is being extracted.

However, the average depth of the Black Sea is two kilometers, and drilling
devices designed to work at such great depths became available only four or
five years ago,” says Van Dyke. The 12,960-square- meter field near Kerch
has an estimated 10.8 billion cubic meters of hydrocarbons.

“If our drilling is successful, it will yield two to three billion barrels
of oil, which is around 400 million tons,” says the president of Vanco

These are all estimates, he adds, because drilling at such great depths
poses a great risk. In the event of failure, Ukraine will not suffer any

“Drilling a well is a $1 million-per-day business. If the well turns out
to be dry, we will lose $90 million. A few years ago we drilled a well
in Turkey’s part of the Black Sea, and after we had spent $25 million
we discovered it was dry. It takes two to three billion dollars to develop
a field like this one. So this business is very risky, and you can’t insure
the risk.” According to Van Dyke, up to 50 percent of deep-sea wells are

Even so, Van Dyke’s years of experience and his undisguised delight with
the agreement offer hope for a positive result because both sides to the
agreement have stated that in the best-case scenario Ukraine may become
an independent energy country.

Specialists at Vanco Energy say that if their efforts are successful,
the project will require $20 billion more in investments. The president’s
press service says that Ukraine expects the agreement to attract $15 billion
of investments and yield 200 million tons of hydrocarbons within 30 years.

The state budget is expected to receive over 200 billion hryvnias if
the project is successful.
NOTE:  Vanco is a member of the U.S.-Ukraine Business Council
(USUBC) in Washington, D.C.,

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

Ukrinform, Kyiv, Ukraine, Tuesday, October 30, 2007

KYIV – Ukraine must seriously get involved in developing its own oil and
gas drilling, in particular, drilling on land, re-opening old fields, which
contain yet 40-50% of their resources and starting efficient drilling in the
Black Sea shelf, President Viktor Yushchenko said in a Sunday interview
to a tv channel, by way of commenting on Ukraine’s provision with energy

According to the president, the agreement, which was signed with the
VANCO company is the first project to explore and drill on the Black Sea
shelf at some two km depth.

Viktor Yushchenko noted that there are all grounds to speak about
Ukraine’s starting oil and gas extraction from one of unique fields in a
couple of years. “This is a key contribution to forming energy security of
Ukraine,” the president is confident.

According to the president, the priority task is covering half of Ukraine’s
demand in oil and gas through extraction from this field.

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
Maria Aksyonova, Staff Writer, Kyiv Post, Kyiv, Ukraine, Thu, Nov 1, 2007

Leading German wine producer Henkell & Sohnlein has taken a majority stake
in Ukraine’s largest champagne producer further strengthening its already
strong position in Eastern Europe.

On Oct. 17, the German company acquired another 25.7 percent share of
Kyiv-based Kyivsky Zavod Shampanskich Vyn Stolitschniy, boosting its

overall holding to 51.9 percent.

The factory produces 16 million bottles of Sovetskoye and Ukrainskoye
champagne annually, which constitutes a 25 percent share of the Ukrainian
sparkling wines market. In 2006, the company made just over $20 million by
increasing its production volume by 9 percent.

Since the 1990’s, Henkell & Sohnlein has expanded east from Germany
throughout the former communist bloc. The purchase of the Kyiv factory

is a strategic one, company officials said.

“Today the sparkling wine market leaders in Austria, Hungary, the Czech
Republic, Slovakia, and Romania are members in the Henkell & Sohnlein


In this context, the acquisition in Kyiv is an important and strategic one
because it adds a successful, market leading company in a very important
European market for sparkling wine to the H&S Group,” said Jan Rock,

press spokesman for the Henkell & Sohnlein Group.

“[The Ukrainian factory’s] sales of 16 million bottles of sparkling wine,
together with Henkell & Sohnlein’s worldwide sales of 133 million bottles
will hopefully increase our foreign turnover considerably,” Rock said.

H&S currently has subsidiary companies in nine European countries with total
revenues for 2006 of $738 million, a 1.5 percent increase from 2005, with
revenues of $727 million.

The cost of the acquisition has not been disclosed. The German company
acquired its first stake in the Kyiv champagne factory this summer.

H&S plans to invest more in the Kyiv factory and will take over sales and
distribution of the premium sparkling wine Ukrainskoye. In return, Kyivskiy
Zavod Shampanskich Vyn Stolitschniy will distribute Henkell & Sohnlein’s
internationally established brands on the Ukrainian market.

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

Interfax Ukraine Economic, Kyiv, Ukraine, Wed, October 24, 2007

KYIV – The Antimonopoly Committee of Ukraine (AMC) has permitted SBF
Southeast European Holdings B.V. (Amsterdam), part of SigmaBleyzer group,

to buy over 50% of Kyiv-based Sumatra-Ltd., which owns the Kosmo retail
chain, which sells cosmetics, perfumes and pharmaceutical products, the
committee’s press service told Interfax-Ukraine on Tuesday.

The press service said that the chain has stores in Kyiv, Zhytomyr, Kyiv,
Mykolaiv, Poltava, Khmelnytsky and Cherkasy regions.

Sumatra-Ltd. was founded in December 1997. As of August 2007, the Kosmo
retail chain comprised 51 stores in seven regions of Ukraine.

Sumatra-Ltd. said that it plans to invest $40 million in the development of
the Kosmo chain and Kosmo Farma drugstore chain in 2008-2009, opening
another 200 stores in all regions of Ukraine.

The company said that its sales in 2006 grew by 50% year-on-year, and in
January through June 2007 they grew by 65% year-on-year.

In February 2007, SigmaBleyzer, a leading private equity firm focused on
Ukraine and Southeastern Europe, closed its fourth fund, SigmaBleyzer
Southeast European Fund IV (SBF IV).

The fund was closed at EUR 250 million ($326 million), the maximum amount
allowed by the partnership agreement, and 25% above its target, making it
the largest private equity fund in Ukraine and one of the largest funds in
Southeastern Europe.

SBF IV included a significant number of limited partners (LPs) from the
company’s previous funds, as well as new investors. A total of 40 LPs
invested in the new fund, with investments ranging from a few million euros
to 20% of the fund, which was provided by the largest LP in SBF IV, the
European Bank for Reconstruction and Development.

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

SBF IV will make investments of EUR 10-70 million, with larger investments
possible through a series of co-investment agreements with its LPs.

In 1996, SigmaBleyzer created the first Ukrainian Growth Fund (UGF). Since
that time, UGF has grown into a family of three funds consisting of UGF I,
UGF II, and UGF III. SigmaBleyzer has offices in Bulgaria, Romania, Ukraine,
the Netherlands, and the United States.
NOTE:  SigmaBleyzer is a member of the U.S.-Ukraine Business
Council (USUBC) in Washington, D.C. Website:

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
Send in names and e-mail addresses for the AUR distribution list.
Lviv is fast emerging as the country’s tourism hotspot, reflecting both the
growth in popularity across Europe of city break holidays and the rising
profile of post-Orange Ukraine

Anna Melnichuk, Business Ukraine magazine
Kyiv, Ukraine, Monday, October 22, 2007

Last week the EU issued a USD 1 million grant to help finance the
development of the tourism industry in Lviv.

The money will be used to provide bilingual road signs (Ukrainian and
English), establish information points and introduce a series of
multilingual plaques around town offering background information on
historical landmarks to allow the thousands of non-Ukrainian speaking
foreign tourists pouring into the city to get more out of their trips.

This show of support is an indication of just how big Lviv’s tourism
potential is thought to be, and how important a role the European Union
thinks it could end up playing in the development of the region.
Since the early 1990s eastern Europe has witnessed huge growth in the
tourism industry, with cities previously stuck for decades behind the Iron
Curtain once more accessible to relatively wealthy Western tourists and
offering refreshingly cheap weekends in environments often comparatively
unspoilt by the mores of modern commercialism.

Cities such as Prague, Krakow and Budapest have built a strong tourism
industry on the basis of this trend, but for over a decade Ukraine seemed to
have missed the boat.

Indeed, talk of Ukraine’s potential as a tourist destination would have been
considered laughable a few years ago, when the country’s biggest tourist
pulls were internet brides and the macabre appeal of the Chernobyl nuclear
power plant.

However, the charms of weekend city breaks in Lviv and Kyiv have now
replaced these more dubious attractions, and the country is fast emerging as
an original and exciting destination on the eastern European tourist trail.

The lifting of visa restrictions for EU citizens in early 2005 has played a
major role in helping Ukraine claim a small but growing slice of the
lucrative international tourist trade, and while Kyiv remains a natural
choice for most first-time visitors to Ukraine, more and more intrepid
explorers are opting to include Lviv in their itinery.

Current local government statistics estimate that around 180,000 tourists
have visited Lviv in the past year. They have come mainly from Poland,
Germany, Austria and France. However, officials claim that this figure is
only a tip of the iceberg, saying that the real number is actually many
times higher.

These new waves of tourists have yet to benefit from much improved
infrastructure, but work is ongoing on Lviv’s legendarily bumpy cobbled

A new wave of hotels has appeared in the past few years to accommodate
the tourist trade, and the city’s thriving café society has risen to the
challenge admirably, now offering everything from bohemian retreats and
artsy coffee shops to western-style Irish pubs.
The vast majority of today’s tourists come from neighbouring Poland, drawn
by Lviv’s deep cultural and historic ties to Poland, the former colonial
master, and to the quaint charm of a Polish-looking city that has yet to
experience the wholesale modernisation that has transformed many
contemporary Polish urban centres.

Relations with the Poles were not always so fruitful. With the collapse of
the Habsburg Empire at the end of the First World War, Lviv was the scene
of a bitter conflict between the local Ukrainian and Polish communities over
control of the city.

In 1918, Lviv was declared the capital of the independent Republic of
Western Ukraine, but troops from the resurgent Polish state seized the city,
and Lviv, or Lwow as it was called in Polish, was returned to Poland, where
it was the third largest Polish city of the Second Republic after Warsaw and
Lodz until the Red Army took control in 1939.

Decades later Pope John Paul II appealed for a reconciliation between the
two nations, while Poland offered vocal backing to Ukraine’s pro-democracy
movement in 2004, adding their moral weight to the Orange Revolution.

In 2005 leaders of the two countries cemented these improved bilateral
relations when they attended a joint prayer ceremony to reopen the Polish
Cemetery of Eagles in Lviv’s Lychakivske cemetery, which holds the remains
of more than 3,000 Polish soldiers killed by Bolsheviks and Ukrainian forces
in the years following the Russian revolution of 1917.
Geography has helped build up interest in Lviv’s tourism potential, as it is
conveniently located just over the EU’s eastern border and can be reached by
coach for day trips.

It is also a comfortingly European city, being in many ways the estranged
sibling of Mittel Europa pearls such as Prague, Bratislava and other
intricate architectural treasures of the Habsburg domains.

