AUR#892 Feb 19 OPIC Closed For Ukraine; Legal System Reform Now; Gas Victor?; Arm & Leg To Gazprom; UPS; Harvard Energy Conf; London Summit

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

Ukrainian History, Culture, Arts, Business, Religion,
Sports, Government, and Politics, in Ukraine and Around the World     
 
OPIC CLOSED FOR UKRAINE  
U.S. Overseas Private Investment Corporation (OPIC)
(Article One)
                        
ACTION UKRAINE REPORT – AUR – Number 892
Mr. E. Morgan Williams, Publisher and Editor, SigmaBleyzer
WASHINGTON, D.C., TUESDAY, FEBRUARY 19, 2008
 
INDEX OF ARTICLES  ——
Clicking on the title of any article takes you directly to the article.               
Return to Index by clicking on Return to Index at the end of each article
U.S. Overseas Private Investment Corporation (OPIC)
By Jim Davis, Business Ukraine magazine
Kyiv, Ukraine, Monday, February 11, 2008
 
2“NOW IS THE TIME TO DRAMATICALLY REFORM
UKRAINE’S LEGAL SYSTEM”

OP-ED by Irina Paliashvili, Chair, Legal Affairs Working Group
U.S.-Ukraine Business Council (USUBC), Washington, D.C.,
President & Senior Counsel. RULG-Ukrainian Legal Group, P.A.
Kyiv Post, Kyiv, Ukraine, Thursday, February 14, 2008

3.  TYMOSHENKO GOVERNMENT OFF TO A PROMISING,
AMBITIOUS START
OP-ED By Anders Aslund, Kyiv Post
Kyiv, Ukraine, Thursday February 7, 2008

 
4UKRAINE: INVESTORS CAUTIOUSLY OPTIMISTIC
By Zenon Zawada, Kyiv Post Chief Editor
Kyiv Post, Kyiv, Ukraine, Thursday, Jan 31 2008

5 VICE PRIME MINISTER HRYHORIY NEMYRYA ADDRESSES
U.S-UKRAINE BUSINESS COUNCIL (USUBC) IN KYIV

U.S.-Ukraine Business Council (USUBC)
Kyiv, Ukraine, Monday, February 4, 2008

 
Catherine Belton, Roman Olearchyk, Financial Times (FT)
London, United Kingdom, Tuesday, Feb 12, 2008
 
Andrew E. Kramer, The New York Times,
New York, New York, Wed, February 13, 2008
 
Business New Europe (bne), Berlin, Germany, Wed, Feb 13, 2008
 
The Economist, London, UK, Thursday, February 14, 2008

10ARM AND LEG TO GAZPROM

Commentary & Analysis: by Alla Yeremenko, Yulia Mostovaya
Zerkalo Nedeli (Mirror Weekly), # 6 (685)
Kyiv, Ukraine, Monday, February 18, 2008
 
Commentary & Analysis By Dmitry Vydrin,
Eurasian Home, Moscow, Russia, Thursday, February 14, 2008

12RUSSIA-UKRAINE GAS RELATIONS:

Analysis & Commentary: by Vladimir Socor
Eurasia Daily Monitor, Volume 5, Number 30,
The Jamestown Foundation, Wash, DC, Fri, Feb 15, 2008

13YUSHCHENKO OUTMANEUVERS PUTIN

Andriy Dutsyk, Kyiv Weekly, Kyiv, Ukraine, Wed, Feb 15, 2008

14UKRAINE’S GAS WOES UNDERSCORE DOMESTIC

POWER STRUGGLE
Analysis & Commentary by Tammy Lynch
THE ISCIP ANALYST, An Analytical Review, Volume XIV, Number 8
Boston University’s Institute for the Study of  Conflict, Ideology & Policy
Boston, Massachusetts, Thursday, 14 February 2008

15UPS JOINS U.S.-UKRAINE BUSINESS COUNCIL (USUBC)

U.S.-Ukraine Business Council (USUBC), Wash, D.C. Nov 2007
16AMERICAN CHAMBER OF COMMERCE 2008 BOARD ELECTIONS
Jorge Zukoski, President, American Chamber of Commerce
Kyiv, Ukraine, Friday, December 14, 2007

17.  REASSESSING POST-SOVIET ENERGY POLITICS:

Harvard University, Friday, March 7-Saturday, March 8, 2008
Harvard Ukrainian Research Institute
The Davis Center for Russian and Eurasian Studies
Harvard, University, Cambridge, MA, February, 2008

18UKRAINIAN AMERICAN BAR ASSOCIATION (UABA) JOINS

U.S.-Ukraine Business Council (USUBC), Wash, D.C., Nov 2007

19UKRAINIAN INVESTMENT SUMMIT IN LONDON
Adam Smith Conferences’ 4th Annual Ukrainian Investment Summit

10th-12th March 2008, London, United Kingdom
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1
 UKRAINE’S OUTSTANDING OPIC DEBT: A
BARRIER TO FOREIGN INVESTMENT
U.S. Overseas Private Investment Corporation (OPIC)

By Jim Davis, Business Ukraine magazine
Kyiv, Ukraine, Monday, February 11, 2008

Amid all the fanfare that has accompanied the signing of a protocol which
will bring Ukraine WTO membership, it is worth noting that a disagreement
over a relatively small amount of money has made it impossible for Ukraine
to enjoy the benefits of an obscure but extremely important agency of the
United States government, the Overseas Private Investment Corporation
(OPIC).

Estimates made by well-informed persons involved in the process relating to
OPIC would suggest that had the problem could have been resolved when it
first arose in 1999, Ukraine could have gained an absolute minimum of an
additional USD 5 – 10 billion in foreign direct investment – and probably a
lot more than that.

The issue could have been solved years ago, but it was as is so often the
case it is a problem for which no one had primary responsibility on the
Ukrainian side.

All those, i.e. the various ministers, who had parts of the responsibility
within their jurisdictions failed to understand the overall importance of
the issue and therefore guarded their own turf rather than that of the state
as a whole.

The end result has been to deny the Ukrainian economy one of the tools that
could have been attracting investment into the country ever since, with a
potential opportunity cost running into the billions of dollars.
A SIMPLE PROBLEM MADE COMPLEX
The matter involves the non-payment of a state debt incurred by the Ministry
of Defence about ten years ago at a time when the needs of various
ministries were seriously under-funded and ministers were prone to making
deals first and worrying about payment later.

The debt in question was covered by OPIC political risk insurance. OPIC paid
the claim to the insured U.S. supplier and looked to Ukraine to ultimately
make good on the original agreement, as was called for in the Ukraine-OPIC
agreement.

The amount of the claim, approximately USD 17 million, is quite small when
viewed in the light of the overall budget of Ukraine.

For the uninitiated, USD 17 million might appear to be a sum that could be
dealt with in a simple meeting among ministers of any government.

However, there is no single ministry nor any single minister who has ever
been tasked with dealing with the problem in a priority manner, so time and
time again the issue has been discussed at seemingly high-level meetings
between U.S. ambassadors and embassy staff on one side and various
ministers and prime ministers on the other.

The matter is further complicated by the nature of Ukraine’s budget process.
No government has wanted to debate the debt in parliament so it has never
been made a part of any annual state budget.

With no line item listing of the debt, some other mechanism would need to
be found in order to keep a payment from being illegal under the existing
legislation of the state budget act. So far, no creative payment mechanism
has been found that would meet the needs of both sides of the disagreement.

The most recent top-level discussions came during a visit to the United
States by then-Prime Minister Viktor Yanukovych in late 2006.

At the time Yanukovych promised U.S. officials during discussions that the
matter would have his personal attention and would be settled in a very
short time. However, the Yanukovych government neither paid the amount
owed nor requested or agreed to negotiations to adjust the amount owed.
ABOUT OPIC
OPIC is an independent U.S. government agency whose mission is to mobilise
and facilitate the participation of U. S. private capital and skills in the
economic and social development of less developed countries and areas, and
countries in transition from non-market to market economies.

OPIC assists U.S. companies by providing financing (from large structured
finance to small business loans), political risk insurance, and investment
funds. OPIC complements the private sector in managing risks associated
with foreign direct investment and supports U.S. foreign policy.

Since its establishment in 1971, OPIC programmes have grown and expanded to
encompass the support of development in over 150 countries. In 2007, OPIC
assisted 70 projects in 38 countries and regions involving a wide range of
industries. Of all the projects underway around the world in 2006, 87% or 61
projects involved U.S. small businesses in 35 U.S. states.

Many OPIC projects involve U.S. procurements, but it is also small and
medium-sized enterprise (SME) projects in recipient cooperating countries
that receive the greatest benefits. For example, in Kazakhstan, OPIC
provided debt financing for a USD 1.89 million investment in the Asian
Credit Fund (ACF), a non-banking microfinance institution established by
the Mercy Corps.

In Azerbaijan, OPIC provided financing to SOAKredit LLC (SOA), an
independent limited liability non-credit organisation. SOA’s purpose is to
implement an innovative finance programme primarily designed to stimulate
local business growth and facilitate Azerbaijan’s transition from a demand
to a market economy.

In Russia, OPIC is providing financing to ZAO Europlan (Europlan), the
leading leaser of equipment and vehicles to SMEs throughout the Russian
Federation, to support a planned USD 450 million expansion.
CREATING CONFIDENCE, OFFERING SECURITY
Nadir Shaikh, Chairman of the Board of Citibank Ukraine, explained that SME
firms and medium-sized projects are the ones that would benefit most if
Ukraine settles its dispute with OPIC.

Shaikh has been one of the persons most active in promoting a settlement
with OPIC and as recently as two weeks ago participated in a meeting with
senior government officials where this matter was discussed.

“We know from experience that the largest foreign firms come here fully
prepared to finance their own way into the Ukrainian market. Their
investments are based on advice from the most sophisticated sources in their
own companies or from professional advisors such as investment banks. It is
the smaller foreign investors who need the type of help and risk coverage
that OPIC is able to give.

“Making OPIC political risk insurance available would, for example, would
give many smaller foreign investors the kind of backing that would first
help convince their own boards of the viability of investments in Ukraine,
and would also assist them in finding financing for projects here or in
their home country.

“In addition, it would help Ukrainian companies to get access to financing
that could be provided by such banks as Citibank, based on OPIC risk
coverage programmes.

“Settling the current dispute requires a firm decision and political will on
the part of government to find a financing mechanism to pay the current
claim. I am optimistic that the efforts of the current government are more
likely to find a solution to this problem,” Shaikh concluded.
A RELATIVELY TRIFLING DEBT
One of the most interesting elements in the OPIC-Ukraine issue is the
flexibility exhibited by OPIC in attempting to settle the claim. On several
occasions various Ukrainian governments have been told that while USD
17 million is the amount actually owed, OPIC is willing to engage in
negotiations that could lead to a solution that would mean a substantially
reduced settlement.

Even with the clearest signals possible from OPIC, no Ukrainian government
over the last ten years has been willing or able to find the will to effect
a settlement.

The issue has not been filed away in a long forgotten filing cabinet,
either. Morgan Williams, president of the U.S.-Ukraine Business Council
(USUBC) said that the OPIC issue has been a matter of discussion between
the two governments in every meeting that he has attended in Washington or
Kyiv in recent years.

“On January 31, while addressing a meeting of the USUBC that included
representatives of the American Chamber of Commerce and U.S. embassy
officials, Vice-Prime Minister Nemyrya made a point of telling the audience
that he was fully aware of the problem and that he expects a solution to be
found soon. We sincerely hope that is correct.

“OPIC programmes are being used all over the world to spur development and
USUBC thinks that the inability of Ukraine to solve its OPIC problem has
cost the country at least one billion and perhaps several billions of
dollars in lost investment opportunities. In effect, a failure to solve the
OPIC issue has a negative effect on Ukraine’s ability to create jobs and
wealth for all of Ukraine’s citizens.

“For example, in the autumn of 2005 OPIC conceived and was ready to
implement a USD 100 million private equity fund programme for Ukraine.

“I have been told on the back channel by top U.S. government officials in
Washington that the total value of OPIC programmes that could be
implemented here within a relatively short time might have a total value of
as much as USD 500 million.

“However, it is the government of Ukraine that must turn the key to open
what is literally a treasure trove of new investment and risk guarantee
opportunities. I hope it will make the effort necessary to find the solution
needed,” Williams concluded.
———————————————————————————————-
LINK: http://www.businessukraine.com.ua/ukraine-s-outstanding-opic-debt
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FOOTNOTE: One of the top issues for the U.S.-Ukraine Business
Council (USUBC) this past year has been the fact that all the economic
development programs of the U.S. government’s Overseas Private
Investment Corporation (OPIC) are closed for Ukraine
(http://www.opic.gov/).

USUBC has been speaking out about this critical issue at meetings, in
Washington and Kyiv, with every top Ukrainian and U.S. government
official who has some responsibility regarding this major problem. 
USUBC will continue speak out loudly and often regarding this issue
until it is resolved and OPIC is open for business in Ukraine.

USUBC has been told in recent meetings that resolving the OPIC
issue is a top priority for the U.S. government by the U.S. Ambassador
to Ukraine William Taylor and a top priority for the new government in
Ukraine according to Vice Prime Minister Hryhoriy Nemyria. USUBC
is encouraging the two governments to have the issue resolved by March
31, 2008.  Morgan Williams, President. USUBC
————————————————————————————————-

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
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2.  “NOW IS THE TIME TO DRAMATICALLY REFORM
UKRAINE’S LEGAL SYSTEM”

OP-ED by Irina Paliashvili, Chair, Legal Affairs Working Group
U.S.-Ukraine Business Council (USUBC), Washington, D.C.,
President & Senior Counsel. RULG-Ukrainian Legal Group, P.A.
Kyiv Post, Kyiv, Ukraine, Thursday, February 14, 2008

In light of the fundamental and systematic economic reforms needed in
Ukraine, and the ongoing sharp increase in foreign and domestic investment,
it is imperative to ensure that Ukraine’s legal system is prepared to serve
as a modern pillar for the economy and society.

The current legal foundation is inadequate and to a large extent, sabotages
the development of a market economy in Ukraine.  It is archaic, anarchic,
and at times absurd.