Lviv’s historic centre is a tourist’s delight, with a wide variety of
churches including Dominican, Carmelite, Jesuit, Benedictine, and Bernadine
dominations, while the remains of ancient castles also dot the central

Unfortunately most of Lviv’s original gothic architecture was destroyed by
fire in the 16th century, but there remain numerous buildings constructed in
the renaissance, baroque, and classic styles still adorning the old town
city centre.

It is also a city begging to be explored, full of winding side streets and
hidden courtyards, while above street level delicately carved figurines
stare out from wedding cake facades and secret courtyards contain little
pockets of peace and quiet in the midst of the busy downtown traffic.

Everywhere in Lviv you will also encounter lions: lions on the city’s crest
and shield, sleeping lions, nasty guard lions, unruffled lions, and
mysterious, distant lions. These lions are very much part of the city’s

Lviv was originally founded as a fort in the mid 13th century by Prince
Danylo of Galicia, which was a former principality of Kyivan Rus. He named
his new settlement after his son, Lev (Lion in old Slavonic), and it has
been a city of lions ever since, albeit under a variety of different names.
Whether under Austrian empresses or Polish kings, the citizens of Lviv have
always considered themselves quintessentially European, and this mentality
has survived fifty years of Soviet rule.

As long ago as the mid-17th century Lviv was a leading regional city of
learning, and one of the oldest universities in Eastern Europe, Lviv
National University (today named after the Ukrainian writer Ivan Franko),
was founded in 1661. Original lectures were held in Latin, German, Polish
and Ukrainian.

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
Government needs to be told again and again: Stay out of the market.

EDITORIAL: Kyiv Post, Kyiv, Ukraine, Thu, Nov 1, 2007

Prime Minster Viktor Yanukovych’s stern warning to sunflower oil exporters
last week suggests that his government is incapable of learning from past

Instead of recognizing that inflation is to be expected when social payments
are increased just before elections, Yanukovych’s Party of Regions has
looked to pin inflation on business and political opponents.

Ukraine is the world’s second largest sunflower oil producer after Russia.
Export restrictions on this staple are not a solution to higher prices
because they ultimately create additional problems.

The last time the Yanukovych government imposed export restrictions (on
grain last year), farmers were hit the worst, as they were unable to fetch
the best prices for their produce.

Multinational traders also incurred hundreds of millions of dollars in
losses. Farmers unable to secure higher revenues will be unable to reinvest
into their operations.

Furthermore, the international business community will have additional proof
that Ukraine is unpredictable and chaotic – an image the country’s
detractors would like to promote.

As we have emphasized in the past: Soviet-style management of the economy
is bad for business, bad for the market, bad for the country and bad for the
farmers. The Ukrainian government needs to be told again and again: Stay out
of the market.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

Dow Jones Newswires, New York, NY, Mon, October 29, 2007

NEW YORK -The Securities and Exchange Commission sued a Ukrainian
national on Monday, alleging he made unlawful trades in options of IMS
Health Inc. (RX) hours before a negative earnings announcement that sent
its shares down 28%.

The regulator, in a lawsuit filed in federal court in Manhattan on Monday,
alleged that Oleksandr Dorozhko purchased out-of-the-money and at-the-
money put options of shares of IMS Health on Oct. 17.

The purchases came hours before the Norwalk, Conn., company announced
after the market close that its third-quarter diluted earnings were 29 cents
a share, 28% below Wall Street expectations.

Dorozhko, who lives in Uzhgorod, Ukraine, allegedly gained access to
material nonpublic information about IMS Health’s third-quarter results by
hacking into computer networks or, otherwise, improperly obtaining
electronic access to systems that contained information about the company’s
imminent earnings announcement, the SEC said.

“Defendant Dorozhko bet nearly a year’s worth of his income that the price
of IMS Health stock would drop dramatically within two days,” the SEC said.

The day after the announcement, IMS Health’s stock fell 28% to $21.20, the
steepest decline in the stock’s trading history, the SEC said. That same
day, Dorozhko sold all of his put options, realizing proceeds of more than
$328,000 and profits of more than $280,000, the SEC said.

Dorozhko is an independent engineering consultant in the energy industry
with a net income of about $45,000 to $50,000 and a net worth of $100,000 to
$250,000, the SEC said, citing documents provided by Interactive Brokers
LLC, where he opened his trading account. Contact information for Dorozhko
wasn’t immediately available on Monday.
By Chad Bray, Dow Jones Newswires,

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
NOTE: Send in a letter-to-the-editor today. Let us hear from you.

Interfax Ukraine Economic, Kyiv, Ukraine, Wed, October 31, 2007

KYIV –  Rezidor Hotel Group, an international hotel business operator with
headquarters in Brussels, plans in future to manage hotels in all of the
largest Ukrainian cities, Group Vice President for Business Development
Arild Hovland has told the press.

“Talks [on the management of hotels] are being held in cities like Odesa,
Lviv, Donetsk, Kharkiv, Dnipropetrovsk and Zaporizhia,” he said at a press
conference in Kyiv on Tuesday.

He said that the group is considering a possibility to manage three-, four-
and five-star hotels under the Radisson SAS Hotels & Resorts and Park Inn

Hovland also said that Rezidor Hotel Group plans to realize its plans
irrespective of hosting the European Football Championship 2012 by Ukraine,
as the group sees large potential in Ukraine.

At present, Rezidor Hotel Group manages two projects in Ukraine – the
Radisson SAS Hotel in Kyiv – and soon it will open a second Radisson SAS
Hotel near Kyiv’s Boryspil airport.

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
Agricultural industry no longer domain of Soviet-style collective farm
bosses, with savvy young MBA-wielding managers introducing branding
concepts & integrated approaches to what was once Ukraine’s most
profitable sector

ANALYSIS: By Jim Davis, Business Ukraine magazine
Kyiv, Ukraine, Monday, October 29, 2007

After a decade in which there was a very high level of migration from
Ukraine’s farms to its cities, the country is hardly the same place that it
was when independence was declared just over 16 years ago. Today the city
dweller is likely to spend more time worrying about the price and venue of
his or her next holiday than about the price of bread.

It is not only the city dwellers who have changed, but those remaining
actively engaged in Ukraine’s agricultural sector have advanced at a pace
that could hardly have been imagined in the days of collectivised

The most progressive farms are likely to use European – or American – made
tractors and combines, some precision-guided by Global Positioning System
(GPS) attachments that rival what might have been installed on a nuclear
submarine just a few years ago.

Agriculture and food processing in Ukraine are not only changing at warp
speed, in the process of change the whole sector is becoming more vertically
integrated and better managed by a new generation who can discuss IPOs and
return on investment just as authoritatively as they do crop rotation and

The process remains far from universal, but very quickly Ukraine is adapting
to true 21st century agriculture and food production.
During the Soviet era and the early years of independence, collective farms
and their immediate successors would range from 5,000 to 15,000 hectares,
with many private farmers doing their best to make a living on the 50
hectare allotments that were first given just after independence.

Today in Ukraine there are any number of agricultural operations that have
aggregated well over 100,000 hectares each with hundreds of tractors and

More importantly, the reading materials for those who lead these operations
are more likely to be the Financial Times or The Wall Street Journal, rather
than Silkskiy Visti.

This is the result of not only a new approach to agriculture but a whole new
generation who understand management and marketing in a way that could not
have been imagined just a few years ago.

Perhaps most interesting of all is that many of the most effective of these
leaders are young – and native to Ukraine or other parts of the former
Soviet Union.
Where farm managers in the past may have come out of the National
Agricultural University and other strictly agriculture-related higher
educational institutions, today’s top managers in the field may just as
likely have an education that includes an MBA from a European or American

For example, only a few months ago Alexei Sizov was named CEO of Agrarian
Investments, LLC, a major agricultural firm which he is leading in a new

Sizov, a banker with a background that includes work throughout the CIS with
Renaissance Capital and JP Morgan, now has the firm concentrating its crop
planting in a dual use mode, i.e. every planting decision is made based on
the potential for the crop’s use as a human food and also as a biofuel feed

Sizov believes that this route provides options for the company to choose
between markets for its farm produce, thereby enhancing options for
profitability, never a certain thing in agriculture.

However, just as the firm’s cropping plans must support two options, Sizov
himself does double duty, first as the top overall manager of the firm, but
just as importantly as a trained banker who is doing his best to lead
Ukraine’s banks toward offering better “off-the-shelf” solutions to
financing problems for agricultural businesses.

Sizov, who had been quite critical of the flexibility of Ukrainian banks in
the past, told Business Ukraine that he believes he is seeing a greater
receptiveness to his ideas by Ukrainian banks.

“We have been working more closely with banks for our own benefit, but also
we believe some of the banking products that we may be able to develop will
benefit all companies in our field,” Sizov said.
While some farm-related companies engage in a wider range of crops, some
prefer to limit their operations to an area where they have greater
expertise. Dr. Sergei Feofilov, a highly regarded independent agricultural
economist, pointed to Astarta-Kyiv as an example of one such company.

Sugar profitability has been a very erratic thing in Ukraine, partly because
of limited investment at the refinery level, and partly because of political
meddling. Many in the sugar business point to former Prime Minister Pavlo
Lazarenko as one who made a number of politically oriented decisions which
it has taken years to overcome.

In spite of many ups and downs, sugar production has been a part of Ukraine
for almost 200 years. In fact, in 19th century Ukraine, it was not wheat but
sugar that was the country’s main cash crop, with Ukraine-grown beets
producing almost all of the sugar for the tsarist empire and much of Europe.
In all of Europe there was no place as well-suited to beet production as
Ukraine’s Right Bank.

By the 1840s, sugar production was well-established and was the basis for
some of the largest fortunes of that era. Family names that are well-known
today – Tereshchenko, Symyrenko and Brodsky – became famous when these
families were among those who came to be known as the “sugar barons.”

However, sugar’s better days have passed and it may take time and more
investment before sugar plays a great role again in Ukraine.

In a recent newspaper interview, Astarta’s General Director Viktor Ivanchyk
was quoted as summing up the sugar situation as follows, “My forecast is
that in the market there will be not 5-7 large companies as it is today, but
only companies that own one or a few plants and provide themselves with
their own sugar beet will remain. Only companies that will occupy a larger
share of the market will be more effective.”
Ivanchyk’s remarks reflect a view that is widely held by economists and
sugar experts among whom the consensus is that only those with the money
to invest and consolidate have a real future in sugar.

There are a half-dozen or more other agricultural operators perhaps worthy
of mention, but among that group one seems to stand out as the best example
of putting together all the pieces for a vertically integrated and highly
profitable future.

If someone had gone to a public relations firm and asked for help in picking
a catchy and saleable name for a company, Myronivsky Hliboprodukt (MHP)
would hardly have been in the top 100 possibilities.

However, in spite of its tongue-twisting name, MHP has built itself into a
world-class operation that is vertically integrated to a greater degree than
most agricultural corporations in the world.

Begun in 1998 with the even less riveting name of Myronivsky Factory for
Production of Grain and Mixed Fodder, MHP became one of the leading
Ukrainian grain trade enterprises in 1999-2000.