The market responds to this situation in a healthy way by avoiding the legal
and regulatory regime and corrupt judiciary, while ignoring the more absurd
laws and concentrating on developing the best modern business practices.

Unfortunately, this creates an ever widening gap between what is written in
law, what is understood by those who administer the law (government
authorities, regulators, judges), and the business community.

At first, this may seem like a reasonable truce, as it does not interfere
with the steady development of Ukraine’s markets. But this solution is not
harmless – it encourages non-compliance, greatly increases the risks of
doing business, provokes artificial commercial disputes, and fosters such
ugly trends as corruption, lack of enforcement, corporate raiders, and lack
of corporate governance.

The new government’s top priority, therefore, should be to act, swiftly and
decisively. Ukraine’s legal system, and consequently the business climate,
could be immediately and dramatically improved by simply cancelling the
most archaic and damaging legislation, using the so-called “guillotine”
principle, which worked successfully in other countries that successfully
undertook modernization reforms.

However, some of the problems are of course fundamental and cannot be
solved in a vacuum and require significant unified political will along with
rational systematic effort.

The fundamental problems include overall outdated, contradictory, ambiguous
and low-quality laws, statutes and regulations; an excessive, inefficient,
and poorly qualified bureaucracy; and a corrupt and underdeveloped judicial
system.  These problems cannot be solved overnight and will require
generations of work.

There are some problems; however they can be resolved much faster and
could have a tremendously positive impact on the business climate.

Corporate legislation is underdeveloped and nonexistent in key areas such
as joint-stock companies and limited liability corporations.

The existing commercial code is anti-market and the civil code is flawed,
and each is in fundamental conflict with the other. Simply axing the
commercial code would have a significantly positive impact.

Chronic overregulation and the resultant government interference in business
affairs are chaotic, arbitrary, excessive, and incredibly costly. This is
loosely referred to as the “permits system,” or by the broader,
internationally known term, “regulatory governance.” Various Ukrainian
governments made several half-hearted attempts at deregulation, but in the
absence of true political will, they generally resulted in yet more
overregulation and chaos.

The highly publicized government effort to eliminate several thousand
regulatory acts in 2005 failed because the cancelled acts turned out to be
archaic documents, which had little to do with business regulation and
were not applied in any case.

The tax system and multiple tax bureaucracies are complicated, with the
worst offenders being the value-added tax (VAT) and unjustifiably high
social taxes.

There are two key problems with VAT. First, the problem exporters have
in obtaining their rightful refunds.  Second, the 2005 law imposing a 20
percent VAT on in-kind contributions by foreign investors into Ukrainian
companies’ charter capital, in effect representing a 20 percent
non-refundable tax on in-kind foreign investment.

The currency regime and financial sector need liberalization. Unnecessary
obstacles and hidden charges include the overregulation of ordinary
financial activities.

For example, in order to perform many one-time simple financial activities,
companies need to be registered with the State Commission of Ukraine
for the Regulation of Financial Services Markets of Ukraine.

Furthermore, any sale-purchase of Ukrainian securities (even outside of
Ukraine between non-residents) must be carried out only with the
participation of a Ukrainian securities trader.

Meanwhile, the National Bank of Ukraine (NBU) has excessive licensing
requirements with regard to foreign currency transactions and payments
outside Ukraine. The NBU also has draconian international loan requirements,
and it constantly interferes with the investment regime, inventing new
barriers to investment.

Inconsistent government policies discourage foreign investment in the vital
energy sector. Although a first-ever Production Sharing Agreement was
concluded in 2007 with the US-based Vanco, most of the energy, and
especially the oil and gas sectors, remain virtually closed to foreign
investors.

Moreover in 2007, the government declared the traditional method of joint
activity agreements used by foreign investors involved in natural resource
exploration and development unlawful. It further drove out foreign investors
by introducing restrictions and price controls on the sale of natural gas
extracted in Ukraine.

Anti-monopoly legislation is unnecessarily broad and ambiguous,
over-regulating economic concentrations with extremely low threshholds,
which in turn forces companies to seek the Antimonopoly Committee of
Ukraine’s prior approval of actions that have no bearing on competition
in the Ukrainian market at all.

Intellectual and industrial property protection is lacking, especially in
enforcement.

Another concern is the ongoing moratorium on sale of agricultural land,
and restrictions on land ownership by foreign investors.

Property rights remain tenuous and corporate raids are increasing. All of
these problems, although constantly and loudly criticized by the business
community, have been neglected by several generations of the country’s
leadership.

No government so far has been willing to develop a strategic program of
reforms for the legal and regulatory system, and it remains to be seen
whether the new government will make a serious and honest effort to
address them.

The good news, however, is that the business community has not given
up, and demand for reform is reaching critical mass.

One of the major market tendencies, which will inevitably result in the
modernization of legal and regulatory regimes, is the immense hunger of
Ukrainian companies for growth. This is equally true for multi-industry
giants, medium-sized companies, and small businesses.

All are looking for financing on both the domestic and international markets
through initial public offerings (IPOs), mergers & acquisitions, strategic
and portfolio investment, issuance of corporate debt instruments, and direct
borrowing from domestic and international lenders. They can no longer
tolerate the obstacles created by the antiquated legal regime and
bureaucracy.

Several sporadic positive developments of the last two years, such as the
adoption of a modernized version of the Securities and Stock Market Law,
the adoption of several progressive laws to promote Ukraine’s World Trade
Organization (WTO) accession, the adoption of stronger anti-piracy optical
media licensing rules, the creation of a regulatory framework for mortgage
lending, and liberalization of incorporation procedures, were similarly
driven by the business community and international organizations and
institutions.

2008 will be the pivotal year in terms of the desperately needed reforms and
modernisation of Ukraine’s legal regime and business climate for two main
reasons.

The business community no longer wants nor can afford to tolerate obstacles
created by the legal chaos and inefficient bureaucracy and second, because
the new government will be unable to remain in power while ignoring the
business community’s demands.
———————————————————————————————-
NOTE: Dr. Irina Paliashvili is chair of the Legal Affairs Working Group

of the US-Ukraine Business Council (USUBC), Washington, D.C.,
(www.usubc.org).  She is also president and senior counsel of the
RULG-Ukrainian Legal Group, P.A., Wash, D.C and Kyiv, Ukraine.
———————————————————————————————–
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[return to index] [Action Ukraine Report (AUR) Monitoring Service]
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3.  TYMOSHENKO GOVERNMENT OFF TO A PROMISING,
AMBITIOUS START

OP-ED By Anders Aslund, Kyiv Post
Kyiv, Ukraine, Thursday, February 7, 2008

After Ukraine’s extraordinary parliamentary elections on Sept. 30, it took
no less than two-and-a-half months to form a government, and it was
confirmed by the slightest of parliamentary margins. The new coalition
government headed by Yulia Tymoshenko, however, has started
ambitiously and auspiciously.

The Ukrainian economy is in good shape with a growth rate of 7.3 percent
last year. The stock market surged by no less than 120 percent last year,
and it has barely fallen during the January turmoil.

The new government’s biggest achievement is to make Ukraine ready to join
the World Trade Organization (WTO) at a February 5 meeting of the WTO
General Council. One month after the parliament ratifies the accession,
Ukraine will become a full-fledged member of the WTO. This could boost
the country’s growth by one percentage point a year.

Ukraine’s WTO accession is a joint accomplishment of the four last
governments. The very last obstacle was a European Union complaint
about the country’s export tariffs, primarily on steel scrap. It has been
relegated to the negotiations about a free-trade agreement with the EU,
which are likely to be concluded before the end of 2008.

As elsewhere in the region, the greatest economic concern is the high and
rising inflation, as consumer prices rose by 16.6 percent last year. As a
consequence, experienced Finance Minister Viktor Pynzenyk immediately
tightened the budget by balancing it.

Fortunately, no price controls or export controls are being discussed.
Tymoshenko says that she has learned not to do so from her tenure in
2005.

Tymoshenko’s most worrisome campaign promise was to compensate
Ukrainians who lost their bank savings in the early 1990s because of
hyperinflation and to do so in the course of two years.

Fortunately, the government has capped this compensation program at $1.2
billion, which is less than one percent of gross domestic product, and it
has distributed the money swiftly and equally.

As in all democratic post-communist countries, corruption was the biggest
concern during the election campaign. Wisely, Tymoshenko made it her key
theme. In order to substantiate her promises to combat corruption, she has
moved quickly on three fronts.

The most obnoxious and conspicuous corruption was the previous government’s
practice of selling value-added tax refunds for exporters at a “commission”
of 20 to 30 percent. Tymoshenko is determined to sort that problem out
through personnel changes.

The customs problem, which Tymoshenko cleaned up in 2005, has again
become one of her focal points of corruption, and she is set to repeat her
prior success.

The most intricate corruption is persistently in gas trade, which Tymoshenko
is very knowledgeable about from her old business. The intermediary
RosUkrEnergo does not appear to have any reason to exist. Nor does its
half-owned Ukrainian subsidiary, UkrGazEnergo.

The apparent purpose of these two nontransparent joint ventures is to siphon
off money to a number of prominent Russians and Ukrainians. The costs of
this boondoggle are so large that the Ukrainian state oil and gas
corporation, Naftogaz Ukrayiny, is on the verge of bankruptcy.

We do not need to know the details to understand that something has to be
done. Tymoshenko has moved to exclude these dysfunctional structures
from Ukraine’s gas trade. Fortunately, Gazprom chairman and Russia’s
president-in-waiting Dmitry Medvedev expresses the same view.

In the last two years, Ukraine has carried out minimal privatization. On
Jan. 18, the new Ukrainian government published a list of 19 state-owned
companies slated for privatization this year. The total value of the stakes
to be sold is assessed at some $5 billion.

Sensibly, the new government has abandoned its predecessor’s tactic of
selling very small posts, instead offering large majority posts in three
major companies, including Ukrtelecom, Ukraine’s old fixed-line monopoly.

Year after year, Ukraine has prolonged a moratorium on the sale of private
agricultural land, benefiting only large businessmen who have bought up tens
of thousands of hectares. The new government has let this moratorium lapse,
and it is intent on swiftly adopting the necessary legislation to facilitate
land trade.

President Viktor Yushchenko, Tymoshenko and Parliamentary Speaker Arseniy
Yatseniuk have signed an application for a Membership Action Plan to NATO
in advance of the alliance’s summit in Bucharest in April. This was somewhat
surprising because Tymoshenko has avoided the topic.

Together with WTO membership and a free trade agreement with the EU, the
MAP, which may or may not lead to NATO membership, defines Ukraine’s
firm Western-oriented foreign policy.

The worst policy that Tymoshenko pursued in 2005 was reprivatization, but
she seems to have learned that lesson as well, so far staying away from such
a destabilizing policy.

The new Ukrainian government has delivered a very impressive start, and
there is strong hope that much more is to come. One outcome of the last
parliamentary elections was that the three dominant parties share a broad
market economic consensus.

All three are democratic, center-right parties that are financed by big
businessmen, most of whom are quickly gentrifying because the market
values of their corporations surge with transparency and orderliness.

Several of the biggest Ukrainian businessmen have voluntarily abandoned
transfer pricing and started paying taxes in full. They are also devoting
large resources to charitable donations, mainly in education and health.
Yet, as a consequence of scandals with big businessmen-cum-ministers,
they are almost absent from the new Cabinet.

Ukraine has all along suffered from constitutional disorder. Although the
constitution has not changed, improved practices are apparent. The dominant
opposition party, the Party of the Regions, has set up a shadow government.

The two coalition partners, the Yulia Tymoshenko Bloc and Yushchenko’s
Our Ukraine, have divided the Cabinet posts so that Tymoshenko controls all
economic appointments while Our Ukraine controls foreign policy, security
and culture. An orderly balance of power between the president and the prime
minister seems to be emerging out of their persistent power struggle.

Obviously, one month is far too early to pass any judgment on a government,
but its start has been truly impressive.

Ukraine sets an illustrative example for how Russia could have evolved if it
had developed its democracy and market economy through competition
among the oligarchs instead of abandoning democracy.

Because of its more radical, market-based economic reforms in the 1990s,
Russia still benefits from better legislation. Even so, property rights
appear more secure in Ukraine now because of democracy’s greater
transparency and checks and balances.
———————————————————————————————
Anders Aslund, a senior fellow of the Peterson Institute for International
Economics, [Washington, D.C.] is the author of “Russia’s Capitalist
Revolution: Why Market Reform Succeeded and Democracy Failed.”
[Aslund is a Senior Advisor to the U.S.-Ukraine Business Council
(USUBC).]
——————————————————————————————-
LINK: http://www.kyivpost.com/opinion/oped/28334/
 ————————————————————————————————
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

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4.  UKRAINE: INVESTORS CAUTIOUSLY OPTIMISTIC

By Zenon Zawada, Kyiv Post Chief Editor
Kyiv Post, Kyiv, Ukraine, Thursday, Jan 31 2008

Prime Minister Yulia Tymoshenko consults with Vice Prime Minister for
Euro-Integration Hryhoriy Nemyria at a Jan. 24 conference. The increasingly
influential Nemyria has served as a point man for investors and diplomats.

As more wide scale business reforms are unveiled by Prime Minister Yulia
Tymoshenko with every passing day, investors are both hopeful for
improvement and concerned about radical steps.

More than 350 businessmen filled the Cabinet of Ministers Club on Jan. 24 to
get a direct impression of Tymoshenko’s business agenda, including vows to
improve rule of law, combat corruption, and create more favorable investment
conditions.

“We have the intention to truly change everything,” Tymoshenko said.
“Whoever doubts whether we can change everything, I again want to remind
you that most people in the country and beyond didn’t believe in pre-term
elections, didn’t believe in the democratic coalition’s creation and didn’t
believe in the new government’s formation, but this all happened.”

While businessmen and lawyers were largely hopeful of such change, some
recoiled at the more radical measures, particularly an initiative to allow
government officials to ignore what she deemed illegal court rulings that
would undermine that very goal.

Kyiv lawyer Oleh Makarov of Vasil Kisil & Partners asked Tymoshenko to
clarify her Cabinet’s Jan. 23 decree allowing tax and customs officials to
countermand, or simply ignore, court decisions which, according to the
measure, “gives the freedom and right to deliberately not execute criminal
court verdicts on the Constitution’s basis.”