However, almost immediately after the company’s foundation it chose to
direct its efforts toward the production of poultry meat, based on the
Peremoga Nova plant.

It is in chicken meat production that MHP has excelled and under the
leadership of founder Yury Kosyuk built itself into a huge and efficient

In 2000, after a nine-year period of decreases, Ukraine’s statistics showed
growth in chicken meat production volumes. In 2001, MHP ceased its activity
as a grain trader and concentrated on production of poultry meat with
gradual integration of the entire production process within the company.

The concept was at once simple and quite complicated. What MHP did
successfully, perhaps more successfully than anyone has ever done in
Ukraine, was to identify old Soviet-era facilities with potential, negotiate
partnerships and buy-outs, as well as through investment and reconstruction
managed to restore and modernise the acquired operations to efficiency and
potential profitability.
If there is a single word that encapsulates the MHP success story, it is
branding. The company discovered branding early on in its corporate life and
has engaged in brand-building with chicken and other products with great

Of course, branding can only work when there is a good product supporting
the brand. In 2002, MHP began a two-year programme during which all of its
poultry plants were upgraded with modern equipment.

The company began introduction of uniform poultry growing technology, and
uniform quality standards were applied to market-ready products. This was
combined with an investment project designed to expand existing capacities
with the ultimate aim of doubling the volume of market-ready products.

In December 2001, MHP created the Nasha Ryaba trademark as the retail brand
for its fresh chicken products with the branded product first appearing in
the marketplace in February 2002.

Within a year, the company introduced a franchising programme for Nasha
Ryaba products and by the end of 2003 had opened approximately 900 MHP
company sales points in all regions of Ukraine exclusively for the sale of
Nasha Ryaba fresh chicken meat.
In addition to its branding success, MHP has developed production facilities
that make it possible to structure the enterprise as an integrated complex
with a closed cycle of meat production.

This made possible maximum control over product quality and costs of
production. In particular, the company expanded its ability to provide its
own mixed feed, thereby exercising maximum cost control.

Further development of its feed capacities made it possible for MHP to bring
into being a second major brand with creation of a beef production complex
aimed at the premium beef market. The brand has been known as Sertyfikovany
Angus and is easily spotted on store shelves by its distinctive packaging.

To further expand its closed cycle concept, in 2004 MHP began sunflower
seed processing, allowing the use of soy protein in feeds for animal herds
and also providing sunflower oil to the market separately.

During the entire early 2000s period, MHP was constantly searching out new
facilities that could bring new depth to its closed cycle operations, always
looking to bring greater efficiencies and lower costs to its operations.

Each new acquisition led to new opportunities for brand development.
Beginning in 2003, MHP began production of goose liver and products from
goose meat based at its Snyatynska Nova plant.

Production of pork, sausages and beef for the premium market also began at
the Druzhba Narodiv plant and production of pure bred Angus cattle at its
Kyivska farm operation got underway.

Recognising a new market segment in Ukraine’s burgeoning middle class, in
January 2006 MHP completed an entire new plant exclusively to produce Legko
brand frozen meat chicken, beef and pork dinners that require only brief
microwave heating to be table ready.
MHP expects to produce over 200,000 tonnes of chicken this year, and
350,000 tonnes annually by 2010. Based on its previous performance, there
seems no reason to doubt that the goals will be realised.

The leadership at MHP appears to have learned two very important lessons.
First, people do not want just unbranded commodities and products. They
want, and are willing to pay for, products with name brands that they trust.

Second, MHP chose to concentrate on chicken meat production because of
a simple fact, the birth to market cycle. With beef this takes an average of
two years. For pigs, the same cycle is about six months. But for chickens,
the cycle from birth to market is only two months.

Chicken meat is not only good business, it is business that can and often
does give the producer a return in a much shorter time frame. Chickens are
not the only answer, but they have proved an answer for some and those who
turn out a quality chicken product are likely to reap rewards.

There will always be challenges in Ukraine’s agricultural sector, but good
business can be done and it can be done profitably, as MHP and other
progressive producers are proving.

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

Plans call for the yard to be sold to Ukrainian company Donbass.

Associated Press (AP), Warsaw, Poland, Monday October 29, 2007

WARSAW, Poland – About 200 workers at Poland’s historic Gdansk
shipyard demonstrated Monday to demand the quick privatization of
their struggling workplace, with some burning tires and setting off
firecrackers in front of management offices.

Workers dressed in blue overalls and yellow plastic helmets held
banners reading “We want a modern yard and a European level of wages.”

They expressed fear that Civic Platform, a pro-business party that won
Oct. 21 elections, could slow down a plan for the sell-off of the
state-run shipyard, the birthplace of the Solidarity movement that
helped overthrow communism.

Many workers believe that privatization is the only way to save the
shipyard — and their jobs. Plans call for the yard to be sold to
Ukrainian company Donbass.

The pro-market Civic Platform staunchly supports privatization, but in
the case of the Gdansk shipyard, wants to examine the existing plan to
ensure greater transparency once it takes power next month.

A Civic Platform lawmaker said the workers have nothing to fear.
“Privatization of the yard is necessary and under no circumstances
will it be jeopardized,” said Tomasz Aziewicz.

Poles have a strong emotional attachment to the Gdansk shipyard, a
symbol of the demise of communism. It was there that electrician Lech
Walesa led strikes in 1980 that led to the birth of Solidarity and the
communist regime’s eventual collapse in 1989.

During the 1990s, the yard’s owners struggled with the threat of
bankruptcy. More recently, it has been at the center of a dispute
between Poland and the European Union, which has pressured Warsaw to
shut down two of three slipways — ship assembly areas — because the
shipyard is losing money and being kept alive with state subsidies.

The EU has rules preventing its member states from keeping inefficient
companies alive artificially.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]


News Analysis: The Economist Intelligence Unit Limited

New York, New York, Monday, Oct 15, 2007

Diversified holding group SCM Holdings has announced that it plans to invest
around up to US$200m by 2013 to expand its recently launched retail chain,
Brusnytsya, across Ukraine to as many as 500 stores.

SCM entered the retail sector earlier this year with the opening of its
first Brusnytsya outlets in the Donetsk region in eastern Ukraine. Currently
the company operates nine stores through its subsidiary Ukrainskiy Retail.

SCM explained that it plans to operate 20 stores by end-year, and that by
end-2008 its retail network would reach 80 stores across the country. In the
first phase, Brusnytsya stores are being built in a smaller format of
300-400 sq metres. Phase two calls for the construction of supermarkets of
800-1,200 sq metres.

SCM is Ukraine’s largest holding company and one of the country’s largest
domestic investors. For the 2006 period, SCM posted consolidated pre-tax
profit of US$1bn. Sales reached over US$6.7bn, a nearly 19% rise over the
previous year. The group’s assets reached over US$11.4bn at end-2006.

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
If you are receiving more than one copy of the AUR please contact us.

By BosNewsLife Special Reporting Unit with BosNewsLife
reporters in the Netherlands, Hungary and Ukraine
BosNewsLift, Budapest, Holland, Tuesday, 30 October 2007

AMSTERDAM/BUDAPEST/UZHHOROD – Aid goods of Dutch Christians
intended for a hospital in Ukraine where babies suffer of starvation and
disease rot in a local storage facility, according to a document released
Tuesday, October 30.

An internal letter of the Dutch-based organization Oost Europa Zending
(OEZ), or ‘East Europe Mission’, obtained by Christian news Website and its partner BosNewsLife, said goods are not
delivered to patients because local staff members fear they may be stolen.

“After a couple of days we discovered a room where everything had been
stored what OEZ had given,” wrote Willemine and Gertjan de Jong, a recently
married couple who just returned from an OEZ mission journey, about the
situation of the hospital in the Ukrainian town of Vinogradiv, near Hungary.

Project leader Edwin Brokaar was quoted as saying, “There are so many
clothes dumped in the depot, enough to dress the babies for another ten
Doctors and nurses claim they are reluctant to use the goods because they
must for them if items are stolen by colleagues or others, BosNewsLife

“That’s nonsense because the products are delivered totally free-of-charge,”
countered Willemine and Gertjan de Jong in their letter to close friends and

A head sister, who was not identified, allegedly said the goods were not
opened “because we think about tomorrow” as there could be shortages,
concerns apparently fuelled by decades of mismanagement when Ukraine was
still part of the Soviet Union.

Problems also occurred at the Ukrainian border, the OEZ volunteers said. “We
set off with 16 people in two mini busses carrying goods.Everything went
fine till we reached Ukrainian customs officials who complained about one
missing stamp in our car papers. We were forced to abandon the vehicles at
the Hungarian site of the border.”
It came at a harrowing moment for the hospital, where aid workers eventually
arrived and discovered dozens of babies, many of them “weak and
malnourished,” the letter said.

Among the babies Maxim, “a white Gypsy boy” of 10 months. “He looked
like a child from Africa suffering hunger, except that he was white,” the De
Jongs claimed.

Another baby, identified as 16-month-old Victor “could not yet sit” and was
suffering because “his head was not straight because he was always laying

The team managed to bring “70 banana boxes” of which “11 were full of care
products” including special soaps, baby lotion and baby oil, according to
the letter. It was not immediately clear if all products arrived at the
intended destination.

The problems of OEZ in Ukraine are no isolated incidents, BosNewsLife
established. An official with the Budapest-based Hungarian Maltese Charity
Service told BosNewsLife his Catholic oriented aid group had similar
troubles in Ukraine’s Trans-Carpathian region, where several Christian aid
groups are active.
He said staff members were threatened in Uzhhorod, the main town in the area
bordering Hungary. “When we parked our bus in a parking lot there, we were
told we had to pay 500 dollars or otherwise they couldn’t guarantee the
vehicle would not be stolen. Our driver was forced to stay the night in the
bus,” explained Maltese spokesman Istvan Kuzmanyi.

Christians in Uzhhorod have linked these cases to a climate of rampant
corruption, with the apparent involvement of local officials. In an open
letter published earlier by BosNewsLife alleged victims of corruption urged
President Viktor Yushchenko to start realizing the ideals of the Orange
Revolution, which helped sweep him to power, nearly three years ago.

“Mr. President, we dream with you of a different Ukraine. A Ukraine where
the rule of law is respected. A Ukraine that will find its rightful place in
Europe as a full fledged member of the European Union,” ‘The Concerned
Citizens of Uzhhorod-Zakarpatskaya’ region wrote.

Yet, with winter approaching, Dutch and other Christian organizations remain
uncertain how to tackle human misery in a region where local authorities
seem unable, or unwilling, to improve the free-flow of apparently
desperately needed aid.

Gertjan de Jong, a Dutch journalist, and his wife Willemine said they may
abandon their comforts at home and base themselves as full-time missionaries
in Ukraine to oversee aid deliveries, “if that’s Gods calling.” (With
additional reporting by Agnes R. Bos and Stefan J. Bos).
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
Send in a letter-to-the-editor today. Let us hear from you.