Finance Minister Viktor Pynzenyk cited egregiously corrupt court rulings
that gave businessmen, their affiliates, and even any future related
businesses full immunity from taxes and customs.

“I think it would be very interesting for you as a lawyer to examine these
exotic verdicts, and it would be interesting for me to look at these judges
who do this and what methods they use to reach these decisions,” said
Tymoshenko, chuckling.

She assured the assembled investors she would act “exclusively within the
limits of the legislation of Ukraine’s Constitution.” Judges found liable
for corrupt decisions will be dismissed, Tymoshenko said.

In discussing the decree on Jan. 23, Tymoshenko said her Cabinet will
compile a list of “illegal verdicts” and submit them to the Ministry of
Justice.

Ukraine’s Supreme Court will also review the cases and draw conclusions,
she said. Yet lawyers and businessmen wanted more details.

“Unless the government provides substantial clarifications as to how its
idea will work, it risks sending the wrong signals to the investment
community and electorate alike,” said Geoffrey Smith of the Renaissance
Capital investment bank in a report.

Another declared initiative to double or triple tax revenue drew concern
from investors because such measures “typically mean tax authorities
pressuring and harassing,” said Morgan Williams, president of the US-
Ukraine Business Council.

“The big concern is that you can’t just wave a magic wand at some of these
issues and tell tax authorities to double or triple tax income,” Williams
said.

To demonstrate her commitment to fighting corruption, Tymoshenko
announced she adopted the European Business Association’s (EBA)
“Barriers to Investment in Ukraine” as her framework.

She pledged her government will work to combat each of the report’s
identified problems and implement its proposed solution one-by-one.

Among the most discussed new programs was the Tymoshenko
Transparency Initiative (TTI), which the prime minister said would
introduce a three-level court system, election of judges, and
accountability for corrupt verdicts.

Transparent privatization, land sales, license issuances, simplified and
shorter tax procedures, and introduction of a single-import declaration
are also addressed in the TTI.

In the spirit of her proposals to create citizens’ councils to advise the
government, Tymoshenko suggested the creation of an investors’ council
to consult the government.

The proposal seemed serious. Throughout the Jan. 24 question-and-answer
session, Tymoshenko urged investors to exchange contact information with
top officials in her government, particularly Economics Minister Bohdan
Danylyshyn.

Value-added tax (VAT) returns were also addressed.

Williams asked Tymoshenko whether US agricultural multinationals Cargill
Corp. and Bunge would get back more than $250 million in VAT taxes
owed them by the Ukrainian government.

“This puts Ukraine as the worst country in the world in terms of the size of
the VAT tax arrears, and the length of time it takes to get them back,”
Williams said. “Some of these are more than a year old. They’re loaning
$250 million to you with no interest. This is not fiscally responsible.”

Incidentally, the government of former Prime Minister Viktor Yanukovych
efficiently compensated VAT taxes last year to businesses based in Donetsk,
his hometown and main base of support. Donetsk is also the hometown of
Rinat Akhmetov, the main financier of Yanukovych’s Party of Regions of
Ukraine.

Finance Minister Viktor Pynzenyk told investors he was aiming for
value-added taxes to be returned within a day, “without delay.”

A week later, Williams said the two companies received between 15
and 20 percent of their VAT refunds.

“It’s the first payments of that size in a long time,” he said. “It’s a step
forward. I think there’s much more hope at this point, that (Viktor)
Pynzenyk and (Vice Prime Minister Hryhoriy) Nemyria will make a
difference.”
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LINK: http://www.kyivpost.com/nation/28278/

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[return to index] [Action Ukraine Report (AUR) Monitoring Service]
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U.S.-Ukraine Business Council (USUBC): http://www.usubc.com
========================================================
5.  VICE PRIME MINISTER HRYHORIY NEMYRYA ADDRESSES
THE U.S-UKRAINE BUSINESS COUNCIL (USUBC) IN KYIV

U.S.-Ukraine Business Council (USUBC)
Kyiv, Ukraine, Monday, February 4, 2008

KYIV – Hryhoriy Nemyrya, Vice-Prime Minister of Ukraine, addressed an
overflow crowd of members and guests of the U.S.-Ukraine Business
Council (USUBC) in Kyiv on Thursday, January 31, with a vivid description
of changes that have already been made during the first few weeks of the
Yulia Tymoshenko government.

This was Nemyrya’s debut performance before any business organization
since becoming one of two vice prime ministers and a leading player in the
new government’s Westward-looking reform program.

Nemyrya emphasized the immense opportunities that lie ahead as soon as the
World Trade Organization board approves Ukraine’s membership application
and parliament ratifies the agreement. WTO approval is expected on Feb. 5,
with parliamentary approval expected before the end of February.

WTO accession, as important as it is, is only a precursor to the next step
that is thought by many to be of greater importance to Ukraine’s economic
future.

Nemyrya said that preparations have already been made for the beginning of
negotiations of an EU-Ukraine Free Trade Agreement and that he expects EU
Trade Commissioner Peter Mandelson to visit Kyiv to kick off the
negotiations in March.

Nemyrya cautioned, however, that in spite of the early progress that appears
possible with the EU’s help, it would take at least two years to negotiate
the treaty.

Nemyrya pointed to the guiding principles encapsulated in the Tymoshenko
Transparency Initiative as not just words on paper but an actual plan of
work that the government takes very seriously and is pursuing very
vigorously.

As a part of this effort to run an entirely open and transparent government,
Nemyrya will head the Government Committee for European and International
Integration. “If we’re serious about going global, we have to be predictable
and reliable partners,” Nemyrya added.

The vice prime minister pointed to the very recent disbursal of some sizable
payments in VAT refunds as a example of the way the government want to
not only deliver on its promises but to do so in an expeditious fashion. He
said new procedures are being implemented that should soon significantly
reduce the huge VAT refund backlogs, over $250 million, suffered by
USUBC members.

He also pointed to RosUkrEnergo, the controversial intermediary that now
deals with Ukraine’s natural gas supplies from Russia, as an example of
an unnecessary and possibly corrupt structure that must be swept aside.

Nemyrya spent over an hour answering questions from a considerable
number of USUBC members and guests on issues such as tax reform;
restrictive grain export quotas; customs regulations and delays; business
partnerships with international energy companies; land privatization;
corporate raidership; intellectual property rights for IT, agricultural
seed/crop protection companies, and pharmaceutical companies;
reform of the legal and court system and the major government
reorganization needed for effective decision making and for the
implementation of policies and programs.

He emphasized the government is doing everything possible to solve
problems rapidly and fairly and to implement new business reforms.

However, in response to a member’s question about the government’s ability
to help business and industry deal with the problems that might be caused in
complying with new WTO regulations, Nemyrya admitted the government has
a long way to go.

“We fear agencies and ministries are not ready to deal with WTO. We will
try to improve their skills and capabilities to deal with all the issues.
The whole challenge is one of compatibility.”

The VPM was asked what the new government planned to do about the
Overseas Private Investment Corporation (OPIC), a major business
development agency of the U.S. government, being closed for Ukraine
because of a rather small claim that has not been settled by the Ukrainian
government since 1999.

Nemyrya said he was fully aware of the situation and expected the problem
to be resolved soon.  When questioned by USUBC president Morgan
Williams, with SigmaBleyzer, as to whether ‘soon’ meant within 90 days

Nemyrya said he expected the issue to be resolved within that time period.

The VPM outlined the important role he thinks the new investors council
to be appointed by Prime Minister Tymoshenko will play. He asked the
USUBC and AmCham to recommend members for the council and to
support the secretariat needed for the council to be effective.

USUBC President Williams said he believed Nemyrya’s appearance marked
an excellent beginning to hopefully a new era of cooperation between
Ukrainian governments and the international business community.

“The USUBC believes that Hryhoriy Nemyrya is an excellent choice for
VPM in the new government. With him at the prime minister’s side,
there is an extremely competent official, who is well known in the
international business community, to help deal with important issues,”
Williams said.

Williams thanked Jorge Zukoski, president of the American Chamber of
Commerce in Ukraine (AmCham) for attending along with Jim Hitch,
Partner, Baker & McKenzie law firm, a new member of USUBC, who
serves as chairman of the AmCham board. “USUBC and AmCham’s joint
efforts should increase the business communities ability to make a positive
impact on Ukraine’s future,” he added.

Members and guests of USUBC who attended the meeting included: AES;
Baker & McKenzie; Bechtel; Bunge; Business Ukraine; Cargill; Capital
Partners; CFC Consulting; Chadbourne & Parke, Citi; Deloitte & Touche;
Deutsche Bank; DHL; Dipol Chemical International; Eli Lilly; Horizon
Capital; IBM; IETG; Kraft; Kyiv-Atlantic Ukraine; Kyiv Post; Marathon;
Max-Well; NDI; PBN; RULG; Salans; Shell; SigmaBleyzer; Softline; Squire,
Sanders & Dempsey; Toepfer/ADM; The Bleyzer Foundation; UMBRA;
CRDF; Ukrainian Weekly; US-Ukraine Foundation; U.S. Department of
Justice, U.S Treasury Department, U.S. Department of Commerce, U.S.
Embassy, USAID, Westinghouse, Vanco and Volia Cable.

The USUBC meeting was held in the conference room of the new corporate
offices of the SigmaBleyzer Emerging Markets Private Equity Investment
Group located in the Mandarin Plaza in Kyiv.
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[return to index] [Action Ukraine Report (AUR) Monitoring Service]
========================================================      
6.  RUSSIA BREAKS TIES WITH GAS MIDDLEMAN

Catherine Belton, Roman Olearchyk, Financial Times (FT)
London, United Kingdom, Tuesday, Feb 12, 2008

Russia and Ukraine on Tuesday agreed to cut out a controversial
Swiss-registered trading company at the heart of a dispute between
the two nations, as Kiev and Moscow settled a broader deal over natural
gas debts.

RosUkrEnergo – 50 per cent owned by Gazprom, the Russian state gas
monopoly, and 50 per cent by two Ukrainian businessmen – has been a bone
of contention between the two capitals. It won a monopoly on Gazprom’s
supplies to Ukraine following a standoff over prices in 2006.

Yulia Tymoshenko, Ukraine’s prime minister, had vowed to eliminate
the trader as a middleman, calling it a “criminal canker”. But Gazprom
had warned its replacement could lead to an increase in gas prices.

Vladimir Putin, Russia’s president, and Viktor Yushchenko, his
Ukrainian counterpart, emerged from talks in the Kremlin on Tuesday to
announce they had negotiated settlement of more than $1bn (?690m, £513m)
in debts Gazprom claims is owed by Kiev.

The two leaders agreed the deal just minutes before a deadline which would
have seen Gazprom reducing supplies to Ukraine, a threat that had renewed
fears in Europe that its supplies could be affected.

Alexei Miller, Gazprom’s chief executive, said last night that a deal
had been clinched to axe RosUkrEnergo and replace it with a joint venture
owned directly by Gazprom and Ukraine’s energy monopoly, Naftogaz Ukrainy.

A spokesman said the new entity would supply gas from central Asia and
Russia to Ukraine on the same terms and prices as RosUkrEnergo for 2008.
He could not say when the joint venture would be formed.

The trader had looked to be threatened after Semyon Mogilevich, suspected
by Ukrainian politicians to be connected to the regional gas business,
was arrested in the Russian capital last month on charges of tax evasion
related to a Moscow perfume retailer. Political analysts in Moscow have
suggested his arrest could have been connected to a shake-up in
the Ukraine-Russia gas trade.

Ukraine’s security service had investigated RosUkrEnergo for possible ties
to Mr Mogilevich in 2006. The investigation was never completed.

RosUkrEnergo, Dmytro Firtash and Ivan Fursin, who together own half
the trader, have denied any ties to Mr Mogilevich. A lawyer for Mr
Mogilevich has denied his client has any links to the gas business.

A spokesperson for Mr Firtash declined to comment last night on the news
the trader was no longer the middleman. A spokesman for RosUkrEnergo

also declined to comment.
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http://www.ft.com/cms/s/0/87ff303a-d9a6-11dc-bd4d-0000779fd2ac.html
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[return to index] [Action Ukraine Report (AUR) Monitoring Service]
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7.  PRESIDENTS RESOLVE UKRAINE GAS DISPUTE

Andrew E. Kramer, The New York Times,
New York, New York, Wed, February 13, 2008

MOSCOW-The presidents of Russia and Ukraine averted a threatened

cutoff of natural gas supplies to Ukraine on Tuesday, at the same time that
Russia’s president said his country might aim nuclear missiles at Ukraine
if it followed through on its intention to join NATO.

“It’s horrible to say and even horrible to think,” President Vladimir
V. Putin of Russia said about the prospect of possibly aiming missiles
at Ukraine.

Mr. Putin made the remarks in response to a question at a Kremlin news
conference. After speaking for a time about Ukraine’s long cultural ties
to Russia, he said that NATO might deploy antimissile systems in Ukraine,
and that Russia would have to respond.

“Russia could target its missile systems at Ukraine,” he said. “Imagine
that for a second.”

Ukraine’s president, Viktor A. Yushchenko, who was sitting beside Mr. Putin
at the news conference, responded, saying that Ukraine had the right to
choose its own alliances and that his country’s Constitution prohibited
foreign military bases on its territory.

Mr. Putin and Mr. Yushchenko called the news conference to announce that
they had resolved a dispute just minutes before the deadline for
a threatened midwinter shutoff of a quarter of Ukraine’s heating fuel.

Last Thursday, Gazprom, the world’s largest natural gas producer and
a monopoly half-owned by the Russian government, demanded a settlement
for what it said was $1.5 billion in debt and threatened to halt
25 percent of Ukraine’s natural gas supply at 6 p.m. on Tuesday.
The two leaders announced the deal a few minutes before 6 p.m.

The disagreement had worried European governments because 80 percent of
Gazprom’s supplies to Western Europe cross Ukrainian territory, snaking
through a network of old Soviet-designed pipelines from gas wells in
the Arctic to homes and factories in the West.

Mr. Yushchenko said Ukraine would start repaying the Gazprom debt on
Thursday.