Interfax Ukraine Business, Kyiv, Ukraine, Wed, October 31, 2007

KYIV – Ukraine has slid from 69th in 2006 to 73rd in 2007 in the rating of
global competitiveness index calculated by the World Economic Forum.
According to the Global Competitiveness Report 2007-2008 published by

the World Economic Forum, the United States tops the overall ranking.

Switzerland is in second position followed by Denmark, Sweden, Germany,
Finland and Singapore, respectively.  Among the emerging markets in the lead
are China (34th) and India (48th), while among the Latin American countries
the best performer was Chile (26th), and in the Middle East – Israel (17th).
Russia slid from 58th to 59th.

The rankings are calculated from both publicly available data and the
Executive Opinion Survey, a comprehensive annual survey conducted by the
World Economic Forum together with its network of Partner Institutes
(leading research institutes and business organizations) in the countries
covered by the Report. This year, over 11,000 business leaders were polled
in a record 131 countries.

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
Current account deficit in the first nine months of the year expanded
to US$2.5bn, nearly ten times as much as in the year-earlier period.

Country Briefing: EIU IndustryWire – News Analysis
The Economist Intelligence Unit Limited
New York, New York, Tuesday, October 30, 2007

Ukraine’s current account deficit in the first nine months of the year
expanded to US$2.5bn, nearly ten times as much as in the year-earlier

This is despite export growth of around 30% over this period; import growth
has risen even faster, driven by strong domestic demand and higher prices
for imported gas.

With yet-higher gas prices on the way next year and prices for metals,
Ukraine’s main export, set to fall, the economy is undergoing a structural
shift–from having a sizeable surplus on the current account to a sizeable

Ukraine’s current-account deficit in the first nine months of the year stood
at US$2.5bn, according to preliminary data from the National Bank of Ukraine
(NBU, the central bank) released in late October. This was equal to 2.6% of

By contrast, over the first three quarters of 2006 the current account
deficit was just US$263m. The NBU noted that the deterioration was a
function of strong domestic demand and “very low” domestic supply; it also
pointed to increases in the price of imported fuel.

Ukraine’s cheerleaders will point out that the nine-month data mark an
improvement, for the current-account deficit in the first half of the year
was equal to 3.4% of GDP.

However, this ignores the fact that the third quarter is customarily the
best for Ukraine in current account terms–it was in both 2005 and 2006.
Indeed, in 2006 the third quarter was the only one in which the current
account was in surplus.
Despite strong growth in exports, the goods-trade deficit has continued to
widen, reaching US$5.96bn in January-August, according to the latest customs

Export growth is running at an impressive 30% year on year, compared with
8.1% growth in the same period of 2006, but import growth is stronger still
at 33.8%. And because imports in value terms were already larger than
exports, the trade deficit has pushed out still further.

Nearly all of the main export sectors are thriving, but the driving force is
the metals sector. As a result of a strengthening since mid-2006 in global
demand and price conditions, nominal growth in exports of metals accelerated
sharply, to 31.9% year on year in the first eight months of 2007, raising
the share of metals in total export revenue to over 43%.

As a result of rates of expansion approaching 50% year on year thus far,
machinery and equipment goods are now the second-largest export category
after metals, as demand in Russia for such goods has picked up strongly.
Mineral product exports are the main exception, as exports of crude oil and
gas have virtually ground to a halt.

In the first eight months, mineral fuel exports are down 2.1% year on year.
Nevertheless, electricity exports continue to rise strongly, owing to the
resumption of supplies to Russia.

On the import side, double-digit growth has continued across many sectors,
including mineral products (largely natural gas, crude oil and petroleum
products), which account for almost one-third of total imports. In
January-August, imports of mineral fuels rose by 28.7% year on year.

These have been boosted by the 37% increase in the cost of gas supplies from
Russia as of January 2007. Gas imports were up by nearly 38% year on year in
nominal terms in January-August.

Non-energy imports are being boosted by Ukraine’s growing investment and
consumption needs. Strong demand for machinery and equipment saw growth in
electronics imports accelerate to 34.4% year on year in January-August.

Imports of transport goods were up by 54.5% in January-August, as successive
years of robust wage and credit growth has fuelled demand for new
foreign-made cars.
The current account deficit is already well in excess of the US$1.6bn
shortfall recorded for the whole of 2006.

This is largely because of the rapidly widening deficit on trade in goods,
although the services surplus also declined year on year in the first half
of 2007 (the most recent period for which full data is available), to
US$453m from US$725m in the first half of 2006, and the income deficit
increased, to US$950m from US$616m.

Imports of financial services have been rising rapidly as the domestic
financial sector develops, and the income deficit has been boosted by a
combination of increasing dividend payments on foreign direct investment
(FDI), and growing debt-servicing payments on foreign loans and Eurobonds in
the Ukrainian banking and corporate sectors.

These trends were only partly offset by an increase in the current transfers
surplus, to US$1.7bn in the first half of 2007 from US$1.4bn a year

In contrast with the worsening current-account position, the combined
capital and financial account strengthened sharply in the first half of
2007, posting a US$5.9bn surplus, compared with a US$930m deficit in the
first half of 2006.

In addition to the established trend of rising FDI and foreign borrowing by
the banking and corporate sectors, this is believed to have been prompted by
an influx of off-shore funds into the country for election purposes.

Net FDI inflows increased to US$3.3bn in the first half of 2007, from
US$2.6bn a year earlier. At US$1.8bn, the quarterly inflow in the second
quarter was the highest ever.

Manufacturing remains the largest recipient of cumulative FDI since
independence, accounting for almost one-quarter of the total, led by the
metallurgy subsector.

However, financial services are currently attracting the largest investment
inflows: FDI into this sector nearly doubled year on year in the first half
of 2007, to over US$1.2bn, accounting for 35% of inflows into the country.

In cumulative terms, the financial sector is now the second-largest
recipient of FDI, receiving 15% of the total. The trade and real estate
sectors account for smaller shares, of 9% and 8% respectively.
The current account deficit recorded in 2006 was the first such annual
deficit for Ukraine in seven years.

This year, the Economist Intelligence Unit forecasts that the deficit will
expand to 2.8% of GDP. In 2008, the deficit on trade in goods is expected to
rise even more sharply–and will drag the current account deficit with it.

There are two main reasons for this: [1] the near-certainty of a sizeable
rise in the price paid for imported Russian and Central Asian gas; and an
anticipated drop in steel prices.

Strong growth in import volumes, linked to a continued rise in incomes, will
also contribute to the larger deficit. As a result, we forecast that the
current account deficit will swell to 4.4% of GDP in 2008 and 4.7% of GDP in

This amounts to a structural shift in Ukraine’s economy, which as recently
as 2004 posted a current-account surplus equal to 10.6% of GDP. On the basis
of current trends, the years 2006 and 2007 will mark the transition from a
sizeable current-account surplus to a sizeable deficit.

In this new environment, there are increased risks for Ukraine. The first is
that steel prices will drop further than we anticipate, and that Russia will
push gas prices higher than expected, and as a result the trade deficit will

[2] The second is that foreign direct investment will not hold up well
enough to finance the expanding current-account deficit, thus necessitating
a depletion in the NBU’s currency reserves and/or a greater reliance on
foreign credits.

On the plus side, for Ukraine’s policy-makers, the shift towards a
current-account deficit should ease the upward pressure on the hryvnya and
so ease the concerns of the country’s exporters. Nevertheless, given the
increased reliance on FDI and the heavy dependence on metals prices, Ukraine
is moving into riskier territory.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
Looking at economic relationships with other countries

ANALYSIS: By Boris Lastochkin-Smirnov, Mirror Weekly #40 (669),
Kyiv, Ukraine, Saturday, 27 Oct – 2 Nov, 2007

Back in the 1980s there was a popular joke in the then-USSR about a lecture
on love. The lecturer says: “There are several types of love.

The first type is love between a man and a woman – it’s too simple and
trivial, so I won’t elaborate on it. The second type is love between a man
and a man – it’s forbidden in our state, so there is nothing to talk about.

“The third type is love between a woman and a woman – it’s forbidden, too,
so we won’t delve into it. Now there’s the most important type of love, and
we will dwell on it today: it is love for the Motherland.”

Countries are like people, and there are several types of relationships
among them. Leaving out the much hackneyed political type, we would like to
dwell on Ukraine’s economic relationships with other countries. How adequate
is the correlation between the political and economic vectors of these

The following analysis of such basic economic indices as commodity turnover,
export, and import over the past decade suggests some paradoxical

Ukraine’s declared pro-European policy ought to be based on increasing
economic cooperation with EU countries, and official figures suggest that
the commodity flow is growing year by year.

In 1996 the 25 EU countries’ share in Ukraine’s commodity turnover was
22.8%. In mid-2007 this figure was 32.7%. Exports grew from 21% to 29.9%
and imports grew from 24.3% to 35.1%.

However, the picture does not look so optimistic at a closer look. Ukraine’s
exports reached their maximum in 2003, when they stood at 34.1%. Then there
were three years of decline. By mid-2007 exports to the EU had dropped by

At the same time, imports from the EU keep growing. Their share in Ukraine’s
total imports increased from 33.7% in 1996 to 35.1% in mid-2007. Some
experts attribute the increase to growing supplies of “modern European
equipment”, but figures are impartial.

According to the State Statistics Committee, the share of machines,
equipment, and vehicles in Ukraine’s imports from the EU grew from 37.6% in
2003 to 44% in 2006, totaling $7.1 billion. Supplies of mechanical equipment
totaled $2.9 billion; of electric machines and equipment – $1.6 billion; of
vehicles – $2.2 billion.

Even without statistics it is obvious that the number of imported cars on
the streets and electrical appliances in stores has grown considerably in
the last couple of years. It is certainly good for consumers, but not good
in macroeconomic terms.

Since 2004, the share of EU countries in Ukraine’s foreign trade has been on
the decline: 33.9% in 2003; 31.1% in 2004; 29.9% in 2005; 31.8% in 2006;
32.7% in mid-2007. Regrettably, Ukraine’s foreign trade increases at the
expense of imports rather than exports.

Another paradox is that the cold spell in Ukrainian-Russian political
relations has had a very positive effect on their trade relations. Since
1996 Russia’s share in Ukraine’s total exports has dropped from 38.7% to
25.4% and imports – from 50.1% to 28.5%.

Between 2003 and mid-2007 its share in Ukraine’s exports grew by 6.7% – from
18.7% to 25.4%. At the same time, its share in Ukraine’s imports dropped by
9.1% – from 37.6% in 2003 to 28.5% in mid-2007.

According to the Institute of Economics and Prognostication of the National
Academy of Sciences, the share of mid- and hi-tech products in Ukraine’s
exports to Russia exceeds its total exports by ten percent.

And finally, there is a serious question, though it may seem irrelevant: who
says that the European course is the only right one for Ukraine and there is
no alternative?

By all economic appearances, the European Union (overburdened with internal
contradictions and problems) is unlikely to remain a powerful player on the
global economic field in a couple of decades. Human history teaches that a
nation should either be strong or be friends with the strong.