Two years ago, Gazprom halted shipments of natural gas to Ukraine in
the middle of winter in another dispute. That was a year after the so-
called Orange Revolution installed Mr. Yushchenko’s pro-Western government
in Kiev, leading critics to call the shutoff politically motivated, which
Gazprom denied.

The latest dispute, too, follows a change in government in Kiev.
Yulia V. Tymoshenko, a leader of the Orange Revolution, resumed her
duties as prime minister after elections last fall. Ms. Tymoshenko has
said Ukraine should revise what it charges Gazprom to ship gas across
its territory.

Gazprom’s threat to cut off the gas came 22 days after Ukraine’s pro-
Western leaders formally applied to be put on a path to NATO membership.

The letter, signed by the president, the prime minister and the speaker of
Parliament, asked Secretary General Jaap de Hoop Scheffer of NATO to review
Ukraine’s status in time for an alliance summit meeting in April in Romania.

In perhaps a favorable sign for Ukraine’s request, President Bush will
attend the meeting and is to visit Ukraine afterward, Bloomberg News
reported.
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www.nytimes.com/2008/02/13/world/europe/13ukraine.html?_r=1&oref=slogin
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[return to index] [Action Ukraine Report (AUR) Monitoring Service]
========================================================
NOTE: Send in a letter-to-the-editor today. Let us hear from you.
========================================================
8.  YUSHCHENKO STEALS PM’S THUNDER BY RESOLVING

GAS DISPUTE WITH RUSSIA
Business New Europe (bne), Berlin, Germany, Wed, Feb 13, 2008

Russian president Vladimir Putin and Ukrainian President Viktor
Yushchenko resolved a dispute over gas prices at a meeting Tuesday,
February 12 that could have ended with Russia once again cutting
Ukraine off from its main energy source.

Russia’s state-owned gas giant Gazprom was threatening to cut off
Ukraine’s gas deliveries from that day if an argument over debts and
gas prices wasn’t resolved. This wasn’t an empty threat: Russia shocked
Western Europe by cutting off Ukraine’s supplies and hence those to most
of Western Europe in the winter of 2006.

This time, though, the two presidents agreed on gas shipment terms for
2008 and the following years on terms that suited Gazprom, Putin said
after the meeting. “The proposals made by the Ukrainian partners suit
Gazprom.

Hopefully, all agreements will be implemented,” Putin was quoted by
Interfax as saying after the meeting. “As major European countries,
Russia and Ukraine bear a significant share of responsibility for
stability and security in Europe.”

Regarding the field of energy, Putin said: “We are extremely interested
in making our cooperation [with Ukraine] absolutely transparent. We have
very good prospects for developing our energy cooperation with the aim
of enhancing Ukraine’s role as a major energy player in Europe.”

The last time Gazprom cut of gas to Ukraine was a public relations
disaster for Russia and the Kremlin is hoping to repair some of the damage
this time with a smiles-all-round result. Putin said that the two sides
had negotiated “the principles of cooperation for 2008 and the coming
years,” with deliveries in 2008 remaining at the base price of $179.

The two presidents also settled an argument over exactly how much Ukraine
owes to Russia in unpaid gas bills. “We agreed that the 2007 debt will be
covered, covered in the near future in the volumes and on the terms
stipulated in the relevant agreements,” Yushchenko said at the press
conference.

The two countries will also set up a forum for Gazprom and Ukraine’s
national gas company Naftogaz to liaise in order to ensure that relations
run smoothly from now on.

“Under an agreement we have reached, Naftogaz and Gazprom will form
a working group, which within days will work through a way of establishing
simpler, direct and more transparent relations in matters of organizing
the market and the shipments,” Yushchenko said.
FACE TO FACE
In a statement released later by Gazprom, Gazprom chief Alexei Miller
said RosUkrEnergo would be eliminated from the gas trade, and instead
Gazprom and Naftogaz would set up a new 50-50 joint venture to handle
the gas sales, according to Interfax.

How this arrangement, if it comes about, will satisfy Ukrainian Prime
Minister Yulia Tymoshenko isn’t clear. Tymoshenko, who made her millions
in Ukraine’s murky gas trading industry in 1990s, has somewhat ironically
demanded an end to all intermediaries operating in the gas trade.

The Ukrainian president also said he will actively work to accelerate
Russia’s accession to the World Trade Organisation – something that
has been high on the Kremlin’s wish list for a long time.

Ukraine joined the organisation in February and potentially has the power
to impede Russia’s bid.

Russia said February 12 it hopes to join the club by the start of next
year. “Ukraine is interested in Russia’s earliest possible membership of
the WTO and will do all it can to facilitate it,” Yushchenko said.

“Adjusting our trade policies to the standards and rules of the World
Trade Organization is in our two countries’ interests.”

The Ukrainian side believes, Yushchenko said, that “restrictions hinder
bilateral trade.” With this promise, Yushchenko plays his trump card and
thus takes it out of the game. This statement is clearly meant as a peace
offering to the Kremlin, which seems to have been accepted.

Meanwhile, Putin demanded that Russian investors should not be discriminated
against. “We hope that our companies and our investors will not be at a
disadvantage compared with other investors in Ukraine.

Russian and other foreign investors must be put on an equal footing. All
disputable issues must be dealt with within legal procedures. We talked
about this with Viktor Andreyevich [Yushchenko] – he assured me this will
be so,” Putin said.

“Problems have arisen recently over our investment in Ukraine. I am sure
this has to do with problems in the Ukrainian legislation and in
the privatization procedure, not with Russian investors’ activities,”
Putin added, referring to a series of de-privatisation cases that have
been started involving companies acquired in Ukraine by Russian investors.

The two presidents talks also touched on Ukraine’s bid to join Nato.
“Anything Ukraine does [on the path of its integration into Nato] is not
designed to work against a third party, not to mention Russia.

We have agreed that we will hold consultations on this issue,” Yushchenko
said, pointing out that the Ukrainian constitution does not provide for
the setting up military bases of other countries on Ukraine’s territory.

However, Ukraine’s bid to join the Nato Membership Action Plan has already
resulted in gridlock in the Rada, as the opposition Party of Regions is
blocking any further work.

On February 11, Rada faction leaders failed to reach any agreement on how
to proceed after the country’s leadership wrote to the Nato secretary
general requesting that Ukraine be included in the Nato Membership Action
Plan. Polls this week showed that 60% of Ukrainians are against Nato

membership.

All in all, the meeting helped smooth the rather battered relations that
exist between the two countries. In recent weeks, there have been
conflicting signals coming out of Kyiv over how to deal with the Russia
gas situation.

PM Tymoshenko has taken a hard line and called for the notorious
intermediaries in the gas trade to be abandoned; Yushchenko has taken
a softer line calling for cooperation with the Russians.

With the deal, Yushchenko has effectively stolen Tymoshenko’s thunder,
who has also arrived on an official visit to Moscow. If a deal hadn’t
been agreed by February 12, then the ball would have dropped into
Tymoshenko’s court, who would have probably used the issue to earn
herself some political capital.

Polls released recently show that her approval rating has been rising
and Ukrainians approve of the hard line she’s taking with the Russians.
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[return to index] [Action Ukraine Report (AUR) Monitoring Service]
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9.  GAS VICTOR?

The Economist, London, UK, Thursday, February 14, 2008

Ukraine’s president has made a surprise breakthrough, by gaining
Russian agreement to oust gas-trade intermediary RosUkrEnergo in
favour of direct sales at the current price, which is less than
two-thirds of the tariff paid by EU states.

However, many important aspects remain undecided, including when
RosUkrEnergo will be removed and the share of its domestic market
that Ukraine must cede to Gazprom in return.

In conjunction with the Russia-Ukraine competition, there is also
an intra-Ukrainian struggle between President Viktor Yushchenko and
Prime Minister Yuliya Tymoshenko.

Mr. Yushchenko achieved a key Ukrainian objective in talks with his
Russian counterpart on February 12, securing Vladimir Putin’s agreement
to replace Swiss-registered intermediary RosUkrEnergo (owned jointly by
Russia’s Gazprom and two Ukrainian businessmen) in Ukraine’s gas import
business while keeping the current price of US$179.5 per 1,000 cu metres
unchanged for the rest of the year.

Less than a week ago, when Russian threats to reduce gas supplies to

Ukraine over unpaid debts had brought the issue to the top of the agenda,
Gazprom officials had suggested that Ukraine would have to pay a higher
price if it bought gas directly from Gazprom.

Ukraine will keep the current price, which is considerably lower than
prices of around US$300 per 1,000 cu metres paid for Russian gas in
Western Europe, because it will continue to consume mainly Central Asian
gas.

If Central Asian supplies fail, as Mr Putin noted, Gazprom will make up
the shortfall, but at a “European price”. In place of RosUkrEnergo,
Gazprom and Ukrainian counterpart Naftogaz will form a 50-50 joint
venture. Another 50-50 venture will be created to market gas in Ukraine;
under the 2006 accords, this role was assigned to Gazprom-RosUkrEnergo
joint venture UkrGazEnergo. Ukraine’s unpaid debts will also be settled.
OUTLINE OF A DEAL
Much remains unclear and plenty is subject to subsequent negotiation.

For instance, it is not clear when RosUkrEnergo will be ousted.
Optimistic Ukrainians hope this can be done by March, but other
commentators insist that the Swiss-registered intermediary will remain
in place until the end of the year.

Naftogaz CEO Oleh Dubyn conceded that RosUkrEnergo would be around

for some time, and that Naftogaz would soon sign a new contract with it.

This seems at odds with Mr Yushchenko’s victory. However, the reason
behind it is also tied up with the outstanding debt. Despite the long-
term nature of the 2006 accords, Mr Dubyn says that Ukraine and
RosUkrEnergo were in the habit of concluding monthly supply
agreements.

Because no contracts were signed for November or December, but gas was
delivered, RosUkrEnergo claimed that debts had sharply accumulated while
Naftogaz refused to acknowledge them.

The debt figure, according to Mr Dubyn, was also inflated because it
referred to volumes that were consumed in 2006 but invoiced in 2007 at
2007 prices.

On this small point, he seems to have won: debts for November and December
will be cleared at a price of US$130 per 1,000 cu metres. And because
the trade is conducted by monthly contract, Ukraine needs to sign fresh
agreements with RosUkrEnergo until Gazprom is ready to take over.

Ukraine’s first deputy prime minister, Oleksandr Turchinov, says that
the timing of RosUkrEnergo’s ouster depends purely on Gazprom-although
for Ukraine, the earlier the better.
WHAT’S A WIN?
The biggest single unanswered question, at least with regard to 2008,
centres on arrangements in the Ukrainian domestic market.

Naftogaz has been pushed to the point of bankruptcy because of the 2006
accords, which saddled it with a higher import price while simultaneously
cutting it out of the lucrative business of gas re-export and sales to the
industrial sector.

According to Mr Dubyn, in 2005 Naftogaz had 99% of the industrial market
and 43% of the total market; today, its total market share is less than
1%. Ms Tymoshenko’s government had already undertaken steps to change

this, by limiting UkrGazEnergo’s share of the domestic market, with a view to
increasing Naftogaz’s revenue–which is a necessity, given its parlous
financial state and its obligation to provide affordable gas to Ukrainian
households.

The major doubt, on the basis of information available currently, is
whether Ms Tymoshenko’s plan to put Naftogaz back as the dominant force
in the Ukrainian gas market can be reconciled with the agreement for
a Gazprom-Naftogaz joint venture.

The key question is the role within the domestic market that will be
assigned to this venture, and whether Naftogaz will separately be
permitted other roles. On the face of it, Russia has done Mr Yushchenko
and Ms Tymoshenko a huge favour by agreeing to push out RosUkrEnergo;
what price has it extracted, or will it extract, in return?
YUSHCHENKO 1, TYMOSHENKO 0
While looking after Gazprom and Russian economic interests, Mr Putin

also seems to be playing a role in Ukraine’s domestic political struggle.

Although Mr Yushchenko and Ms Tymoshenko are political allies, their
relationship is also marked by rivalry: Ms Tymoshenko is regarded as
a strong potential challenger to the incumbent at the election due in
2010.

Her early moves as prime minister suggest that she is eager to achieve
quick results, in the expectation that she will not be in post for very
long (Mr Yushchenko has already sacked her from the premiership once,

in September 2005).

On the face of it, Mr Putin has given a boost to Mr Yushchenko by cutting
a deal with him–and by allowing him to notch an unexpected victory.

Ms Tymoshenko, in Kiev, was left scrambling to hail the deal as a team
victory and to insist that her government was ready to participate in
drawing up new contracts for direct gas sales. It would be a major setback
for Ms Tymoshenko if RosUkrEnergo remains on the scene until the year-end,
or if Gazprom’s encroachment prevents Naftogaz from returning to its place
at the heart of Ukraine’s domestic market.

It is too early to declare Yushchenko the winner, or to conclude that
Mr Putin decided to help his counterpart and so deal a blow to the more
fiery and determinedly pro-Western Ms Tymoshenko. The Ukrainian prime
minister’s popularity and political skills are such that she is a serious
challenger, or perhaps even the favourite, for the Ukranian presidency in
2010.

Thus Russia’s leadership has an incentive to cultivate her. With many
political questions and gas-related issues undecided, in particular
regarding the extent to which Gazprom will benefit from the ouster of
RosUkrEnergo and UkrGazEnergo, it is possible that Ms Tymoshenko will

be taking the plaudits when she visits Moscow in the next few weeks.
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LINK: http://www.economist.com/displayStory.cfm\?story_id=10705426 
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[return to index] [Action Ukraine Report (AUR) Monitoring Service]
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10.  ARM AND LEG TO GAZPROM
By Alla Yeremenko, Yulia Mostovaya
Zerkalo Nedeli (Mirror Weekly), # 6 (685)
Kyiv, Ukraine, Monday, February 18, 2008

On February 12, after three hours of negotiations, Presidents Viktor
Yushchenko and Vladimir Putin found a new formula of gas cooperation
between Ukraine and Russia. They announced that Ukraine’s Naftogaz
and Russia’s Gazprom would found two joint ventures on parity terms.

The news inspired hopes that Ukraine would get rid of the much hated
intermediary companies RosUkrEnergo and UkrGazEnergo.

Viktor Yushchenko sounded satisfied with the agreements reached in
Moscow and Prime Minister Yulia Tymoshenko called them “a victory of
the democratic team.”
SAME OLD STORY
On second thought, the agreement does not look that encouraging.

The day after the talks between Yushchenko and Putin, the latter’s
future successor and currently first vice-premier Dmitriy Medvedev
stated quite unambiguously, “Most probably, we will need an
intermediary, because Ukraine can not afford any prices higher than
the price of Central Asian natural gas, i.e. 179 dollars per thousand
cu m.”

He stressed that it would be impossible to deliver Central Asian natural
gas to Ukraine without intermediaries. “The contracts already concluded
will have to be fulfilled by intermediaries, no matter what you may name
them,” Medvedev said.

At the same time, he stated Russia’s readiness to supply its gas without
go-betweens.

“We may as well supply our gas without go-betweens. All we need is money.
But the moment Ukraine begins to buy Russian gas instead of Turkmen gas
the price will grow by a third. That is too much for Ukraine’s economy,”
Medvedev warned, reiterating Russia’s readiness “for any forms of
cooperation with Ukraine in natural gas supply.”

One of the possible “forms of cooperation” was disclosed on February
14 by MP Yuriy Miroshnichenko of the Regions Party. On the live talk
show “I Think So” on 1+1 TV channel he quoted some excerpts from
a draft agreement on founding two new Russo-Ukrainian joint ventures.

The document (which may not be the only one up Gazprom’s sleeve)
contains anything but parity terms. On February 15 Naftogaz came up
with a feeble statement, saying that “the contents of the quoted
document contradicted the agreements reached by the Presidents of
Ukraine and Russia and the positions of the negotiating sides.”

However, Naftogaz did not refute the existence of that draft
agreement or the fact that Gazprom had offered it to Naftogaz.
Neither did Gazprom.

What would suit Naftogaz in the new joint venture? On the external
market it hopes to have a vote in price talks with Turkmenistan,
Uzbekistan, and Kazakhstan, thus having a hand in the delivery of
natural gas to the Russia-Ukraine borderline. Naftogaz would like to
have partial access to Central Asian gas (which is now under the full
control of Gazprom’s daughter company Gazpromexport).

Naftogaz also hopes to get a quota for export of natural gas to Europe
(albeit within the joint venture) and thus be able to export surplus
amounts.

In 2006 RosUkrEnergo exported some 9 billion cu m of gas via Ukraine,
declaring $95 per 1,000 cu m at customs and selling it at $300. It is
easy to calculate how much Ukraine could have earned but for that
go-between. In 2007 RosUkrEnergo exported some 7 billion cu m.

The scheme was the same: declaring $130 at customs, RosUkrEnergo
sold the same gas at $300 – $400.

Naftogaz would like to buy up and dispose of all gas delivered to
the Ukrainian border. However, the Russian version of the gas
agreement states the following: “The natural gas supplied to
Ukraine and extracted on Ukraine’s territory is meant exclusively
for Ukrainian consumers and may not be sold beyond Ukraine’s
border.”

This definitely means a ban on exporting gas, which Ukraine hoped
for when trying to get rid of RosUkrEnergo.

In the meantime, RUE stays on the market, and not only as an
intermediary supplier but also as the monopoly exporter of gas to
Europe (under active long-term contracts).

The future joint venture is supposed to receive natural gas from
Gazpromexport (or another company affiliated with Gazprom). Annual
contracted supplies (currently owned by RUE) are to consist of:

– 40,500M cu m of Turkmen natural gas at $130.75 per 1,000 cu m in
the first semester of 2008 and $150.75 from July 1;

– 10,500M cu m of Uzbek natural gas at $130.75 per 1,000 cu m in
the first semester of 2008 and $160.75 from July 1;

– 4,000M cu m of Kazakh natural gas (the price is not set).

The tentative agreement proceeds from the current annual quota for
supplies of Central Asian gas to Ukraine – 55 billion cu m. Besides,
the new joint venture is to start operating in April at the earliest.

Interestingly, the Russians want the joint venture to be registered in
Switzerland (just like RUE). Someone must be very reluctant to leave
the friendly canton of Zug where taxes are so low.

Here is another excerpt from the Russian draft of the Agreement on
Development of Relations in the Gas Sector:

“2. Establishment of the JV

2.1. . The parties have agreed to found on parity terms (each holding
50% in the statutory fund) Joint Venture 1 and Joint Venture 2.”

JV 1, tentatively named Rosukrgaz AG, will be registered in the Swiss
canton of Zug for . “supplying natural gas to Ukraine.”
PIKE SENTENCED TO DROWNING
The Russian authors of the draft agreement see Joint Venture 2 as
a limited liability company or a closed holding selling natural
gas to industrial and other consumers.

Prima facie, the new company is meant to solve two big problems
created by UkrGazEnergo since it was founded in 2006:

a) the supplier is unreliable; b) the supplier tends to overcharge
Ukrainian consumers, especially the most solvent category –
industrial companies.

By hook or by crook, in late 2007 UGE became the monopoly supplier
of natural gas to all big industrial consumers in Ukraine.

Moreover, consumers had to pay UGE for storage of gas in underground
gasholders. As the monopoly, UGE was now able to dictate its terms to all
industrial enterprises in this country.

Russian companies already own four of six Ukrainian oil refineries.
We all remember too well how they stopped as one “for scheduled
maintenance,” creating gasoline shortage crises in the country.
Now it looks like Ukraine is going to be vulnerable to crises in
other sectors that depend on natural gas.

UGE controls the industrial segment of the national market. Now,
through JV 2, Gazprom will get its hands on practically all
segments, including the socially important ones. And once it gets
its foot in the door, it will never leave.

The authors of the draft agreement set another trap: they mean to
authorize JV 2 “to sell the whole amount of natural gas – both
imported and extracted on Ukraine’s territory.”

This means that Naftogaz, which extracts natural gas in Ukraine and
sells it to households, governmental structures, and public utility
enterprises, will have no right to dispose of it! In other words,
this means direct sociopolitical climate control in Ukraine from
the Kremlin (through Gazprom’s office).

What if that JV 2 decides to raise the price for households on
the eve (or instead) of a presidential or parliamentary election?

Furthermore, the draft agreement says that in case JV 2 is not
starting to operate in April 2008, UkrGazEnergo may possibly be used
instead of it.

According to our sources, the Russians even accept Voronin as
the president of JV 2. Everything is simple. Thus, we don’t really
need to change the name “UkrGazEnergo”.

Creation of JV 2 will double the Russian part in the Ukrainian gas
distribution sector. This is a very expensive way to get cheap gas.

We should also remember that two days ago a quadripartite commission
on revision of gas supplies and payments started its work in Moscow.

This commission is made up of the representatives of Gazprom,
Naftogaz, RosUkrEnergo and UkrGazEnergo. We believe that someone
will be surprised with the results of the revision when he finds
out how much money was stolen.
WHAT SHOULD BE SACRIFICED: RATINGS OR INDEPENDENCE?
It looks like neither the President nor the Prime-Minister or new
Naftogaz’s management is satisfied with the proposition from the Russian
side. However, every one of them could be satisfied with completely
different results of negotiation talks.

The President could be satisfied with no results at all as long as
Ukraine receives gas for USD 179.5. He could also accept Voronin and
Firtash in charge of UkrGazEnergo.

The President indicates that the price of gas is much more important
than the scheme employed for its supply and distribution in the country.

In fact, most Ukrainian citizens support the President in this matter.
What can we add here?

Yulia Tymoshenko will be very disappointed if the Russian and Ukrainian
sides don’t reach an agreement before April 1, 2008 – the deadline defined
by the Russians. If the agreements reached during negotiations include at
least half of the terms stated in the abovementioned draft, this will
hardly bring any positive changes for Ukraine.

However, Yulia Volodymyrivna is ready to sacrifice the country’s interests
for the low price of gas and liquidation of RUE. Naftogas is receiving

directives from both the Presidential Secretariat and the Cabinet of Ministers.

Besides, it should follow the price policy defined by Yushchenko and
Tymoshenko: Ukraine should receive “cheap” gas since neither the Prime
Minister nor the President want to make decisions that would negatively
influence their ratings before the upcoming elections of 2009.

At the same time, Naftogaz is not provided with information about
Gazprom’s internal tendencies that could be helpful during
the negotiations.

Naftogaz is not provided with necessary information about the Central
Asian region; Naftogaz often receives contradictory orders from
the Presidential Secretariat and The Cabinet of Ministers…

It is thoughtless to say that liquidation of RUE will automatically
make the existing gas supply scheme transparent.

The only possible transparent gas supply scheme is the one in which

a) Ukraine buys gas from Russia for market price, i.e. for USD 314;
b) Russia pays market price for gas transit and gas storage in
Ukrainian underground storage facilities;
c) Naftogaz transparently distributes gas inside the country;
d) the government provides budget and utilities sectors with gas
produced in Ukraine and is not worried about the price of gas for
the enterprises of Akhmetov, Firtash, Pinchuk or Indian investors.

If we begin to buy gas for European prices and use transparent
schemes in the gas sphere, we will be able to increase our national
gas production, re-equip our power-consuming industries and
cultivate development of alternative sources of energy.

It could be a strong impulse for technological progress and a real
step towards strengthening of national security.

However, neither Tymoshenko nor Yushchenko is ready for this step.
Notwithstanding the fact that their teams have people who agree with
this transparent gas supply scheme, there is no hope that it will be
implemented in our country this year. Eventually, we will receive gas
for European prices.

This will happen much earlier than we think. However, by legalizing
Gazprom in our market, we won’t have any impulse for re-equipping
the power-consuming industries – we will live under the patronage of
Gazprom.

Thus, Tymoshenko, Yushchenko and Yanukovych should take the risks

of losing their ratings and make the decision about buying gas for
European prices.

They also should do everything to make this process less painful for
the citizens. Otherwise, all talk about transparent schemes, national
security, technical re-equipment and eliminating corruption will be
just talk.
————————————————————————————————
LINK: http://www.mw.ua/1000/1550/62086/ 
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11. VISIT OF UKRAINIAN PRES YUSHCHENKO TO MOSCOW
 
Commentary & Analysis: by Dmitry Vydrin,
Eurasian Home, Moscow, Russia, Thursday, Feb 14, 2008

The visit of the Ukrainian President Viktor Yushchenko to Moscow on
February 12 can be summed up in the following way: Yuliya Tymoshenko
articulates the policy which Viktor Yushchenko implements.

Yushchenko manages to do what the Prime Minister fails for different
reasons – from psychological and political to historical. The Moscow
officials have a more cautious attitude towards Tymoshenko than to
Yushchenko. He looks a more predictable and consistent policy-maker
who is as good as his word.

Probably, now Moscow prefers to cooperate with Yushchenko. Over
the long term Yushchenko-Putin Committee is most likely to resume
its activities.

After the presidential election it will work in the new capacity
since Vladimir Putin may fill a new state position.

But the agreements that have been made public are only the tip of
the iceberg. Most probably, there are other agreements. It is
significant that Putin said that the agreements had been reached
not only about the acute issues but also about the future.

Moscow is afraid of making Tymoshenko a counterpart in addressing
the issues, which were not made public. It believes that it is too
early (or, on the contrary, too late) to do that. As a result,
Yushchenko again became the major negotiator with Russia.

This turn of events does not serve Tymoshenko’s interests.
Her position, as Prime Minister’s, becomes more advantageous
because the gas supplies are guaranteed. But as a politician she
is at a disadvantage. So, it is entirely possible that she will
behave sternly, which may make the existing agreements more
complicated or even destroy them.

Maybe, she will mark time until Yushchenko make a mistake or
the situation in Moscow changes.

Yushchenko is strengthening his hand as the major negotiator with
Moscow thanks to the fact that some Russian officials are angry
because such a project as the Party of Regions led by Viktor
Yanukovych is unprofitable, the investments have not proved their
value, and the agreements, for example on the Russian language, have
been violated.

In this connection Moscow wants to replace a negotiator. Yushchenko
lays claim to be that negotiator and, as a result, his image can be
politically transformed. Yushchenko may seek to gain the voters in
Ukraine’s east.
——————————————————————————————
Dmitry Vydrin is a Director of the European Institute for Integration and
Development, Member of the Party of the Free Democrats, Kyiv
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http://www.eurasianhome.org/xml/t/expert.xml?lang=en&nic=expert&pid=1435
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12.  RUSSIA-UKRAINE GAS RELATIONS:
MURKY AFTER PUTIN-YUSHCHENKO MEETING
 
Analysis & Commentary: by Vladimir Socor
Eurasia Daily Monitor, Volume 5, Number 30,
The Jamestown Foundation, Wash, DC, Fri, Feb 15, 2008

Presidents Vladimir Putin of Russia and Viktor Yushchenko of Ukraine
have agreed on a reshuffling of the cards in Russia-Ukraine gas
relations.

During Yushchenko’s February 12-13 visit to Moscow (see EDM, February
14) the two presidents adopted on a personal basis what Yushchenko
termed “tactical decisions” on gas relations for 2008 and “strategic
decisions” for the years thereafter.

Regarding the latter, Yushchenko declared, “We have agreed on
the strategy, but will not publicize [afishirovat] it at this time.”

He disclaimed “any desire as President to have to deal with gas issues”
and credited Putin with a similar aloof disinterest: “I am sure that
the same is true of Vladimir Vladimirovich” (Kremlin.ru, February 12;
Russia Television Channel One, February 13). Putin did not seem to
take umbrage.

The decisions focus on replacing the two intermediaries, RosUkrEnergo
and UkrGazEnergo, from the Russia-Ukraine gas trade. In their stead,
Gazprom and the Ukrainian state company are to establish two new joint
companies, each on a 50%-50% parity basis.

As Gazprom’s chairman and Russia’s president-in-waiting Dmitry Medvedev
told journalists on this occasion, the intermediary’s title is immaterial
as long as the system continues. Gazprom, he said, can supply gas to
Ukraine at European prices of some $300 without intermediaries, if Ukraine
chooses that option.

But if Ukraine wants cheaper Central Asian gas, it must accept an
intermediary by agreement with Gazprom. The Russian side is ready for
either option, Medvedev said. He recalled that Russia had in 2005
proposed to create such an intermediary in the form of a Gazprom-Naftohaz
joint company, but that the Ukrainian side favored the RosUkrEnergo
solution (Itar-Tass, February 14).