Quite a few countries demonstrate spectacular rates of economic growth, but
four countries stand out: Brazil, Russia, India, and China – now abbreviated
as BRIC. Ukraine’s economic relations with them (except Russia) are rather
weak and relations with China and Brazil show a depressing downward trend.

The share of exports to China dropped from 3.7% in 2003 to 1.2$ in 2006
while Chinese imports grew from 2.1% to 4.8%.

Trade turnover with Brazil is ridiculously low – less than $500M in each of
the past four years, and its share in Ukraine’s commodity turnover shrank
from 1% in 2003 to 0.4% in 2006.

Things are a bit better with India: the share of Ukrainian exports there
grew to 1.9% in 2006 from 0.8% in 2003 and the total trade turnover almost
doubled – from 0.7% to 1.3%.

One Ukrainian diplomat asked a good rhetorical question: supposing we direct
our economic course toward those countries, but are they waiting for us with
open arms? The answer is obvious: no. And it is obvious that nobody will
wait for Ukraine as long as it stands pat waiting for painless gains.

Ukraine has a unique chance: since it is not a member of the EU, it has no
formal membership obligations and so has a certain freedom of maneuver –
both political and economic.

In the 19th century Europe lived waiting for a bright future – “with liberty
and justice for all”. In the 21st century it turns out that the world is
ruled by pragmatism, and Kyiv hears this truth from both the East and the

So where should we move? Even if we find an answer to this question, it is
much harder to answer the question “how”.

Ukraine has about fifty trade missions at diplomatic representations in
countries that are its trade partners. The Chamber of Accounts recently
checked their activity and made a paradoxical conclusion: they had no
serious influence on the development of Ukraine’s foreign trade.

Experts explain it by poor planning and double subordination of the
missions – to the Foreign Ministry and the Economy Ministry.

The question of planning is philosophical rather than practical. Seeing
those soaring prices for essential food products, ordinary consumers are
hardly interested in knowing how much grain the Agrarian Policy Ministry
planned to harvest this year.

Or take, for instance, the notorious planning for the police: news reports
make everyone wonder whether the number of criminals grows or investigators
work better.

The most recent example is the September 30th parliamentary election. The
Regions Party had planned to win with the biggest number of votes and so it
did, outstripping all its rivals. But did it help the party much?

[The Yulia Tymoshenko Bloc and the Our Ukraine – People’s Self-Defense Bloc
taken together got a narrow majority of 228 seats in the parliament, leaving
the Regions Party in the opposition minority – A.B.]

In the early years of the Soviet Union it was even planned “how many books
per year a proletarian writer must produce”. Can anybody remember at least
one of those authors today?

Actually, one can plan anything, but work in a trade mission abroad is a
very serious and highly intellectual kind of activity. There is no direct
correlation between the volume of work fulfilled and the volume of trade

It is one of the natural laws, just like in a war when soldiers die both in
attacks and in retreats. There are numerous examples of long and serious
preparatory work preceding a breakthrough. Therefore, “poor planning” is no

As far as the “double subordination” is concerned, Ukrainian trade missions
are not to blame. After all, Truffaldino in the famous comedy served two
masters on his own initiative and to his own ends.

Why not use the positive experience of other countries? In her first report
to the newly appointed Russian prime minister on October 4, the new minister
of economic development Elvira Nabibullina noted proudly that Russia’s
economic interests abroad were secured by 39 trade representations that were
“financially separate from embassies”.

She identified only five strategic objectives for the next three years:
[1] strategic planning of socioeconomic development;
[2] facilitation of economic diversification and removal of
     infrastructural limitations;
[3] creation of comfortable environments for business;
[4] higher efficiency of government institutions;
[5] effective integration with the global economic community.

That sounds quite laconic and clear, without recondite pre-election promises
or hollow populism for street vendors. The fifth objective is backed by a
newly developed program for enhancing Russia’s international image.

Why not read that 100-page document to the Ukrainian leaders? Why not learn
from others? The Chamber of Accounts notes in its report that the trade
missions “failed to prevent negative trends in international trade in 1997
and 1998″.

Everybody knows that those were the years of a devastating default that
broke out in Southeast Asia and swept across the world like a tsunami,
shaking even the strongest economies. Now we know the name of the scapegoat
who “failed to prevent it” – the Ukrainian trade missions abroad .

There is one more instrument of facilitating international trade that
Ukraine has but does not use: bilateral intergovernmental commissions for
trade and economic cooperation. Ukraine has about sixty such commissions –
mostly with its major trading partners.

Take, for instance, Turkmenistan – an extremely important partner. In July
Ashgabat hosted a session of the Turkmen-Russian commission.

Notably, besides the official governmental delegations, a special flight
delivered top managers of 60 big Russian companies, including Gazprom,
Lukoil, Souyzneftegaz, TNK-BP, Itera, TMK, KamAZ, and Rosoboronexport.

Ukraine and Turkmenistan have a bilateral commission as well. Moreover, it
was set up at the presidential level. The problem is it was set up on paper
only: it has not held a single session yet.

Russia and other neighboring countries use quite successfully such
instruments as economic partnership between the central government and
private entities.

Delegations that include government officials and regional authorities and
successful businesspeople make widely advertised promo tours, drawing
attention to Russia as a lucrative trading partner.

And finally, here are some more eloquent figures. Eight Ukrainian companies
have representatives in Austria while Austrian companies have more than 200
representatives in Ukraine. The proportion is about the same with many other
countries that have business with Ukraine.

According to the State Statistics Committee, as of July 1, 2007 there were
1,633 economic entities with Russian capital in Ukraine and 81 economic
entities with Ukrainian capital in Russia. Russia’s population exceeds
Ukraine’s three times while its GDP exceeds Ukraine’s nine times.

If Ukraine wants a real breakthrough, it should be more active and even
aggressive in its efforts to break through to international markets.

Otherwise, Ukrainians are doomed to have nothing but their “love for the
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
Inflation Rates, Price of Gas, Russian Relations, NATO, EU

Political Review, Ukrainian News Agency, Kyiv, Ukraine, Wed, Oct 31, 2007

Over the survey period, the government of Viktor Yanukovych endeavored to
suppress the unprecedented hike of consumer prices and restrain inflation.
In September, inflation rate hit seven-year maximum of 2.2%, whereas the
government assured that the indicator would stay within 0.6%.

Hike in foodstuffs prices had played its part in the surge of inflation.
Foodstuffs in Ukraine constitute about 60% in the structure of inflation.

October is anticipated to repeat the September’s inflation indicator.
Outlooks of international organizations and experts are alarming: according
to calculations of the International Monetary Fund, inflation will surge to
11.5% this year.

The Cabinet has nothing to do but revise macroeconomic indicators, despite
its initial optimistic statements. As over the firs nine months of the
current year, the inflation rate has gone above the annual government
forecast of 7.5% reaching 8.6%. The Economy Minister states that maximum
permissible inflation is 10%, whereas analysts warn it may exceed 14%.

Thus, economic achievements of the Yanukovych’s government are under serious
doubts. If previously, advancing inflation and growing consumer prices could
be explained by the elections, now this is not the case. Yuschenko rebuked
the Cabinet of Ministers for price increase.

The government has decided to restrain prices by tested but ineffective
administrative and non-market means – foodstuff interventions, quoted
exports, and tighter control over price formation policy of local

In the surveyed period, the government introduced registration of change in
the wholesale and retail prices for foodstuffs in an attempt to improve the
system of state control over prices.

Now producers and realtors of foodstuffs are bound to inform local
authorities within ten days if price is revised higher by over than 1% and
explain the reason.

This mechanism is unlikely to yield positive results, as the government,
while trying to preserve the semblance of market relations, did not envisage
ways of influencing producers, who unreasonably lift prices for products.

Not accidentally, Yanukovych rebuked the Economy Ministry in a week after
its introduction. In the situation of growing prices for sunflower oil the
premier found nothing better than offering to ban exports.
Another problem, which, most likely, will not be faced by the incumbent
government, but the new one, is imported gas price rise. Tymoshenko’s
opponents would rather entrust this problem to her.

Today they disseminate statements describing harm to the economy, which may
be caused by her governing, predicting revaluation of hryvnia,
re-privatization, re-division of property, worsening relations with Russia,

The Minister of Economy has forecasted that the government of Yanukovych
hopes to arrange with the northern neighbor on USD 150 per thousand cubic
meters of gas.

Russian President, meditating about pragmatic relations between Ukraine and
his country, concluded that transition to market relations in the sector of
the energy resources will be “easy, calm, friendly, making no hurt to
Ukrainian partners.”

Still, experts fear that Gazprom will raise gas price to USD 180, which will
automatically make entire branches of Ukrainian economy unprofitable.

Positions of the government in gas talks with Russia have been shaken, after
Ukraine was forced to concede to the debt of USD 2 billion demanded by
Gazprom for imported gas.

Although Ukrainian officials strongly denied any liabilities before Russia
pointing to mediators, they quickly agreed to pay the debt partly by gas
from the Ukrainian underground gas storage facilities, and partly by money.

The Presidential Secretariat referred to statements of Gazprom about debt as
“apparent political pressure on Ukraine and preparation of ground for talks
on gas price.” The President’s entourage offers to return to direct gas
imports without mediators.

Gas has become the reason of other troubles in Ukraine – striking man-caused
accident in Dnipropetrovsk housing estate. Gas blast caused by malfunction
of gas-distributing point killed 23 people and completely destroyed two
sections of the building. The Tymoshenko Bloc at once put the blamed for the
accident on the government: “the government is guilty 300%.”

According to Tymoshenko, such strategic units like oblhaz, miskhaz should
not be transferred in private hands by the state or should be carefully
supervised. Meanwhile, private owners of the like strategic units economize
on upgrading and technical support of networks.

Such accidents happen as a result. Russian businessmen Veksleberg, who
indirectly holds shares of Dniprohaz, assured that victims would be paid
compensations of UAH 500,000.
A new sharp angle emerged in relations between Ukraine and Russia. The
activists of the Eurasian Youth Union performed an act of vandalism on
Hoverla Mountain having defiled state symbols – arms, flag and granite board
dedicated to the Constitution of Ukraine. SBU has quickly found the

Vandalism was ordered by Russian citizen Pavel Zarifulin and Aleksandr Dugin
accompanied by three executors of the order one of which is a Russian
citizen. Dugin was earlier barred from entry in Ukraine. After profanation
of the state symbols Ukraine resumed non-grata policy, which was suspended
following the arrangement between the two states.

Both Dugin and Zarifulin were declared persona non-grata. Legalization of
youth organization was banned in Ukraine. “Those who broke symbols on
Hoverla. they are all ethnic Ukrainians and are of Ukrainian nationality,”
Zarifulin tried to deny the results of the SBU’s investigation.

Leader of the Eurasian Youth Union explained that accident on Hoverla was
provoked by the “initiatives of the President concerning Roman Shukhevych.”