The two existing intermediaries are Gazprom’s offshoots. RosUkrEnergo,
50% owned by Gazprom and 50% by Gazprom’s Ukrainian allies, buys gas from
Gazprom and delivers it through Gazprom’s pipelines to the Russia-Ukraine
border.

UkrGazEnergo, 50% owned by RosUkrEnergo and 50% by Naftohaz — and
managed by long-time Gazprom collaborators in Ukraine — buys that gas
from RosUkrEnergo at the border and sells it within Ukraine. There,
UkrGazEnergo supplies the lucrative industrial market and Naftohaz
the debt-ridden household market.

This system is in place under the January 2006 agreements signed by
Yushchenko’s energy team with Gazprom.

Through this arrangement, Ukraine receives gas at prices far below those
prevailing in Europe, although the price charged to Ukraine is rising each
year and should reach the European level by 2011. Ukraine pays $179.5 per
1,000 cubic meters in 2008, compared to more than $300 paid by most of
Gazprom’s customers in Europe.

Gazprom sustains this discount to Ukraine by buying Turkmen and other
Central Asian gas far below European prices, adding some volumes of
“European-priced” Russian gas, and selling the mix to RosUkrEnergo for
transport to Ukraine, where UkrGazEnergo distributes it to consumers.

Attractive in the short term, this system of discounts is actually depriving
Naftohaz of revenues, pushing it into indebtedness, and preventing it from
modernizing Ukraine’s gas transit system, which Naftohaz owns and operates.

By pushing Naftohaz toward bankruptcy, Gazprom aims for some form of

shared control of Ukraine’s gas transit system.

In late January-early February, Gazprom threatened to reduce gas supplies
to Ukraine as of February 11, unless Naftohaz begins reimbursing arrears
worth $1.5 billion. By Gazprom’s accounting, $500 million of that sum
stems from a suddenly increased “Russian” portion in the Central Asian-
Russian mix of gas supplied to Ukraine during November-December 2007.

With frost-hit Central Asia facing gas shortfalls, Gazprom compensated
for the missing Central Asian volumes by adding expensive “Russian” gas
for delivery to Ukraine by RosUkrEnergo.

Furthermore, Moscow complains that Naftohaz bought 5 billion cubic meters
of gas in January 2008 from UkrGazEnergo without a valid contract, once
the price of the gas mix went up (Interfax-Ukraine, UNIAN, February 12-14).

The debt-formation mechanism has operated as follows: Naftohaz is unable
to pay to UkrGazEnergo, which in turn cannot pay to RosUkrEnergo, which
in its turn owes that amount to Gazprom. Thus, Gazprom turns to the Kremlin
to collect the debt from Ukraine. The mechanism seems to work as Moscow
intended all along.

The Ukrainian government is now looking at debt-repayment options, which —
according to Fuel and Energy Minister Yuriy Prodan — include: collecting
arrears from Ukrainian gas consumers, “restructuring its debts to Gazprom,”
or taking yet another international loan to pay Gazprom through that chain
of intermediaries.

On February 14, the Ukrainian cabinet of ministers under Yulia Tymoshenko
decided to set up a commission to disband UkrGazEnergo and replace it
with a Naftohaz-Gazprom parity company. Thus, Gazprom can move directly
into the transmission and distribution system within Ukraine, taking over
50% of the business if this arrangement takes shape.

RosUkrEnergo is to continue operating in 2008, pending its replacement
in accordance with the February 12 Putin-Yushchenko agreement. That
agreement is only an outline, likely to be challenged politically in
Ukraine.
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LINK: http://www.jamestown.org/edm/article.php\?article_id=2372808
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13.  YUSHCHENKO OUTMANEUVERS PUTIN

Andriy Dutsyk, Kyiv Weekly, Kyiv, Ukraine, Wed, Feb 15, 2008

The official visit of President Viktor Yushchenko to Moscow turned
out to be the most well best organized visit of a Ukrainian leader
in this past decade. The significance of this meeting should be
measured not only by concrete results, but also by the thorough
preparations by the Ukrainian side.

Meanwhile, the fact that the Kremlin agreed to participate in
a meeting of the Yushchenko-Putin Commission testified to
the readiness of the Russian elite to hold talks with the current
leadership in Ukraine, which not up until recently was viewed
through the prism of anti-Russian ideas and dependence on
Washington.
ALL SAID AND DONE
In preparation for the president’s visit, Yushchenko’s team did
everything possible to strike the most heated and disputable issues
off the agenda of Ukrainian-Russian talks. The first issue concerns
Ukraine’s accelerated integration into NATO: the president, government
and parliamentary majority support this course.

At the same time, all political forces feel that the Ukrainian people
are the main judges to decide the fate of their country’s membership
in NATO through a nationwide referendum. The scheme has become so
transparent and understandable that it is becoming ever more difficult
for Russia to accuse Ukraine of uncongenial behavior.

Secondly, the current government and the political opposition reached
a compromise on the country’s integration into the EU, while Russia is
mostly viewed as a trading partner, cooperation with which is imperative
in establishing a free trade zone. Integration into the WTO ahead of
Russia will give Ukraine an additional trump card in its negotiations
with Russia, particularly on the sensitive gas issue for the two
countries.

Thirdly, Russia has not succeeded in establishing a pro-Russia political
non-government project on Ukraine’s political arena. Less than 10% of
the population considers themselves primarily citizens of the former
Soviet Union, according to a survey by the Institute of Sociology
under the National Academy of Sciences (NASU).

It is virtually impossible to gain a political edge or have influence
with the votes in this category of citizens as they are scattered
between different forces.

Besides, Russian oligarchs turned out to be much more visionary than
the Putin administration by maintaining constant ties with the Ukrainian
president. As a result of such an approach, LUKoil, TNK, Alfa Group

and Yevraz Group can decide on issues and lobby them without the
permission or assistance of the Kremlin.

In short, Russia’s political elite managed to lose yet another lever
of influence in its talks with Yushchenko and the ability to conduct
a policy of protecting the economic interests of Russian manufacturers
in Ukraine.
LOFTY RELATIONS
Yushchenko’s team took all these factors into consideration when
preparing the president’s visit to Moscow. At the same time, sensing
strong support of the West and confident control over a certain
political “backup” within the country, Yushchenko managed to play
his bargaining chip in a particular conflict.

Indeed, just before the president’s visit to Moscow the conflict over
certain hydrographic objects in Crimea was aggravated, the “black
lists” of Ukrainians that have been deemed persona non grata for
entry into the territory of Russia were reinstated and the State
Security Service (SBU) of Ukraine took note of the heightened level of
activity on the part of radical pro-Russian organizations that support
and propagate the notion of separatism on the Crimean peninsula.

While the aggravation of conflicting issues once played into the hands
of official Moscow prior to the latest Ukrainian-Russian diplomatic
talks, now these issues are more of an “ace up Kyiv’s sleeve”.

Having allies in the current government and in Tymoshenko’s parliament
gave Yushchenko the opportunity to not react to these issues and maintain
his composure and position during the talks in Moscow.

The Ukrainian president did everything possible to avoid a new conflict
with Putin during his meeting and psychologically prepped the Russians
for tough yet constructive dialog.

Specifically, Yushchenko demonstrated his ability to suppress the excessive
radical initiatives of Tymoshenko in the gas sector by not offering his
support of the Cabinet of Ministers in its attempts to review the scheme
for the supply of Russian gas to Ukraine, participation in the construction
of gas pipelines from Turkmenistan to Ukraine that bypass Russia and
a fivefold hike in transit tariffs for Gasprom.

In his latest exclusive interviews on the country’s main TV channels
Yushchenko sent a clear message to the Kremlin: gas relations will be
stable if Gasprom agrees to the proposals of the Ukrainian president.

The fact that NSDC Secretary Raisa Bohatyryova with her pro-Russian
ideas went to Moscow with the president instead of pro- western Foreign
Minister Volodymyr Ohryzko or Premier Tymoshenko is testimony that
Ukraine’s president wishes to maintain amicable ties with Russia.

This important visit to Russia had its minuses as well. For instance,
the information campaign on the joint appeal of the president, the VR
speaker and the premier about Ukraine joining the plan of action for
gaining membership in NATO to the NATO General Secretariat was
a miserable flop;

the official statement of Vsevolod Loskutov, adviser and messenger
at the Russian Embassy in Ukraine, that Russia could alter relations
with Ukraine in connection with the latter’s membership in NATO (first
and foremost, this concerns the military-industrial complex);

and the threats by Gasprom of possibly cutting off gas supplies to
Ukraine due to its outstanding debts to the UkrGasEnergo company.

At the same time, even these doubtful trump cards that Putin is
playing are not likely to destroy Ukraine’s diligence in the artful
preparation of Yushchenko’s visit to Moscow on the highest level and
the skill of the Ukrainian president’s team at smoothing out the rough
edges.
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LINK: http://www.kyivweekly.com/\?art=1202930728
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14. UKRAINE’S GAS WOES UNDERSCORE DOMESTIC

POWER STRUGGLE

ANALYSIS & COMMENTARY: by Tammy Lynch
THE ISCIP ANALYST, An Analytical Review, Volume XIV, Number 8
Boston University’s Institute for the Study of  Conflict, Ideology & Policy
Boston, Massachusetts, Thursday, 14 February 2008

On 12 February the international press heralded a “solution” to the latest
dispute between Russia and Ukraine over the latter’s gas debt.  (1)
Ukraine’s politicians publicly celebrated, too.  Prime Minister Yulia
Tymoshenko termed the “agreement” made between Russia President Vladimir
Putin and Ukraine President Viktor Yushchenko a “victory of the democratic
team.”

In particular, Tymoshenko stressed that both sides had agreed to pursue “the
elimination of all mediators from the gas market of Ukraine, including the
shadows and corruption.” (2)

However, it is likely that this celebration is just a bit premature.  A
close examination of the situation shows that, with two major exceptions,
the “agreement” actually contained only outlines for future discussions.

The exceptions are important.  In a clear negotiating maneuver, Gazprom
figured the cost of gas used (and not paid for) in the final quarter of 2007
at the 2008 price of $179 per 1000 cubic meters instead of the 2007 price of
$130 per 1000 cubic meters.  Putin and Yushchenko finally agreed that the
price would be $130 per 1000 cubic meters, which will, according to
Yushchenko, lower the debt by over $150 million.  (3)

Gazprom also agreed to remove the controversial gas broker RosUkrEnergo from
the gas distribution process.  The way in which this will be done, however,
and the long term implications for Ukraine were left to others to decide.
Since this constitutes the thorniest issue in the gas debate, it is very
possible that within just a few short weeks, a new dispute will emerge.

This is particularly true since there is deep disagreement within Ukraine
about how to deal with the situation, and since Gazprom has been unclear
about whether or not it will accept removal of gas intermediaries
altogether.
Yushchenko, Tymoshenko and RosUkrEnergo
Although the situation is often portrayed simply as a dispute between Russia
and Ukraine, in reality this dynamic is just one part of the equation.

Ukraine’s gas trade is fully immersed in a power struggle between President
Yushchenko and Prime Minister Tymoshenko, and to a lesser extent, between
Russian politicians vying for control as President Vladimir Putin’s
presidential term ends. The internal Ukrainian power struggle informs every
word and every action taken around the issue of gas.

The main disagreement, and the underlying cause of Ukraine’s dispute with
Russia, deals with the use of RosUkrEnergo (RUE) to control the gas trade
between the two countries.  RUE was created in 2004 by then-President Leonid
Kuchma simply as a tool to negotiate a gas deal between Ukraine and Central
Asia.  In the last two years, it has taken full control over all gas
transactions for Ukraine.

Its work has been profitable.   RUE reported earnings of around $800 million
from its work as an intermediary during 2006. (4)  Several energy analysts
claim that some 45% of that figure went to a Ukrainian businessman who was
found last year to be a major holder of RosUkrEnergo, through his own
company.  Another Ukrainian businessman is said to own a significant portion
of RUE, also through the same company, while Gazprom owns 50%.  The

precise figure’s are difficult to confirm at this point.

As of 13 February, earnings for 2007 do not appear on the company’s website.

The company reportedly has received a percentage of its profits by
re-exporting-at a price of over $300 per 1000 cubic meters-a portion of the
Central Asian gas that was imported at only $179 per 1000 cubic meters.
Most of these exports were to Poland or Hungary.

This arrangement with RUE removes the Ukrainian government entirely from
oversight over gas imports, while creating a windfall for a very select few.
Furthermore, while cutting out the Ukrainian government, it simultaneously
allows Russian state-owned Gazprom significant input over Ukraine’s gas
policy by virtue of the company’s 50% ownership of RUE.

As noted in the previous ISCIP Analyst, President Yushchenko has publicly
waffled between calling for all intermediaries to be removed from the
process and supporting the work done by RosUkrEnergo.  In recent weeks,
Yushchenko has increased his praise for the company’s work in securing what
he has described as the lowest gas price in Europe.

“The price we have today, of 179 dollars per 1000 cubic meters, is the
lowest price on the whole perimeter from the Baltic to the Caucasus,” he
said on 20 January.   “This is good.” (5)

Prime Minister Tymoshenko, meanwhile, has urged that RosUkrEnergo be
immediately discharged from its intermediary duties, calling it a corrupt
structure and suggesting that the fees and profits the company receives are
a hidden additional tax that must be included in the cost of Ukraine’s gas.
“It is a front company, an artificially created company, so that gas coming
to Ukraine comes through a filter that will catch a significant amount of
money,” she told the New York Times in 2006. (6)

This disagreement between Yushchenko and Tymoshenko has the potential to
undermine any deal with Gazprom.  Any gas contract involving Naftohaz
technically must be approved not by the head of state, Yushchenko, but by
the head of government, Tymoshenko.

At the same time, as head of the National Security and Defense Council, and
as the leader of one bloc in Tymoshenko’s parliamentary majority, Yushchenko
can torpedo any deal made by his Prime Minister.
That was then.
Questions abound regarding how RosUkrEnergo was created and who was
involved.  Ukraine’s media carries continual speculation, with the only
certainty being that the decisions were made quietly outside the view of the
public.   These questions long have caused tensions between Ukraine’s two
leaders.

During Tymoshenko’s first premiership in 2005, she began investigating
whether Ukrainian politicians had received a portion of RUE’s windfall in
exchange for supporting the deal that created the company.

Former Minister for Fuel and Energy Yuriy Boyko was found to have been
listed as a member of RosUkrEnergo’s founding Coordinating Council and,
according to former Security Services head Oleksandr Turchynov, was
questioned at length twice about his connection to the company.  Officials
also questioned Ihor Voronin, former deputy head of Naftohaz, for his
appearance on the Coordinating Council.  (7)

Turchynov, who has been one of Tymoshenko’s closest allies for more than 15
years, hinted to RFE/RL in 2006 that his investigation of RosUkrEnergo
contributed to the decision by Yushchenko to dismiss the Tymoshenko
government in September of 2005.  Yushchenko has denied this vehemently,
citing other reasons for the dismissal, including what he called
unsatisfactory work overseeing the economy.

Turchynov suggested that, in mid-August, Yushchenko ordered him to stop
“persecuting my men,” and complained that his investigation was causing
tensions between him and President Putin.  Turchynov claimed that
investigators uncovered evidence of kickbacks to former government
officials.

He has never publicly produced such evidence and no officials have been
charged.  The investigator working on the case was transferred to other
matters, following Turchynov’s sudden removal.  (8)

During the acrimonious 2006 parliamentary campaign, which saw the blocs of
Tymoshenko and Yushchenko running separately, Tymoshenko suggested that
Yushchenko had ordered her away from the gas industry.  “There were written
documents which contained certain restrictions for the government when the
gas matters were concerned,” she told Ukrayinska Pravda.

“He said ‘I am going to deal with these issues myself, there is no need for
the Prime Minister to get involved,'” she continued.   She did not
aggressively protest at that time, Tymoshenko said, but suggested that she
was bothered by the order.  “I thought: RosUkrEnergo has got itself a new
‘roof’ now.” (9)

Since then, Yushchenko and Tymoshenko have reconciled and Tymoshenko shies
away from direct criticism of the president.  She has gone to great lengths
to underscore that she does not believe gas corruption has touched
Yushchenko himself.

Nevertheless, these accusations have led to constant undercurrents of
suspicion regarding Yushchenko’s connection to RosUkrEnergo’s beneficiaries,
although there has never been any evidence-direct or indirect-that the
president is benefiting from RosUkrEnergo’s existence.

Just one week ago, Yushchenko responded with irritation when questioned
about the situation by a reporter on a live interview program:

“I find it unpleasant to talk about gas. I don’t feel like talking about
this damn subject because I realize that it.it puts me in a tight spot. I
get tied to the allegation that my family is involved in gas trade. Thank
God Almighty, I’m occupied with something more interesting – and so is my
family – than gas.” (10)

In fact, many observers of the president suggest that his primary motivation
is that he prefers to avoid confrontation;  he views any disagreement over
RosUkrEnergo as unnecessary and potentially destabilizing to the economy.

The President also has expressed suspicion of Tymoshenko, implying that she
would like to gain control of the gas income for her allies.  She vehemently
denies these suggestions.

For her part, the Prime Minister never has avoided confrontation, seeing it
as necessary to implement significant reform.  She has called corruption in
the energy market a “cancer” on Ukraine, and is said to view RosUkrEnergo as
the country’s greatest example of this “cancer.”

Nevertheless, almost immediately after Tymoshenko’s dismissal in 2005, her
replacement, Yushchenko ally Yuriy Yekhanurov, began negotiating a new
agreement with Gazprom through RosUkrEnergo.  For reasons never fully
explained, in the new agreement, RosUkrEnergo, Gazprom and Ukraine’s
Naftohaz created yet another intermediary structure for distribution of gas
within Ukraine.

Previously, RUE could import gas only for distribution by Naftohaz.  The new
UkrGasEnergo effectively took over most of the work of the state-owned
Naftohaz, distributing gas to industrial customers and collecting money and
fees for doing so.  UkrGasEnergo is owned 50% each by RosUkrEnergo and
Naftohaz.

In the agreement that created the concern, Naftohaz was granted the right to
distribute gas to residential consumers, who represent the least lucrative
gas market in the country.  In essence, Naftohaz de facto was privatized.

Then in opposition, Tymoshenko launched a campaign against the continued use
of RosUkrEnergo and against the creation of UkrGasEnergo.   Speaking on ICTV’s
“Freedom of Speech” debate program, she warned that the effect of allowing
UkrGazEnergo to distribute gas in Ukraine could be “bankruptcy and the loss
of our state company [Naftohaz].” (11) These worries were dismissed by the
government.

Privately, a number of energy analysts wondered if perhaps Naftohaz
intentionally was being pushed to bankruptcy.  Such a bankruptcy would allow
those in power to make a case for full legal privatization of the entity,
which could lead to UkrGazEnergo and RosUkrEnergo taking over all
distribution of gas in Ukraine, and potentially management of the country’s
pipeline system.  Ukraine’s largest asset would be neutralized.

. and this is now
 Upon entering office in late December 2007, Tymoshenko’s Cabinet discovered
that Naftohaz had neglected to pay RosUkrEnergo for gas it distributed to
residential customers. (12)  At the time, according to those close to the
situation, Naftohaz even was unable to articulate what it had paid and what
it hadn’t.  No money appeared on its accounts.  After an examination of
various accounts, the government confirmed a debt for gas as of 1 January
2008, totaling approximately $1.04 billion.

In a 31 January 2008 letter to RosUkrEnergo, copied to Gazprom, Naftohaz
formally acknowledged the discovery of the $1.04 billion debt for 2007.   In
its note, newly appointed Naftohaz deputy head Ihor Didenko suggested that
the company is in negotiations with Deutsche Bank for a loan, and that full
payment of the 2007 debt should be complete within 6-8 weeks.  (13)

It is unclear whether there was any official written response to this
letter, but one week later, Gazprom’s Sergey Kupriyanov threatened to “cut
supplies of Russian gas to Ukraine.” (14)  Kupriyanov suggested that the
debt had “ballooned” to $1.5 billion.  Ukraine immediately rejected the
figure, largely because it included the cost of Russian gas instead of only
gas from Central Asia.

Because Central Asia could not meet its designated gas volumes to Ukraine in
late 2007 and so far this year, RUE chose to make up the difference with far
more expensive Russian gas, for which it is charging not $179 per 1000 cubic
meters, but $314.  (15)

The Ukrainian government apparently was not consulted about the inclusion of
Russian gas at the new price, and there appears to be no way for the
government to verify where its gas originated, since it is “mixed” by
RosUkrEnergo at the border.

On 11 February, Tymoshenko said Ukraine “will not accept from RosUkrEnergo
any gas other than Central Asian gas.”  (16) At the same time, the Prime
Minister suggested that Ukraine’s debt had increased to $1.072 billion as of
that day – calculated using the $179 figure.  (17)

For his part, Yushchenko has kept his comments general.  He has released no
statement on the possibility of removing RosUkrEnergo, although Gazprom’s
Aleksei Miller suggested that it had been agreed upon during a meeting
between Putin and Yushchenko.  The Ukrainian president also has given no
opinion on the size of the debt, instead suggesting that a working group
would be formed to examine the issue.

The issue of a schedule for debt payment and how to solve the issue of
RosUkrEnergo will now be the subject of negotiations including
representatives Naftohaz and Gazprom.  Gazprom continues to insist that
Ukraine owes over $1.5 billion, while Ukraine insists that it owes under
$1.1 billion.

Additionally, on 13 February, one day after announcing the agreement, Miller
rejected Tymoshenko’s calls for a removal of all intermediaries.  “If they
want Central Asian gas,” he said, “it would be necessary to leave an
intermediary.” (18)  He did not explain why, but it is clear that Russia
intends to keep some sort of private entity involved in the process.

At their meeting, Putin and Yushchenko agreed to replace RosUkrEnergo with a
new company owned equally by Gazprom and Naftohaz – in other words, a new
gas intermediary.

Those monitoring the creation of RosUkrEnergo in 2004 will remember that
this company also was designed originally to represent Gazprom and Naftohaz
equally;  somehow, though, Ukraine’s interests were put in the hands of
private businessmen who profited handsomely at Ukraine’s expense.  Could
this happen again?

Those same observers also will remember that RosUkrEnergo replaced another
discredited intermediary that had, in turn, replaced yet another.  Is it
possible, then, to create a gas broker that could serve the interests of
both Russia and Ukraine?

To do so, agreement must be achieved not only between Russia and Ukraine,
but also between Ukraine’s leaders.  Given the history of all concerned,
that may be too much to ask.
———————————————————————————————
SOURCE NOTES:
(1) “Russia and Ukraine negotiate solution to gas dispute, payments start
Thursday,” The Canadian Press, 0250 EST, 12 Feb 08, and “Russia and Ukraine
Strike Gas Deal,” The Associated Press, 1243 EST, 12 Feb 08, and “Russia,
Ukraine Reach Last Minute Deal,
(2) Press Office of the Cabinet of Ministers, 11:00 CET, 13 Feb 08 via
www.kmu.gov.ua.
(3) President comments on gas agreements,” Press Office of President
Yushchenko, 1423 CET, 13 Feb 08 via www.president.gov.ua.
 (4) Financial data, RosUkrEnergo, via
www.rosukrenergo.ch/eng/pub/business.html.
(5) Inter TV, 1800 GMT, 20 Jan 08 via Lexis-Nexis.
(6) “Ex-Premier of Ukraine Attacks Gas Price Deal,” New York Times, 6 Jan
06.
(7) Roman Kupchinsky, “Ukraine: Battle Against Corruption Grinds to a Halt,”
RFE/RL, 26 Sept 06.
(8) Ibid.
(9) Serhiy Leshchenko, “Yulia Tymoshenko: I suspect Yushchenko avoids
meeting me because it would hurt him to look me in the eyes,” Ukrayinska
Pravda,17 Feb 06.
 (10) “Ya Tak Dumayu (I think that),” 1+1 television, 7 Feb 08. Video available at
www.youtube.com/watch?v=U51bv_OQub8&eurl=http://tap-the-talent.blogspot.com
(11) Svoboda Slova (Freedom of Speech), ICTV, 20 Jan 06.  Video available at
www.tymoshenko.com.ua.
(12) See ISCIP Analyst, Volume XIV Number 7 (31 January 2008) for further
details on Naftohaz’s brush with loan default.
 (13) A scanned copy of the letter is available in “Þë³ÿ Òèìîøåíêî vs
RosUkrEnergo,” Ukrayinska Pravda, 1115 CET, 11 Feb 08 via
www.pravda.com.ua/news/2008/2/11/71342.htm.
 (14) “Gazprom threatens to cut off gas supplies to Ukraine,” ForUm, 1220
CET, 8 Feb 08.
 (15)  “RosUkrEnergo Claims Ukrhaz-Enerho’s USD 830 million Debt for
Delivered Gas,” Ukrainian News Agency, 0843 CET, 17 Jan 08 via
www.ukranews.com.
 (16) “Yulia Tymoshenko won’t accept RosUkrEnergo and UkrGazEnergo’s terms
for regulating the gas conflict,” Ukrayinska Pravda, 11 Feb 08 via Yulia
Tymoshenko Personal Website at www.tymoshenko.com.ua/eng/news/first/5247/
(17)”Yulia Tymoshenko: Ukraine will work on restructuring Naftogaz’s $1.072
billion debt,” Press Service of Yulia Tymoshenko, 11 Feb 08 via
www.tymoshenko.com.ua/eng/news/first/5248/
(18) “U Moskvy peredumali zabirati RosUkrEnergo (Russia considers how to
remove RosUkrEnergo),” Ukrayinska Pravda, 1942 CET, 13 Feb 08.
————————————————————————————————
By Tammy Lynch (tammymlynch@hotmail.com)
———————————————————————————————–
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
========================================================

Ukraine Monthly Macroeconomic Report From SigmaBleyzer:
http://www.sigmableyzer.com/index.php?action=publications 
========================================================
15.  UPS JOINS U.S.-UKRAINE BUSINESS COUNCIL (USUBC)

 
U.S.-Ukraine Business Council (USUBC)
Washington, D.C., November 2007
WASHINGTON, D.C. – The Executive Committee of the U.S.-Ukraine
Business Council (USUBC) is pleased to announce that UPS has been
approved as the forty-ninth member of the USUBC, according to
Morgan Williams, SigmaBleyzer, President of USUBC.

USUBC met with Arnold F. Wellman, Vice President, Corporate
Public Affairs, Domestic/International, in Washington. Mr. Wellman
confirmed the very strong business interest UPS has in Ukraine and
the desire of UPS to become a member of USUBC. He will represent
UPS on the USUBC board of directors.  Svetlana Tidiakina is the

Country Manager for UPS in Kyiv, Ukraine. 

The USUBC welcomes UPS into our rapidly growing membership.
UPS has over 300 employees in Ukraine and provides services to
many Ukrainian cities.

UPS was founded in Seattle, Washington on August 28, 1907 and
thus are celebrating 100 years of service.

Mr. Wellman has been to Ukraine many times and just recently
returned from a one week trip there. Arnold many times goes to the
Ukrainian village of Nizankowice, on the far western border near
Poland, where he works on a People-To-People project UPS has
implemented to support the development of the local school and
also to provide computers and satellite Internet connection.

UPS also has a People-To-People project in the neighboring small
villages of Lipa and Sierakosce, Poland. Last year, 80 UPS employees
from 11 countries built a fully functioning 38-foot by 42-foot computer
lab, complete with high-tech computers, printers, software, and training
for students, teachers, and residents in Lipa.

The People-To-People project is a part of UPS’ unique strategy to
personally get to know and understand the residents of a rural
community in a country where the company is doing business.

UPS has adopted a distinctly different approach to entering a new
market by encouraging its employees to immerse themselves in the
local culture as they work side-by-side with residents of the community
to improve their way of life.

The UPS Foundation enables nonprofit organizations to serve
communities more effectively around the world.  The UPS
Foundation’s global giving focus addresses three areas:  literacy,
hunger and volunteerism (www.community.ups.com).