In the surveyed period, Yuschenko posthumously conferred the ‘Hero of
Ukraine’ title on the leader of the Ukrainian rebel army (UPA) on his 100th
anniversary. Russian-leaning political organizations’ reaction was

Communists named vandalism on Hoverla as “a beginning of the response of the
Ukrainian society to the President’s endeavors to impose pro-fascist
neo-Nazi policy.” They were also indignant at “efforts on rehabilitation of
pro-fascistic organizations like OUN-UPA.”

The Eurasian Youth Union also warned against possible appointment of Yulia
Tymoshenko to the post of prime minister. Allegedly, if this happens, the
Union will fail to “restrain Ukrainian activists from direct preventive
actions against the leaders of this pseudo state.”

The Party of Regions viewed vandalism as provocation of BYT leader. “The
implication of the provocation is, quite probably, an attempt to invoke
sympathy for Tymoshenko among Ukrainian patriots,” Anna Herman said. Her
colleague Vadym Kolesnichenko insists that incident on Hoverla should not be
linked with relations between Russia and Ukraine.

However, Russian embassy assumes that measures will be taken as a response
to the declaration of its citizens “persona non-grata”. Russian ambassador
says vandalism was a “bad joke.”
Meanwhile, Ukraine continues its progress in NATO and the EU integration.
Russian foreign ministry reiterated that Ukraine’s intended joining to NATO
“will adversely affect the entire complex of Russian-Ukrainian bilateral

During the summit of the council of defense ministers of south-eastern
Europe, which was held in Kyiv, Ukraine has joined to the agreement on
multi-national peace keeping forces of South-East Europe. The council of
ministers of the South-East Europe nations was created to ensure security
and ease integration into NATO.

During the meeting, the President called on the European partners to assist
Ukraine in its aspirations to join the Action Plan on membership in the
North Atlantic Treaty Organization. He stressed that Ukraine is clearly
targeted at membership in the EU and NATO.

Yuschenko was said that NATO would be able to examine the issue on joining
of Ukraine to the Action Plan only after receiving official application,
which may follow, say, at the next summit of NATO in April 2008 in

Meanwhile, leader of the Communist Party reminded the President that
“Ukrainian people do not favor the idea of joining NATO, which is proved by
every public poll without exceptions and sociology surveys.” Regarding the
moods, the US defense minister considers that the issue of Ukraine’s
integration into NATO is not in the nearest perspective.

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

Concludes that corruption in Ukraine constitutes a real threat
to the principles of democracy and the rule of law.

Council of Europe, Strasbourg, France, Monday, October 29, 2007

STRASBOURG – The Group of States against Corruption (GRECO) has
published today its Joint First and Second Round Evaluation Report on
Ukraine, which joined GRECO in 2006.

The report focuses on general anti-corruption policies, specialisation of
law enforcement bodies in fighting corruption, independence of the
judiciary, immunity from prosecution for corruption offences, the
deprivation of benefits drawn from corrupt acts, measures to counter
corruption in public administration and the prevention of legal persons –
such as commercial companies – from being used as shields for corruption.

The report was drawn up by a team of GRECO evaluators following a one
week visit to Ukraine, during which the team held thorough discussions with
officials and civil society representatives.

Information collected during the on-site visit indicates that Ukraine is
perceived as being considerably affected by corruption, the problem being
systemic and wide scale, affecting the whole society, its public
institutions, including the judiciary, at central and local levels.

GRECO concludes that corruption in Ukraine constitutes a real threat to the
principles of democracy and the rule of law. The fight against corruption
can therefore not be treated in isolation from democratic reforms. GRECO
stresses that the President’s Concept Paper “On the way to Integrity” is a
good basis for this reform process.

GRECO addresses 25 recommendations to Ukraine. They aim at the
establishment of a mechanism for the implementation of an overall anti-
corruption policy, including an action plan against corruption.

More particularly, the recommendations deal with problems relating to the
independence of the judiciary and the procuracy, access to information held
by public authorities, procurement procedures, reform of the public
administration and of the civil service, codes of ethics, reporting of
corruption, auditing of central and local bodies and liability of legal
persons for corruption offences.

GRECO will monitor the implementation of the recommendations to Ukraine
towards the end of 2008, through its specific compliance procedure.
GRECO website:
Council of Europe Press Division,
[return to index] Action Ukraine Report (AUR) Monitoring Service]
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Associated Press, Kiev, Ukraine, Tue, October 30, 2007

KIEV- Hackers from several countries launched a massive attack and
temporarily disabled the Web site of Ukraine’s Western-leaning President
Viktor Yushchenko, his office said Tuesday. A Russian nationalist group
claimed responsibility.

The attacks from servers in Russia, the U.K., Kazakhstan, the U.S., Israel
and Ukraine began Sunday night and continued through Tuesday afternoon,

the presidential press service told The AP.

Over 18,000 attacks have been carried out, temporarily blocking access to
the site. The Web page couldn’t be accessed Tuesday night.

A radical Russian nationalist youth group, the Eurasian Youth Movement,
claimed responsibility for the attacks in their blog, saying it was their
retaliation for Yushchenko’s office’s alleged attack of their own Web site,
which had been disabled.

The group also accused Yushchenko of adhering to fascist ideology and of
attacking the organization’s Moscow office. Yushchenko’s office denied the

The Eurasian Youth Movement is strongly critical of the West and opposes
what it calls a U.S. encroachment on Russia’s traditional sphere of

The group has opposed Yushchenko’s campaign to bring Ukraine into the
European Union and the North Atlantic Treaty Organization, considering this
ex-Soviet republic part of Russia’s realm. Its leader Alexander Dugin has
been barred from entering Ukraine.

Earlier this month, the group claimed responsibility for desecrating a
monument to Ukraine’s independence erected on top of the country’s highest
mountain – an act that drew widespread anger and condemnation from
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

Associated Press (AP), Kyiv, Ukraine, Monday, October 29, 2007

KYIV- Ukraine’s President Viktor Yushchenko stripped two key figures
in his nearly lethal dioxin poisoning of honorary rank Monday, taking
way away their benefits and prestigious titles, the presidential office

Yushchenko, who was an opposition leader at the time, fell severely ill
during the fiercely contested 2004 presidential election campaign after
having dinner with top security officials Ihor Smeshko and Volodymyr

The illness left his face pockmarked and discolored and he was later
diagnosed as having suffered massive dioxin poisoning.

No arrests have been made and the probe is still under way. But many
observers point the finger at Russia – both because Yushchenko was running
against a Kremlin-backed candidate and because Russia is one of four
countries that produces the specific formula of dioxin used to poison him.

On Monday, Yushchenko annulled a January 2004 decree issued by his
predecessor Leonid Kuchma which elevated Smeshko, then Ukraine’s
Security Service chief, to the rank of an extraordinary and plenipotentiary
He also canceled Kuchma’s August 2004 decree which gave Satsyuk,
Smeshko’s deputy at the time, a general’s rank, dismissing both
decrees as “groundless,” according to the presidential Web site.

Yushchenko has complained that Russia was hampering the investigation
by refusing to provide dioxin samples and hand over key suspects.

Ukrainian authorities have not named any suspects, but Yushchenko has
said several of them are hiding out in Russia.

The Kremlin backed Yushchenko’s rival, Viktor Yanukovych, in the 2004
presidential election, which deepened rifts between Moscow and the West.

Yanukovych was initially declared the winner. Massive street protests –
dubbed the Orange Revolution – broke out, and the Supreme Court threw
out the results on grounds of fraud. Yushchenko won a court-ordered
repeat vote.

Yushchenko has hinted that he knows those responsible for the poisoning.
While refraining from naming the alleged culprits until the investigation
is over, he has intimated that the poisoning could have been masterminded
from outside the country.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

Political Review, Ukrainian News Agency, Kyiv, Ukraine, Wed, Oct 31, 2007
Before the ink dried on the coalition agreement between BYT and OU-PSD, it
was slammed by the President and his team. NSDC secretary and head of the
Presidential Secretariat have accused members of the coalition of
interference with authorities of the President in the energy, military and
defense sectors.

Baloha, in particular, pointed out several campaigning promises of BYT in
the agreement, implementation of which may have negative effect. The matter
concerns abolishment of conscription and reimbursement of devaluated

According to him, only magician David Copperfield may fulfill them, but not
responsible politicians. Yuschenko made it clear that he joined to
indignation of his subordinate and told that transfer to contract-based army
is possible only in 2010, because it is a long process that needs hefty

To confirm his words, the President announced two conscriptions in 2008, in
this, demonstrating inability of BYT leader to fulfill her promises. Yulia
Tymoshenko failed to convince that formation of contract army is possible
with only UAH 50 million spent. Some parliament candidates from OU-PSD also
agree that many provisions of the coalition agreement should be itemized and

BYT again was astonished and hurt. “We thought we agree with people who have
relevant authorities,” BYT stated. It is not surprising that Yulia
Tymoshenko usually prefers to agree directly with the President.

However, in the question of coalition Yuschenko and his allies – Baloha and
Pliusch – are supporters of the broad coalition. Baloha criticized
arrangements of BYT and OU-PSD and reminded them that the coalition is not
numerous enough, and therefore a vote might not be fruitful if at least
three MPs are absent.

There is information that despite the signed agreements, talks on creation
of broad coalition with the Party of Regions are under way.

That is why the Party of Regions feels so confident and does not doubt it
will not only form the government but also head it as the party-election
winner. Viktor Yanukovych insists that one-color coalition will be instable
and proposes his loyalists to wait a bit.

Member of the Regions Party Chornovil predicts political turmoil up to
presidential election. “Interim stabilization in politics is possible if
broad coalition is created,” he noted. OU-PSD believes that such statements
of their rivals testify that they are not sure of their future actions.

Allegedly, the Regions Party understands that creation of the coalition of
democratic forces is an accomplished fact, subsequently they have to be in
opposition, and they are not psychologically prepared to it. That is why
they are trying to delay the process in order to make it more complicated or
even frustrate it.

As it was last year, when lobby talks with Moroz allowed the Party of
Regions to create the anti-crisis coalition. Thus, one cannot be sure that
the democratic coalition will rule in the new parliament.

It is too unstable, fragile and has too many strong opponents who will make
every avenue to ruin it, if not prior to its creation in the parliament,
then after. Still, leader of BYT strongly believes that the coalition will
be stable because she and her team have made enormous concessions to the

In the surveyed period, OU-PSD and BYT failed to involve the Bloc of Lytvyn
into their coalition. However persistent was OU-PSD in calling on Volodymyr
Lytvyn to make a decision, he does not haste.

BYT is not very eager to share posts with Lytvyn to persuade him join the
team. Oleksandr Turchynov says that majority consisting even of 228 MPs can
fulfill the program OU-PSD and BYT.

Parliament candidate Shkil (BYT) proposes another form of cooperation with
Lytvyn – situational alliance in some votes. The insignificance of advantage
of the majority over the opposition does not seem to be a problem for
Tymoshenko Bloc despite the fact it is so small that the opposition may
easily level it.