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[return to index] [Action Ukraine Report (AUR) Monitoring Service]
========================================================
16.  AMERICAN CHAMBER OF COMMERCE 2008 BOARD ELECTIONS
 
Jorge Zukoski, President, American Chamber of Commerce
Kyiv, Ukraine, Friday, December 14, 2007

KYIV – The American Chamber of Commerce would like to thank everyone
who participated in the 2008 Board of Directors Election that was held on
Thursday, December 13th, 2007 at the International Management Institute
MIM-Kyiv, Kyiv, Ukraine. The ballot contained 27 candidates running for
seats on the Board of Directors.

The Membership elected the following 14 members to the 2008 Board of
Directors listed in alphabetical order:
Mr. Patrick van Daele, General Manager, Shell Ukraine Exploration and
     Production
Mr. Dean Gilfillan, General Director, British American Tobacco Ukraine
Mr. Douglas Hill, Region Manager, Coca-Cola Ukraine Ltd.
Mr. James Hitch, Managing Partner, Baker & McKenzie-CIS, Ltd.
Mr. Axel Hluchy, Managing Director, METRO Cash & Carry Ukraine Ltd.
Mr. Boris Krasnyansky, Managing Partner, PricewaterhouseCoopers
Dr. George Logush, Managing Director, Kraft Foods Ukraina
Mr. Jacques Mounier, President of the Board of Management, Calyon

     Bank Ukraine
Mr. Emin Ozkan, General Manager, Procter & Gamble Ukraine LLC
Mr. Andrzej Rozycki, Chairman of the Board – President, Cargill AT, CJSC
Mr. Nadir Shaikh, Chairman, Citibank (Ukraine)
Mr. Robert Shantz, Partner – Tax, KPMG
Mr. Myron Wasylyk, Senior Vice President and Managing Director,
     The PBN Company
Mr. Kamen Zahariev, Country Director, European Bank for
     Reconstruction and Development

The Chamber congratulates the new Board who will serve in 2008. The
Administrative Staff of the Chamber looks forward to working with the

new Board of Directors to continue to build the Chamber into the best
organization for our Membership adding the most value possible.

The Chamber would like to thank all candidates for their active
participation in this election and to all Members who made their voices
heard by voting whether in person or by proxy.
—————————————————————————————–
The American Chamber of Commerce in Ukraine,

Horizon Office Towers, 42-44 Shovkovychna vul., LL1
Kyiv 01601, Ukraine, Telephone: +380 44 490 5800
Fax: +380 44 490 5801, chamber@chamber.ua, http://www.chamber.
———————————————————————————————–
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
========================================================
17.  REASSESSING POST-SOVIET ENERGY POLITICS:

UKRAINE, RUSSIA, AND THE BATTLE FOR GAS FROM
CENTRAL ASIA TO THE EUROPEAN UNION
Harvard University, Friday, March 7-Saturday, March 8, 2008

Harvard Ukrainian Research Institute

The Davis Center for Russian and Eurasian Studies
Harvard, University, Cambridge, MA, February, 2008

Reassessing Post-Soviet Energy Politics:
Ukraine, Russia, and the Battle for Gas from Central Asia to

the European Union

Conference co-sponsored by:
The Harvard Ukrainian Research Institute and
The Davis Center for Russian and Eurasian Studies

Session 1. Actors, Agendas and Interests
Friday, March 7, 2008
9:15 a.m.-12:00 noon

Session 2. Gas Trade and Energy Security: The Impact on National

and International Politics
Friday, March 7, 2008
2:15-5:00 p.m.

Session 3. From Producer to Consumer: Transit, Prices, and Informal
Institutions
Saturday, March 8, 2008
9:15 a.m.-12:00 noon

All sessions held at Case Study Room, CGIS, 1730 Cambridge St.,

Cambridge, MA.

Speakers will include:
Rawi Abdelal, Margarita M. Balmaceda, Gene Fishel, Roman

Kupchinsky, Taras Kuzio, Martha Brill Olcott, Ferdinand Pavel, Carol
Saivetz, Volodymyr Saprykin, Alla Yeriomenko, and other specialists
from Ukraine, Russia, Europe and North America
—————————————————————————————-
LINK: http://www.huri.harvard.edu/calendar.html#2008_3_7-8
———————————————————————————————–
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========================================================
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18.  UKRAINIAN AMERICAN BAR ASSOCIATION (UABA) JOINS
U.S.-UKRAINE BUSINESS COUNCIL (USUBC), MEMBER NO. 50
 
U.S.-Ukraine Business Council (USUBC)
Washington, D.C., November 2007
 
WASHINGTON – The Executive Committee of the U.S.-Ukraine Business
Council (USUBC) is pleased to announce it has approved the Ukrainian
American Bar Association (UABA) as the 50th member of the USUBC.

Andrew A. Pidgirsky, Esq.,  Partner, Adams and Reese LLP, Houston,
Texas, who has served as president of the UABA and now serves as

chairman of the board will serve on the USUBC Board of Directors.

The Ukrainian American Bar Association (UABA) is a professional legal
association of U.S. judges, attorneys and law students of Ukrainian descent
and those with an interest in Ukrainian matters.  The affiliate membership
of the UABA includes Ukrainian and Canadian attorneys, Supreme Court
and District Court judges and prosecutors from Ukraine as well as members
of the Ukrainian Parliament.

The UABA Scholarship Fund was established in the 1980’s to provide financial
assistance to qualified law students from US and Ukraine and since its
inception granted numerous scholarships.  The UABA Scholarship Fund also
funded a separate scholarship with the Georgetown University Law Center.

The UABA was established in 1977 to promote human rights and to defend
dissidents in Ukraine during the Soviet era and to work more closely with
the Ukrainian community and the Ukrainian organizations.  Since Ukraine’s
independence, the UABA has taken an active legal role in Ukraine by
promoting democracy, constitutional reforms, commercial law projects and
the Rule of Law.

UABA provides legal assistance to the Embassy of Ukraine and Consular
offices in the U.S., participated in the formation of the World Congress of
Ukrainian Jurists and assists in lobbying efforts with the US Congress on
behalf of Ukraine and the Ukrainian community in the US.

The UABA has developed a strong working relationship with the US and
Ukrainian legal and business communities.  UABA members represent US
businesses in the complexities of the Ukrainian legal system and Ukrainians
and others living in the US with legal matters in Ukraine.  UABA members
also represent Ukrainian interests in the US, including commercial
transactions, civil litigation, immigration, and many other legal matters.

Many UABA members are directors and officers of various Ukrainian
American as well as national and international organizations and
associations, and often provide prominent leadership and active
community support to the Ukrainian community. You may find more

information about the UABA at www.uaba.org.

UABA was the 28th new member for USUBC in 2007. The 28 new
members were:
(1)    American Continental Group, LLC
(2)    Atlantic Group
(3)    Bracewell & Giuliani LLP
(4)    Bunge North America
(5)    Cardinal Resources
(6)    Cisco Systems
(7)    The Coca-Cola Company
(8)    The Eurasia Foundation
(9)    Holtec International
(10)  Int’l Environmental Trading Group
(11)  Kennan Institute
(12)  Kyiv-Atlantic Group of Companies
(13)  Marathon Oil Corporation
(14)  Marks and Sokolov, LLC
(15)  Northrop Grumman
(16)  Open World Leadership Center
(17)  Shell Oil Company
(18)  TD International, LLC
(19) The State Export-Import Bank of Ukraine
(20)  U.S. Civilian Research Development Foundation
(21)  U.S.-Ukraine Foundation
(22)  Ukrainian American Bar Association (UABA)
(23)  Ukrainian-American Environmental Association
(24)  Ukrainian Development Company
(25)  Vanco Energy Company
(26)  Charles H. Camp, Law Offices of Charles H. Camp
(27)  Ukrainian Federation of America (UFA)
(28)  UPS
———————————————————————————————–
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
========================================================
19.  UKRAINIAN INVESTMENT SUMMIT IN LONDON

 

Adam Smith Conferences’ 4th Annual Ukrainian Investment Summit
10th-12th March 2008, London, United Kingdom
 
LONDON – Adam Smith Conferences invites you to attend their 4th
Annual UKRAINIAN INVESTMENT SUMMIT which will take place
in London on March 10th-12th, 2008.

The U.S.-Ukraine Business Council (USUBC), Washington, D.C., its

president Morgan Williams and several of its members, such as Kraft,
Horizon Capital, Shell, Baker & McKenzie, Salans, Marks Sokolov &
Burd, Cardinal Resources, and TD International, will be participating in
the Ukrainian Investment Summit. Dr. Anders Aslund, Senior Advisor
to USUBC, will be holding a book signing event.

This Summit is the largest investment conference dedicated to Ukraine
globally, attracting over 600 attendees from 26 countries in 2007. It
brings together key Ukrainian government officials from the economic
and finance block and the elite of Ukrainian business to meet with their
international counterparts.

The aim of the Summit is to ensure that the international investment
community is fully informed about the opportunities that exist in
Europe’s fastest growing economy.
 
The format of the UIS 2008 is a three-day conference with a mixture
of plenary and streamed sessions. One stream, running over two days,
will be dedicated to the Ukrainian Infrastructure Summit, highlighting
the opportunities that are being created for the private sector as Ukraine
undertakes to completely upgrade its infrastructure in preparation
for co-hosting the Euro-2012 football championships. Broad and varied
social programme will give all participants opportunity for informal
discussions and meetings.
 
Full information about summit can be found on

http://www.adamsmithconferences.com/YU4USBC 
  
80+ strong speaker faculty, featuring such leading international and domestic
investors as: Asnova Holding, AVentures Group, Bank Finance and Credit,
Central European Media Enterprises, Commerzbank, Danone, Dniprospetstal,
DTEK, Ferrexpo, Financial Times, Horizon Capital, INSEAD, Kraft,
Mironivsky Khliboproduct, MTS Ukraine, NFI Empik Media & Fashion,
SCM Finance, Shell, System Capital Management, Telenor, Ukrtelecom and
UNIQA.
 
This year’s Summit has a host of new, value-added features, including:
 (1) the Ukrainian Infrastructure Summit, highlighting the opportunities being
created through preparations for Euro-2012 and featuring the likes of the
cities of Kyiv, Kharkiv and Lviv, Bouygues, EBRD, EIB, Hochtief,
Macquarie Capital, Skanska, Strabag and Ukrainian Railways
(2) A book-signing session with Dr Anders Aslund
(3) The pioneering SpotMe networking and electronic polling system
(4)  A Welcome Drinks Reception, sponsored by Ferrexpo plc and Bank
Finance & Credit , to be opened personally by their main shareholder,
Kostyantyn Zhevago
(5) Champagne roundtable discussion groups, focusing on key industry
sectors and the Euro-2012 host cities
(6) Gala Evening at the historic Freemasons’ Hall, sponsored by
DataGroup.
 
Once again for full information, do visit
http://www.adamsmithconferences.com/YU4USBC
 
We look forward to welcoming you to London in March for the annual
meeting place for the Ukrainian and global investment communities!
If you have any questions, Adam Smith Conferences staff will be happy to
help.  Please contact Lydmyla Durneva on +44 207 0177339/7444 or write
———————————————————————————————-
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11. UKRAINIAN AMERICAN COORDINATING COUNCIL (UACC),
Ihor Gawdiak, President, Washington, D.C., New York, New York
12. U.S.-UKRAINE FOUNDATION (USUF), Nadia Komarnyckyj
McConnell, President; John Kun, Vice President/COO; Markian
Bilynskyj, VP/Director of Field Operations; Kyiv, Ukraine. Web:
http://www.USUkraine.org
13. WJ GROUP of Ag Companies, Kyiv, Ukraine, David Holpert, Chief
Financial Officer, Chicago, IL; http://www.wjgrain.com/en/links/index.html
14. EUGENIA SAKEVYCH DALLAS, Author, “One Woman, Five
Lives, Five Countries,” ‘Her life’s journey begins with the 1932-1933
genocidal famine in Ukraine.’ Hollywood, CA, www.eugeniadallas.com.
15. ALEX AND HELEN WOSKOB, College Station, Pennsylvania
16. SWIFT FOUNDATION, San Luis Obispo, California
17. TRAVEL TO UKRAINE website, http://www.TravelToUkraine.org,
18. BUYUKRAINE.ORG website, http://www.BuyUkraine.org.
19. www.ArtUkraine.com Website, Kyiv, Ukraine
20. DAAR FOUNDATION, Houston, Texas, Kyiv, Ukraine.

========================================================
 TO BE ON OR OFF THE FREE AUR DISTRIBUTION LIST
If you would like to read the ACTION UKRAINE REPORT- AUR,
several times a month, please send your name, country of residence,
and e-mail contact information to morganw@patriot.net. Information
about your occupation and your interest in Ukraine is also appreciated.
 
If you do not wish to read the ACTION UKRAINE REPORT please
contact us immediately by e-mail to morganw@patriot.net.  If you are
receiving more than one copy please let us know so this can be corrected. 
SPAM & BULK MAIL BLOCKERS ARE A REAL PROBLEM                 
If you do not receive a copy of the AUR it is probably because of a
SPAM OR BULK MAIL BLOCKER maintained by your server or by
yourself on your computer. Spam and bulk mail blockers are set in very
arbitrary and impersonal ways and block out e-mails because of words
found in many news stories or the way the subject line is organized or
the header or who know what.
 
Spam blockers also sometimes reject the AUR for other arbitrary reasons
we have not been able to identify. If you do not receive some of the AUR
numbers please let us know and we will send you the missing issues. Please
make sure the spam blocker used by your server and also the one on your
personal computer, if you use a spam blocker, is set properly to receive
the Action Ukraine Report (AUR).
HOTMAIL.COM AND YAHOO.COM

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

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

Emerging Markets Private Equity Investment Group;
President, U.S.-Ukraine Business Council, Washington;
1701 K Street, NW, Suite 903, Washington, D.C. 20006
Tel: 202 437 4707; Fax 202 223 1224
www.sigmableyzer.com; www.usubc.org
========================================================
Power Corrupts and Absolute Power Corrupts Absolutely.
========================================================
return to index [Action Ukraine Report (AUR) Monitoring Service]
========================================================
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