The Party of Regions believes that even though the “orange” coalition is
created “it will live only a couple of months and will split from inside.”

They hope that the “orange” will quarrel and the broad coalition will come
into being. The open unwillingness of the President and a part of OU-PSD to
see Yulia Tymoshenko in the post of the prime minister encourages the Party
of Regions most of all.

Parliament candidate Kyseliov from the Party of Regions doubts that
“Yuschenko will allow himself to repeat his mistake and agree to appoint
Tymoshenko as prime minister”.

So far, the President did not commit to nominate Tymoshenko and each time
invents new terms for the democratic coalition. For instance, vote for a
number of laws before appointment of the prime minister.

There are 12 of them: the most important are cancellation of deputy immunity
and privileges and introduction of imperative mandate, the law on
opposition, local state administrations, amending the law on the Cabinet of
Ministers and local self-governance.

The Bloc of Yulia Tymoshenko has agreed to vote for these laws before
nomination of the prime minister and appointment of the government. It’s
going to be a package vote, which contradicts the regulations of the
Verkhovna Rada. Package vote was held only once in 2004 when political
reform was approved.

The Party of Regions categorically objects to violations of the law and
threatens to freeze work of the Verkhovna Rada if non-created coalition
starts voting for a package of laws before appointing the parliament
leadership, formation of parliamentary committees and the government.

The Party of Regions prefers to consider each bill separately in the first
and the second reading making amendments and propositions.

Thereby it can delay creation of the “orange” coalition testing its
firmness. After all, the decision to vote 12 laws at once is conditioned not
only by the absence of actual agreement in the coalition, but also by the
critically small advantage over the opposition.

Besides, frustrated vote suggests breach of arrangements and, therefore,
allows the President and his party to take up creation of the broad
coalition with the Party of Regions.

The latter has stated that it is ready to start full-fledged negotiations on
creation of a broad coalition soon after the process of forming of the
“orange” coalition collapses. The broad coalition would “unite political
forces loyal to the President and supporters of the incumbent prime

The party assumes it will have to live a week with coalition between OU-PSD
and BYT as it did last year. And it has all grounds to think so, because
some parties-members of OU-PSD have already protested against “dictatorship
of Tymoshenko in the coalition.”

Meanwhile, work of the sixth convocation parliament is delayed up to mid
November, deputy CEC chair forecasts. Regardless, the Central Electoral
Commission has eventually announced the election returns, their promulgation
is delayed.

First, communist Hmyria and then four other political forces, which have not
got into the parliament (PSPU, Party of Free Democrats, Socialist Party and
All-Ukrainian Party of People’s Trust) challenged election returns in the
High Administrative court. It suspended promulgation of the election returns
in official newspapers Holos Ukrainy and Uriadovyi Kurier due on October 20.

The parliament cannot gather until the returns are published. Claims of all
political forces were combined into one procedure – on declaring illegal
activity and inactivity of the CEC with respect to establishment of the
election returns.

Claims to the CEC referred to violation of rights of citizens who could not
vote duet to abolishment of absentee ballots and inaccurate electoral roll.
Apart from that, votes of 3 million of Ukrainians working abroad were
allegedly rigged in favor of the “orange” team.

Theoretically, the claimants insisted on recount of votes, but such
development of events gave a dim chance only to the Socialist Party to enter
the parliament. They simply buried the court under various petitions. Though
they did not much expect to succeed, as well as their colleagues.

First of all, because the Ukraine’s judicial branch of power has been ruined
by the President and his team. “Courts make political resolutions,”
communists say.

Despite the illusory success, claimants diligently stick to each legal
procedure aiming exclusively to delay start of parliament’s work and
creation of the coalition and the government.

Former deputy from the Socialist Party doubts that 228 signatures will
appear under the coalition agreement despite its existence. Time works
against Tymoshenko but for the Party of Regions.

The more time goes by, the higher is the probability that the agreement will
not be signed by each deputy. That is why the Tymoshenko Bloc accused the
Party of Regions of involvement in the judicial proceeding. Claims were even
printed using the same printer, lawyer from the bloc claims.

OU-PSD attempted to achieve publication of the election returns, referring
to unplanned consumption of budget funds and to the fact that neither of the
court’s decisions will affect the results, but were refused.

However, outsiders of the election lost the chance to get to the parliament.
The High Administrative Court did not see violations in activity of the CEC
and permitted publication of the election returns.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
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ANALYSIS: Paul Johnson, Business Ukraine magazine
Kyiv, Ukraine, Monday, October 22, 2007

The unveiling of a new monument to controversial nationalist idol Stepan
Bandera in Lviv is just the latest example of the leading role the city
plays in the revisionist trend at the root of Ukraine’s ideological divide

Since independence in 1991 Lviv has become a focus of Ukrainian nationalism,
with calls for recognition of WWII-era anti-Soviet guerrillas prominent
among the many claims championed by patriots in the west Ukrainian city.

October 13 saw the official unveiling of a statue depicting guerrilla leader
and inspiration Stepan Bandera in what is yet another local offensive in the
on-going battle for Ukrainian historical justice and closure with the Soviet

While many Ukrainians favour a conciliatory approach to the country’s
history of Russian domination, throughout west Ukraine there is a far more
strident tendency towards opposition to Moscow.

Lviv has repeatedly acted as the focal point of protest actions and
political movements which portray Russia as an imperial invader seeking the
subjugation of the Ukrainian nation.
Russophobia is so potent a force in Lviv that in the years following
independence the city had a radio station with a breakfast jingle that ran,
“Wake up, wake up! Moscow has been awake for an hour already!”

This anti-Russian sentiment can also be seen in the decision to rename a
Lviv street General Dudayev Street in honour of the fallen Chechen commander
and in the earlier renaming of the city’s central Peace Street as Stepan
Bandera Street.

The Russian cultural centre in Lviv, meanwhile, has also been regularly the
victim of hooligan attacks, with a bust of Russian bard Oleksandr Pushkin
often defaced.

This tendency is a product of the city’s cosmopolitan history, which allowed
a sense of Ukrainian nationalism to take root while elsewhere in Russian and
later Soviet dominated Ukraine such sentiments were ruthlessly suppressed.

Unlike the rest of Ukraine, the western regions of the country had had no
experience of rule from Moscow until they were unceremoniously annexed by
the Kremlin in 1939 as part of Hitler’s pact with Stalin to carve up eastern
Europe into spheres of influence.

In the wake of the Soviet occupation tens of thousands were rounded up and
deported or subjected to summary execution. As a result many west Ukrainians
initially welcomed the troops of the German army in 1941 when Hitler
unleashed his invasion of the Soviet Union.

Similar scenes of welcome were recorded throughout the western extremities
of the USSR as subject peoples celebrated what they thought of as liberation
from the godless Soviet yoke.

However, once the reality of Nazi occupation became apparent many west
Ukrainians committed themselves to a guerrilla campaign of partisan warfare,
using the woods and mountains of the region as cover to mount a war of
attrition on both Nazi and, later on, Red Army troops.

This forgotten aspect of WWII involved countless atrocities against the
civilian population of the region, and it remains a subject of extreme
sensitivity to this day, with supporters of the guerrillas claiming that
veterans of the campaign should be honoured as heroes, while detractors
continue to label them as fascists and collaborators with the invading

At core this debate centres on relations with Russia, and whether the Soviet
forces of the time should be regarded as foreign invaders or an army of

Most Ukrainians outside the west of the country, having long since grown
accustomed to Russian and then Soviet rule, preferred to adopt the latter
point of view, and are adamant that west Ukrainian guerrillas deserve no
respect for the role they played in fighting their own countrymen.

In west Ukraine itself the veterans of the guerrilla campaign have long been
lionized by much of the general population, and since independence they have
taken to parading in uniform on a regular basis.

In 2005 President Yushchenko attempted to initiate a process of
reconciliation between Red Army veterans and the aging veterans of the west
Ukrainian insurgent army, but was strongly rebuffed by the old Soviet
soldiers, who insisted that honouring the guerrillas demeaned the war dead
and the nation.

Each October surviving members of the insurgent army gather in Kyiv to mark
the anniversary of their foundation, where they are joined by younger
generations of supporters, many of them from Lviv itself.

These annual events have become a flashpoint on the Ukrainian calendar, with
supporters of pan-Slavic parties and those sympathetic to Ukraine’s Russian
ties gathering to form rival demonstrations and attempting to physically
attack the west Ukrainian nationalists.
At the time of the Soviet occupation west Ukraine boasted religious freedoms
unheard of in Russian-dominated rump Ukraine, with a flourishing Greek
Catholic Church commanding the loyalty of the majority of the population.

However, the secret police battalions who followed the occupying Red Army
troops soon targeted this eastern offshoot of the Roman Catholic Church, and
a policy of oppression was soon instigated.

Throughout the Soviet period this Greek Catholic Church was doomed to remain
outlawed, making it the largest underground religious movement in the world
at the time.

Priests were incarcerated in gulag concentration camps and churches turned
over for use by party officials as museums of atheism or warehouses for
sundry stockpiles.

In contrast the Russian Orthodox Church, although frowned upon by the Soviet
authorities, was allowed to continue a piecemeal existence, with regular
services and a relatively unmolested priesthood.

This slanted anti-religious policy served to enrage already simmering
Russophobia throughout west Ukraine and make the Greek Catholic Church a
focus for Ukrainian patriots determined to throw off the shackles of Moscow
This confrontational approach to Ukraine’s often shared and interwoven joint
history with neighbouring Russia was strengthened by the events of 2004,
when Lviv served as one of the engines of the Orange Revolution, proving
thousands of observers all over the country and sending trainloads of
supporters to join the masses on Maidan.

Since 2004 the politics of division have been exploited by Ukraine’s warring
partiers, further entrenching long-held beliefs that might otherwise have
been expected to lessen with the passing of time.

At present Lviv is working hard to reinvigorate the city’s appeal as a
tourist destination and centre of European culture, but the battle for the
soul of modern Ukraine looks likely to tarnish the city’s image as a focus
of culture, learning and ethnic tolerance for the foreseeable future.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

COMMENTARY: By Halya Coynash
Kharkiv Human Rights Protection Group
Kharkiv, Ukraine,  Monday, October 29, 2007

On 30 October 2007 – the Day of Soviet Political Prisoners – please stop for
a moment or two.

There are many reasons.  One is that in this seventieth anniversary of the
Terror of 1937, we surely need a moment’s silent remembrance.

Anna Akhmatova’s words “I would like to name them all .” have haunted more
than one generation.  We name our own relatives, the famous, the notorious .
And yet there were millions, and here and now it would be unseemly to name
just one or two.

Spare a moment then in memory of all the victims.

The Day of Soviet Political Prisoners was more however.  It was first
commemorated on 30 October 1974 by prisoners in the Soviet political labour
camps.  Hunger strikes were held in the Mordovan and Perm political labour
camps, as well as in the Vladimir Prison.

On the same day, a press conference was given in Andrei Sakharov’s flat by
the Initiative Group for the Defence of Human Rights in the USSR.  News had
been smuggled out of the camps about the planned actions to affirm the
honour, dignity and rights of all political prisoners.

From then on this day was marked by protest actions until the last Soviet
political prisoners were released, not long before the collapse of the
Soviet Union.

A letter which Yevhen Sverstyuk, himself a former political prisoner,
quotes, says it much better than we can: “You deserve to be honoured for
you stood up for our dignity, and in that you  were successful.”

There were very many people, many unfortunately no longer with us, who
sacrificed a great deal.  As human beings they gained immeasurably and they
gave us an example we are all too often cravenly loath to appreciate, let
alone follow.

Once again it would be inappropriate to name some and not others.  For all
those then, our deepest respect.

There is one last reason.  Here and now in 2007, the situation in Ukraine
has thankfully improved, however in many of the former Soviet republics
there are a number of political prisoners.

The pretexts and cosmetic appearances in some countries have changed, the
bitter reality, however, has not.  Mikhail Trepashkin, Igor Sutyagin and
Valentin Danilov are just three of a greater number of political prisoners
in Russia.

In Belarus there are many more, some of whom like the opposition politician
Alexander Kozulin are serving long sentences for their opposition to
Lukashenko’s dictatorship.

Here we are not reeling off a whole list because the number can seem
overwhelming, whereas each individual needs our support, our clear and
unrelenting protest.

In the 1970s and 1980s during the Days of Soviet Political Prisoners there
were protest actions in many countries aimed at pushing the Soviet
authorities to release both specific prisoners and all imprisoned for their

While any person remains imprisoned in the countries of the former Soviet
Union, this day should be not merely a day of remembrance, but one of
active protest.

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

The Ukrainian Observer, Kyiv, Ukraine, Sunday, October 28, 2007

KYIV- The mysteries of Soviet times are open wounds for many.

For some in Ukraine, Poland and Russia, healing has at least begun with
the reburial on Saturday of what is thought to be only a few of
the thousands killed by Stalin’s NKVD and buried in mass graves in
the forest near Bykovnya, a small village only a few miles from Kyiv.

Saturday’s reburial ceremonies involved only 1,998 bodies, of which 474
were Polish. The total number killed and dumped in the forest burial
ground is thought to exceed 30,000.some suggest 100,000 or more.

According to the accounts of villagers and others who lived in the area,
the process began with the appearance of a high green fence and a guardhouse
in the mid-1930s. During this, one of the most repressive periods of Soviet
history, the villagers knew enough to speculate in silence.

When it was learned much later that the fenced area in the forest held
thousands, perhaps many thousands of dead, officials first claimed
the bodies were victims of the German occupiers during World War II.

The ugly truth really emerged only after Ukrainian independence.

Villagers interviewed said the trucks delivered their cargo to the area
behind the green fence for years before the Germans arrived. For those
who lived in the area and saw the trucks roll by day after day, they have
no doubt that the bodies, many found with bullet holes in the backs
of the skulls, were victims of Stalin’s secret police.

According to local folklore, when suspects arrested by the NKVD demanded
to know what law they had broken, their interrogators in Kyiv would tell
them, ”You’ve been arrested under Statute 23.” For the interrogators,
this was a grisly joke. For those being questioned, it was a terrifying
answer, for 23 was the number of the tramline that ran to Bykovnya.

For some, Saturday’s ceremony may provide some sense of closure, but many
thousands of questions remain unanswered and are likely to remain so.
This is particularly true for the Polish people.

Andrzej Przewoznik, general secretary of Poland’s Council for the Protection
of Monuments to Struggle and Martyrdom, is among those who believe that,
just as in the infamous Katyn wood where 15,000 Polish officers were
massacred, Bykovnya is one of the places where Stalin tried to rip
the heart out of the Polish nation.

Leaders of the Memorial Society, an independent group that has set out
to honor the victims of Stalin, have identified eight such mass graves
from the 1930’s and 1940’s. Some, like the graveyard at Kurapaty, near
Minsk in Belarus, have been officially acknowledged as NKVD execution
places. The searches and reburials are likely to go on for a very
long time.

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

The Day Weekly Digest, Kyiv, Ukraine, Tue, October 30, 2007

Frankly speaking, the event I am going to describe is one of those
that demonstrate the true solidity, value, and strength of Ukrainian
independence and Ukrainian statehood per se.

On Oct. 27 Odesa witnessed the long-advertised ceremony of unveiling
the so-called Monument to the Founders of the City, with a statue of
Catherine II of Russia in the center (the ceremony had been repeatedly
postponed due to the resistance of the local patriotically minded

Incidentally, a number of historians are correctly refuting her status
as  a city founder.

Quite a few residents of Odesa regard the whole project as a Ukrainophobic
one, aimed at inciting interethnic animosity, accompanied by clashes
between protesters and Berkut riot squads, the latter apparently acting
under orders from the municipal authorities to guard this monument
to the Russia’s ruling bloodthirsty she- wolf (in the words of Taras
Shevchenko) who ordered destruction of the Zaporozhian Sich and turned
the Ukrainian peasants into serfs.

One can spend a long time pondering the issue of the “consolidating”
effects of such projects – as is practiced by Party of Regions functionaries
who are saying, “Let ’em build a monument to Stepan Bandera in Lviv and
Catherine II in Odesa, for we have a democracy, don’t we?”

The Day asked its experts these questions: “How could such a project
become a reality in Ukraine, in its 17th year of national independence,
and what do you think it really means? Who is to assume political
responsibility for the events that have taken place in conjunction with
the unveiling of this monument?”
Russians first asserted their position in Khadjibey, shortly to be
renamed Odesa, “to the accompaniment of the Zaporozhian hopak dance.”

I am not quoting from Oleh Tiahnybok, whom some persist in advertising
as the number one expert on the “right kind” of Ukrainian history, but
from Major General Jose de Ribas [known in Russia as Osip Mikhailovich

The monument unveiled in Odesa is dedicated to a German woman by the
name of Sophie Friederike Auguste, Prinzessin (princess) von Anhalt-Zerbst,
destined to become Russia’s empress Catherine II.

This brings me back to [Russia’s Generalissimo] Count Aleksandr Suvorov,
who helped transform the small Khadjibey fortress into a big port city,
yet this process involved Ukrainian Cossacks. On July 4, 1794, Suvorov
wrote in a special report addressed to Field Marshal Peter Rumyantsev-
Zadunaisky that it would be worth enlisting the experience and skills
of Cossacks that had not fled to the Kuban area in order to put together
a local team of sailors.

Twelve Cossack chaika boats constituted the bulk of the Odessa flotilla.
The Russian military leader, who was at the time staying in the Polish
town of Nemirow [today: Nemyriv in Ukraine] dispatched 76 Cossacks to
Odesa (all of them members of his headquarters’ security detail).

All told, there were more than 600 Ukrainian Cossacks among some one
thousand first settlers in Odesa. And now we have a monument to
Catherine II in Odesa.

Here one finds not only inadequate historical knowledge, but also an
irresponsible attitude on the part of those who seem to have forgotten
that they are living in an independent Ukrainian nation- state.

The esteemed ranking bureaucrats of Odesa apparently don’t know enough
about Catherine II, so why didn’t they ask experts at the National
Academy’s Institute of History of Ukraine?

They could have made inquiries at the history faculty of Odesa University.
Why haven’t they asked for expert opinions before unleashing a war of
monuments, let alone a war against monuments.

Another trouble is that over all these years, after Aug. 24, 1991, no one
has been punished – even formally – for authorizing the construction of
anti-Ukrainian monuments in this country.

Hence the unveiling of a monument to a German woman in Odesa, who
hated Ukraine, regarding it as a source of freethinking and a threat to her
cherished alles ist in Ordnung system in the Russian empire.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

By Anshel Pfeffer, Haaretz, Israel, Sunday October 28, 2007

Ukrainian President Victor Yushchenko is expected to ask Israel to recognize
the genocide of the Ukrainian people in the 1930s by their communist
government when he visits here in about two weeks, sources said.

Israel is not expected to accede to the request, which has won the support
of Jewish community leaders in Ukraine, so as not to damage its relationship
with Vladimir Putin’s government at a sensitive time.

Millions of Ukrainians died of hunger from 1931 to 1932 following the
collectivization of farming in the Soviet Union by Joseph Stalin. Famine was
particularly severe in Ukraine, which was a regional breadbasket and was
strongly opposed to the move.

At the same time the communist government attempted to wipe out Ukrainian
intelligentsia and nationalists, with estimations of the number of victims
ranging from a million and a half to 10 million.

A number of countries, including the United States, have recognized these
acts as genocide, however, Russia vigorously rejects this definition,
prefering to use the term “tragedy.”

Members of the Jewish community in Ukraine say Yushchenko also intends
to present a proposal in the parliament in Kiev to recognize the suffering
of the Jewish people in the Holocaust and the suffering of the Ukrainian

The chairman of the General Council of Jewish organizations, Joseph Zisels,
who met with Yushchenko last Monday, said yesterday: “Israelis understand
more than anyone what genocide is and Yushchenko therefore expects that
Israelis will also recognize the Ukrainian genocide. We don’t think it is
the same as the Holocaust, but it is also a terrible tragedy with seven or
eight million murdered.”

Last week Yushchenko signed a presidential order to return to the Jewish
community 700 Torah scrolls that were confiscated from the community by
the communists.

The move is believed to be an attempt to soften up Jewish and Israeli public
opinion ahead of his visit. He is expected to bring some of the scrolls to
the Presidential Residence in Jerusalem during his visit.

An attempt to organize a visit by Yushchenko to Israel was made about six
months ago by Rabbi Moshe Azman, Ukraine’s Chabad rabbi, and Mordechai
Tzivin, an Israeli attorney active in international Jewish causes.

But Israeli government officials postponed the visit, among other reasons
because Yushchenko wanted to be in Israel on Holocaust Day and to
participate in a ceremony at the Yad Vashem Holocaust Memorial.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

ForUm, Kyiv, Ukraine, Wed, October 31, 2007

KYIV – On October 30 the National congress of the Republic of Ecuador
adopted a resolution by which the Holodomor of 1932-1933 in Ukraine was
recognized as an act of genocide of the Ukrainian people. Chairman of the
subcommittee on interparliamentary relations, bilateral and multilateral
relations of the foreign affairs Committee of the VRU of the fifth
convocation Oksana Bilozir informed.

As it is noted in the statement, the parliament of Ecuador also shows
solidarity with the Ukrainian people, noted that following of principles of
justice, freedom, democracy and mutual respect, which must be the basis in
the relations between the countries in order such phenomena as Holodomor in
Ukraine doesn’t repeat again.

Ecuador is the second country after Peru, the parliament of which recognized
Holodomor in Ukraine as an act of genocide of the Ukrainian people. 11
countries have already recognized Holodomor in Ukraine.

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